Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE
1 - NATURE OF OPERATIONS AND CONSOLIDATION
NutraLife
BioSciences, Inc. F/K/A NutraFuels, Inc. (“We” or the “Company”) is the producer and distributor of nutritional
supplements that uses micro molecular formulae and a utilization of an oral spray to provide faster and more efficient absorption.
Our products are sold to private label distributers who sell the products we manufacture under their own brand name as well as
under our own brand name.
NOTE
2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting
Principles (“GAAP”) in the United States of America (“U.S.”) as promulgated by the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and with the rules and regulations
of the U.S Securities and Exchange Commission (“SEC”). In our opinion, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation. Interim
results are not necessarily indicative of results for a full year. Therefore, the interim unaudited condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial statements and the notes thereto contained in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, from which the accompanying condensed consolidated
balance sheet dated December 31, 2019 was derived.
Principles
of Consolidation
The
condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Precision Analytic
Testing, LLC, NutraDerma Technologies, Inc., PhytoChem Technologies, Inc., and TransDermalRX, Inc. We operate as one reportable
segment. All intercompany transactions and balances have been eliminated in consolidation.
Recent
Accounting Pronouncements
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments” (“ASU 2016-13”), which requires an entity to assess impairment of its
financial instruments based on its estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released
several amendments to improve and clarify the implementation guidance. In November 2019, the FASB issued ASU 2019-10,
“Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):
Effective Dates”, which amended the effective date of the various topics. As the Company is a smaller reporting
company, the provisions of ASU 2016-13 and the related amendments are effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2022 (quarter ending March 31, 2023 for the Company). Entities are required
to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting
period in which the guidance is effective. The Company will evaluate the impact of ASU 2016-13 on the Company’s
consolidated financial statements in a future period closer to the date of adoption.
In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU
2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain
exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.
This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020,
with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements
and related disclosures.
In
August 2020, the FASB issued ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own
Equity,” which simplifies and clarifies certain calculation and presentation matters related to convertible equity and debt
instruments. Specifically, ASU-2020-06 removes requirements to separately account for conversion features as a derivative under
ASC Topic 815 and removing the requirement to account for beneficial conversion features on such instruments. Accounting Standards
Update 2020-06 also provides clearer guidance surrounding disclosure of such instruments and provides specific guidance for how
such instruments are to be incorporated in the calculation of Diluted EPS. The guidance under ASU 2020-06 is effective for fiscal
years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but
no earlier than fiscal years beginning after December 15, 2020. The Company will adopt this standard using a modified retrospective
approach effective January 1, 2021. The Company is currently evaluating the effects of adoption on its consolidated financial
statements.
Management
does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a
material effect on the accompanying consolidated financial statements.
Reclassifications
Reclassifications
occurred to certain prior period amounts in order to conform to the current presentation. The reclassifications have no effect
on the reported net loss.
Use
of Estimates
The
preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in
the United States 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 condensed consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Cash
and Equivalents
The
Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company did not
have cash balances in excess of FDIC insured limits at September 30, 2020 and December 31, 2019.
Inventories
Inventories
are stated at lower of cost or net realizable value utilizing the weighted average method of valuation and consist of raw materials
and finished goods. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when it is apparent
that the expected realizable value of an inventory item falls below its original cost. A charge to cost of sales results when
the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews the Company’s
inventories for such declines in value. Inventory consists of the following:
|
|
|
September
30, 2020
|
|
|
December
31, 2019
|
|
|
Raw
Materials
|
|
$
|
628,620
|
|
|
$
|
206,238
|
|
|
Finished
Goods
|
|
|
30,040
|
|
|
|
283,935
|
|
|
|
|
$
|
658,660
|
|
|
$
|
490,173
|
|
Allowance
for Doubtful Accounts
We
establish the existence of bad debts through a review of several factors including historical collection experience, current aging
status of the customer accounts, and financial condition of our customers. The allowance for doubtful accounts is $0 and $1,500
as of September 30, 2020 and December 31, 2019, respectively.
Property
and Equipment
All
property and equipment are recorded at cost and depreciated over their estimated useful lives, generally three, seven and twelve
years, using the straight-line method. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from
their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges,
which do not increase the useful lives of the assets, are charged to operations as incurred. Leasehold improvements are amortized
over their estimated useful lives or the remaining term of the lease, whichever is shorter.
