UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
[X] |
Quarterly
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For
the quarterly period ended September 30, 2015 |
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[
] |
Transition
Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
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For
the transition period to __________ |
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Commission
File Number:000-54767 |
Rich
Pharmaceuticals, Inc.
(Exact
name of Registrant as specified in its charter)
Nevada |
46-3259117 |
(State
or other jurisdiction of incorporation or organization) |
(IRS
Employer Identification No.) |
|
|
9595
Wilshire Blvd., Suite 900
Beverly
Hills, California 90212 |
(Address
of principal executive offices) |
|
|
(424)
230-7001 |
(Registrant’s
telephone number) |
|
|
_____________________________________________________________ |
(Former
name, former address and former fiscal year, if changed since last report) |
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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 issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [
]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.
[
] Large accelerated filer Accelerated filer |
[
] Non-accelerated filer |
[X]
Smaller reporting company |
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [] Yes [X] No
The number
of shares outstanding of common stock as of October 9, 2015 was 4,420,461,736.
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TABLE
OF CONTENTS |
Page |
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|
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PART
I - FINANCIAL INFORMATION |
|
Item
1: |
Financial
Statements |
3 |
Item
2: |
Management’s
Discussion and Analysis of Financial Condition and Results of Operations |
4 |
Item
3: |
Quantitative
and Qualitative Disclosures About Market Risk |
5 |
Item
4: |
Controls
and Procedures |
5 |
|
PART
II - OTHER INFORMATION |
|
Item
1: |
Legal
Proceedings |
6 |
Item
1A: |
Risk
Factors |
6 |
Item
2: |
Unregistered
Sales of Equity Securities and Use of Proceeds |
12 |
Item
3: |
Defaults
Upon Senior Securities |
12 |
Item
4: |
Mine
Safety Disclosures |
12 |
Item
5: |
Other
Information |
12 |
Item
6: |
Exhibits |
12 |
Unless
otherwise indicated, in this Form 10-Q, references to “we,” “our,” “us,” the “Company,”
or the “Registrant” refer to Rich Pharmaceuticals Inc., a Nevada corporation.
FORWARD-LOOKING
STATEMENTS
This
Report on Form 10-Q contains forward-looking statements within the meaning of the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995. Reference is made in particular to the description of our plans and objectives
for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this
report. Such statements may be identified by the use of forward-looking terminology such as “may,” “will,”
“expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,”
or similar terms, variations of such terms or the negative of such terms. Such statements are based on management’s
current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially
from those described in the forward-looking statements. Such statements address future events and conditions concerning,
among others, capital expenditures, earnings, litigation, regulatory matters, liquidity and capital resources, and accounting
matters. Actual results in each case could differ materially from those anticipated in such statements by reason of factors
such as future economic conditions, changes in consumer demand, legislative, regulatory and competitive developments in markets
in which we operate, results of litigation, and other circumstances affecting anticipated revenues and costs. You should not place
undue reliance on these forward looking statements.
The
forward-looking statements made in this report on Form 10-Q relate only to events or information as of the date on which the statements
are made in this report on Form 10-Q. Except as required by law, we undertake no obligation to update or revise publicly
any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the
statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents
that we reference in this report, including documents referenced by incorporation, completely and with the understanding that
our actual future results may be materially different from what we anticipate.
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
RICH
PHARMACEUTICALS, INC.
TABLE
OF CONTENTS
SEPTEMBER
30, 2015
RICH
PHARMACEUTICALS, INC.
BALANCE
SHEETS (UNAUDITED)
AS
OF SEPTEMBER 30, 2015 AND MARCH 31, 2015
|
September 30, 2015 | |
March 31, 2015 |
ASSETS |
| | | |
| | |
Current Assets |
| | | |
| | |
Cash and equivalents |
$ | -- | | |
$ | 15,892 | |
Prepaid expenses |
| 2,093 | | |
| 7,578 | |
Total Current Assets |
| 2,093 | | |
| 23,470 | |
Property and equipment, net |
| 552 | | |
| 788 | |
TOTAL ASSETS |
$ | 2,645 | | |
$ | 24,258 | |
|
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| | | |
| | |
Current Liabilities |
| | | |
| | |
Accounts payable |
$ | 910,803 | | |
$ | 910,272 | |
Bank overdraft |
| 484 | | |
| -- | |
Accrued expenses |
| 338,289 | | |
| 200,891 | |
Due to related parties |
| 37,874 | | |
| 6,067 | |
Convertible notes payable, net of debt discount |
| 183,362 | | |
| 402,131 | |
Derivative liabilities |
| 405,496 | | |
| 139,983 | |
Total Current Liabilities |
| 1,876,308 | | |
| 1,659,344 | |
|
| | | |
| | |
Long-term Liabilities |
| | | |
| | |
Convertible notes payable, net of debt discount |
| 2,307 | | |
| 6,080 | |
Derivative liabilities |
| 33,370 | | |
| 77,775 | |
Total Long-term Liabilities |
| 35,677 | | |
| 83,855 | |
Total Liabilities |
| 1,911,985 | | |
| 1,743,199 | |
|
| | | |
| | |
Stockholders’ Deficit |
| | | |
| | |
Preferred stock, $.001 par value, 10,000,000 shares authorized, 6,000,000 shares issued and outstanding, respectively |
| 6,000 | | |
| 6,000 | |
Common stock, $.001 par value, 37,503,000,000 shares authorized, 4,072,077,779 and 1,541,083,957 shares issued and outstanding, |
| 4,072,077 | | |
| 1,541,083 | |
Additional paid-in capital |
| 2,404,530 | | |
| 4,168,956 | |
Accumulated deficit |
| (8,391,947 | ) | |
| (7,434,980 | ) |
Total Stockholders’ Deficit |
| (1,909,340 | ) | |
| (1,718,941 | ) |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
$ | 2,645 | | |
$ | 24,258 | |
See
accompanying notes to financial statements.
RICH PHARMACEUTICALS, INC.
STATEMENTS
OF OPERATIONS (UNAUDITED)
FOR
THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
|
Three Months ended
September 30, 2015 | |
Three Months ended
September 30, 2014 | |
Six Months ended
September 30, 2015 | |
Six Months ended
September 30, 2014 |
|
| |
| |
| |
|
REVENUES |
$ | -- | | |
$ | -- | | |
$ | -- | | |
$ | -- | |
|
| | | |
| | | |
| | | |
| | |
OPERATING EXPENSES |
| | | |
| | | |
| | | |
| | |
Consulting expenses |
| -- | | |
| 81,211 | | |
| 6,000 | | |
| 161,211 | |
Office expenses |
| 25,140 | | |
| 19,480 | | |
| 45,894 | | |
| 42,317 | |
Depreciation expense |
| 118 | | |
| 118 | | |
| 237 | | |
| 236 | |
Wages and taxes |
| 91,071 | | |
| 94,877 | | |
| 182,793 | | |
| 245,955 | |
Professional fees |
| 26,338 | | |
| 203,664 | | |
| 92,285 | | |
| 329,543 | |
Regulatory fees |
| 15,580 | | |
| 34,582 | | |
| 17,249 | | |
| 35,647 | |
Research and development |
| 2,000 | | |
| -- | | |
| 9,000 | | |
| -- | |
Stock-based compensation |
| 62,301 | | |
| 61,149 | | |
| 192,392 | | |
| 181,441 | |
Travel, meals and entertainment |
| 11,980 | | |
| 22,746 | | |
| 14,592 | | |
| 39,685 | |
|
| | | |
| | | |
| | | |
| | |
TOTAL OPERATING EXPENSES |
| 234,528 | | |
| 517,827 | | |
| 560,442 | | |
| 1,036,035 | |
|
| | | |
| | | |
| | | |
| | |
LOSS FROM OPERATIONS |
| (234,528 | ) | |
| (517,827 | ) | |
| (560,442 | ) | |
| (1,036,035 | ) |
|
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSE) |
| | | |
| | | |
| | | |
| | |
Amortization of debt discount |
| (101,837 | ) | |
| (26,785 | ) | |
| (270,988 | ) | |
| (26,785 | ) |
Change in value of derivative liability |
| 180,446 | | |
| (8,735 | ) | |
| 230,186 | | |
| (8,735 | ) |
Derivative expense |
| (142,073 | ) | |
| (109,872 | ) | |
| (335,244 | ) | |
| (109,872 | ) |
Interest expense |
| (11,082 | ) | |
| (7,680 | ) | |
| (20,255 | ) | |
| (9,929 | ) |
Interest expense – related party |
| (150 | ) | |
| -- | | |
| (224 | ) | |
| -- | |
|
| (74,696 | ) | |
| (153,072 | ) | |
| (396,525 | ) | |
| (155,321 | ) |
|
| | | |
| | | |
| | | |
| | |
LOSS
BEFORE PROVISION FOR INCOME TAXES |
| (309,224 | ) | |
| (670,899 | ) | |
| (956,967 | ) | |
| (1,191,356 | ) |
|
| | | |
| | | |
| | | |
| | |
PROVISION FOR INCOME TAXES |
| -- | | |
| -- | | |
| -- | | |
| -- | |
|
| | | |
| | | |
| | | |
| | |
NET LOSS |
$ | (309,224 | ) | |
$ | (670,899 | ) | |
$ | (956,967 | ) | |
$ | (1,191,356 | ) |
|
| | | |
| | | |
| | | |
| | |
NET LOSS PER SHARE: BASIC AND DILUTED |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
|
| | | |
| | | |
| | | |
| | |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED |
| 3,556,918,656 | | |
| 421,636,100 | | |
| 5,682,706,764 | | |
| 419,376,122 | |
See
accompanying notes to financial statements.
RICH
PHARMACEUTICALS, INC.
