Notes
to Consolidated Financial Statements
Sept
30, 2021, and 2020
Note
1 Nature of Operations
Omnia
Wellness Inc. (the “Company”) was incorporated as a Nevada corporation on March 2, 2016, by the filing of articles of incorporation
with the Secretary of State of the State of Nevada under the name Glolex, Inc.
On
June 25, 2019, Maksim Charniak, the Company’s then sole executive officer and director and the owner of 3,000,000 shares (pre-
stock split) of the Company’s common stock, sold all his shares of common stock of the Company to Amer Samad, resulting in a change
of control of the Company. As part of that transaction, Mr. Charniak resigned from all of his officer and director positions, and Mr.
Samad was appointed as the Chief Executive Officer, President, Chief Financial Officer and Secretary of the Company, and was appointed
to the Board of Directors of the Company. Mr. Samad also purchased 1,167,937 shares (pre-stock split) of the Company’s common stock
in a series of private transactions, resulting in Mr. Samad owning 4,167,937 shares (pre-stock split) of the Company’s common stock,
or approximately 95.6% of the issued and outstanding common stock of the Company.
On
March 5, 2020, the Company filed Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada to,
among other things, (i) increase the Company’s authorized shares of common stock from 75,000,000 to 100,000,000, (ii) create and
authorize 10,000,000 shares of “blank check” preferred stock, and (iii) effect a 12.6374:1 forward stock split of the common
stock. In addition, on March 16, 2020, the Company filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation
with the Secretary of State of the State of Nevada to change the name of the Company from Glolex Inc. to Omnia Wellness Inc. On April
15, 2020, the stock of the Company began trading on the OTC Pink market under the symbol “OMWS”.
On
April 17, 2020, the Company entered into a Share Exchange and Reorganization Agreement (the “Exchange Agreement”) with Omnia
Wellness Corporation (formerly known as Bed Therapies Inc.), a Texas corporation (“Omnia Corp.”), and the beneficial stockholders
of Omnia Corp. to acquire 100% of the issued and outstanding shares of capital stock of Omnia Corp. The transactions contemplated by
the Exchange Agreement were consummated on January 5, 2021, and, pursuant to the terms of the Exchange Agreement, among other things,
all outstanding shares of common stock of Omnia Corp., no par value, or the Omnia Corp. Shares, were exchanged for shares of the Company’s
common stock, par value $0.001 per share, based on the exchange ratio of one share of the Company’s common stock for every one
Omnia Corp. Share. The Company refers herein to the transactions contemplated by the Exchange Agreement, collectively, as the Acquisition.
Accordingly, the Company acquired 100% of Omnia Corp. in exchange for the issuance of 10,000,000 (not adjusted to reflect the Company’s
15:1 forward stock split on April 6, 2021) shares of the Company’s common stock and Omnia Corp. became the Company’s wholly
owned subsidiary. As of the closing of the Acquisition (the “Closing”), Mr. Samad, resigned as an officer and director of
the Company and agreed to cancel 52,656,888
(pre-stock split) shares of the Company’s
common stock owned beneficially and of record by him as part of the conditions to Closing, which were cancelled immediately following
the Closing. The Company also issued an aggregate of 1,269,665
(pre-stock split) shares of common stock on January
5, 2021, as a result of the conversion in accordance with their terms of outstanding convertible promissory notes in the aggregate principal
amount of approximately $539,000.
As
of immediately prior to the closing of the Acquisition, the Company entered into an Assignment and Assumption Agreement with RZI Consulting
LLC (the “Assignment Agreement”), pursuant to which RZI Consulting LLC assumed substantially all of the Company’s remaining
assets and liabilities through the closing of the Acquisition. Accordingly, as of the closing of the Acquisition, the Company had no
assets or liabilities (other than relating to general and administrative expenses).
Following
the Acquisition, the Company, through its wholly owned subsidiary Omnia Corp., now develops and markets products for wellness and physical
therapy markets, using patented dry-hydro therapy equipment that the Company plans to offer and sell in medical and fitness markets.
On
April 6, 2021, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to (i) increase the Company’s
authorized shares of common stock from 100,000,000 to 1,500,000,000, (ii) increase the Company’s authorized shares of “blank
check” preferred stock from 10,000,000 to 150,000,000, and (iii) effect a 1:15 forward stock split of the common stock.
The
Company’s principal executive office is located at 999 18th St., Suite 3000, Denver, CO 80202, and its telephone number
is 888-320-5711. The Company’s website address is www.omniawellness.com.