Impairment
of Long-Lived Assets
A
long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount
may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted
cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying
amount of the long-lived assets exceeds its fair value.
Impairment
charges would be included with costs and expenses in the Company’s condensed consolidated statements of operations and would
result in reduced carrying amounts of the related assets on the Company’s condensed consolidated balance sheets. No adjustments
were made to long-lived assets during the three or nine month periods ended September 30, 2020 and 2019, respectively.
Revenue
Recognition
The
Company accounts for revenue under the guidance of FASB ASC 606, “Revenue from Contracts from Customers” (“ASC
606”).
ASC
606 prescribes a five-step model that focuses on transfer of control and entitlement to payment when determining the amount of
revenue to be recognized. Under the new guidance, an entity is required to perform the following five steps: (1) identify the
contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4)
allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity
satisfies a performance obligation.
The
Company generates revenues from the sale of products. The product is invoiced, and the revenue is recognized upon shipment or
once transfer of risk has passed to the customer, which is the point at which the Company has satisfied its performance obligation.
Payments
received in advance from customers are recorded as customer deposits until earned, at which time revenue is recognized.
We
recognize certain revenues under bill and hold arrangements with certain customers when the Company has fulfilled all of its performance
obligations, the units are segregated for the specific customer only, and the goods are ready for physical transfer to the customer
in accordance with their defined contract delivery schedule. For any requested bill and hold arrangement, we make an evaluation
as to whether the bill and hold arrangement qualifies for revenue recognition. The customer must initiate the request for the
bill and hold arrangement. The customer must make a fixed commitment to purchase the items. The risk of ownership is passed to
the customer, and payment terms are not modified.
The
Company’s revenues accounted for under ASC 606 do not require significant estimates or judgements based on the nature of
the Company’s revenue. The Company’s contracts do not include multiple performance obligations or variable consideration.
All of the Company’s sales resulted from contracts with customers for the nine months ended September 30, 2020 and 2019.
Income
Taxes
The
Company recorded no income tax expense for the three and nine months ended September 30, 2020 and 2019 because the estimated annual
effective tax rate was zero. As of September 30, 2020, the Company continues to provide a valuation allowance against its net
deferred tax assets since the Company believes it is more than likely than not that its deferred tax assets will not be realized.
Net
Loss Per Share
Basic
loss per share excludes dilution and is computed by dividing the loss attributable to stockholders by the weighted-average number
of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock
that shared in the earnings of the Company. Diluted loss per share is computed by dividing the loss available to stockholders
by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless consideration
of such dilutive potential shares would result in anti-dilution. The following warrants and convertible notes were excluded from
the computation of net loss per share.
|
|
|
September
30, 2020
|
|
|
September
30, 2019
|
|
|
|
|
|
(Shares)
|
|
|
|
(Shares)
|
|
|
Warrants
|
|
|
22,560,598
|
|
|
|
18,597,058
|
|
|
Convertible
notes payable, and accrued interest
|
|
|
3,089,378
|
|
|
|
-
|
|
|
|
|
|
25,649,976
|
|
|
|
18,597,058
|
|
Related
Party Transactions
All
transactions with related parties are in the normal course of operations and are measured at the exchange amount.
Leases
On
January 1, 2019, the Company adopted FASB ASU 2016-02, “Leases” (“ASC 842”) and other associated standards,
which defines a lease as any contract that conveys the right to use a specific asset for a period of time in exchange for consideration.
ASC 842 requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance
sheet and the disclosure of key information about certain leasing arrangements. As permitted by ASC 842, the Company elected the
adoption date of January 1, 2019, which is the initial date of application. As a result, the consolidated balance sheet prior
to January 1, 2019 was not restated, continues to be reported under ASC Topic 840, “Leases”, or ASC 840, which did
not require the recognition of operating lease liabilities on the balance sheet, and is not comparative. Under ASC 842, all leases
are required to be recorded on the balance sheet and are classified as either operating leases or finance leases (formerly called
capital leases). The lease classification affects the expense recognition in the income statement. Operating lease charges are
recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of-use asset is recorded
in operating expenses and an implied interest component is recorded in interest expense. The expense recognition for operating
leases and finance leases under ASC 842 is substantially consistent with ASC 840. As a result, there is no significant difference
in the Company’s results of operations presented in the consolidated statement of operations for each period presented.