STATEMENTS
OF CASH FLOWS (UNAUDITED)
FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
|
Six months ended
September 30, 2015 | |
Six months ended
September 30, 2014 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
| | | |
| | |
Net loss for the period |
$ | (956,967 | ) | |
$ | (1,191,356 | ) |
Adjustments to reconcile net loss to net cash used in operating activities |
| | | |
| | |
Depreciation expense |
| 236 | | |
| 236 | |
Amortization of debt discount |
| 270,988 | | |
| 28,423 | |
Change in value of derivative liability |
| (230,186 | ) | |
| 8,735 | |
Derivative expense |
| 335,244 | | |
| 109,872 | |
Warrants issued for services |
| 13,259 | | |
| | |
Stock-based compensation |
| 192,392 | | |
| 181,441 | |
Changes in operating assets and liabilities: |
| | | |
| | |
Decrease in prepaid expenses |
| 5,485 | | |
| -- | |
Increase (Decrease) in accounts payable |
| 531 | | |
| (10,583 | ) |
Increase in accrued expenses |
| 137,398 | | |
| 123,185 | |
Increase in bank overdraft |
| 484 | | |
| -- | |
Net Cash Used by Operating Activities |
| (231,136 | ) | |
| (750,047 | ) |
|
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: |
| | | |
| | |
Acquisition of intangible assets |
| -- | | |
| -- | |
Net Cash Used by Investing Activities |
| -- | | |
| -- | |
|
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: |
| | | |
| | |
Loans received (repaid) from/to related parties |
| 30,417 | | |
| (36,000 | ) |
Proceeds from sale of common stock and warrants |
| 50,873 | | |
| 340,000 | |
Issuance of convertible note payable |
| 133,954 | | |
| 437,500 | |
Net Cash Provided by Financing Activities |
| 215,244 | | |
| 741,500 | |
|
| | | |
| | |
Net Increase (Decrease) in Cash and Cash Equivalents |
| (15,892 | ) | |
| (8,547 | ) |
|
| | | |
| | |
Cash and cash equivalents, beginning of period |
| 15,892 | | |
| 12,387 | |
Cash and cash equivalents, end of period |
$ | -- | | |
$ | 3,840 | |
|
| | | |
| | |
SUPPLEMENTAL CASH FLOW INFORMATION: |
| | | |
| | |
Interest paid |
$ | -- | | |
$ | -- | |
Income taxes paid |
$ | -- | | |
$ | -- | |
|
| | | |
| | |
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION: |
| | | |
| | |
Stock deposits reclassified as common stock and stock warrants |
$ | -- | | |
$ | 147,050 | |
Common stock issued for accrued expense |
$ | -- | | |
$ | 330,000 | |
Original issue discounts recorded on notes payable |
$ | 5,400 | | |
$ | 20,975 | |
Debt discounts recorded on convertible notes payable |
$ | 330,902 | | |
$ | 206,500 | |
Debt/interest converted into common stock |
$ | 308,451 | | |
$ | 12,000 | |
See
accompanying notes to financial statements.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Business
On
August 9, 2010 the Company was incorporated as Nepia Inc. in the State of Nevada. From August 9, 2010 to July 18, 2013, the Company
was in the business of developing, manufacturing, and selling small boilers aimed at farmers primarily in Southeast Asia. Beginning
on July 19, 2013, the Company acquired bio-pharmaceutical intellectual property for the treatment of acute myeloid leukemia (AML)
and is entering into phase II human studies. The goal is to perfect this indication for marketing purposes for distribution
world-wide. On August 26, 2013, as a consequence of our new business direction, the Company changed its name to Rich Pharmaceuticals,
Inc. (“Rich” or “the Company”).
On
July 18, 2013, the Company designated, from our 10,000,000 authorized shares of preferred stock, par value $0.001, 6,000,000 shares
of Series “A” Preferred Stock. Our Series “A” Preferred Stock has voting rights of 100 votes per share
and votes with common shares as a single class.
On
July 18, 2013, the Company entered into an Asset Assignment Agreement (the “Assignment Agreement”) with Imagic, LLC
and its principals to acquire certain assets including a US Patent entitled “Phorbol esters as anti-neoplastic and white
blood cell elevating agents” and all related intellectual property associated with the patent. In consideration for the
intellectual property the Company issued 82,767,038 common shares, and 6,000,000 Series “A” Preferred shares. The
common and preferred shares were valued at $123,973. The Company further agreed to use its best efforts to complete a financing
resulting in proceeds of at least $2,000,000. If the Company was unable to raise $400,000 according to the terms of the Assignment
Agreement, the patent reverts back to Imagic, LLC and its principals. On January 17, 2014, the right of reversion was terminated
in exchange for a payment of $20,000.
On
July 19, 2013, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations
(the “Sale Agreement”) with our prior officers and directors. Pursuant to the Sale Agreement, the Company transferred
all assets and business operations associated with our boiler business in exchange for assumption of all obligations associated
with that business and cancellation of loans amounting to $28,818. The cancellation of debt was recorded as additional paid-in
capital. In consequence to the Sale Agreement two former officers sold 531,292,500 common shares held by them to our new officer/director.
In turn, our new officer/director agreed to cancel 500,255,434 of those shares he received and returned them to treasury for retirement.
Certain other shareholders also agreed to cancel 262,521,000 common shares.
On
September 5, 2013, the Company increased the authorized common shares, par value $0.001, from 90,000,000 shares to 37,503,000,000
shares. Correspondingly, the Company affirmed a forward split of 416.7 for 1 in which each shareholder was issued 416.7 common
shares for each share held. All share and per share date included in these financial statements has been retrospectively adjusted
to account for the stock split.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. At September 30,
2015 and March 31, 2015 the Company had $-- and $15,892, respectively, of unrestricted cash.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis
of Presentation
The
financial statements of the Company have been prepared using the accrual basis of accounting in accordance with generally accepted
accounting principles in the United States of America and are presented in U.S. dollars. The Company has adopted a March 31 fiscal
year end.
Certain
information and note disclosures normally included in our annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with
a reading of the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March
31, 2015, as filed with the U.S. Securities and Exchange Commission.
Property
and Equipment
Property
and equipment is recorded at cost and is depreciated using the straight-line method over the estimated useful lives of the related
assets. The useful lives of the assets are as follows: Computer equipment, 3 years.
Long-Lived
and Intangible Assets
The
Company accounts for long-lived and intangible assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment
or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate.
The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result
from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an
impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value.
As of March 31, 2014, the Company fully impaired their intangible assets to $0. During the year ended March 31, 2015, the Company
acquired another intangible asset from a related party and valued it at the cost of the intangible to the related party totaling
$82,120. As of March 31, 2015, the Company fully impaired their intangible assets to $0.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist of cash and cash equivalents, prepaid expenses, accounts payable, accrued expenses,
amounts due to related parties, stock deposits, and a convertible note payable. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise
disclosed in these financial statements.
Fair
value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs
used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring
that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing
the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs
are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or
liability. The guidance establishes three levels of inputs that may be used to measure fair value:
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair
Value of Financial Instruments (continued)
Level
1 – Observable inputs such as quoted prices in active markets;
Level
2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;
Level
3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own
assumptions.
The
Company did not have any level 1 or level 3 financial instruments at September 30, 2015 and 2014. As of September 30, 2015, the
derivative liabilities were considered a level 2 item; see Note 8.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
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.
Income
Taxes
Income
taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and
are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax
assets that, based on available evidence, are not expected to be realized.
Revenue
Recognition
The
Company will recognize revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Stock-Based
Compensation
Stock-based
compensation is accounted for at fair value in accordance with ASC Topic 718. On September 6, 2013, the Company approved the adoption
of Rich Pharmaceuticals, Inc. 2013 Stock Option/Stock Issuance Plan (the "2013 Plan”). The 2013 Plan is intended to
aid in recruiting and retaining key employees, directors or consultants and to motivate them by providing incentives through the
granting of awards of stock options or other stock based awards. The 2013 Plan is administered by the board of directors. Directors,
officers, employees and consultants and our affiliates are eligible to participate under the 2013 Plan. A total of 390,004,800
common shares have been reserved for awards under the 2013 Plan. During the year ended March 31, 2015, the Company granted 19,750,000
stock options to officers, directors, employees and consultants. During the period ended September 30, 2015, the Company granted
304,000,250 stock options to officers, directors, employees and consultants. The Company made the following modifications to the
exercise prices of its options: January 12, 2015, the Company modified the exercise price on all outstanding stock options to
$0.0017; April 6, 2015, the Company modified the exercise price on all outstanding stock options to $0.0008 per share; August
4, 2015, the Company modified the exercise price on all outstanding stock options to $0.0001 per share.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic
Loss Per Share
The
basic earnings (loss) per share is calculated by dividing the Company’s net income available to common shareholders by the
weighted average number of common shares during the year. The diluted earnings (loss) per share is calculated by dividing the
Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding
during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as
of the first of the year for any potentially dilutive debt or equity.
Recent
Accounting Pronouncements
The
Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant impact on the
Company’s results of operations, financial position or cash flow.
NOTE
2 – PROPERTY AND EQUIPMENT
Property
and equipment, recorded at cost, consisted of the following as of September 30, 2015 and March 31, 2015:
|
September 30, 2015 | |
March 31, 2015 |
Computer equipment |
$ | 1,419 | | |
$ | 1,419 | |
Less: accumulated depreciation |
| (867 | ) | |
| (631 | ) |
Property and equipment, net |
$ | 552 | | |
$ | 788 | |
The
useful life of the computer equipment is 3 years.
Depreciation
expense was $236 and $473 for the periods ended September 30, 2015 and March 31, 2015, respectively.
NOTE
3 – INTANGIBLE ASSETS
On
July 18, 2013, the Company entered into an Asset Assignment Agreement (the “Assignment Agreement”) with Imagic, LLC
and its principals to acquire certain assets including a US Patent entitled “Phorbol esters as anti-neoplastic and white
blood cell elevating agents” and all related intellectual property associated with the patent. In consideration for the
intellectual property the Company issued 82,767,038 common shares and 6,000,000 Series “A” Preferred Stock. These
shares were valued at a total of $123,973. The Company has also paid additional funds to third parties to further the development
of this asset and terminate the right of reversion totaling $45,000. The Company analyzed the assets at March 31, 2014 and determined
that the value could not be supported and impaired the assets to $0.
On October
6, 2014, the Company entered into an Asset Assignment Agreement (the “Assignment Agreement”) with Imagic, LLC and
its principals to acquire certain assets including a US Patent entitled “Compositions and methods of use of Phorbol Esters
for the treatment of Hodgkin’s Lymphoma”, and all related intellectual property, inventions and trade secrets, data
and clinical study results. In consideration for the intellectual property the Company issued 220,792,028 common shares. These
shares were valued at a total of $7,904,355; however, since the asset was acquired from a related party the Company valued the
asset at the cost of the asset to the related party, $82,120, and treated the excess value as a deemed dividend reducing additional
paid in capital. The Company analyzed the assets at March 31, 2015 and determined that the value could not be supported and impaired
the assets to $0.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
4 – ACCRUED EXPENSES
Accrued
expenses consisted of the following as of September 30, 2015 and March 31, 2015:
|
September 30, 2015 | |
March 31, 2015 |
Wages and taxes |
| 313,822 | | |
| 175,357 | |
Accrued interest |
| 24,467 | | |
| 25,534 | |
Consulting |
| 0 | | |
| 0 | |
Total accrued expenses |
$ | 338,289 | | |
$ | 200,891 | |
NOTE
5 – RELATED PARTY DEBT AND TRANSACTIONS
On
July 19, 2013, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations
(the “Sale Agreement”) with our prior officers and directors. Pursuant to the Sale Agreement, the Company transferred
all assets and business operations associated with its boiler business in exchange for assumption of all obligations associated
with that business and cancellation of loans amounting to $28,818. The cancellation of debt was recorded as additional paid-in
capital.
During
the year ended March 31, 2015 and 2014, the Company received loans from companies controlled by its new CEO or shareholders totaling
$5,000 and $36,000, respectively. The loans are unsecured, non-interest bearing with no specific terms of repayment. The Company
repaid all $41,000 of the loans during the year ended March 31, 2015.
Also
during the year ended March 31, 2015, the Company received a $6,000 loan from a shareholder. The loan is unsecured and bears 8%
interest. The total due was $6,000 as of September 30, 2015. Interest accrued on the 2015 note as of September 30, 2015 was $217.
During
the period ending September 30, 2015, the Company received $24,200 in unsecured non-interest bearing loans from related parties.
These loans are deemed to be short-term and are payable at the discretion of the Company.
On September
6, 2013, the Company entered into an Employment Agreement with our Chief Executive Officer, Chief Financial Officer, President
and Secretary. The Employment Agreement provides for a term of two years; annual compensation of $275,000, a signing bonus of
$68,750, and options to purchase up to 3,000,240 shares of common stock at an exercise price of $0.02 per share. The CEO earned
$137,500 and $151,422 for the six months ended September 30, 2015 and 2014 (respectively) as a result of this agreement, of which
$258,130 and $154,062 is included in accrued expenses, as of September 30, 2015 and March 31, 2015.
