The accompany notes are an integral part of these consolidated financial statements.
The accompany notes are an integral part of these consolidated financial statements.
The accompany notes are an integral part of these consolidated financial statements.
The accompany notes are an integral part of these consolidated financial statements.
The accompany notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
Note 1. General Organization and Business
AngioSoma is a wellness company dedicated to bringing innovative, effective and high-quality supplement products to the medical, wellness and adult-use markets through our marketing subsidiary, SomaCeuticalsTM. SomaCeuticals has acquired a diversified supply of supplements, strong clinical, scientific and operating capabilities and leading product research and development infrastructure in order to create trusted products and brands in an expanding global market.
We have abandoned our pursuit of FDA clearance and marketing of any drugs or products, including LiprostinTM, the patented pharmaceutical for a controlled drug delivery system. When rights to the drug were acquired it was represented that the initial clinical trials had been successfully completed and the single remaining trial was eligible to go forward. Research disclosed the representations are untrue. Therefore, further efforts to seek clearance and market the product ceased.
The Company was incorporated on April 29, 2016. The Company’s year-end is September 30.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, SomaCeuticals, Inc., 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 September 30, 2019. 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 payable and accrued expenses.
The following table presents assets that were measured and recognized at fair value as of September 30, 2019 and the period then ended on a recurring and nonrecurring basis:
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Available for sale securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Totals
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
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
|
|
Revenue Recognition
The Company recognizes revenue from product sales upon product delivery. All of our products are shipped through a third-party fulfillment center to the customer and the customer takes title to product and assumes risk and ownership of the product when it is delivered. Shipping charges to customers and sales taxes collectible from customers, if any, are included in revenues.
Effective June 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) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to each performance obligation in the contract; and (5) recognizing 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 the 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 year ended September 30, 2019.
Cash and Cash Equivalents
All cash is maintained with a major financial institution in the United States. Deposits with this bank may occasionally exceed the amount of insurance provided on such deposits. For the purpose of the financial statements, cash includes cash in banks. Cash was $100,459 and $91,597 as of September 30, 2019 and 2018, respectively. There were no cash equivalents as of September 30, 2019 and 2018.
Property and equipment
Property and equipment of the Company is stated at cost. In accordance with ASC Topic 360 Property, Plant and Equipment, expenditure for fixed assets that substantially increase the useful lives of existing assets are capitalized at cost and depreciated. Routine expenditures for repairs and maintenance are expensed as incurred. Depreciation is provided principally on the straight-line method over the estimated useful lives of the asset
During the year ended September 30, 2019, the Company did not purchase any property or equipment. Depreciation expense was $472 during the year ended September 30, 2019 compared to $118 during the year ended September 30, 2018.
Oil and Gas Properties
The Company follows the full cost method of accounting for its oil and gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing, and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil, in which case the gain or loss is recognized in the statement of operations. Costs of production and general and administrative corporate costs unrelated to acquisition, exploration and development activities are expensed as incurred.
The Company recorded other income in connection with oil lease royalties in the amount of $0 and $5,531 during the years ended September 30, 2019 and 2018, respectively. All oil and gas properties were disposed of during the period ended September 30, 2018.
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities 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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of September 30, 2019 and 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 September 30, 2019 or 2018.
Recently Issued Accounting Pronouncements
Accounting standards promulgated by the Financial Accounting Standards Board (the “FASB”) are subject to change. Changes in such standards may have an impact on our future financial statements. The following are a summary of recent accounting developments.