In
March 2020 the World Health Organization declared COVID-19 a pandemic. The Company is still assessing the impact COVID-19 may have on
its business, but there can be no assurance that this analysis will enable the Company to avoid part or all of any impact from the spread
of COVID-19 or its consequences, including downturns in business sentiment generally. The extent to which the COVID-19 pandemic and global
efforts to contain its spread will impact the Company’s operations will depend on future developments, which are highly uncertain
and cannot be predicted at this time, and include the duration, severity and scope of the pandemic and the actions taken to contain or
treat the COVID-19 pandemic.
Note
2 Summary of Significant Accounting Policies
The
principal accounting policies applied in the preparation of these financial statements are set out below.
Basis
of Presentation - The consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”).
Principles
of Consolidation - The consolidated financial statements include accounts of the Company’s wholly-owned subsidiary Omnia
Wellness Corp., and Omnia Wellness Corp.’s wholly-owned subsidiary Solajet Financing Company, LLC. All significant intercompany
balances and transactions have been eliminated in consolidation.
Accounting
Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts in the financial statements and the accompanying notes. Such estimates and assumptions impact, among
others, the following: the allowance for doubtful accounts, determination of impairment on investments and determination of recoverability
of deferred tax assets. Actual results could differ from those estimates.
Risks
and Uncertainties - The Company’s operations may be subject to significant risk and uncertainties including financial,
operational, regulatory, and other risks associated with a start-up company, including the potential risk of business failure. See Note
3 regarding going concern matters.
Loss
Per Common Share - Basic net loss per common
share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding
for each period presented. Diluted net loss per common share is computed by giving effect to all potential shares of common stock, including
stock options and warrants, to the extent dilutive. As of September 30, 2021, and 2020, there were 224,227,107
and 55,058,006,
respectively, of common stock equivalents.
Cash
- In the consolidated statement of cash flows, cash includes cash in hand and other short-term highly liquid investments with
original maturities of three months or less. The Company places its cash on deposit with financial institutions it believes to be of
high quality.
Related
Party Transactions - The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification
of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include (a) affiliates
of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through
one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed
under Rule 405 under the Securities Act); (b) entities for which investments in their equity securities would be required, absent the
election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method
by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under
the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company
may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one
of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly
influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting
parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests. The financial statements shall include disclosures of material related party transactions, other
than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of
transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements.
The disclosures shall include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions
to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other
information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts
of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing
the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet
presented and, if not otherwise apparent, the terms and manner of settlement.
Advance
Payments on Purchases of Inventory, related party - Advance payments on purchases of inventory consists of hydro-therapy beds
and related equipment that are held by DryRx, a company owned and controlled by the Chairman’s brother, under a Contract Services
Agreement until ownership is transferred, which is when a sale or a lease of the bed and equipment occurs or beds are moved to rental
facilities and placed in service. The value of the advance payments is stated at the lower of cost or market, determined using the first
in, first-out method. Inventory held by third parties in use, which is inventory installed at a third-party location and ownership is
maintained by the Company, is re-classified to fixed assets and depreciated over its useful life using the straight-line method of depreciation.
All inventory held as advance payments on purchases of inventory are available either for sale or for lease to be installed at third-party
locations and not transferred until a transaction has occurred. The balance of advance payments on purchases of inventory was $40,000
and $0 as of September 30, 2021 and 2020, respectively.
Fixed
Assets - Fixed assets are carried at cost less accumulated depreciation and amortization. Depreciation is computed using the
straight-line method over the estimated useful lives. The fixed assets include equipment placed in use at certain locations or leased
equipment to customers in which ownership is maintained by the Company. For leased equipment under agreements, depreciation is provided
using the straight-line method over the 60-month maximum useful life instead of the remaining agreement term. The accumulated depreciation
was calculated to be $169,230 and $97,276 as of September 30, 2021, and 2020, respectively.
Patent
Cost - Patents with a finite useful life that are acquired through the license agreement are carried at cost less accumulated
amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives.
The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any impairment
changes being accounted for on an annual basis. The expected life of the current patent recorded is expected to be 10 years. The accumulated
amortization was calculated to be $500,075 and $300,000 as of September 30, 2021, and 2020, respectively.