Leases
are classified as a finance lease if any of the following criteria are met:
|
|
1.
|
The
lease transfers ownership of the underlying asset to the lessee by the end of the lease
term.
|
|
|
2.
|
The
lease grants the lessee an option to purchase the underlying asset that the lessee is
reasonably certain to exercise.
|
|
|
3.
|
The
lease term is for the major part of the remaining economic life of the underlying asset.
|
|
|
4.
|
The
present value of the sum of lease payments and any residual value guaranteed by the lessee
equals or exceeds substantially all of the fair value of the underlying asset.
|
|
|
5.
|
The
underlying asset is of such a specialized nature that it is expected to have no alternative
use to the lessor at the end of the lease term.
|
For
any leases that do not meet the criteria identified above for finance leases, the Company treats such leases as operating leases.
As of September 30, 2020, the Company has two finance leases and three operating leases.
Under
the new guidance, both finance and operating leases are reflected on the balance sheet as lease or “right-of -use”
assets and lease liabilities. There are some exceptions, which the Company has elected in its accounting policies. For leases
with terms of twelve months or less, or below the Company’s general capitalization policy threshold, the Company elects
an accounting policy to not recognize lease assets and lease liabilities for all asset classes. The Company recognizes lease expense
for such leases generally on a straight-line basis over the lease term.
The
Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate,
or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain
to be exercised. Certain leases contain non-lease components, such as common area maintenance, which are generally accounted for
separately. In general, the Company will assess if non-lease components are fixed and determinable, or variable, when determining
if the component should be included in the lease liability. For purposes of calculating the present value of the lease obligations,
the Company utilizes the implicit interest rate within the lease agreement when known and/or determinable, and otherwise utilizes
its incremental borrowing rate at the time of the lease agreement. The related right-of-use asset is initially measured at cost,
which primarily comprises of the initial amount of the lease liability.
Lease
expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line
basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included
in the initial lease liability. Lease expense for finance leases consists of the amortization of the right-of-use asset on a straight-line
basis over the lease term and interest expense determined on an amortized cost basis. The lease payments are allocated between
a reduction of the lease liability and interest expense.
Intangible
Asset
Intangible
asset represents the value assigned to intellectual property and is amortized based on the economic benefit expected to be realized.
NOTE
3 - LIQUIDITY AND GOING CONCERN CONSIDERATIONS
Our
condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of business. We sustained significant losses and
negative cash flows from operations. We incurred a net loss of approximately $1,909,500 and we had cash used in operating activities
of approximately $906,000 for the nine months ended September 30, 2020, and have an accumulated deficit of approximately $40,750,000
at September 30, 2020. These conditions raise substantial doubt about our ability to continue as a going concern.
In
December 2019, a novel strain of coronavirus was reported to have surfaced in China. The spread of this virus caused various business
disruptions including temporary closures to the Company’s offices and facilities. While these disruptions are currently
expected to be temporary, there is considerable uncertainty around the duration. Therefore, the Company expects this matter to
negatively impact its operating results. The related financial impact and duration cannot be reasonably estimated at this time.
The
Company is currently in the process of raising capital to complete and finalize the build-out of its facility in Deerfield Beach
for the purpose of consolidating its operations. The structure of the capital raise is currently in development. The Company is
continuing its path to profitability through increased business development, marketing and sales of the Company’s multiple
lines of topical, ingestible and skincare health and wellness products. The Company is also focused on completing an efficacy
clinical study on its patented mosquito bug patch with plans upon a successful conclusion to launch globally in the very near
future, adding to the Company’s suite of wellness products.
Failure
to successfully continue to grow operational revenues could harm our profitability and adversely affect our financial condition
and results of operations. We face all of the risks inherent in a new business, including the need for significant additional
capital, management’s potential underestimation of initial and ongoing costs, and potential delays and other problems in
connection with establishing sales channels.
We
are continuing our plan to further grow and expand operations and seek sources of capital to pay our contractual obligations as
they come due. Management believes that its current operating strategy will provide the opportunity for us to continue as a going
concern as long as we are able to obtain additional financing; however, there is no assurance this will occur. The accompanying
consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going
concern.