NOTE
6 – STOCK DEPOSITS
The
Company received deposits for future stock purchases during the year ended March 31, 2014 totaling $147,050. The Company signed
subscription agreements with four investors on June 16, 2014 to grant 1,469,000 shares of common stock in exchange for the deposits.
The remaining balance as of March 31, 2015 and September 30, 2015 is $0.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
7 - CONVERTIBLE NOTES PAYABLE
On
March 11, 2014, the Company issued a convertible promissory note in the amount of $37,500. The note is due on December 13, 2014
and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued
interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price,
which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period ending
on the latest complete trading day prior to the conversion date. During the year ended March 31, 2015, the note holder converted
$37,500 of principal and $1,500 of interest into 2,159,271 shares of common stock leaving a remaining balance of $0. Accrued
interest was $0 as of March 31, 2015.
On
April 8, 2014, the Company issued a convertible note payable in the amount of $53,000. The note bears 8% interest and is due on
January 14, 2015. The loan becomes convertible 180 days after the date of the note. The
loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied
by the market price, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading
day period ending on the latest complete trading day prior to the conversion date. During the
year ended March 31, 2015, the note holder converted $53,000 of principal and $2,120 of interest into 6,089,041 shares of common
stock leaving a remaining balance of $0. Accrued interest was $0 as of March 31, 2015.
On
May 21, 2014, the Company issued a convertible note payable in the amount of $42,500. The note bears 8% interest and is due on
February 23, 2015. The note is currently in default. The loan becomes convertible 180 days
after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common
stock at a rate of 58% multiplied by the market price, which is the average of the lowest three (3) trading prices for the common
stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date. During the
year ended March 31, 2015, the note holder converted $42,500 of principal and $1,700 of interest into 15,252,347 shares of common
stock leaving a remaining balance of $0. Accrued interest was $0 as of March 31, 2015.
On
August 14, 2014, the Company issued a convertible note payable in the amount of $66,780 including an original issue discount of
$3,380. The note bears 8% interest and is due on August 14, 2015. The loan becomes convertible
180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s
common stock at a rate of 58% multiplied by the market price, which is the average of the lowest three (3) trading prices for
the common stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date.
During the year ended March 31, 2015, the note holder converted $66,780 of principal and $2,850 of interest into 121,442,490 shares
of common stock leaving a remaining balance of $0. Accrued interest was $0 as of March 31, 2015.
On
August 14, 2014, the Company issued a convertible note payable in the amount of $58,300 including an original issue discount of
$3,300. The note bears 8% interest and is due on August 14, 2015. The loan becomes convertible
180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s
common stock at a rate of 58% multiplied by the market price, which is the average of the lowest three (3) trading prices for
the common stock during the twenty-two (22) trading day period ending on the latest complete trading day prior to the conversion
date. During the year ended March 31, 2015, the note holder converted $58,300 of principal and $2,527 of interest into 131,091,236
shares of common stock leaving a remaining balance of $0. Accrued interest was $0 as of March 31, 2015.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
7 – CONVERTIBLE NOTE PAYABLE (CONTINUED)
On
August 13, 2014, the Company issued a convertible note payable in the amount of $61,111 including an original issue discount of
$5,500. The note has a one-time 12% interest charge and is due on August 14, 2016. The loan becomes convertible 180 days after
the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common stock
at a rate of 60% multiplied by the market price, which is the lowest trading prices for the common stock during the twenty (20)
trading day period ending on the latest complete trading day prior to the conversion date. During the year ended March 31, 2015,
the note holder converted $61,111 of principal and $6,266 of interest into 140,370,000 shares of common stock leaving a remaining
balance of $0. Accrued interest was $1,067 as of September 30, 2015.
On
August 19, 2014, the Company issued a convertible note payable in the amount of $57,895 including an original issue discount of
$2,895. The note bears 12% interest and is due on August 19, 2016. The loan becomes convertible immediately upon the date of the
note. The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 60%
multiplied by the market price, which is the lowest trading prices for the common stock during the twenty (20) trading day period
ending on the latest complete trading day prior to the conversion date. During the year ended March 31, 2015, the note holder
converted $57,895 of principal and $14,035 of interest (including a $10,000 penalty) into 179,825,000 shares of common stock leaving
a remaining balance of $0. Accrued interest was $0 as of March 31, 2015.
On
September 18, 2014, the Company issued a convertible note payable in the amount of $64,500 including an original issue discount
of $5,500. The note bears a one-time 12% interest charge and is due on September 18, 2015.
The loan becomes convertible immediately upon the date of the note. The loan and any accrued interest can then be converted into
shares of the Company’s common stock at a rate of 60% multiplied by the market price, which is the average of the lowest
three (3) trading prices for the common stock during the twenty (20) trading day period ending on the latest complete trading
day prior to the conversion date. However, if the market price during the 20 day trading period (mentioned above) is below $0.03,
then the conversion factor will be reduced to 55%. During the year ended March 31, 2015, the note holder converted $10,000 of
principal into 18,181,818 shares of common stock leaving a remaining balance of $54,500. During the period ending September 30,
2015 the note holder converted $54,500 in principal and $8,240 in accrued interest into 187,959,744 shares of common stock leaving
a remaining balance of $0. Accrued interest was $0 as of September 30, 2015.
On
September 23, 2014, the Company issued a convertible note payable in the amount of $55,000. The note bears 8% interest and is
due on June 23, 2015. The loan becomes convertible 180 days after the date of the note.
The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 55% multiplied
by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty-five (25)
trading day period ending on the latest complete trading day prior to the conversion date. During the year ended March 31, 2015,
the note holder converted $25,200 of the principle into 70,000,000 common shares leaving a remaining balance of $29,800.
During the period ending September 30, 2015 the note holder converted $29,800 in principal
and $2,158 in accrued interest into 86,467,222 shares of common stock leaving a remaining balance of $0. Accrued interest was
$0 as of September 30, 2015.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
7 – CONVERTIBLE NOTE PAYABLE (CONTINUED)
On
October 6, 2014, the Company issued a convertible promissory note in the amount of $33,000. The note is due on July 6, 2015 and
bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest
can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price, which is
the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period ending on the latest
complete trading day prior to the conversion date. During the period ending September 30, 2015 the note holder converted $33,000
in principal and $1,320 in accrued interest into 78,000,000 shares of common stock leaving a remaining balance of $0. Accrued
interest was $0 as of September 30, 2015.
On
November 6, 2014, the Company issued a convertible promissory note in the amount of $55,000. The note is due on May 6, 2015 and
bears interest at 12% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest
can then be converted into shares of the Company’s common stock at a rate of 52.5% multiplied by lowest daily market price,
for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion
date. During the period ending September 30, 2015 the note holder converted $55,000 in principal
and $3,553 in accrued interest into 281,363,421 shares of common stock leaving a remaining balance of $0. Accrued interest was
$0 as of September 30, 2015.
On
November 25, 2014, the Company issued a convertible promissory note in the amount of $43,000. The note is due on August 28, 2015
and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued
interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price,
which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period ending
on the latest complete trading day prior to the conversion date. During the period ending September 30, 2015 the note holder assessed
a default fee of $3,510 to increase the balance of the note and also converted $45,980 in principal into 281,363,421 shares of
common stock leaving a remaining balance of $530. Accrued interest was $2,064 as of September 30, 2015. The Company is in default
on the balance of this note.
On
December 16, 2014, the Company issued a convertible note payable in the amount of $33,333 including an original issue discount
of $3,333. The note bears a one-time 12% interest charge and is due on December 16, 2016.
The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into
shares of the Company’s common stock at a rate of 60% multiplied by the market price, which is the lowest trading prices
for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion
date. During the period ending September 30, 2015 the note holder converted $32,472 in principal into 423,700,000 shares of common
stock leaving a remaining balance of $861. Accrued interest was $5,262 as of September 30, 2015. This loan has an unamortized
original issue discount of $2,021 as of the end of the period.
On
January 9, 2015, the Company issued a convertible promissory note in the amount of $33,000. The note is due on October 13, 2015
and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued
interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price,
which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period ending
on the latest complete trading day prior to the conversion date. Interest
accrued on this note for the period ended September 30, 2015 is $1,909.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
7 – CONVERTIBLE NOTE PAYABLE (CONTINUED)
On
February 5, 2015, the Company issued a convertible promissory note in the amount of $54,000. The note is due on November 9, 2015
and bears interest at 8% per annum. The loan becomes convertible 180 days after the date of the note. The loan and any accrued
interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price,
which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period ending
on the latest complete trading day prior to the conversion date. Interest
accrued on this note as of September 30, 2015 is $2,805.
On
February 17, 2015, the Company issued a convertible note payable in the amount of $66,780 including an original issue discount
of $6,780. The note bears 8% interest and is due on August 14, 2015. The loan becomes convertible
180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s
common stock at a rate of 58% multiplied by the market price, which is the average of the lowest three (3) trading prices for
the common stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date.
During the period ending September 30, 2015 the note holder converted $32,280 in principal and $755 in accrued interest into 331,318,989
shares of common stock leaving a remaining balance of $34,500. Accrued interest was $1,701 as of September 30, 2015. The
Company is in default on the balance of this note.
On
February 25, 2015, the Company issued a convertible note payable in the amount of $27,778 including an original issue discount
of $2,778. The note bears a one-time 12% interest charge and is due on February 25, 2017.
The loan becomes convertible 180 days after the date of the note. The loan and any accrued interest can then be converted into
shares of the Company’s common stock at a rate of 60% multiplied by the market price, which is the lowest trading prices
for the common stock during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion
date. Interest accrued on this note for the period ended September 30, 2015 is $5,005. This loan has an unamortized original
issue discount of $1,954 as of the end of the period.
On
March 9, 2015, the Company issued a convertible note payable in the amount of $55,000. The note bears 8% interest and is due on
December 9, 2015. The loan becomes convertible 180 days after the date of the note. The
loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 55% multiplied
by the market price, which is the average of the lowest two (2) trading prices for the common stock during the twenty-five (25)
trading day period ending on the latest complete trading day prior to the conversion date. During the period ending September
30, 2015 the note holder converted $5,708 in principal and $2,266 in accrued interest into 177,203,333 shares of common stock
leaving a remaining balance of $49,292. Interest accrued on this note for the period ended September 30, 2015 is $187.
On
March 26, 2015, the Company issued a convertible note payable in the amount of $29,680 including an original issue discount of
$1,680. The note bears 8% interest and is due on March 23, 2016. The loan becomes convertible
180 days after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s
common stock at a rate of 58% multiplied by the market price, which is the average of the lowest three (3) trading prices for
the common stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date.
Interest accrued on this note as of September 30, 2015 is $1,222. This loan has an unamortized original issue discount
of $831 as of the end of the period.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
7 – CONVERTIBLE NOTE PAYABLE (CONTINUED)
On
March 2, 2015, the Company issued a convertible note payable in the amount of $58,300 including an original issue discount of
$3,300. The note bears 8% interest and is due on August 14, 2015. The loan becomes convertible
immediately at the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s
common stock at a rate of 58% multiplied by the market price, which is the average of the lowest three (3) trading prices for
the common stock during the twenty-two (22) trading day period ending on the latest complete trading day prior to the conversion
date. On March 2, 2015 the note holder converted $56,402 of the principle into 121,555,062 common shares leaving a remaining balance
of $1,898. During the period ending September 30, 2015 the note holder converted $1,898 in principal and $20 in accrued interest
into 5,300,000 shares of common stock leaving a remaining balance of $0. Accrued interest was $0 as of September 30, 2015.