License
Payable, related party - License payable is the remaining balance due for the initial intangible asset cost. License payable
is classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
Warranty
Liability - For sales to customers, the Company provides a warranty on the beds sold which includes, a three-year warranty on
parts, a five-year warranty on the frame and a 90-day warranty on any labor. Warranty liability is accrued and is estimated at 5% of
monthly sales and adjusted for actual repairs, replacements, and warranties as they are incurred. The Company periodically assesses the
adequacy of our recorded warranty liability and book adjustments as claims data and experience warrants.
Beneficial
Conversion Features - The Company accounts for convertible notes payable in accordance with ASC 470-20. A beneficial conversion
feature (“BCF”) is a non-detachable conversion feature that is “in the money” at the commitment date, which requires
recognition of interest expense for underlying debt instruments and a deemed dividend for underlying equity instruments. A conversion
option is in the money if the effective conversion price is lower than the commitment date fair value of a share into which it is convertible.
As of September 30, 2021 and 2020, the Company did not have any conversion options that were in the money.
Derivatives
- The Company accounts for derivative instruments in accordance with ASC815 and ASC470, which establishes accounting and reporting
standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments
or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation.
Accounting for changes in fair of the derivative instruments depends on whether the derivatives qualify as hedging relationships and
the types of relationships designated are based on the exposures hedged. At September 30, 2021 and 2020, the Company did not have any
derivative instruments that were designated as hedges.
Revenue
- Revenue Recognition Standard, ASC 606 is used by the Company to recognize revenue. ASC 606 standards were jointly issued by
the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). The five conditions of ASC 606
applied to revenue are: 1. Identify the contract with the customer; 2. Identify the performance obligations in the contract; 3. Determine
the transaction price; 4. Allocate the transaction price to separate performance obligations; and 5. Recognize revenue as each performance
obligation is satisfied.
The
Company derives its revenues primarily from the sale and revenue share of hydro therapy massage beds and installation services. Revenues
are recognized when control of these products or services is transferred to its customers, in an amount that reflects the consideration
the Company expects to be entitled to in exchange for those products and services. Sales and other taxes the Company collects concurrent
with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue.
The Company also derives revenue from equipment placed in use in which customers pay to use the equipment and revenue is recorded at
the time the service is performed.
The
Company records leases of inventory under ASC 842 - Leases. Due to the probability of collection, the Company maintains the assets on
the financials and records a deposit liability for the payments received until the collectability becomes probable. Once collectability
becomes probable, the asset is derecognized, and the lease investment is recorded. The leases tend to have a fixed monthly payment, and
some include a revenue share for additional revenues the equipment generates. The leases have a lease term of 48 to 60 months and the
right of the lease to purchase the bed at the end of the lease term.
Income
Taxes - The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred
income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax
assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be
realized. 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 the statements of operations in the period that includes the enactment date. The Company adopted section
740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination
of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section
740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized
in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent
(50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de- recognition, classification,
interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
The
estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying
balance sheets, as well as tax credit carrybacks and carry-forwards. The Company periodically reviews the recoverability of deferred
tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
Management
makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates
of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions.
In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction
varies from estimates, additional allowances or reversals of reserves may be necessary.
Fair
Value of Financial Instruments - From inception, the Company adopted ASC 820, Fair Value Measurements and Disclosures,
which provides a framework for measuring fair value under GAAP. Fair value is defined 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. The standard also expands disclosures about instruments measured
at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair
value:
|
|
●
|
Level
1: Quoted prices for identical assets and liabilities in active markets;
|
|
|
|
|
|
|
●
|
Level
2: Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities
in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable
in active markets; and
|
|
|
|
|
|
|
●
|
Level
3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
The
carrying amounts of financial instruments including cash, accounts payable, warrant liability and notes payable approximated fair value
as of September 30, 2021, and 2020 due to the relatively short maturity of the respective instruments.