In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services. In addition, ASU 2014-09 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is effective for fiscal years beginning after December 15, 2017. The new revenue standard is principle-based and interpretation of those principles may vary from company to company based on their unique circumstances. It is possible that interpretation, industry practice, and guidance may evolve as companies and the accounting profession work to implement this new standard. The implementation of this standard did not have a material effect on our results of operations.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842): Accounting for Leases. This update requires that lessees recognize right-of-use assets and lease liabilities that are measured at the present value of the future lease payments at lease commencement date. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will largely remain unchanged and shall continue to depend on its classification as a finance or operating lease. We have performed a comprehensive review in order to determine what changes were required to support the adoption of this new standard. We intend to adopt the ASU and related amendments on October 1, 2019 and expect to elect certain practical expedients permitted under the transition guidance. We elected the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and will not restate prior periods. Under the new guidance, the majority of our leases will continue to be classified as operating leases. During the first quarter of fiscal 2020, we will complete our implementation of our processes and policies to support the new lease accounting and reporting requirements. We do not expect the implementation of this pronouncement to have a material effect on our financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The update addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update is effective for reporting periods beginning after December 15, 2017, including interim periods within the reporting period. Adoption of ASU 2016-15 did not have a material effect on our financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU becomes effective for us on October 1, 2019. We do not expect the implementation of this pronouncement to have a material effect on our financial statements.
In May 2017, the FASB issued ASU No. 2017-09, Stock Compensation - Scope of Modification Accounting, which provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The ASU requires that an entity account for the effects of a modification unless the fair value (or calculated value or intrinsic value, if used), vesting conditions and classification (as equity or liability) of the modified award are all the same as for the original award immediately before the modification. The ASU became effective for us on October 1, 2018, and will be applied to an award modified on or after the adoption date. Adoption of ASU 2017-09 did not have a material effect on our financial statements.
Effective June 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606 — Revenue from Contracts with Customers. Under ASC 606, we recognize 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 our financial statements as a result of adopting ASC 606.
There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.
Note 3. Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the year ended September 30, 2019, the Company had a net loss of $675,072. As of September 30, 2019, the Company had a working capital deficit of $686,257 and an accumulated deficit of $6,673,607. The Company has minimal revenue. Without additional capital, the Company will not be able to remain in business.
These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will advance capital to the Company or that the new business operations will be profitable. The 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 4. Related Party Transactions
For the year ended September 30, 2019
David Summers, a significant shareholder of the Company, formerly provided 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 September 30, 2019, the aggregate liability accrued to Mr. Summers was $112,804. The Company was also involved in a legal dispute with Mr. Summers to gather the funds due by Summers to the Company, as well as the written agreement for Summers to provide certain patents and formulas. Subsequent to September 30, 2019, the Company entered into a settlement agreement with Mr. Summers; see note 10.
Alex Blankenship is paid $5,000 per month under her employment agreement as Chief Executive Officer of the Company. As of September 30, 2019, the Company owed Ms. Blankenship $140,438 for unpaid compensation.
During the year ended September 30, 2019, the Company issued 3,500,000 shares of common stock with a fair value of $68,250 to Ms. Blankenship as a bonus. These shares were valued at $0.195 per share, which was the closing price of the Company’s common stock on the date of the grant.
As of September 30, 2019, the Company owed Sydney Jim, our former CEO, $38,130 for accrued but unpaid compensation.
For the year ended September 30, 2018
Alex Blankenship is paid $5,000 per month under her employment agreement with the Company. As of September 30, 2018, the Company owed Ms. Blankenship $130,438 for unpaid compensation.
As of September 30, 2018, the Company owed Sydney Jim, our former CEO, $38,130 for accrued but unpaid compensation.
During the period from inception (April 29, 2016) through September 30, 2016, Mr. Summers advanced $1,000 to the Company for working capital. The advance was non-interest bearing and payable on demand. During the same period, Mr. Summers paid $275 of expenses on behalf of the Company. As of September 30, 2018, the Company owed Mr. Summers a total of $112,804. Effective June 18, 2018, the Company dissolved all relationships with Mr. Summers.