On
May 5, 2015, the Company issued a convertible note payable in the amount of $68,900 including an original issue discount of $3,900.
The note bears 8% interest and is due on May 5, 2016. The loan becomes convertible 180 days
after the date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common
stock at a rate of 42% multiplied by the market price, which is the average of the lowest three (3) trading prices for the common
stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date. Interest
accrued on this note for the period ended September 30, 2015 is $2,235. This loan has an unamortized original issue discount of
$2,275 as of the end of the period.
On
May 6, 2015, the Company issued a convertible note payable in the amount of $10,500. The note bears 8% interest and is due on
February 8, 2016. The loan becomes convertible 180 days after the date of the note. The
loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 50% multiplied
by the market price, which is the average of the lowest three (3) trading prices for the common stock during the thirty (30) trading
day period ending on the latest complete trading day prior to the conversion date. Interest accrued on this note as of
September 30, 2015 is $338.
On
May 27, 2015, the Company issued a convertible note payable in the amount of $16,500. The note bears 8% interest rate and is due
on May 28, 2016. The loan becomes convertible on May 27, 2015, the issue date of the note.
The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 65% multiplied
by the market price, which is the average of the lowest three (3) trading prices for the common stock during the twelve (12) trading
day period ending on the latest complete trading day prior to the conversion date. Interest accrued on this note for the
period ended September 30, 2015 is $456. This loan has an unamortized original issue discount of $979 as of the end of the period.
On
August 28, 2015, the Company issued a convertible note payable in the amount of $15,000. The note bears 8% interest and is due
on August 28, 2016. The loan becomes convertible 180 days after the date of the note. The
loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of 50% multiplied
by the market price, which is the lowest trading prices for the common stock during the twenty (20) trading day period ending
on the latest complete trading day prior to the conversion date. Interest accrued on this note as of ended September 30,
2015 is $108.
On September
4, 2015, the Company issued a convertible note payable in the amount of $19,000. The note bears 8% interest and is due on June
4, 2016. The loan becomes convertible 180 days after the date of the note. The loan and
any accrued interest can then be converted into shares of the Company’s common stock at a rate of 55% multiplied by the
market price, which is the average of the lowest two (2) trading prices for the common stock during the fifteen (15) trading day
period ending on the latest complete trading day prior to the conversion date. Interest accrued on this note as of September
30, 2015 is $108.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
8 – DERIVATIVE LIABILITIES
In
accordance with AC 815, the Company has bifurcated the conversion feature of their convertible notes and recorded a derivative
liability on the date each note became convertible. The derivative liability was then revalued on each reporting date.
As
detailed in Note 7 (above) the Company has issued several convertible notes in varying amounts and terms, with the following loans
becoming convertible during the years ending March 31, 2015 and 2016: $37,500 note dated March 11, 2014; $53,000 note dated April
8, 2014; $42,500 note dated May 21, 2014; $55,000 note dated September 23, 2014; $66,780 note dated August 14, 2014; $58,300 note
dated August 14, 2014; $64,500 note dated September 18, 2014; $58,300 note dated March 2, 2015; $61,111 note dated August 13,
2014; $57,895 note dated August 19, 2014; $33,333 note dated December 16, 2014; $27,778 note dated February 25, 2015; $33,000
noted dated October 6, 2014; $55,000 note dated November 6, 2014; $43,000 note dated November 25, 2014; $68,900 note dated May
5, 2015; $16,500 note dated May 27, 2015; $10,500 note dated May 6, 2015; $15,000 note dated August 28, 2015; $19,000 note dated
September 4, 2015.
ASC
815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize
any change in the fair market value as another income or expense item. The Company’s only asset or liability
measured at fair value on a recurring basis is its derivative liability associated with the above convertible debt. During
the period ended September 30, 2015, the Company recorded a total change in the fair market value of the derivative liabilities
of $230,186.
The
Company uses the Black-Scholes option pricing model to value the derivative liability upon the initial conversion date and at
each reporting period. Included in the model to value the derivative liabilities of the above loans are the following
assumptions: stock price at valuation date of $0.0001 - $0.0008, exercise price of $0.00006 - $0.000483, dividend yield of zero,
years to maturity of 0.0356 – 1.46, a risk free rate of 0.01% - 0.33%, and annualized volatility of 56% - 713%.
The above loans were all discounted in full with the exception of the March 2, 2015 loan which had a debt discount of $46,370,
the May 5, 2015 loan which had an initial debt discount of $41,222, and the May 27, 2015 loan which had an initial debt discount
of $15,000. Based on the valuations on the initial valuation dates, the Company recognized debt discounts related to the conversion
features totaling $330,902 and a derivative expense of $335,244 related to the excess value of the derivative liabilities. Once
the loans are fully converted, the remaining derivative liability is reclassified to equity as additional paid-in capital. As
of September 30, 2015, unamortized debt discount, including original issue discounts totaled $173,873. The derivative liabilities
totaled $438,866 as of September 30, 2015, of which $33,370 related to long-term debt.
NOTE
9 – EQUITY TRANSACTIONS
The
Company has 37,503,000,000 common shares authorized with a par value of $ 0.001 per share.
The
Company has 10,000,000 preferred shares authorized with a par value of $ 0.001 per share.
On
July 18, 2013, the Company designated, from the 10,000,000 authorized shares of preferred stock, 6,000,000 shares of Series “A”
Preferred Stock. The Series “A” Preferred Stock has voting rights of 100 votes per share and votes with common shares
as a single class.
On
July 18, 2013, the Company granted 6,000,000 Series “A” Preferred shares and 82,767,038 common shares for the intellectual
property. The common and preferred shares were valued at a total of $123,973.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
9 – EQUITY TRANSACTIONS (CONTINUED)
On
July 19, 2013, our new officer/director agreed to cancel 500,255,434 common shares and returned them to treasury. Certain other
shareholders also agreed to cancel 262,521,000 common shares.
On
September 5, 2013, the Company increased the authorized common shares from 90,000,000 to 37,503,000,000. Correspondingly, the
Company affirmed a forward split of 416.7 for 1 in which each shareholder was issued 416.7 common shares for each share held.
All share and per share date included in these financial statements has been retrospectively adjusted to account for the stock
split.
On
October 29, 2013, the Company granted 250,000 units at $0.30 per unit. Each unit consisted of 1 share of common stock and one
common stock warrant with an exercise price of $0.50 and a one year term. The value of the warrants was derived by using the Black-Scholes
valuation model. A summary of the valuation inputs is below.
On
December 11, 2013, the Company granted 250,000 units at $0.30 per unit. Each unit consisted of 1 share of common stock and one
common stock warrant with an exercise price of $0.50 and a one year term. The value of the warrants was derived by using the Black-Scholes
valuation model. A summary of the valuation inputs is below.
On
March 10, 2014, the Company issued 83,334 units at $0.30 per unit. Each unit consisted of 1 share of common stock and one common
stock warrant with an exercise price of $0.50 and a one year term. The value of the warrants was derived by using the Black-Scholes
valuation model. A summary of the valuation inputs is below.
The
following is a summary of the inputs used to determine the value of the warrants issued in connection with common stock using
the Black-Scholes option pricing model.
Date |
October
29, 2013 |
December
11, 2013 |
March
10, 2014 |
Warrants |
250,000 |
250,000 |
83,334 |
Stock
price on grant date |
$0.30 |
$0.02 |
$0.02 |
Exercise
price |
$0.50 |
$0.50 |
$0.50 |
Expected
life |
1
year |
1
year |
1
year |
Volatility |
147% |
64% |
65% |
Risk-free
rate |
0.12% |
0.11% |
0.13% |
Calculated
value |
$10,473 |
$0 |
$0 |
Fair value
allocation of proceeds |
$7,381 |
$0 |
$0 |
On
April 4, 2014, the Company issued 83,334 units at $0.30 per unit. Each unit consisted of 1 share of common stock and one common
stock warrant with an exercise price of $0.50 and a one year term. The value of the warrants was derived by using the Black-Scholes
valuation model. A summary of the valuation inputs is below.
On
April 24, 2014, the Company issued 1,000,000 units at $0.25 per unit. Each unit consisted of 1 share of common stock and one common
stock warrant with an exercise price of $0.35 and a three year term. The value of the warrants was derived by using the Black-Scholes
valuation model. A summary of the valuation inputs is below.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
9 – EQUITY TRANSACTIONS (CONTINUED)
On
July 10, 2014, the Company issued 700,000 units at $0.043 per unit. Each unit consisted of 1 share of common stock and one common
stock warrant with an exercise price of $0.15 and a three year term. The value of the warrants was derived by using the Black-Scholes
valuation model. A summary of the valuation inputs is below.
On
July 29, 2014, the Company issued 700,000 units at $0.05 per unit. Each unit consisted of 1 share of common stock and one common
stock warrant with an exercise price of $0.15 and a three year term. The value of the warrants was derived by using the Black-Scholes
valuation model. A summary of the valuation inputs is below.
On
June 9, 2014, the Company issued 90,000,000 units at $0.0002 per unit. Each unit consisted of one common stock warrant with an
exercise price of $0.0002 and a five year term. The value of the warrants was derived by using the Black-Scholes valuation model.
A summary of the valuation inputs is below.
The
following is a summary of the inputs used to determine the value of the warrants issued in connection with common stock using
the Black-Scholes option pricing model.
Date |
April
4, 2014 |
April
24, 2014 |
July
10, 2014 |
July
29, 2014 |
June
9, 2015 |
Warrants |
83,334 |
1,000,000 |
700,000 |
700,000 |
90,000,000 |
Stock
price on grant date |
$0.199 |
$0.252 |
$0.037 |
$0.037 |
$0.0002 |
Exercise
price |
$0.50 |
$0.35 |
$0.15 |
$0.15 |
$0.0002 |
Expected
life |
1
year |
3
year |
3
year |
3
year |
5
year |
Volatility |
113% |
76% |
119% |
119% |
98% |
Risk-free
rate |
0.12% |
0.84% |
0.96% |
0.98% |
1.74% |
Calculated
value |
$3,181 |
$104,416 |
$12,130 |
$12,102 |
$13,259 |
Fair value
allocation of proceeds |
$2,822 |
$73,653 |
$8,637 |
$8,992 |
$13,259 |
The
following is a summary of the warrant activity for the period from April 1, 2013 to September 30, 2015:
|
Number
of warrants |
Weighted
average exercise price |
Outstanding,
April 1, 2013 |
- |
$0.00 |
Granted |
583,334 |
$0.50 |
Exercised |
- |
- |
Outstanding,
March 31, 2014 |
583,334 |
$0.50 |
Granted |
2,483,334 |
$0.24 |
Exercised |
- |
- |
Outstanding,
March 31, 2015 |
3,066,668 |
$0.29 |
Granted |
90,000,000 |
$0.0002 |
Exercised |
- |
- |
Outstanding,
September 30, 2015 |
93,066,668 |
$0.0097 |
On
May 7, 2014, the Company granted 2,500,000 shares to a consultant for prior services rendered. The Company had accrued $300,000
for these services as of March 31, 2014.
