Quarterly Report (10-q)

Date : 02/19/2019 @ 8:41PM
Source : Edgar (US Regulatory)
Stock : Angiosoma, Inc. (PC) (SOAN)
Quote : 0.0094  0.0001 (1.08%) @ 9:33PM

Quarterly Report (10-q)



UNITED STATES

SECURITY AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

 


 

FORM 10-Q  

 


 

(MARK ONE)

 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31 , 2018

 

or

 

  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File Number: 333-170315

 

AngioSoma Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

 

27-3480481

(State or other jurisdiction of Incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

2500 Wilcrest Drive, 3 rd Floor
Houston, TX

 

77042

(Address of principal executive offices)

 

(Zip code)

 

Registrant’s telephone number, including area code : 832-781-8521

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  

Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer

Accelerated filer

 

Non-accelerated filer

Smaller reporting company

 

(Do not check is smaller reporting company)

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of February 13, 2019, 91,848,197 shares of common stock were issued and outstanding.

 

 

 

 


TABLE OF CONTENTS


 

PART I — FINANCIAL INFORMATION

4

 

 

Item 1. Financial Statements

4

 

 

Consolidated Balance Sheets as of December 31 , 2018 (Unaudited) and September 30, 201 8

4

 

 

Consolidated Statements of Operations for the Three Months Ended December 31 , 2018 and 2017 (Unaudited)

5

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended December 31 , 2018 and 2017 (Unaudited)

6

 

 

Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended December 31 , 2018 (Unaudited)

7

 

 

Consolidated Statements of Cash Flows for the Three Months Ended December 31 , 2018 and 2017 (Unaudited)

8

 

 

Notes to the Unaudited Consolidated Financial Statements

9

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

17

 

 

Item 4. Controls and Procedures

17

 

 

PART II — OTHER INFORMATION

18

 

 

Item 1. Legal Proceedings

18

 

 

Item 1A. Risk Factors

18

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

18

 

 

Item 3. Defaults upon Senior Securities

18

 

 

Item 4. Mine Safety Disclosures

18

 

 

Item 5. Other Information

18

 

 

Item 6. Exhibits

19

 

 

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

 

OTHER PERTINENT INFORMATION

 

When used in this report, the terms, “we,” the “Company,” “our,” and “us” refers to AngioSoma Inc., a Nevada corporation and its subsidiaries unless the context specifically indicates otherwise.

 

 

 

 

 


PART I — FINANCIAL INFORMATION


 

ITEM 1. FINANCIAL STATEMENTS

 

ANGIOSOMA INC.

CONSO LIDATED BALANCE SHEETS

DECEMBER 31 , 2018 and SEPTEMBER 30, 201 8

(UNAUDITED)

 

   

December 31 ,

   

September 30,

 
   

2018

   

201 8

 

CURRENT ASSETS

               

Cash and cash equivalents

  $ 53,909     $ 91,597  

Prepaid expenses and other current assets

    3,150       16,395  

Inventory

    40,377       3,815  

Total current assets

    97,436       111,807  
                 

Plant, property, and equipment, net of accumulated depreciation of $236 and $118

    1,176       1,294  

Available for sale securities, at market value

    11,644       11,644  
                 

TOTAL ASSETS

  $ 110,256     $ 124,745  
                 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

               

Current Liabilities

               

Accounts payable and accrued liabilities

  $ 143,523     $ 136,867  

Accounts payable to related party

    286,372       281,372  

Advances payable

    59,650       59,650  

Current portion of convertible notes payable, net of discount of $32,587 and $8,720, respectively

    129,413       185,280  

Note payable, default

    100,000       100,000  

Current portion of accrued interest payable

    235,810       232,307  
                 

Total current liabilities

    954,768       995,476  
                 
                 

TOTAL LIABILITIES

    954,768       995,476  
                 

COMMITMENTS AND CONTINGENCIES

            -  
                 

STOCKHOLDERS’ DEFICIT

               

Common stock, $0.001 par value; 480,000,000 shares authorized; 85,088,853 and 69,323,021 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively

    85,089       69,323  

Preferred stock, $0.001 par value; 20,000,000 shares authorized:

               

Series A Preferred Stock, 5,000,000 shares issued and outstanding at December 31, 2018 and September 30, 2018

    2,990,535       2,990,535  

Series B Preferred Stock, $0.001 par value; 0 and 30,000 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively

    -       -  

Series D Preferred Stock, $0.001 par value; 509,988 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively

    510       510  

Series E Preferred Stock, $0.001 par value; 1,000,000 shares issued and outstanding at December 31, 2018 and September 30, 2018

    1,000       1,000  

Series F Preferred Stock; $0.001 par value; 471,975 and 471,975 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively

    447       447  

Additional paid-in capital

    2,403,714       2,065,018  

Accumulated other comprehensive income

    971       971  

Accumulated deficit

    (6,326,778

)

    (5,998,535

)

                 

TOTAL STOCKHOLDERS’ DEFICIT

    (844,512

)

    (870,731

)

                 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

  $ 110,256     $ 124,745  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

ANGIOSOMA INC.

CONS OLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED DECEMBER 31 , 2018 AND 2017

(UNAUDITED)

 

   

Three Months Ended

December 31,

 
   

2018

   

2017

 
                 

REVENUE

  $ 275       -  

Cost of goods sold

    47       -  

Gross Profit

    228       -  
                 

OPERATING EXPENSES

               

General and administrative expenses

    129,623       128,695  

Total operating expenses

    129,623       128,695  
                 

LOSS FROM OPERATIONS

    (129,395

)

    (128,695

)

                 

OTHER INCOME (EXPENSE)

               

Loss on conversion of preferred stock

    -       (7,250 )

Loss on conversion of debt

    (115,311

)

    (328,200

)

Interest expense

    (83,537

)

    (1,205

)

                 

NET LOSS

  $ (328,243

)

  $ (465,350

)

                 

NET LOSS PER COMMON SHARE - Basic and diluted

  $ (0.00

)

  $ (0.01

)

                 

WEIGHTED AVERAGE SHARES OUTSTANDING

    74,910,986       51,356,893  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

 

ANGIOSOMA INC.

CONS OLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED DECEMBER 31 , 2018 AND 2017

(UNAUDITED)

 

   

Three Months Ended

December 31,

 
   

2018

   

2017

 
                 

NET LOSS

  $ (328,243

)

  $ (465,350

)

                 

Change in fair value of AFS securities

  $ -     $ 1,941  
                 

COMPREHENSIVE LOSS

  $ (328,243

)

  $ (463,409

)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

ANGIOSOMA INC.

CONS OLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED DECEMBER 3 1 , 2018

(UNAUDITED)

 

   

Common stock  

 

Series A 

Preferred Stock

 

Series B 

Preferred Stock

 

Series D 

Preferred Stock

 

Series E 

Preferred Stock

 

Series F 

Preferred Stock

 

Additional

paid-in

 

Accumulated Other 

Comprehensive

 

Accumulated

 

Total

Equity

 
   

Shares

   

Par

 

Shares

   

Amount

 

Shares

   

Amount

 

Shares

   

Amount

 

Shares

   

Amount

 

Shares

   

Amount

 

capital

 

Income

 

Deficit

 

(Deficit)

 

Balance, September 30, 2017

    45,584,067     $ 45,584     5,000,000     $ 2,990,535     30,000     $ 30     509,988     $ 510     1,000,000     $ 1,000     471,975     $ 472   $ 1,520,658   $ (970

)

$ (5,181,794

)

$ (623,975

)

                                                                                                               

Conversion of Series B Preferred stock  to common stock

    500,000       500     -       -     (30,000

)

    (30

)

  -       -     -       -     -       -     6,780     -     -     7,250  
                                                                                                               

Common stock issued for conversion of convertible note payable

    20,738,954       20,739     -       -     -       -     -       -     -       -     -       -     88,442     -     -     109,181  
                                                                                                               

Common stock issued for conversion of Series F Preferred stock

    2,500,000       2,500     -       -     -       -     -       -     -       -     (25,000

)

    (25

)

  (2,475

)

  -     -     -  
                                                                                                               

Beneficial conversion discount on convertible notes payable

    -       -     -       -     -       -     -       -     -       -     -       -     91,133     -     -     91,133  
                                                                                                               

Loss on conversion of debt

    -       -     -       -     -       -     -       -     -       -     -       -     360,480     -     -     360,480  
                                                                                                               

Other comprehensive gain

    -       -     -       -     -       -     -       -     -       -     -       -     -     1,941     -     1,941  
                                                                                                               

Net loss for the year ended September 30, 2018

    -       -     -       -     -       -     -       -     -       -     -       -     -     -     (816,741