NOTE
4 – PROPERTY AND EQUIPMENT, NET
A
summary of property and equipment at September 30, 2020 and December 31,2019 is as follows:
|
|
|
September
30, 2020
(Unaudited)
|
|
|
December
31, 2019
|
|
|
Furniture and equipment
|
|
$
|
1,959,694
|
|
|
$
|
1,959,694
|
|
|
Leasehold
improvements
|
|
|
840,728
|
|
|
|
840,728
|
|
|
Property and equipment, at cost
|
|
|
2,800,422
|
|
|
|
2,800,422
|
|
|
Less: accumulated
depreciation
|
|
|
(472,416
|
)
|
|
|
(423,775
|
)
|
|
|
|
$
|
2,328,006
|
|
|
$
|
2,376,647
|
|
Depreciation
expense for the three months ended September 30, 2020 and 2019 totaled $15,389 and $0, respectively.
Depreciation
expense for the nine months ended September 30, 2020 and 2019 totaled $48,641 and $66,524, respectively.
NOTE
5 – INTANGIBLE ASSET
In
February 2019, the Company acquired certain intellectual property consisting of patent rights. The aggregate purchase price paid
in connection with the patent purchase was $714,640, consisting of $130,000 cash, and 3,300,000 shares of the Company’s
common stock valued at $0.177 per share or an aggregate of $584,640. Of the 3,300,000 shares, 1,800,000 shares were provided at
closing and 1,500,000 were to be provided one year thereafter. These shares have not been issued and the Company is in negotiations
with the seller to extend the issuance of the shares. The acquired patent is amortized over its remaining estimated useful life
of approximately 11 years. Amortization for the three months ended September 30, 2020 and 2019 totaled $16,225 and $0, respectively.
Amortization for the nine months ended September 30, 2020 and 2019 totaled $48,726 and $21,600. The estimated annual amortization
expense for the next five years and thereafter is as follows:
|
2020 (remainder of year)
|
|
$
|
16,274
|
|
|
2021
|
|
|
65,000
|
|
|
2022
|
|
|
65,000
|
|
|
2023
|
|
|
65,000
|
|
|
2024
|
|
|
65,000
|
|
|
Thereafter
|
|
|
330,086
|
|
|
|
|
$
|
606,360
|
|
A
summary of the intangible asset at September 30, 2020 and December 31, 2019 is as follows:
|
|
|
September
30, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Patent
|
|
$
|
714,640
|
|
|
$
|
714,640
|
|
|
Less:
accumulated amortization
|
|
|
(108,280
|
)
|
|
|
(59,554
|
)
|
|
|
|
$
|
606,360
|
|
|
$
|
655,086
|
|
NOTE
6 – ACCRUED EXPENSES
A
summary of accrued expenses is as follows:
|
|
|
September 30,
2020
|
|
December 31, 2019
|
|
|
|
(Unaudited)
|
|
|
|
Officer – Bonus
|
|
$
|
375,000
|
|
|
$
|
300,000
|
|
|
Accrued Expenses - Other
|
|
|
11,592
|
|
|
|
9,561
|
|
|
Accrued Interest
|
|
|
143,500
|
|
|
|
42,059
|
|
|
Other Current Liabilities
|
|
|
53,157
|
|
|
|
61,574
|
|
|
Accrued Rent
|
|
|
107,215
|
|
|
|
-
|
|
|
|
|
$
|
690,464
|
|
|
$
|
413,194
|
|
NOTE
7 – NOTES PAYABLE
Notes
Payable, Related Parties
During
the quarter ended March 31, 2020, the Company received proceeds aggregating $345,000 in connection with multiple short-term promissory
notes with due dates ranging from February to June 2020. The notes have interest at 0% to 12% for the terms of the notes. Each
noteholder had the right to convert all the outstanding principal and accrued unpaid interest to the Company’s common stock
at a price ranging from $.085 to $.10 per share, prior to the maturity date. Additionally, an aggregate of 3,250,000 shares were
issued to the noteholders as additional consideration. The notes also included a beneficial conversion feature (BCF).
During
the quarter ended September 30, 2020, the Company received proceeds aggregating $230,000 in connection with multiple short-term
promissory notes each with a term of one year, maturing in August or September 2021. The notes bear interest at 18%. Four of the
five notes were issued under a subscription agreement whereby in addition to the promissory note, the note holder is offered up
to four shares of common stock for each one dollar of principal amount of the note at a price of $0.0001 per share. Under the
subscription agreement, a total of 780,000 shares were issued.