Recently
Issued Accounting Pronouncements - In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU
2016- 02”), which requires lessees to recognize a right of use asset and related lease liability for those leases classified as
operating leases at the commencement date and have lease terms of more than 12 months. This topic retains the distinction between finance
leases and operating leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2020, and interim periods within
those years, and must be applied under a modified retrospective transition approach for leases existing at, or entered into after, the
beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, Leases
(Topic 842): Targeted Improvements (“ASU 2018-11”). The amendments in ASU 2018-11 provide entities with an additional
(and optional) transition method to adopt the new lease requirements by allowing entities to initially apply the requirements by recognizing
a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s
reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease requirements would
continue to be in accordance with current GAAP (Topic 840). An entity electing this additional (and optional) transition method must
provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change
the existing disclosure requirements in Topic 840. The Company is currently evaluating the provisions of this guidance and assessing
its impact on the Company’s financial statements and disclosures. The Company does not believe this standard will have a material
impact on the Company’s financial statements and disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments
- Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The main objective
of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial
instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the
amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected
credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
ASU 2016-13 is effective for fiscal years beginning after December 15, 2021, including interim periods within those years, and must be
adopted under a modified retrospective method approach. Entities may adopt ASU 2016-13 earlier as of the fiscal years beginning after
December 15, 2018, including interim periods within those years. The Company is currently evaluating the provisions of this guidance
and assessing its impact on the Company’s financial statements and disclosures. The Company does not believe this standard will
have a material impact on the Company’s financial statements and disclosures.
Note
3 Going Concern
The
Company adopted Accounting Standards Update No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The Company’s
financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations,
realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the financial statements, the
Company had an accumulated deficit at September 30, 2021 and 2020, a net loss and net cash used in operating activities for the reporting
periods then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The
Company is commencing operations to generate sufficient revenue; however, the Company’s cash position may not be sufficient to
support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While
the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise
additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon
the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional
funds by way of private offering. The financial statements do not include any adjustments related to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue
as a going concern.
Note
4 Related Parties
The
Company outsources its manufacturing pursuant to a Contract Services Agreement with DryRX, LLC dated as of January 1, 2020, which replaced
and superseded the Contract Services Agreement with DryRX, LLC dated as of July 22, 2018, which expired in accordance with its terms.
The Contract Services Agreement, among other things, provides that DryRX shall provide manufacturing and support services on behalf of
the Company, and shall be responsible for the manufacturing oversight and production operations of the Company’s products. In return,
the Company is obligated to pay to DryRX a fee equal to 10% of net sales less cost-of-goods-sold and all expenses associated with the
services. DryRX is owned and controlled by Steve Howe’s brother.
The
Company entered into a Consulting Agreement with Massagewave, Inc, owned and controlled by Steve Howe, to assist with business development
and administrative activities. The agreement was entered into on May 1, 2018 and had required monthly payments of $15,000 per month.
The agreement expired on April 30, 2020, with renewal options. The Company incurred consulting expense, related party of $68,262 and
$111,884 as of September 30, 2021, and 2020, respectively. The Company also has an accounts payable, related party balance of $1,500
and $1,500 as of September 30, 2021, and 2020, respectively. The due to and due from accounts are to various investors and related parties
above for business related activities.
Note
5 Fixed Assets
The
carrying basis and accumulated depreciation of fixed assets at September 30, 2021 and 2020 is as follows:
Schedule
of Fixed Assets
|
|
|
Useful Lives
|
|
September 30, 2021
|
|
|
September 30, 2020
|
|
|
Inventory at 3rd Party Warehouse
|
|
5 years
|
|
$
|
212,000
|
|
|
|
329,000
|
|
|
Equipment in use
|
|
5 years
|
|
$
|
147,000
|
|
|
$
|
0
|
|
|
Vehicles and Trailers
|
|
5 years
|
|
|
60,266
|
|
|
|
60,266
|
|
|
Research and Development
|
|
5 years
|
|
|
0
|
|
|
|
217,076
|
|
|
Patent Costs
|
|
10 years
|
|
|
2,001,000
|
|
|
|
0
|
|
|
Building improvements
|
|
40 years
|
|
|
167,565
|
|
|
|
0
|
|
|
Less depreciation and amortization
|
|
|
|
|
669,304
|
|
|
|
97,277
|
|
|
Total fixed assets, net
|
|
|
|
$
|
1,918,527
|
|
|
|
509,065
|
|
The
Company recorded depreciation expense, including depreciation on equipment in use and leased equipment, of $61,700 and $57,340 for the
years ended September 30, 2021, and 2020, respectively.