Note 5. Convertible Notes Payable
Convertible notes payable consisted of the following at September 30, 2019 and September 30, 2018:
|
|
September 30,
2019
|
|
|
September 30,
2018
|
|
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 bid prices during the 15 trading days prior to conversion. In November and December 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 bid prices during the 15 trading days prior to conversion. In December 2018, principal in the amount of $12,000 was converted into a 2,006,689 shares of common stock; in January 2019, principal in the amount of $31,000 and accrued interest in the amount of $2,580, respectively, were converted into an aggregate of 5,245,708 shares of common stock.
|
|
|
-
|
|
|
|
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 bid prices during the 15 trading days prior to conversion. In February 2019, principal in the amount of $33,000 and accrued interest in the amount $1,980 were converted into an aggregate of 2,608,527 shares of common stock.
|
|
|
-
|
|
|
|
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 bid prices during the 15 trading days prior to conversion. In March 2019, principal in the amount of $40,000 and accrued interest in the amount of $2,400 were converted into an aggregate of 7,298,763 shares of common stock.
|
|
|
-
|
|
|
|
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 April 29, 2019 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion. In May 2019, principal in the amount of $38,000 and accrued interest in the amount of $2,280 were converted into an aggregate of 8,597,234 shares of common stock.
|
|
|
-
|
|
|
|
-
|
|
|
|
September 30,
2019
|
|
|
September 30,
2018
|
|
Convertible note dated December 20, 2018 in the original principal amount of $33,000, maturing October 15, 2019, bearing interest at 12% per year, convertible beginning June 18, 2019 into common stock at a rate of 65% of the average of the two bid prices during the 15 trading days prior to conversion. In July 2019, principal in the amount of $33,000 and accrued interest in the amount of $1,980 were converted into an aggregate of 13,859,627 shares of common stock.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible note dated January 22, 2019 in the original principal amount of $38,000, maturing November 15, 2019, bearing interest at 12% per year, convertible beginning July 21, 2019 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion. In July 2019, principal in the amount of $11,600 was converted into an aggregate of 6,105,263 shares of common stock; in August 2019, principal in the amount of $26,400 and accrued interest in the amount of $2,280 were converted into an aggregate of 15,094,737 shares of common stock.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible note dated February 19, 2019 in the original principal amount of $38,000, maturing December 15, 2019, bearing interest at 12% per year, convertible beginning August 18, 2019 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion. In August 2019, principal in the amount of $38,000 and accrued interest in the amount of $2,280 were converted into an aggregate of 26,568,571 shares of common stock.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible note dated April 1, 2019 in the original principal amount of $45,000, maturing February 15, 2020, bearing interest at 12% per year, convertible beginning September 28, 2019 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion.
|
|
|
45,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible note dated May 21, 2019 in the original principal amount of $35,000, maturing March 15, 2020, bearing interest at 12% per year, convertible beginning November 17, 2019 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion.
|
|
|
35,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible note dated August 2, 2019 in the original principal amount of $33,000, maturing May 15, 2020, bearing interest at 12% per year, convertible beginning January 29, 2020 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion.
|
|
|
33,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible note dated August 13, 2019 in the original principal amount of $33,000, maturing May 30, 2020, bearing interest at 12% per year, convertible beginning February 9, 2020 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion.
|
|
|
33,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total current convertible notes payable
|
|
|
166,000
|
|
|
|
194,000
|
|
|
|
|
|
|
|
|
|
|
Less: discount on convertible notes payable
|
|
|
(52,205
|
)
|
|
|
(8,720
|
)
|
Total convertible notes payable, net of discount
|
|
$
|
113,795
|
|
|
$
|
185,280
|
|
During the year ended September 30, 2019, the Company also converted a note payable with a remaining principal of $0 into 3,300,001 shares of common stock with a fair value of $99,000; the Company recognized a loss in the amount of $99,000 on this conversion. This debt was originally settled in a previous year through conversions, but the Company honored a current year conversion notice resulting in a loss on conversion.
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.
During the year ended September 30, 2019, the Company recognized interest expense of $25,521 and amortization of discount on convertible notes payable of $334,842.
During the year ended September 30, 2018, the Company recognized interest expense of $19,893 and amortization of discount on convertible notes payable of $83,597.
Conversions to Common Stock
During the year ended September 30, 2019, the holders of the convertible notes payable elected to convert principal and accrued interest of $339,763 into 97,644,262 shares of common stock, resulting in a loss on conversion in the amount of $99,000.