On
June 16, 2014, the Company issued 1,469,000 shares of common stock for stock deposits of $147,050. The Company had received the
deposits during the year ended March 31, 2014.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
9 – EQUITY TRANSACTIONS (CONTINUED)
On
July 1, 2014, the Company granted 1,000,000 shares to a professional for prior legal services rendered. The Company had accrued
$30,000 for these services as of June 30, 2014. The shares were valued on the grant date at the fair market value of $60,000 resulting
in a loss on the issuance of shares of $30,000.
On
October 6, 2014, the Company entered into an Asset Assignment Agreement (the “Assignment Agreement”) with Imagic,
LLC, a related party, and its principals to acquire certain assets including a US Patent entitled “Compositions and methods
of use of Phorbol Esters for the treatment of Hodgkin’s Lymphoma”, and all related intellectual property, inventions
and trade secrets, data and clinical study results. In consideration for the intellectual property the Company issued 220,792,028
common shares. These shares were valued at a total of $7,904,355; however, since the asset was acquired from a related party the
Company valued the asset at the cost of the asset to the related party, $82,120, and treated the excess value of $7,822,235 as
a deemed dividend reducing additional paid in capital.
Also
on October 6, 2014, the Board of Directors approved the issuance of 8,000,000 shares of common stock to the CEO and 4,000,000
shares of common stock to the Company’s attorney as bonuses. The shares were valued based on the closing stock price on
the grant date for a total value of $429,600.
On
November 19, 2014, the Company entered into an agreement with an unrelated vendor to provide six months of consulting services
in exchange for 500,000 shares of common stock. The shares were valued based on the closing stock price on the grant date for
a total value of $6,450. The entire contract was expensed as of March 31, 2015.
On
August 13, 2014, the Company entered into an investment agreement with an investor to invest up to $4,000,000 to purchase the
Company’s common stock. The price per share for each investment is determined by the lesser of: (1) 65% of the lowest traded
price of the Company’s common stock during the ten consecutive trading days prior to the drawdown notice date or (2) 65%
of the closing bid price on the day before the drawdown notice is submitted. During the year ended March 31, 2015, the Company
issued 79,961,892 shares of common stock to this investor for total proceeds of $220,000.
On
April 22, 2015, the Company sold 10,038,108 shares of common stock for $5,405 in cash, which was paid directly to a vendor for
accounts payable.
On
June 25, 2015, the Company sold 154,245,477 shares of common stock for $10,797 in cash, of which $3,750 was paid directly to professionals
in connection with the expenses of that sale, and $7,047 was retained by the Company.
On
July 7, 2015, the Company sold 161,942,326 shares of common stock for $11,336 in cash, of which $3,750was paid directly to a vendor
for professional services.
On
July 15, 2015, the Company sold 143,928,240 shares of common stock for $10,075 in cash.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
9 – EQUITY TRANSACTIONS (CONTINUED)
During
the year ended March 31, 2015 and the period ended September 30, 2015, the Company received, as listed, conversion notices from
various note holders. The Company issued the following common shares to satisfy the conversion of the following debt and interest:
Date |
Debt/Interest
Converted |
Common
Stock Issued |
Price
per Share |
September
22, 2014 |
$12,000 |
550,459 |
$0.0218 |
October
1, 2014 |
$12,000 |
648,649 |
$0.0185 |
October
8, 2014 |
$9,000 |
505,618 |
$0.0178 |
October
16, 2014 |
$6,000 |
454,545 |
$0.0132 |
October
29, 2014 |
$15,000 |
1,250,000 |
$0.0120 |
November
3, 2014 |
$10,000 |
819,672 |
$0.0122 |
November
7, 2014 |
$12,000 |
1,188,119 |
$0.0101 |
November
19, 2014 |
$18,120 |
2,831,250 |
$0.0064 |
December
8, 2014 |
$15,000 |
3,488,372 |
$0.0043 |
December
15, 2014 |
$12,000 |
4,285,714 |
$0.0028 |
December
26, 2014 |
$17,200 |
7,478,261 |
$0.0023 |
February
11, 2015 |
$29,900 |
74,750,000 |
$0.0004 |
February
12, 2015 |
$17,333 |
37,356,055 |
$0.00046 |
February
13, 2015 |
$17,894 |
37,280,000 |
$0.00048 |
February
15, 2015 |
$35,730 |
73,924,324 |
$0.00048 |
February
17, 2015 |
$17,003 |
36,643,945 |
$0.00046 |
February
23, 2015 |
$20,603 |
47,090,000 |
$0.00044 |
February
23, 2015 |
$17,003 |
36,643,945 |
$0.00046 |
February
24, 2015 |
$9,488 |
20,447,291 |
$0.00046 |
February
26, 2015 |
$42,030 |
105,075,000 |
$0.0004 |
February
27, 2015 |
$26,880 |
56,000,000 |
$0.00048 |
March
2, 2015 |
$56,402 |
121,555,062 |
$0.00046 |
March
9, 2015 |
$33,900 |
47,518,166 |
$0.00071 |
March
10, 2015 |
$25,200 |
70,000,000 |
$0.00036 |
March
20, 2015 |
$10,000 |
18,181,818 |
$0.00006 |
March
31, 2015 Total |
$498,686 |
805,966,265 |
|
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
9 – EQUITY TRANSACTIONS (CONTINUED)
Date |
Debt/Interest
Converted |
Common
Stock Issued |
Price
per Share |
April
1, 2015 |
$16,650 |
41,111,111 |
$0.00041 |
April
6, 2015 |
$10,000 |
20,964,361 |
$0.00048 |
April
8, 2015 |
$15,309 |
45,356,111 |
$0.00034 |
April
8, 2015 |
$20,001 |
45,454,545 |
$0.00044 |
April
9, 2015 |
$14,320 |
32,545,455 |
$0.00044 |
April
14, 2015 |
$10,000 |
23,696,682 |
$0.00042 |
April
16, 2015 |
$1,918 |
5,300,000 |
$0.00036 |
April
21, 2015 |
$10,000 |
25,974,026 |
$0.00039 |
April
29, 2015 |
$15,000 |
38,961,039 |
$0.00039 |
May
4, 2015 |
$5,083 |
13,146,439 |
$0.00039 |
May
12, 2015 |
$28,456 |
90,337,960 |
$0.00031 |
May
20, 2015 |
$20,199 |
94,764,514 |
$0.00021 |
May
20, 015 |
$17,240 |
78,363,636 |
$0.00022 |
May
27, 2015 |
$13,568 |
70,180,137 |
$0.00019 |
May
29, 2015 |
$15,000 |
88,235,295 |
$0.00017 |
June
11, 2015 |
$9,897 |
94,260,947 |
$0.00010 |
June
16, 2015 |
$14,100 |
117,500,000 |
$0.00012 |
June
16, 2015 |
$13,565 |
113,041,667 |
$0.00012 |
June
22, 2015 |
$7,415 |
123,583,333 |
$0.00006 |
June
22, 2015 |
$14,384 |
247,992,413 |
$0.00006 |
June
23, 2015 |
$7,752 |
129,200,000 |
$0.00006 |
September
16, 2015 |
$7,974 |
177,203,333 |
$0.000045 |
September
28, 2015 |
$10,000 |
166,666,667 |
$0.00006 |
September
29, 2015 |
$10,620 |
177,000,000 |
$0.00006 |
Sept
30, 2015 Total |
$308,451 |
2,060,840 |
|
The
Company accounts for employee stock-based compensation in accordance with the guidance of ASC Topic 718: Compensation - Stock
Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values.
The
Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants
and other non-employees. In accordance with ASC Topic 505-50, these stock options issued as compensation for services provided
to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the
option, whichever can be more clearly determined.
During the
year ended March 31, 2014, the Company granted 47,503,280 stock options to officers, directors, employees and consultants. During
the year ended March 31, 2015, the Company granted 19,750,000 stock options to officers, directors, employees and consultants.
During the period ended September 30, 2015, the Company granted 304,000,250 stock options to officers, directors, employees and
consultants The options have been re-priced twice as follows: (1) Effective January 12, 2015, the Company approved the re-pricing
of all 67,253,280 previously granted options under the Company’s 2013 Equity Incentive Plan, which had exercise prices between
$.0191984 per share and $0.30 per share, to $0.0017 per share which was the closing price of the Company’s common stock
on January 9, 2015. All of the other terms of the options remained unchanged.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
9 – EQUITY TRANSACTIONS (CONTINUED)
(2)
Effective April 6, 2015, the Company approved the re-pricing of all 271,253,530 previously granted options under the Company’s
2013 Equity Incentive Plan, which had exercise prices between $.0008 per share and $0.0017 per share, to $0.0008 per share which
was the closing price of the Company’s common stock on April 6, 2015. All of the other terms of the options remained unchanged.
(3) Effective August 4, 2015, the Company approved the re-pricing of all 371,253,530 previously granted options under the Company’s
2013 Equity Incentive Plan, which had exercise prices between $.0008 per share and $0.0002 per share, to $0.0002 per share which
was the closing price of the Company’s common stock on August 4, 2015. All of the other terms of the options remained unchanged.
The Company revalued all existing options on January 12, 2015 and again on April 6, 2015, and again on August 4, 2015 using the
Black-Scholes option pricing model using the initial terms of the options and the modified terms of the options. The difference
in the valuations was recorded as additional expense. The re-pricing of the options resulted in the recognition of an additional
$50,448 on January 9, 2015 and an additional $9,316 on April 6, 2015, and an additional $47,463 on August 4, 2015 in related stock
based compensation expense for those periods.
The
following is a summary of the inputs used to determine the value of the options using the Black-Scholes option pricing model.
Date |
September
6, 2013 |
February
7, 2014 |
March
14, 2014 |
May
7, 2014 |
July
23, 2014 |
October
6, 2014 |
April
6, 2015 |
June
9, 2015 |
Options |
41,003,280 |
1,500,000 |
5,000,000 |
3,500,000 |
750,000 |
15,500,000 |
204,000,250 |
100,000,000 |
Stock
price grant date |
$0.02 |
$0.02 |
$0.30 |
$0.12 |
$0.069 |
$.0358 |
$0.0008 |
$0.0002 |
Initial
Exercise price |
$0.0191984 |
$0.0191984 |
$0.30 |
$0.12 |
$0.069 |
$0.0191984 |
$0.0008 |
$0.0002 |
Modified
Exercise price |
$0.0001 |
$0.0001 |
$0.0001 |
$0.0001 |
$0.0001 |
$0.0001 |
$0.0001 |
$0.0001 |
Expected
life |
10.00 |
10.00 |
10.00 |
10.00 |
10.00 |
5.0 |
5.0 |
5.0 |
Volatility |
76% |
74% |
74% |
73% |
88% |
101% |
99% |
99% |
Risk-free
rate |
2.94% |
2.71% |
2.65% |
2.56% |
2.53% |
1.04% |
1.31% |
1.74% |
Calculated
value |
$663,307 |
$23,825 |
$1,182,141 |
$315,772 |
$45,109 |
$454,798 |
$120,778 |
$14,838 |
Modified
value |
$83,850 |
$3,069 |
$10,232 |
$7,164 |
$1,537 |
$31,408 |
$151,221 |
$16,347 |
The
following is a summary of the option activity for the period April 1, 2013 through September 30, 2015:
|
Number
of options |
Weighted
average exercise price |
Outstanding,
April 1, 2013 |
- |
$0.00 |
Granted |
47,503,280 |
$0.0001 |
Exercised |
- |
- |
Outstanding,
March 31, 2014 |
47,503,280 |
$0.0001 |
Granted |
19,750,000 |
$0.0001 |
Exercised |
- |
- |
Expired |
- |
- |
Outstanding,
March 31, 2015 |
67,253,280 |
$0.0001 |
Granted |
304,000,250 |
$0.0001 |
Exercised |
- |
- |
Expired |
- |
- |
Outstanding,
September 30, 2015 |
371,253,530 |
$0.0001 |
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
10 – COMMITMENTS AND CONTINGENCIES
The
Company leases office space on a verbal month-to-month agreement. Monthly rent is approximately $2,600.