Note
6 License Agreement, Related Party
On
April 30, 2019, the Company entered worldwide exclusive license with Drywave Technologies, Inc. (“Drywave”), a Company owned
by Steve Howe. On the terms and conditions of the agreement, the Company received intellectual property rights to manufacture, use, and
offer for sale all the products related to the patents and trademarks for dry hydrotherapy therapy technologies. The license fee to acquire
the technology was $2,000,000, and was paid as follows:
|
|
(a)
|
$350,000,
plus $1,000 escrow fee, due on or before April 30, 2019;
|
|
|
|
|
|
|
(b)
|
$200,000
due on or before October 30, 2019; and
|
|
|
|
|
|
|
(c)
|
$1,450,000
due on or before March 2, 2020.
|
The
Company made all the required payments as of March 31, 2021. After payment of the $2,000,000 License Fee, the Company pays to Drywave
a royalty of 3% of Net Sales for the longer of the period in which there are valid patent claims or ten years. The Company is performing
on this agreement.
The
company recorded the original license fee as an intangible asset as of April 30, 2019, and is amortizing the asset over the expected
useful life of the asset of 10 years. The Company recorded amortization expense of $50,025 and $50,000 for the Quarters ended September
30, 2021, and 2020, respectively.
Note
7 Notes Payable
The
following are the various notes payable of the Company:
PPP
Loan - During the fiscal year ended March 31, 2021, the Company received PPP loans under the Paycheck Protection Program sponsored
by the U.S. Small Business Administration (SBA) providing for proceeds of $294,066. The PPP Loan was made pursuant to the Coronavirus
Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the SBA. $145,411 was forgiven on May 4,
2021, on May 12, 2021, $151,502.67, including interest, was forgiven. Additionally, the Company borrowed an additional aggregate of $294,825
in January and February 2021 under the CARES Act, which may be forgiven subject to the terms of the Paycheck Protection Program. $146,959,
including interest was forgiven on August 17, 2021.
Nonconvertible
notes, related party - The Company has issued $1,244,655 in unsecured notes payable to investors. $1,180,937 is due in the
short term and $63,718 is due in the long term.
Schedule of Nonconvertible Notes Related Party
|
Interest Rate
|
|
|
Issuance Date
|
|
Maturity
|
|
|
September 30,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.00
|
%
|
|
12/31/2018
|
|
12/31/2020
|
|
|
|
55,250
|
|
|
|
4.00
|
%
|
|
12/31/2018
|
|
12/31/2020
|
|
|
|
66,900
|
|
|
|
4.00
|
%
|
|
12/31/2018
|
|
12/31/2020
|
|
|
|
74,220
|
|
|
|
4.00
|
%
|
|
9/30/2019
|
|
9/29/2021
|
|
|
|
314,000
|
|
|
|
4.00
|
%
|
|
9/17/2019
|
|
9/16/2020
|
|
|
|
81,500
|
|
|
|
4.00
|
%
|
|
9/30/2019
|
|
9/29/2021
|
|
|
|
12,450
|
|
|
|
1.00
|
%
|
|
12/31/2020
|
|
12/30/2022
|
|
|
|
254,382
|
|
|
|
1.00
|
%
|
|
12/31/2020
|
|
12/30/2022
|
|
|
|
235,600
|
|
|
|
1.00
|
%
|
|
12/31/2020
|
|
12/30/2022
|
|
|
|
83,785
|
|
|
|
4.00
|
%
|
|
12/31/2020
|
|
12/31/2021
|
|
|
|
53,100
|
|
|
|
4.00
|
%
|
|
12/31/2020
|
|
12/31/2021
|
|
|
|
13,468
|
|
|
|
|
|
|
|
|
|
|
|
|
1,244,655
|
|
Nonconvertible
notes, non-related- The Company has issued $2,670,844 in unsecured notes payable to investors. $2,468,219 is due in the short term
and $202,625 is due in the long term.