During the year ended September 30, 2018, the holders of the convertible notes payable elected to convert principal and accrued interest of $109,180 into 20,738,954 shares of common stock, resulting in a loss on conversion in the amount of $360,480.
Advances
As of September 30, 2019 and 2018, the Company owed non-interest bearing advances of $59,650. The Company recorded imputed interest in the amount of $4,772 during the years ended September 30, 2019 and 2018.
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. During the year ended September 30, 2019, this note in the principal amount of $100,000 and accrued interest in the amount of $10,834 was forgiven by the lender; the Company recorded a gain in the amount of $110,834 in connection with the note forgiveness, and as of September 30, 2019, the balance of this note is $0. During the year ended September 30, 2019, the Company accrued interest in the amount of $1,371 and $4,058, respectively, on this note.
Note 7. Stockholders’ deficit
As of inception, the Company had authorized 480,000,000 shares of common stock and 20,000,000 shares of preferred stock. As of September 30, 2019, there were 170,467,283 shares of common stock, 5,800,000 shares of Series A Preferred Stock, 509,988 shares of Series D Preferred Stock, 1,000,000 shares of Series E Preferred Stock and 386,975 shares of Series F Preferred Stock outstanding.
Conversions to Common Stock
During the year ended September 30, 2019, the holders of the convertible notes payable elected to convert principal and accrued interest of $339,763 into 97,644,262 shares of common stock, resulting in a loss on conversion in the amount of $99,000.
During the year ended September 30, 2018, the holders of the convertible notes payable elected to convert principal and accrued interest of $109,180 into 20,738,954 shares of common stock, resulting in a loss on conversion in the amount of $360,480.
Common stock issued for services
During the year ended September 30, 2019, the Company issued 3,500,000 shares of common stock with a fair value of $68,250 to its President and CEO as a bonus. These shares were valued at $0.195 per share, which was the closing price of the Company’s common stock on the date of the grant.
Preferred Stock
Our authorized preferred stock consists of 20,000,000 shares of $0.001 par value preferred stock.
Series A Preferred Stock – Our board of directors has designated up to 6,000,000 shares of Series A Preferred Stock. The Series A Preferred Stock has a liquidation value of $2.00 per share. The initial number issued is 5,000,000 with additional shares to be issued as a dividend not to exceed a total of 6,000,000 shares. The rank of the Series A is prior to all common and preferred shares. In addition, the Series A Preferred Stock retains protective provisions to maintain their seniority with respect to liquidation or dissolution. The Series A Preferred Stock holds no voting rights and earns an 8% per annum dividend, payable in additional shares of Series A Preferred Stock. During the year ended September 30, 2019, the Company issued 800,000 shares of Series A Preferred Stock with a liquidation value of $1,600,000 as a dividend. At September 30, 2019 and 2018, there were 5,800,000 and 5,000,000 shares of our Series A Preferred Stock outstanding, respectively
Series B Preferred Stock – Our board of directors has designated up to 1,000,000 shares of Series B Preferred Stock. The Series B Preferred Stock has a liquidation value of $1.00 per share. The holders of the Series B Preferred Stock are entitled to dividends of 8% per year payable quarterly in cash or in shares of common stock at the option of the Company. The holders of the Series B Preferred Stock have no voting rights. The Series B Preferred Stock is redeemable at the option of the Company at a price of $1.00 per share.
During the year ended September 30, 2018, the Company issued 500,000 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. At September 30, 2019 and 2018, there were 0 and 30,000 shares, respectively, of our Series B Preferred Stock outstanding.
Series C Preferred Stock – On September 12, 2017, our board of directors designated up to 1,200,000 shares of Series C Preferred Stock with a liquidation value of $0.50 per share. The holders of the Series C Preferred Stock have no voting rights. The Series C Preferred Stock is convertible at the option of the holder into shares of common stock at a rate of one share of common stock for each share of Series C Preferred Stock. The Series C Preferred Stock is redeemable at the option of the Company at a price of $0.50 per share. The Series C Preferred Stock has been canceled, and there are no shares of Series C Preferred Stock outstanding as of September 30, 2019 and 2018.