The
inventor of the intellectual property which was assigned to Rich Pharmaceuticals, Inc. in July 2013 by Imagic, LLC and Richard
L. Chang’s Holdings, LLC is presently in declaratory relief litigation with Biosuccess Biotech, Co. LTD. (“Biosuccess”),
a company who was previously assigned licensing rights in the intellectual property. In connection with this litigation, on January
17, 2014, the Company received notice of a complaint filed by Biosuccess against the Company, Imagic, LLC, Richard L. Chang’s
Holdings, LLC, and Ben Chang (our CEO and a director) in the United States District Court, Central District of California Western
Division (the “District Court”). The Complaint includes allegations of patent and copyright infringement, misappropriation
of trade secrets, breach of fiduciary duty, unfair competition and other causes of actions against the Company, Imagic, LLC, Richard
L. Chang’s Holdings, LLC, and Ben Chang (the “Litigation”). The Complaint seeks relief which includes compensatory
damages, attorneys’ fees and costs, an award of treble damages, and such other relief as the court may deem just and proper.
In January 2015, the trial in the Litigation was concluded in the Court. The Court has not rendered a verdict in the Litigation
as of the date of filing.
The
Company believes the allegations in the complaint are without merit and the Company intends to defend itself in the Litigation.
However, the Company has incurred expenses and the diversion of financial resources and management personnel in responding to
the complaint. Additionally, an adverse determination against the Company in the Litigation may subject us to significant liabilities
or require us to seek licenses that may not be available from third parties on commercially favorable terms, if at all. Further,
an adverse determination against the Company in the Litigation may require us to pay substantial financial damages, which can
be tripled if the infringement is deemed willful, or be required to discontinue or significantly delay development, marketing,
selling and licensing of the Company’s affected products and intellectual property rights.
NOTE
11 – LIQUIDITY AND GOING CONCERN
The
Company has a working capital deficit, has not yet received revenues from sales of products or services, and has incurred losses
since inception. These factors create substantial doubt about the Company’s ability to continue as a going concern. The
financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
The
ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common
stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling its
equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no
assurance the Company will be successful in these efforts.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
12 – INCOME TAXES
As
of September 30, 2015, the Company had net operating loss carry forwards of approximately $8,391,947 that may be available to
reduce future years’ taxable income in varying amounts through 2033. Future tax benefits which may arise as a result of
these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and
accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
The provision
for Federal income tax consists of the following for the period ended September 30, 2015 and the year ended March 31, 2015:
|
September 30, 2015 | |
March 31, 2015 |
Federal income tax benefit attributable to: |
| | | |
| | |
Current operations |
$ | 325,369 | | |
$ | 1,405,416 | |
Less: valuation allowance |
| (325,369 | ) | |
| (1,405,416 | ) |
Net provision for Federal income taxes |
$ | -- | | |
$ | -- | |
The cumulative
tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows as of September
30, 2015 and March 31, 2015:
|
September 30, 2015 | |
March 31, 2015 |
Deferred tax asset attributable to: |
| | | |
| | |
Net operating loss carryover |
$ | 2,780,320 | | |
$ | 2,454,951 | |
Less: valuation allowance |
| (2,780,320 | ) | |
| (2,454,951 | ) |
Net deferred tax asset |
$ | -- | | |
$ | -- | |
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $8,391,947
for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating
loss carry forwards may be limited as to use in future years.
RICH
PHARMACEUTICALS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2015
NOTE
13 – SUBSEQUENT EVENTS
On
September 29, 2015, the Company issued 177,203,333 shares of Company common stock to satisfy the conversion of $7974.15 of a convertible
note payable.
On
September 28, 2015, the Company issued 166,666,667 shares of Company common stock to satisfy the conversion of $10,000.00 of a
convertible note payable.
On
October 7, 2015, the Company issued 37,500,000 shares of Company common stock to satisfy the conversion of $2,250 of a convertible
note payable.
On
October 7, 2015, the Company issued 140,000,000 shares of Company common stock to satisfy the conversion of $8,400 of a convertible
note payable.
On
October 5, 2015, the Company received an unsecured non-interest bearing short-term loan from a related party of $4,000.
In
accordance with ASC 855-10, the Company has analyzed its operations subsequent to September
30, 2015 to the date these financial statements were issued, and has determined that it does not have any material subsequent
events to disclose in these financial statements other than the events described above.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Company Overview
Results
of Operations for the Three and Six Months Ended September 30, 2015
We
generated no revenue for the three and six months ended September 30, 2015. We do not anticipate earnings revenues until we are
able to sell or license our products.
Our
operating expenses and net loss during the three and six months ended September 30, 2015 were $234,528 and $560,442 respectively,
as compared with $517,827 and $1,036,035 for the same period ended 2014. The operating expenses for the three months ended September
30, 2015 consisted mainly of professional fees ($26,338), wages and taxes ($91,071), office expense ($25,140) and stock-based
compensation ($62,301). The operating expenses for the six months ended September 30, 2015 consisted mainly of professional fees
($92,285), wages and taxes ($182,793), office expense ($45,894) and stock-based compensation ($192,392).
We
anticipate our operating expenses will continue to increase with our plan of operations.
Liquidity
and Capital Resources
As
of September 30, 2015, we had total current assets of $2,093; we had total current liabilities of $1,876,308; and we had a stockholders’
deficit of $1,909,340. Operating activities used $231,136 in cash for the six months ended September 30, 2015.
Our
net loss of $956,967 for the six months ended September 30, 2015 primarily accounted for our negative operating cash flow. Financing
activities during the six months ended September 30, 2015 generated $215,244 in cash.
As
of September 30, 2015 and the date of this report, we have insufficient cash to operate our business at the current level for
the next twelve months and insufficient cash to achieve our business goals. Our continuation as a going concern is dependent upon
our ability to obtain additional financing and to generate profits and positive cash flow. We will require additional cash of
$2,000,000 over the next twelve months to cover the costs of overhead and operations, drug manufacturing, maintaining our patent
portfolio, and conducting clinical trials for the indication Acute Myeloid Leukemia (“AML”). We plan to raise the
required capital pursuant to a private debt or equity financing in the near term, but there is no guarantee or assurances that
we will be able to do so.
Off
Balance Sheet Arrangements
As
of September 30, 2015, there were no off balance sheet arrangements.
Going
Concern
We
have negative working capital and have not yet received revenues from sales of products or services. These factors create substantial
doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary
if we are unable to continue as a going concern.
Our
ability to continue as a going concern is dependent on generating cash from the sale of our common stock and/or obtaining debt
financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining
debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful
in these efforts.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
A
smaller reporting company is not required to provide the information required by this Item.
Item
4. Controls and Procedures
Disclosure
Controls and Procedures
We
carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2015. This evaluation was carried out under the supervision
and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of September 30, 2015, our disclosure controls and procedures
were not effective due to the presence of material weaknesses in internal control over financial reporting.
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not
be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management
to conclude that, as of September 30, 2015, our disclosure controls and procedures were not effective: (i) inadequate segregation
of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting
with respect to the requirements and application of both US GAAP and SEC guidelines.
Remediation
Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
We
plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered
by this quarterly report on Form 10-Q, we were not been able to remediate the material weaknesses identified above. To remediate
such weaknesses, and subject to our ability to obtain additional funding, we plan to implement the following changes during our
fiscal year ending March 31, 2015: (i) appoint additional qualified personnel to address inadequate segregation of duties and
ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting.
The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing
the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material
manner.
Changes
in Internal Control over Financial Reporting
There
were no changes in the Company’s internal controls over financial reporting during the period ended September 30, 2015 that
have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings
As
previously disclosed, the inventor of the intellectual property which was assigned to the Company in July 2013 by Imagic, LLC
and Richard L. Chang’s Holdings, LLC is presently in declaratory relief litigation with Biosuccess Biotech, Co. LTD.
(“Biosuccess”), a company who was previously assigned licensing rights in the intellectual property.
In connection with this litigation, on January 17, 2014, the Company received notice of a complaint filed by Biosuccess
against the Company, Imagic, LLC, Richard L. Chang’s Holdings, LLC, and Ben Chang (our CEO and a director) in the
United States District Court, Central District of California Western Division (the “District Court”). The
Complaint includes allegations of patent and copyright infringement, misappropriation of trade secrets, breach of fiduciary
duty, unfair competition and other causes of actions against the Company, Imagic, LLC, Richard L. Chang’s Holdings,
LLC, and Ben Chang (the “Litigation”). The Complaint seeks relief which includes compensatory damages,
attorneys’ fees and costs, an award of treble damages, and such other relief as the court may deem just and proper. The
trial for the Litigation involving the Company is still scheduled for March of 2016 and a mediation is scheduled for December
10, 2015.
The
Company believes the allegations in the complaint are without merit and that it will prevail in the Litigation. However, we have
incurred expenses and the diversion of financial resources and management personnel in responding to the complaint. Additionally,
an adverse determination against us in the Litigation may subject us to significant liabilities or require us to seek licenses
that may not be available from third parties on commercially favorable terms, if at all. Further, an adverse determination against
us in the Litigation may require us to pay substantial financial damages, which can be tripled if the infringement is deemed willful,
or be required to discontinue or significantly delay development, marketing, selling and licensing of the Company’s affected
products and intellectual property rights.
Item
1A: Risk Factors. An investment in our common stock involves a high degree of risk. You should carefully consider the
risks described below, together with all of the other information included in this quarterly report on Form 10Q, before making
an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations
could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
You should read the above section entitled "Forward-Looking Statements" for a discussion of what types of statements
are forward-looking statements as well as the significance of such statements in the context of this report.
Risks
Related To Our Business
We
are a development stage company and may never commercialize any of our products or services or earn a profit. Prior to
July 19, 2013, we were a “shell” company with no or nominal operations. We recently became funded and commenced operations.
We are a development stage company in the business of developing treatments for Acute Myelogenous Leukemia (AML). We currently
have no products ready for commercialization, have not generated any revenue from operations and expect to incur substantial net
losses for the foreseeable future to further develop and commercialize our technology. We cannot predict the extent of these future
net losses, or when we may attain profitability, if at all. If we are unable to generate significant revenue from our technology
or attain profitability, we will not be able to sustain operations. Because of the numerous risks and uncertainties associated
with developing and commercializing our technology, we are unable to predict the extent of any future losses or when we will become
profitable, if ever. We may never become profitable and you may never receive a return on an investment in our common stock. An
investor in our common stock must carefully consider the substantial challenges, risks and uncertainties inherent in the attempted
development and commercialization of medical treatments. We may never successfully commercialize our technology, and our business
may fail.