Schedule of Nonconvertible Notes Non Related
|
Interest
Rate
|
|
|
Default
Rate
|
|
|
Issuance
Date
|
|
Maturity
|
|
September 30,
2021
|
|
|
|
14.00
|
%
|
|
|
|
|
|
8/1/18
|
|
1/31/20
|
|
|
500,000
|
|
|
|
14.00
|
%
|
|
|
Additional
2
|
%
|
|
10/30/19
|
|
10/29/20
|
|
|
229,500
|
|
|
|
14.00
|
%
|
|
|
-
|
|
|
2/5/2020
|
|
2/5/2021
|
|
|
51,000
|
|
|
|
-
|
%
|
|
|
-
|
%
|
|
2/28/2020
|
|
8/27/2020
|
|
|
372,219
|
|
|
|
20.00
|
%
|
|
|
Additional
2
|
%
|
|
2/25/2020
|
|
8/24/2020
|
|
|
208,000
|
|
|
|
20.00
|
%
|
|
|
Additional
2
|
%
|
|
2/28/2020
|
|
8/27/2020
|
|
|
102,000
|
|
|
|
14.00
|
%
|
|
|
Additional
2
|
%
|
|
12/31/2019
|
|
12/31/2020
|
|
|
102,000
|
|
|
|
20.00
|
%
|
|
|
Additional
2
|
%
|
|
4/24/2020
|
|
4/23/2021
|
|
|
20,000
|
|
|
|
30.00
|
%
|
|
|
Additional
2
|
%
|
|
10/29/2020
|
|
2/28/2021
|
|
|
25,500
|
|
|
|
12.00
|
%
|
|
|
Additional
2
|
%
|
|
10/30/2020
|
|
11/1/2021
|
|
|
25,500
|
|
|
|
12.00
|
%
|
|
|
Additional
2
|
%
|
|
10/30/2020
|
|
11/1/2021
|
|
|
25,500
|
|
|
|
20.00
|
%
|
|
|
-
|
|
|
2/5/2021
|
|
7/4/2021
|
|
|
112,000
|
|
|
|
18.20
|
%
|
|
|
25.00
|
%
|
|
9/18/2019
|
|
9/18/2023
|
|
|
25,055
|
|
|
|
18.20
|
%
|
|
|
25.00
|
%
|
|
10/9/2019
|
|
10/9/2023
|
|
|
40,100
|
|
|
|
18.20
|
%
|
|
|
24.00
|
%
|
|
3/10/2020
|
|
3/10/2024
|
|
|
94,420
|
|
|
|
15.00
|
%
|
|
|
-
|
|
|
4/1/2021
|
|
3/31/2022
|
|
|
43,050
|
|
|
|
10.00
|
%
|
|
|
-
|
|
|
4/1/2021
|
|
3/31/2022
|
|
|
100,000
|
|
|
|
12.00
|
%
|
|
|
-
|
|
|
6/23/2021
|
|
6/22/2022
|
|
|
595,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,670,844
|
|
Convertible
notes, related party - The Company has issued $29,970 in unsecured notes payable to investors of the Company, bearing an annual interest
rate of 4% and a default interest rate of an additional 2%. The notes are due December 30, 2021 unless sooner paid in full or converted
in accordance with the terms of conversion, provided, however, that if a “Qualified IPO” does not occur on or before the
maturity date, the maturity date shall be extended automatically for an additional one-year period and, during such period, the notes
will bear interest at an annual rate of eight percent.
Convertible
notes, non related - As of the year ended September 30, 2021, the Company has issued an aggregate of $1,811,643
in unsecured notes payable bearing average annual
interest rates of 10%.
The notes are due between March – October 2022 unless sooner paid in full or converted in accordance with the terms of conversion;
provided, however, that if a “Qualified IPO” does not occur on or before the maturity date, the maturity date shall be extended
automatically for an additional one-year period and, during such period, the
notes will bear interest at an annual rate of eight percent (10%).
The maturity date of these notes was extended to December 2021.
Upon
commencement by the Company of an underwritten initial public offering or the completed Share Exchange and Reorganization Agreement,
of Borrower’s common stock, the Note principal, together with all accrued and unpaid interest, will be converted into Shares as
of the date of such commencement. After the share exchange was completed, the Company negotiated with the lenders to convert the loans
for securities of the Company determined by dividing the outstanding balance of the Note and accrued interest by $1.80, subject to adjustment.
The Company evaluates these notes at commencement for beneficial conversion features and derivatives and concluded there were none.
Auctus
Loan - On June 24, 2021, the Company entered into a Securities Purchase Agreement dated as of June 24, 2021, and issued and sold
to Auctus Fund, LLC (“Auctus”), a Senior Secured Promissory Note in the principal amount of $650,000 (the “Auctus Note”).
Also pursuant to the Purchase Agreement, in connection with the issuance of the Note, the Company issued two common stock purchase warrants
(separately, the “First Warrant” and the “Second Warrant” and together, the “Warrants”) to Auctus,
each allowing Auctus to purchase an aggregate of 4,333,333 shares of the Company’s common stock. The Second Warrant is subject
to cancellation pursuant to the terms of the Auctus Note and may not be exercised until the Trigger Date (as defined in the Second Warrant).