Series D Preferred Stock – On September 21, 2017, our board of directors designated up to 539,988 shares of Series D Preferred Stock with a liquidation value of $1.00 per share. The holders of the Series D Preferred Stock have no voting rights. The Series D Preferred Stock is convertible at the option of the holder into shares of common stock at a rate of $0.01 per share of common stock. The Series D Preferred Stock is not redeemable. At September 30, 2019 and 2018, there were 509,988 shares of Series D Preferred Stock outstanding.
Series E Preferred Stock – On August 3, 2015, our board of directors designated 1,000,000 shares of Series E Preferred stock. The Series E Preferred stock is subordinate to our common stock. It does not receive dividends and does not participate in equity distributions. The Series E Preferred stock retained 2/3 of the voting rights in the Company.
At September 30, 2019 and 2018, there were 1,000,000 shares of Series E Preferred stock outstanding. Dividends, when, as and if declared by the Board of Directors, shall be paid out of funds at the time legally available for such purposes.
Series F Preferred Stock – On September 21, 2017, our board of directors designated up to 501,975 shares of Series F Preferred Stock with a liquidation value of $1.00 per share. The holders of the Series F Preferred Stock have no voting rights. The Series F Preferred Stock is convertible at the option of the holder into shares of common stock at a rate of $0.01 per share of common stock. The Series F Preferred Stock is not redeemable. During the year ended September 30, 2019, 60,000 shares of the Series F Preferred Stock were returned for cancellation. At September 30, 2019, 386,975 shares of the Series F Preferred Stock were issued and outstanding.
During the year ended September 30, 2018, the Company issued 2,500,000 shares of common stock upon conversion of 25,000 shares of Series F Preferred Stock. There was no gain or loss recognized on this transaction.
During the year ended September 30, 2019, the holders of 60,000 shares of the Series D Preferred stock returned these shares to the Company for cancellation. There was no gain or loss recognized on this transaction.
At September 30, 2019 and 2018, there were 386,975 and 446,975 shares of Series F Preferred Stock outstanding, respectively.
Beneficial conversion discount
During the year ended September 30, 2019, we recorded a beneficial conversion discount of $354,326 as a result of discounts on convertible notes payable issued during the period.
During the year ended September 30, 2018, we recorded a beneficial conversion discount of $91,133 as a result of discounts on convertible notes payable issued during the period.
Note 8. Income Taxes
There is no current or deferred income tax expense or benefit for the period ended September 30, 2019. The Company currently has net operating loss carryforwards aggregating $2,007,956 which expire in 2033. The deferred tax asset related to the net operating loss carryforwards has been fully reserved.
The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference for the period from April 29, 2016 (date of inception) through September 30, 2019 is the valuation allowance as follows.
Tax benefit at U.S. statutory rate
|
|
$
|
423,807
|
|
Valuation allowance
|
|
|
(423,807
|
)
|
Tax benefit, net
|
|
$
|
—
|
|
The Company has not recognized an income tax benefit for the period based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the current period presented is offset by a valuation allowance (100%) established against deferred tax assets arising from operating losses and other temporary differences, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.
The tax returns for fiscal year 2017 is still open for review by the Internal Revenue Service.