)

  (816,741

)

                                                                                                               

Balance, September 30, 2018

    69,323,021     $ 69,323     5,000,000     $ 2,990,535     -     $ -     509,988     $ 510     1,000,000     $ 1,000     446,975     $ 447   $ 2,065,018   $ 971   $ (5,998,535

)

$ (870,731

)

                                                                                                               

Common stock issued for conversion of convertible note payable and accrued interest

    12,265,832       12,266     -       -     -       -     -       -     -       -     -       -     61,214     -     -     73,480  
                                                                                                               

Common stock issued to officer as compensation

    3,500,000       3,500     -       -     -       -     -       -     -       -     -       -     64,750     -     -     68,250  
                                                                                                               
Discount on convertible notes payable     -       -     -       -     -       -     -       -     -       -     -       -     97,421     -     -     97,421  
                                                                                                               
Loss on conversion of debt     -       -     -       -     -       -     -       -     -       -     -       -     115,311     -     -     115,311  
                                                                                                               

Net loss for the three months ended December 31, 2018

    -       -     -       -     -       -     -       -     -       -     -       -     -     -     (328,243

)

  (328,243

)

                                                                                                               
Balance, December 31, 2018     85,088,853     $ 85,089     5,000,000     $ 2,990,535     -     $ -     509,988     $ 510     1,000,000     $ 1,000     446,975     $ 447   $ 2,403,714   $ 971   $ (6,326,778

)

$ (844,512 )

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

ANGIOSOMA INC.

CONSO LIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED DECEMBER 31 , 2018 AND 2017

(UNAUDITED)

 

   

Three Months Ended

 
   

December 31,

 
   

2018

   

2017

 

CASH FLOW FROM OPERATING ACTIVITIES:

               

Net loss

  $ (328,243

)

    (465,350

)

Adjustments to reconcile net loss to net cash used in operating activities:

               

Depreciation

    118       -  

Amortization of discount on convertible note payable

    76,554       -  
Loss on conversion of preferred stock     -       7,250  

Loss on conversion of debt

    115,311       328,200  
Non-cash compensation     68,250       -  

Changes in operating assets and liabilities

               

Inventory

    (20,167

)

    -  

Prepaid expenses

    (3,150 )     -  

Accounts payable and accrued liabilities

    6,656       3,916  

Accounts payable to related party

    5,000       110,314  

Accrued interest payable

    6,983       1,823  

NET CASH USED IN OPERATING ACTIVITIES

    (72,688

)

    (13,847

)

                 

NET CASH USED IN INVESTING ACTIVITIES

    -       -  
                 

CASH FLOWS FROM FINANCING ACTIVITIES

               

Proceeds from convertible notes payable

    35,000       65,000  

NET CASH PROVIDED BY FINANCING ACTIVITIES

    35,000       65,000  
                 

NET (DECREASE) INCREASE IN CASH

    (37,688

)

    51,153  
                 

Cash at beginning of period

    91,597       14,100  
                 

Cash at end of period

  $ 53,909     $ 65,253  
                 

Cash paid during the period for:

               

Interest

  $ -     $ -  

Taxes

  $ -     $ -  
                 

Noncash investing and financing transactions:

               

Conversion of convertible notes payable into common stock

  $ 73,480     $ 6,000  

Change in fair value of available-for-sale securities

  $ -     $ 1,940  

Preferred stock issued for debt conversion

  $ -     $ 500  

Discount issued on convertible debt

  $ 97,421     $ -  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

ANGIOSOMA INC.

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.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

AngioSoma 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.

 

Critical Accounting Policies

 

We prepare our consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the condensed consolidated financial statements are prepared. We regularly review our accounting policies, and how they are applied and disclosed in our condensed consolidated financial statements.

 

While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.

 

Results of Operations

 

Three Months Ended December 31 , 2018 Compared to the Three Months Ended December 31 , 2017

 

Revenue.   We had revenue of $275 for the three months ended December 31, 2018, compared to $0 for the three months ended December 31, 2017. Revenue consisted of the sale of nutriceuticals.

 

Cost of goods sold.   We had cost of goods sold of $47 for the three months ended December 31, 2018, compared to $0 for the three months ended December 31, 2017. The increase was due to the increase in sales.