The Warrants each have an exercise price of $0.15 per share, subject to customary adjustments (including anti-dilution adjustments),
and may be exercised at any time until the three year anniversary of the Warrants; provided, however, in the event the Company repays
the Auctus Note in its entirety on or prior to the maturity date, the Second Warrant shall automatically expire and may only be exercised
in the event it does not so automatically expire. The Warrants include a cashless exercise provision as set forth therein.
Note
8 Shareholders’ Equity
Common
Stock - The Company is authorized to issue 1,500,000,000 shares of common stock, par value $0.001 per share. All shares of the Company’s
common stock have equal rights and privileges with respect to voting, liquidation, and dividend rights. Each share of common stock entitles
the holder thereof to:
|
|
a.
|
One
non-cumulative vote for each share held of record on all matters submitted to a vote of the stockholders;
|
|
|
|
|
|
|
b.
|
To
participate equally and to receive all such dividends as may be declared by the Board of Directors out of funds legally available;
therefore, and
|
|
|
|
|
|
|
c.
|
To
participate pro rata in any distribution of assets available for distribution upon liquidation.
|
Stockholders
have no pre-emptive rights to acquire additional shares of common stock or any other securities. Common shares are not subject to redemption
and carry no subscription or conversion rights.
Preferred
Stock - On April 6, 2021, the Company increased its authorized shares of “blank check” preferred stock from 10,000,000
to 150,000,000 shares, which may be issued from time to time in one or more series and/or classes. No shares of preferred stock have
been issued or are outstanding as of September 30, 2021.
The
Company has not declared or paid any dividends or returned any capital to common stock shareholders as of September 30, 2021, and 2020.
Note
9 Income Taxes
Income
Tax Expense
For
the fiscal year ended September 31, 2021, the reconciliation between the income tax benefit computed by applying the statutory U.S. federal
income tax rate to the pre-tax loss before income taxes, and total income tax expense recognized in the financial statements is the change
in the valuation allowance. For the fiscal year ended September 31, 2021, and 2020, the Company did not recognize any current income
tax expense or benefit due to a full valuation allowance on its deferred income tax assets.
NOL
Carryforwards and Other Matters
The
Company files income tax returns in the U.S. federal jurisdiction and the state of Colorado. The Company’s federal and state tax
years for the 2018 fiscal year and forward are subject to examination by taxing authorities.
The
Company did not have any unrecognized tax benefits as of September 30, 2021, and 2020. The Company’s policy is to account for any
interest expense and penalties for unrecognized tax benefits as part of the income tax provision. The Company does not anticipate that
unrecognized tax benefits will significantly increase or decrease within the next twelve months.
Note
10 Commitments and Contingencies
Off-Balance
Sheet Arrangements - The Company has no 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.
Leases
- The Company leases approximately 200 square feet on a month-to-month basis. Under the lease, the lease term continues for 12 months
and may be terminated upon 30 days prior notice from the landlord or, by the Company, upon 30 days prior written notice. As needed, additional
space can be leased in the same building the Company currently utilizes.
The
Company leases a warehouse facility of approximately 1,500 square feet utilized as a service location for Southern California clients.
Under the lease, the lease term continues for 37 months and may be terminated upon 90 days prior notice from the landlord or, by the
Company, upon 90 days prior written notice
Licenses-
The Company entered into a Master Facility License Agreement in which space is currently leased at two fitness facilities to operate
equipment in use. The licenses have an initial term of 90 days and then are on a month-to-month basis. The rent is a fixed fee times
the number of beds that ware installed in the space. After six months, the rental fee also includes 2% of gross revenue generated under
the license. Subsequent to June 30, 2021, the rental fee on the two facilities was modified to eliminate a fixed fee rental to a percentage
of gross revenues. The term was also modified so the initial term of each License granted be effective as of such license’s grant
date and shall continue for a period of two years, unless sooner terminated. At the expiration of a license term, the applicable license
shall automatically expire and terminate unless prior to the expiration of the license term, the parties enter into a mutually agreed
upon agreement for licensee to continue providing services within the applicable facility.
Legal
Matters - From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal
course of business. During the periods ended September 30, 2021 and 2020, there are no proceedings in which the Company or any of its
directors, officers or affiliates, or any registered or beneficial shareholders, is an adverse party or has a material interest adverse
to its interest.
Note
11 Subsequent Events
On
July 20, 2021, the principal balance under the Auctus Note was increased by $25,000 as consideration for Auctus waiving a covenant under
the Auctus Note requiring the Company to comply with the reporting requirements of the Securities Exchange Act of 1934.