Note 9. Available-for-Sale Securities
The Company owns a non-controlling interest in certain marketable equity securities. This investment is accounted for as available-for-sale. The Company determined that the loss in value of the available-for-sale securities was considered other than temporary due to the fact that these shares are no longer trading on public markets. As a result, the loss of $10,673 was recognized as an impairment loss in the consolidated statement of operations. Available-for-sale securities is comprised of the following as of September 30,
|
|
2019
|
|
|
2018
|
|
Common stock of Biofuels Power Corp. (Initial Cost)
|
|
$
|
35,000
|
|
|
$
|
35,000
|
|
Cumulative realized loss on available-for-sale securities
|
|
|
(35,000
|
)
|
|
|
(24,327
|
)
|
Unrealized loss on available-for-sale securities
|
|
|
-
|
|
|
|
971
|
|
Available-for-sale securities
|
|
$
|
-
|
|
|
$
|
11,644
|
|
Note 10. Subsequent Events
Change of Corporate Domicile to Wyoming
On October 4, 2019, AngioSoma, Inc. (the “Company”) filed Articles of Continuance with the Secretary of State of Wyoming to continue its business in the state of Wyoming. The Company filed its Certificate of Dissolution with the Secretary of State of Nevada on October 21, 2019 since it is no longer a Nevada corporation. The Company undertook the necessary steps to notify the Financial Industry Regulatory Authority (“FINRA”) of the move from Nevada to Wyoming, and on October 28, 2019, FINRA notified the Company that FINRA has updated their system to reflect that the Company is now a Wyoming company.
Settlement Agreement
As of September 30, 2019, the Company was involved in litigation: Case No. 2018-48120; Somaceuticals, Inc. and AngioSoma, Inc. v. David Summers in the 151st District Court of Harris County, Texas. Dr. Summers provided scientific expertise to AngioSoma for a number of years, and there was a dispute regarding the ownership of several patents and other intellectual property. AngioSoma obtained a favorable settlement of the lawsuit on October 16, 2019, which resulted in the settlement of all claims of both parties along with (i) the assignment by the Company of certain technology and intellectual property to Dr. Summers, (ii) the assignment by Dr. Summers of any interest he owns in certain technology and intellectual property to the Company; and (iii) the assignment by Summers of 5,800,000 shares of Series A preferred stock of the Company to the Company.
Conversion of Notes Payable
On October 7, 2019, the holders of the convertible note payable dated April 1, 2019 elected to convert principal in the amount of $12,000 into 4,285,714 shares of the Company’s common stock at a price of $0.0028 per share. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.
On October 15, 2019, the holders of the convertible note payable dated April 1, 2019 elected to convert principal in the amount of $16,900 into 6,500,000 shares of the Company’s common stock at a price of $0.0026 per share. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.
On October 22, 2019, the holders of the convertible note payable dated April 1, 2019 elected to convert principal in the amount of $16,100 and accrued interest in the amount of $2,700 into a total of 8,545,455 shares of the Company’s common stock at a price of $0.0022 per share. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.
On December 2, 2019, the holders of the convertible note payable dated May 21, 2019 elected to convert principal in the amount of $15,000 into 7,894,737 shares of the Company’s common stock at a price of $0.0019 per share. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.
On December 16, 2019, the holders of the convertible note payable dated May 21, 2019 elected to convert principal in the amount of $12,000 into 6,666,667 shares of the Company’s common stock at a price of $0.0018 per share. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.
On December 27, 2019, the holders of the convertible note payable dated May 21, 2019 elected to convert principal in the amount of $8,000 and accrued interest in the amount of $2,100 into a total of 5,941,176 shares of the Company’s common stock at a price of $0.0017 per share. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.
Annual Meeting
On October 25, 2019, AngioSoma, Inc. (‘The Company’, ‘We’, ‘Our’) held its 2019 Annual Shareholder Meeting at 9:00 A.M. CDT in the corporate office (the “Meeting”) and today announces the results of the Meeting as follows:
Alex Blankenship was reelected as the sole director to serve until the next annual meeting or until her successor is elected and qualified.
The chairman made the following statement that was adopted by the majority shareholder and made a part of the 2019 Annual Shareholder Meeting:
I’ve heard rumors that some people believe Brent Atwood, a permanently barred securities broker and unregistered investment advisor will become affiliated with the Corporation in some capacity other than shareholder. All shareholders and the public generally are strongly advised that management and the holder of majority shareholder vote have no intention of permitting Atwood to have any position with the Corporation. In addition to being barred for life as a broker and being an unregistered investment advisor, we are informed the Securities and Exchange Commission enforcement division has opened a file on Atwood for insider trading in the Corporation’s stock.
M&K CPAS PLLC was confirmed as the Company’s auditor and there was no discussion or vote on executive compensation.