 

General and administrative expense.   We recognized general and administrative expense of $129,623 for the three months ended December 31, 2018 compared to $128,685 for the comparable period of 2017. The increase in general and administrative expense was related to an increase in non-cash compensation during the period.

 

Loss on conversion of debt and preferred stock.   We recognized a loss on the conversion of debt in the amount of $115,311 during the three months ended December 31, 2018 compared to $335,450 during the three months ended December 31, 2017. The decrease was due to the loss on conversion of preferred stock and convertible notes payable.

 

Interest expense.   We recognized interest expense of $83,537 for the three months ended December 31, 2018 compared to $1,205 for the comparable period of 2017. The increase was due primarily to the amortization of the discount on convertible notes payable during the current period in the amount of $76,554 compared to $2,931 during the comparable period of the prior year.

 

Net loss.   For the reasons above, we recognized a net loss of $328,243 for the three months ended December 31, 2018 compared to $465,350 for the three months ended December 31, 2017.

 

Liquidity and Capital Resources

 

At December 31, 2018, we had cash on hand of $53,909. The Company has negative working capital of $857,332. Net cash used in operating activities for the three months ended December 31, 2018 was $72,688. Cash on hand is adequate to fund our operations for less than twelve months. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to the Company. We have no material commitments for capital expenditures as of December 31, 2018.

 

 

Additional Financing

 

Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.

 

Off Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

 

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to a smaller reporting company.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Management’s Report on Internal Control over Financial Reporting

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2018. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2018, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

1.

As of December 31, 2018, we did not maintain effective controls over the control environment. Specifically, we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

 

2.

As of December 31, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.

 

Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

 

Change in Internal Controls Over Financial Reporting

 

There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

 

 


PART II — OTHER INFORMATION


 

ITEM 1. LEGAL PROCEEDINGS

 

We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.

 

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.

 

ITEM 1A. RISK FACTORS

 

Not applicable to a smaller reporting company.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Set forth below is information regarding the securities sold during the quarter ended December 31, 2018 that were not registered under the Securities Act:

 

Date of Sale

 

Title of Security

 

Number Sold

 

Consideration Received
and Description of
Underwriting or Other
Discounts to Market
Price or Convertible
Security, Afforded to
Purchasers

 

Exemption from
Registration
Claimed

 

If Option, Warrant
or Convertible
Security, terms of
exercise or
conversion

October 15, 2018   Common Stock     3,300,001   Conversion of Note Payable   Section 3(a)(9) of the Securities Act   Convertible at $0.0091 per share

November 23, 2018

 

Common Stock

    1,098,901  

Conversion of Note Payable

 

Section 3(a)(9) of the Securities Act

 

Convertible at $0.0151 per share

November 30, 2018

 

Common Stock

    1,442,308  

Conversion of Note Payable

 

Section 3(a)(9) of the Securities Act

 

Convertible at $0.0117 per share

December 10, 2018

 

Common Stock

    1,224,490  

Conversion of Note Payable

 

Section 3(a)(9) of the Securities Act

 

Convertible at $0.0107 per share

December 14, 2018

 

Common Stock

    3,193,443  

Conversion of Note Payable

 

Section 3(a)(9) of the Securities Act

 

Convertible at $0.0064 per share

December 28, 2018

 

Common Stock

    2,006,689  

Conversion of Note Payable

 

Section 3(a)(9) of the Securities Act

 

Convertible at $0.0064 per share

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

The Company has not defaulted upon senior securities.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

This item is not applicable to smaller reporting companies.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 

ITEM 6. EXHIBITS

 

3.1

Articles of Incorporation (1)

3.2

Bylaws (2)

14.1

Code of Ethics (3)

31.1

Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer (4)

32.1

Section 1350 Certification of principal executive officer and principal financial accounting officer (4)

101

XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q (4)(5)

 

(1)

Incorporated by reference to our Definitive Proxy Statement on Schedule 14A filed on April 8, 2015.

(2)

Incorporated by reference to our Form 10-K/A Amendment No. 1 for the year ended September 30, 2015 filed on January 22, 2016.

(3)

Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on November 3, 2010.

(4)

Filed or furnished herewith.

(5)

In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

AngioSoma Inc.

 

 

Date: February 19, 2019

By: /s/ Alex Blankenship

 

Alex Blankenship

 

Chief Executive Officer, President, Secretary, Treasurer, Principal Executive Officer, Principal Finance and Accounting Officer and Sole Director

 

 

 

 

 

 

20

 

 

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