The
common stock issued to the noteholders were treated as debt discounts. The gross proceeds of the notes were allocated to debt
and common shares issued on a relative far value basis.
The
debt discounts associated with the BCF and common stock issuances are amortized through the earlier of the conversion of the notes
into common stock, or the maturity date of the notes, on a straight-line basis which approximates the effective interest method
due to the short-term nature of the notes. Amortization of the debt discount is reported as finance costs in the Statement of
Operations.
The
Company allocated $314,100 of the gross proceeds of the convertible notes to the stock issuances and $29,500 of the gross proceeds
of the subscription agreement notes to the stock issuances on a relative fair value basis, which has been recorded as a debt discount.
Total amortization associated with stock issuances debt discount was $30,172 and $445,782 for the three and nine months ended
September 30, 2020, respectively.
Because
the effective conversion prices of the convertible notes were less than the fair value of the underlying common stock on the issuance
date, the Company allocated $51,900, the intrinsic value of that beneficial conversion feature, to additional paid-in capital.
Total
amortization associated with the beneficial conversion feature and warrants debt discounts were $29,008 and $176,422 for the three
and nine months ended September 30, 2020.
As
of September 30, 2020 and December 31, 2019, convertible notes payable to related parties, net of discounts totaled $1,763,710
and $1,164,039, respectively, and other notes payable to related parties, net of discounts, totaled $202,033 and $0, respectively.
Note
Payable, SBA
On
April 23, 2020, the Company received an aggregate of $254,700 related to its filing under the Paycheck Protection Program and
Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) from Trust Bank, N.A. (the “Lender”).
The payment terms of the note are as follows:
|
|
1.
|
No
payments during the deferral period, which is defined as the seven-month period beginning on the date of the loan, or November
23, 2020.
|
|
|
2.
|
Commencing
one month after the expiration of the deferral period, and continuing the same day of each month thereafter until the maturity
date, the Company shall pay to the (“Lender”), monthly payments of principal and interest, each in such equal
amount required to fully amortize the principal amount outstanding on the note on the last day of the deferral period by the
maturity date (twenty-four months from the date of the note, or April 23, 2022).
|
|
|
3.
|
On
the maturity date, the Company shall pay the Lender all unpaid principal plus accrued and unpaid interest plus interest accrued
during the deferral period.
|
|
|
4.
|
Payments
shall be allocated among principal and interest at the discretion of Lender unless otherwise agreed or required by applicable
law. Notwithstanding, in the event the Loan, or any portion thereof, is forgiven pursuant to the Paycheck Protection Program
under the federal CARES Act, the amount so forgiven shall be applied to principal.
|
|
|
5.
|
The
Company may prepay this note at any time without payment of any premium.
|
|
|
6.
|
Interest
shall be accrued at a rate of 1% per annum from the date the loan is funded through maturity.
|
The
Lender is participating in the Paycheck Protection Program to help businesses impacted by the economic impact from COVID-19. Forgiveness
of this loan is only available for principal that is used for the limited purposes that qualify for forgiveness under the Small
Business Administration’s (the “SBA”) requirements; and that to obtain forgiveness, the Company must request
it and must provide documentation in accordance with the SBA requirements and certify that the amounts the Company is requesting
to be forgiven qualify under those requirements. The Company elected to treat the loan as debt under FASB ASC 470. As such, the
Company will derecognize the liability when the loan is forgiven, and the Company is legally released from the loan.
Principal
payments on this note are due as follows:
|
2020 (remainder
of the year)
|
|
$
|
20,000
|
|
|
2021
|
|
|
128,000
|
|
|
2022
|
|
|
106,700
|
|
|
Total
|
|
$
|
254,700
|
|
The
loan was forgiven on March 12, 2021.
In
February 2021, the Company received additional proceeds from the Lender under the Paycheck Protection Program and CARES Act in
the amount of $243,275, at an interest rate of 1% per annum. Similar terms apply. Forgiveness of the loan is dependent upon approval
of the SBA and while the Company expects forgiveness of this loan under the current terms of requirement by the SBA, there can
be no assurance or certainty that forgiveness will in fact occur.