We
will need to raise substantial additional capital to commercialize our technology, and our failure to obtain funding when needed
may force us to delay, reduce or eliminate our product development programs or collaboration efforts. As of the date of
this Annual Report on Form 10K, we have limited cash resources. Due to our expectation that we will continue to incur losses
in the future, we will be required to raise additional capital to complete the development and commercialization of our technology.
During the next 12 months and potentially thereafter, we will have to raise additional funds to continue the development
and commercialization of our technology. When we seek additional capital, we may seek to sell additional equity and/or debt securities
or to obtain a credit facility, which we may not be able to do on favorable terms, or at all. Our ability to obtain additional
financing will be subject to a number of factors, including market conditions, our operating performance and investor sentiment.
If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back
or discontinue the development and/or commercialization of one or more of our technologies, restrict our operations or obtain
funds by entering into agreements on unattractive terms.
Our
ability to successfully commercialize our technology will depend largely upon the extent to which third-party payors reimburse
the costs for our treatment in the future. Physicians and patients may decide not to order our products unless third-party payors,
such as managed care organizations as well as government payors such as Medicare and Medicaid pay a substantial portion of the
price of the treatment. Reimbursement by a third-party payor may depend on a number of factors, including a payor’s determination
that our product candidates are:
•
not experimental or investigational;
•
effective;
•
medically necessary;
•
appropriate for the specific patient;
•
cost-effective;
•
supported by peer-reviewed publications; and
•
included in clinical practice guidelines.
Market
acceptance, sales of products based upon our technology, and our profitability may depend on reimbursement policies and health
care reform measures. Several entities conduct technology assessments of medical treatments and provide the results of their assessments
for informational purposes to other parties. These assessments may be used by third-party payors and health care providers as
grounds to deny coverage for a treatment or procedure. The levels at which government authorities and third-party payors, such
as private health insurers and health maintenance organizations, may reimburse the price patients pay for such products could
affect whether we are able to commercialize our products. Our technology may receive negative assessments that may impact our
ability to receive reimbursement of the treatment. Since each payor makes its own decision as to whether to establish a policy
to reimburse a treatment, seeking these approvals may be a time-consuming and costly process. We cannot be sure that reimbursement
in the U.S. or elsewhere will be available for any of our products in the future. If reimbursement is not available or is limited,
we may not be able to commercialize our products.
If
we are unable to obtain reimbursement approval from private payors and Medicare and Medicaid programs for our product candidates,
or if the amount reimbursed is inadequate, our ability to generate revenues could be limited. Even if we are being reimbursed,
insurers may withdraw their coverage policies or cancel their contracts with us at any time, stop paying for our treatment or
reduce the payment rate for our treatment, which would reduce our revenue.
The
commercial success of our product candidates will depend upon the degree of market acceptance of these products among physicians,
patients, health care payors and the medical community. The use of our treatment technology has never been commercialized
for any indication. Even if approved for sale by the appropriate regulatory authorities, physicians may not order treatment based
upon out technology, in which event we may be unable to generate significant revenue or become profitable. Acceptance of our technology
will depend on a number of factors including:
•
acceptance of products based upon our technology by physicians and patients;
•
successful integration into clinical practice;
•
adequate reimbursement by third parties;
•
cost effectiveness;
•
potential advantages over alternative treatments; and
•
relative convenience and ease of administration.
We
will need to make leading physicians aware of the benefits of using our technology through published papers, presentations at
scientific conferences and favorable results from our clinical studies. In addition, we will need to gain support from thought
leaders who believe that our treatment will provide superior results. Ideally, we will need these individuals to publish support
papers and articles which will be necessary to gain acceptance of our products. There is no guarantee that we will be able to
obtain this support. Our failure to be successful in these efforts would make it difficult for us to convince medical practitioners
to order our treatment for their patients and consequently our revenue and profitability will be limited.
If
our potential treatments are unable to compete effectively with current and future treatments targeting similar markets as our
potential products, our commercial opportunities will be reduced or eliminated. The medical treatment industry for AML
and stroke is intensely competitive and characterized by rapid technological progress. In each of our potential product areas,
we face significant competition from large biotechnology, medical diagnostic and other companies. The technologies associated
with the medical industry are evolving rapidly and there is intense competition within such industry. Certain companies have established
technologies that may be competitive to our technology and any future products that we develop. Some of these competing companies
may use different approaches or means to obtain results, which could be more effective or less expensive than our treatments.
Moreover, these and other future competitors have or may have considerably greater resources than we do in terms of technology,
sales, marketing, commercialization and capital resources. These competitors may have substantial advantages over us in terms
of research and development expertise, experience in clinical studies, experience in regulatory issues, brand name exposure and
expertise in sales and marketing as well as in operating central laboratory services. Many of these organizations have financial,
marketing and human resources greater than ours; therefore, there can be no assurance that we can successfully compete with present
or potential competitors or that such competition will not have a materially adverse effect on our business, financial position
or results of operations.
Since
our technology is under development, we cannot predict the relative competitive position of any product based upon the technology.
However, we expect that the following factors will determine our ability to compete effectively: safety and efficacy; product
price; turnaround time; ease of administration; performance; reimbursement; and marketing and sales capability.
If
our clinical studies do not prove the superiority of our technologies, we may never sell our products and services. The
results of our clinical studies may not show that treatment results using our technology are superior to existing treatment. In
that event, we will have to devote significant financial and other resources to further research and development, and commercialization
of products using our technologies will be delayed or may never occur.
If
we do not receive regulatory approvals, we may not be able to develop and commercialize our technology. We will need FDA
approval to market products based on our technology in the United States and approvals from foreign regulatory authorities to
market products based on our technology outside the United States. We have not yet filed an application with the FDA to obtain
approval to market any of our proposed products. If we fail to obtain regulatory approval for the marketing of products based
on our technology, we will be unable to sell such products and will not be able to sustain operations. The regulatory review and
approval process, which may include evaluation of preclinical studies and clinical trials of products based on our technology,
as well as the evaluation of manufacturing processes and contract manufacturers’ facilities, is lengthy, expensive and uncertain.
Securing regulatory approval for products based upon our technology may require the submission of extensive preclinical and clinical
data and supporting information to regulatory authorities to establish such products’ safety and effectiveness for each
indication. We have limited experience in filing and pursuing applications necessary to gain regulatory approvals.
Regulatory
authorities generally have substantial discretion in the approval process and may either refuse to accept an application, or may
decide after review of an application that the data submitted is insufficient to allow approval of any product based upon our
technology. If regulatory authorities do not accept or approve our applications, they may require that we conduct additional clinical,
preclinical or manufacturing studies and submit that data before regulatory authorities will reconsider such application. We may
need to expend substantial resources to conduct further studies to obtain data that regulatory authorities believe is sufficient.
Depending on the extent of these studies, approval of applications may be delayed by several years, or may require us to expend
more resources than we may have available. It is also possible that additional studies may not suffice to make applications approvable.
If any of these outcomes occur, we may be forced to abandon our applications for approval, which might cause us to cease operations.
If
we are unable to protect our intellectual property effectively, we may be unable to prevent third parties from using our technologies,
which would impair our competitive advantage. We will rely on patent protection as well as a combination of copyright
and trade secret protection, and other contractual restrictions to protect our proprietary technologies, all of which provide
limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. If we fail
to protect our intellectual property, we will be unable to prevent third parties from using our technologies and they will be
able to compete more effectively against us. We cannot assure you that the patent issued to us will not be challenged, invalidated
or held unenforceable. We cannot guarantee you that we will be successful in defending challenges made in connection with our
patent and any future patent applications. In addition to our patent and any future patent applications, we will rely on contractual
restrictions to protect our proprietary technology. We will require our employees and third parties to sign confidentiality agreements
and employees to also sign agreements assigning to us all intellectual property arising from their work for us. Nevertheless,
we cannot guarantee that these measures will be effective in protecting our intellectual property rights.
We
may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property
rights and we may be unable to protect our rights to, or use, our technology. The inventor of the intellectual property
which was assigned to the Company in July 2013 by Imagic, LLC and Richard L. Chang’s Holdings, LLC is presently in declaratory
relief litigation with Biosuccess Biotech, Co. LTD. (“Biosuccess”), a company who was previously assigned licensing
rights in the intellectual property. In connection with this litigation, on January 17, 2014, the Company received notice of a
complaint filed by Biosuccess against the Company, Imagic, LLC, Richard L. Chang’s Holdings, LLC, and Ben Chang (our CEO
and a director) in the United States District Court, Central District of California Western Division (the “District Court”).
The Complaint includes allegations of patent and copyright infringement, misappropriation of trade secrets, breach of fiduciary
duty, unfair competition and other causes of actions against the Company, Imagic, LLC, Richard L. Chang’s Holdings, LLC,
and Ben Chang (the “Litigation”). The Complaint seeks relief which includes compensatory damages, attorneys’
fees and costs, an award of treble damages, and such other relief as the court may deem just and proper. The trial for the Litigation
involving the Company is scheduled for March of 2016. A request for a two and a half month extension, to June 2016, has been submitted
to the courts with no reply as of the date of this filing. The Company believes the allegations in the complaint are without
merit and that it will prevail in the Litigation. However, we have incurred expenses and the diversion of financial resources
and management personnel in responding to the complaint. Additionally, an adverse determination against us in the Litigation may
subject us to significant liabilities or require us to seek licenses that may not be available from third parties on commercially
favorable terms, if at all. Further, an adverse determination against us in the Litigation may require us to pay substantial financial
damages, which can be tripled if the infringement is deemed willful, or be required to discontinue or significantly delay development,
marketing, selling and licensing of the Company’s affected products and intellectual property rights.
Also,
our competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such
patent application may have priority over our patent applications and could further require us to obtain rights to issued patents
covering such technologies. There may be third-party patents, patent applications and other intellectual property relevant to
our potential products that may block or compete with our products or processes. If another party has filed a United States patent
application on inventions similar to ours, we may have to participate in an interference proceeding declared by the United States
Patent and Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial,
and it is possible that such efforts would be unsuccessful, resulting in a loss of our United States patent position with respect
to such inventions. In addition, we cannot assure you that we would prevail in any of these suits or that the damages or other
remedies if any, awarded against us would not be substantial. Claims of intellectual property infringement may require us to enter
into royalty or license agreements with third parties that may not be available on acceptable terms, if at all. We may also become
subject to injunctions against the further development and use of our technology, which would have a material adverse effect on
our business, financial condition and results of operations. Some of our competitors may be able to sustain the costs of complex
patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties
resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise
the funds necessary to continue our operations.
Our
financial statements have been prepared assuming that the Company will continue as a going concern. We have generated
losses to date and have limited working capital. These factors raise substantial doubt about our ability to continue as a going
concern. Our financial statements do not include any adjustments that might result from this uncertainty. The report of our independent
registered public accounting firm included an explanatory paragraph expressing substantial doubt about our ability to continue
as a going concern in their audit report included herein. If we cannot generate the required revenues and gross margin to achieve
profitability or obtain additional capital on acceptable terms, we will need to substantially revise our business plan or cease
operations and an investor could suffer the loss of a significant portion or all of his investment in our Company.
We
do not expect to pay dividends for the foreseeable future, and we may never pay dividends and, consequently, the only opportunity
for investors to achieve a return on their investment is if a trading market develops and investors are able to sell their shares
for a profit or if our business is sold at a price that enables investors to recognize a profit. We currently intend
to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends
for the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking
into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans
and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our
common stock may be limited by state law. Accordingly, we cannot assure investors any return on their investment, other than in
connection with a sale of their shares or a sale of our business. At the present time there is a limited trading market for our
shares. Therefore, holders of our securities may be unable to sell them. We cannot assure investors that an active trading market
will develop or that any third party will offer to purchase our business on acceptable terms and at a price that would enable
our investors to recognize a profit.
Corporate
and Other Risks
Limitations
on director and officer liability and indemnification of our Company’s officers and directors by us may discourage stockholders
from bringing suit against an officer or director. Our Company’s certificate of incorporation and bylaws provide,
with certain exceptions as permitted by governing state law, that a director or officer shall not be personally liable to us or
our stockholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct,
fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing
suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders
on our behalf against a director.
We
are responsible for the indemnification of our officers and directors. Should our officers and/or directors require us
to contribute to their defense, we may be required to spend significant amounts of our capital. Our certificate of incorporation
and bylaws also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances,
against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their
association with or activities on behalf of our Company. This indemnification policy could result in substantial expenditures,
which we may be unable to recoup. If these expenditures are significant, or involve issues which result in significant liability
for our key personnel, we may be unable to continue operating as a going concern.
Certain
provisions of our Certificate of Incorporation may make it more difficult for a third party to effect a change-of-control.
Our certificate of incorporation authorizes the Board of Directors to issue up to 10,000,000 shares of preferred stock. The preferred
stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors
without further action by the stockholders. These terms may include preferences as to dividends and liquidation, conversion rights,
redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our
common stock, and therefore could reduce the value of such common stock. In addition, specific rights granted to future holders
of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of the Board
of Directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire
or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable
offer is extended and could materially and negatively affect the market price of our common stock.
The
issuance of Preferred Stock to our Chief Executive Officer provides him with voting control which may limit your ability and the
ability of our other stockholders, whether acting alone or together, to propose or direct the management or overall direction
of our Company. Our Chief Executive Officer has 6,000,000 shares of Preferred Stock which provide him with 100 to 1 voting
rights over shares of common stock. This ownership provides him with voting control over matters which require shareholder approval.
This concentration of voting power could discourage or prevent a potential takeover of our Company that might otherwise result
in an investor receiving a premium over the market price for his shares. If you acquire shares of our common stock, you may have
no effective voice in the management of our Company. Such concentrated control of our Company may adversely affect the price
of our common stock. Our principal stockholders may be able to control matters requiring approval by our stockholders, including
the election of directors, mergers or other business combinations. Such concentrated control may also make it difficult for our
stockholders to receive a premium for their shares of our common stock in the event we merge with a third party or enter into
different transactions which require stockholder approval. These provisions could also limit the price that investors might be
willing to pay in the future for shares of our common stock.
We
are dependent for our success on a few key individuals. Our success depends on the skills, experience and performance
of key members of our management team. Each of those individuals may voluntarily terminate his relationship with the Company
at any time. Were we to lose one or more of these key individuals, we would be forced to expend significant time and money in
the pursuit of a replacement, which would result in both a delay in the implementation of our business plan and the diversion
of limited working capital. We do not maintain a key man insurance policy on any of our executive officers.
Capital
Market Risks
Our
common stock recently commenced trading and has limited volume and high price volatility, so you may be unable to sell your shares
to raise money or otherwise desire to liquidate your shares. The Company’s common stock commenced trading
March 14, 2014 on the OTC Markets. The trading volume has been very limited by the fact that many major institutional investment
funds, including mutual funds, as well as individual investors follow a policy of not investing in OTC stocks and certain major
brokerage firms restrict their brokers from recommending OTC stocks because they are considered speculative, volatile, thinly
traded and the market price of the common stock may not accurately reflect our underlying value. The market price of our common
stock is subject to wide fluctuations, and may be subject to further fluctuations based on announcements of new products or services
by us, significant sales of our common stock, including “short” sales, the operating and stock price performance of
other companies that investors may deem comparable to us, and news reports relating to trends in our markets or general economic
conditions.
The
application of the “penny stock” rules to our common stock could limit the trading and liquidity of the common stock,
adversely affect the market price of our common stock and increase your transaction costs to sell those shares. As long
as the trading price of our common stock is below $5 per share, the open-market trading of our common stock will be subject to
the “penny stock” rules, unless we otherwise qualify for an exemption from the “penny stock” definition.
The “penny stock” rules impose additional sales practice requirements on certain broker-dealers who sell securities
to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 together with their spouse). These regulations, if they apply, require the delivery, prior
to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks.
Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain
accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser’s
written agreement to a transaction prior to sale. These regulations may have the effect of limiting the trading activity of our
common stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases
of our common stock as compared to other securities. The stock market in general and the market prices for penny stock companies
in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These
broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance. Stockholders
should be aware that, according to Securities and Exchange Commission (“SEC”) Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include 1) control of the market for
the security by one or a few broker-dealers that are often related to the promoter or issuer; 2) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press releases; 3) boiler room practices involving high-pressure
sales tactics and unrealistic price projections by inexperienced sales persons; 4) excessive and undisclosed bid-ask differential
and markups by selling broker-dealers; and 5) the wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent
investor losses. The occurrence of these patterns or practices could increase the volatility of our share price.
We
may not be able to attract the attention of major brokerage firms, which could have a material adverse impact on the market value
of our common stock. Security analysts of major brokerage firms may not provide coverage of our common stock since
there is no incentive to brokerage firms to recommend the purchase of our common stock. The absence of such coverage limits the
likelihood that an active market will develop for our common stock. It will also likely make it more difficult to attract new
investors at times when we require additional capital.
We
may be unable to list our common stock on NASDAQ or on any securities exchange. Although we may apply to list our
common stock on NASDAQ or the American Stock Exchange in the future, we cannot assure you that we will be able to meet the initial
listing standards, including the minimum per share price and minimum capitalization requirements, or that we will be able to maintain
a listing of our common stock on either of those or any other trading venue. If our common stock begins trading, until such time
as we would qualify for listing on NASDAQ, the American Stock Exchange or another trading venue, our common stock would trade
on OTC Markets or OTC Bulletin Board or another over-the-counter quotation system where an investor may find it more difficult
to dispose of shares or obtain accurate quotations as to the market value of our common stock. In addition, rules promulgated
by the SEC impose various practice requirements on broker-dealers who sell securities that fail to meet certain criteria set forth
in those rules to persons other than established customers and accredited investors. Consequently, if our common stock begins
trading, these rules may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity
of our common stock. It would also make it more difficult for us to raise additional capital.
Future
sales and issuances of our equity securities could put downward selling pressure on our securities, and adversely affect the stock
price. There is a risk that this downward pressure may make it impossible for an investor to sell his or her securities
at any reasonable price, if at all. Future sales of substantial amounts of our equity securities in the public market, or the
perception that such sales could occur, could put downward selling pressure on our securities, and adversely affect the market
price of our common stock.
Conversion
of our convertible notes into common stock could result in additional dilution to our stockholders. We have issued convertible
notes which are convertible into shares of our common stock at conversion prices which are at a discount to the then current trading
price of our common stock. Additionally, upon the occurrence of certain events of default (including conditions outside of our
control) the note holders are entitled to increased repayment and interest rates, as well as other remedies. The note holders
have anti-dilution and conversion reset provisions which are triggered by the issuance of lower priced securities. The Company
has issued a significant number of shares of common stock as a result of the conversion of these convertible notes and expects
to continue to issue a significant number of shares in the future. For example, as of July 11, 2014, the number of outstanding
shares of the Company was 420,463,772; as of June 22, 2015 the number of outstanding shares of the Company was 3,097,091,736;
and as of October 9, 2015 the number of outstanding shares of the Company was 4,420,461,736. A significant portion of these additional
share issuances resulted from the conversion of convertible notes. As shares of our common stock are issued due to the conversion
of some or all of the convertible notes in the future, the ownership interests of existing stockholders will continue to be diluted
and such dilution is expected to be significant.
The
Company’s common stock was the subject of an unauthorized spam stock promotion. In April 2014, the Company was made
aware of spam stock promotion regarding shares of the Company. The Company received complaints, and was forwarded emails and links
to social media sites, relating to unsolicited messages containing false and misleading information regarding the Company and
its stock price. The spam mails touted RCHA as "the opportunity of the year" that could go past "2 or
3 dollars". The Company did not, and does not, authorize, endorse or sponsor these illegal spam stock promotions or any
of the information contained in the emails. However, the spam stock promotions caused the OTC Markets to place a skull and crossbones
next to the Company’s stock symbol on the OTC Markets website warning investors with respect to the Company’s stock,
and may have caused reputational damage to the Company and its stock. The Company does not have the ability to stop or restrict
any future spam stock promotions which may occur and any such future promotions could have an adverse effect on the Company and
its share price.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item
3. Defaults upon Senior Securities
On July 15, 2015, the Company received a Notice of Default from
each of KBM Worldwide, Inc. and Vis Veres Group, Inc. (the “Lenders”) pursuant to the Company’s convertible
notes (the “Notes”) with the Lenders due to the Company’s failure to timely file its Form 10-K under the Exchange
Act of 1934. The Notices of Default made demand of the Company for immediate repayment of 150% of all amounts outstanding
under the Notes, together with default interest as provided in the Notes (the “Default Amounts”). Each Notice
of Default also provided that if the Default Amounts were not paid within 5 days of the Notices of Default, in addition to the
rights and remedies available to it, the Lenders reserved the right to convert the Default Amounts into Company equity as provided
in the Notes. The Company did not pay the Lenders the Default Amounts. As of the date of this Form 10-Q, the total
amount owed to the Lenders under the Notes was $97,500.
Item
4. Mine Safety Disclosures
Not
applicable.
Item
5. Other Information
None
Item
6. Exhibits
Exhibit
Number |
Description
of Exhibit |
|
|
31.1 |
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
31.2 |
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
32.1 |
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
101** |
The
following materials from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 formatted in Extensible
Business Reporting Language (XBRL). |
**Provided
herewith
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.
|
Rich
Pharmaceuticals, Inc. |
|
|
Date: |
November
24, 2015 |
|
|
|
By:
/s/ Ben Chang
Ben
Chang
Title:
Chief Executive Officer and Director |
CERTIFICATIONS
I, Ben Chang, certify that;
1. |
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2015 of Rich Pharmaceuticals, Inc. (the “registrant”); |
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. |
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. |
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. |
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. |
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. |
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 24, 2015
/s/ Ben Chang
By: Ben Chang
Title: Chief Executive Officer
CERTIFICATIONS
I, Ben Chang, certify that;
1. |
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2015 of Rich Pharmaceuticals, Inc. (the “registrant”); |
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. |
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. |
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. |
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. |
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. |
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 24, 2015
/s/ Ben Chang
By: Ben Chang
Title: Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the quarterly Report of
Rich Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2015 filed with the Securities
and Exchange Commission (the “Report”), I, Ben Chang, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
|
1. |
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
|
2. |
The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented. |
By: |
/s/ Ben Chang |
Name: |
Ben Chang |
Title: |
Principal Executive Officer, Principal Financial Officer and Director |
Date: |
November 24, 2015 |
This certification has been furnished solely
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.