NOTE
8 - STOCKHOLDERS’ EQUITY
During
the quarter ended March 31, 2020, the Company issued 1,538,461 shares of common stock for $.065 per share, for an aggregate of
$100,000.
During
the quarter ended March 31, 2020, the Company issued 470,229 shares of common stock for services aggregating $47,023, valued using
the trading price on the date of issuance.
In
April, 2020 the Company issued 384,615 shares of common stock for $.065 per share for an aggregate of $25,000.
The
Company recorded $51,900 to additional paid-in capital resulting from the beneficial conversion feature.
In
July 2020, the Company issued 740,740 warrants in exchange for cash proceeds of $5,000. The warrants have an exercise price of
$0.10 and expire two years after issuance.
Series
A Preferred Stock
The
Company has 10,000 shares of Preferred Stock authorized of which 9,890 shares are designated as Series A Preferred Stock, as of
September 30, 2020. The Series A Preferred Stock is not entitled to dividends or liquidation preferences. Each share has voting
rights equal to 500,000 shares of the Company’s common stock.
In
2012, Edgar Ward, the Company’s President, CEO, and director, was granted 1,000 shares of Series A Preferred Stock for $1,000.
As
of September 30, 2020 and December 31, 2019, 1,000 shares of Series A Preferred Stock is outstanding.
Series
B Preferred Stock
In
September 2020, the Company designated 110 shares of Preferred Stock as Series B Convertible Preferred Stock. As of September
30, 2020 there is no Series B Preferred Stock issued or outstanding. A Series B Holder will have the right from time to
time, and at any time following January 1, 2021, to convert each outstanding share of Series B Preferred Stock into shares
of common stock at a rate of 149,567 shares of common stock for each share of Series B Preferred Stock. Each share of Series B
Preferred Stock shall have a number of votes equal to the number of conversion shares which would be issuable as of the date of
such vote. The Series B Preferred Stock does not have any liquidation preferences. The Series B Preferred Stock will participate
in any dividends, distributions or payments to the holders of the common stock on an as-converted basis. The Series B Preferred
Stock is subject to an ownership limitation, pursuant to which no holder of Series B Preferred Stock will be entitled to convert
such investor’s shares of Series B Preferred Stock into shares of common stock if such conversion would result in ownership
of more than 4.99% of the outstanding shares of common stock of the Company. Once issued, certain shares of the Series B Preferred
Stock are redeemable at the election of the Company at any time prior to the Permitted Conversion Date pursuant to separate written
agreements that will be effectuated between holders of the Series B Preferred Stock and the Company.
Subsequent
issuances:
In
October 2020, the Company issued 20 shares of Series B Convertible Preferred Stock to three consultants as part of their compensation
arrangements.
In
November 2020, the Company issued 12,500,000 shares of common stock in exchange for 250 shares of Series X Convertible Preferred
Stock of Lord Global Corporation in connection with a Stock Purchase Agreement.
NOTE
9 – LEASES
In
conjunction with the new guidance for leases, as defined by the FASB with ASU 2016-02, Leases (Topic 842), the Company
has designated the existing leases as operating as further described below:
The
Company leases their office and warehouse facilities located in in Coconut Creek, Florida under a non-cancelable operating lease
agreement that expires in February 2022.
In
June 2017, the Company entered into a lease for an additional facility located in Deerfield Beach, Florida under a non-cancelable
operating lease. The term of the lease is for 86 months beginning on January 1, 2018 and calls for yearly 3% increases to base
rent, with monthly payments that commenced in March 2018.
In
July and September of 2019, the Company’s wholly owned subsidiary, Phytochem, entered into two separate lease agreements
for office and warehouse space located in Onalaska, Wisconsin, that commenced on August 1 and October 1, respectively. Each lease
is for six-month terms with four (4) renewal options to extend for six additional months. The Company expects to occupy one of
the spaces for the full term of the lease totaling 30 months. The Company terminated its lease on the other facility in May 2020,
without penalty. The remaining lease calls for an annual 3% increase to base rent.
As
of September 30, 2020, in the condensed consolidated balance sheet, the Company has recorded right-of-use assets of $710,738 and
a lease liability of $761,071, of which $210,000 is reported as a current liability. The weighted average remaining lease term
is 47 months and weighted average discount rate used is 10%.
The
following table presents a reconciliation of the undiscounted future minimum lease payments remaining under the operating lease
reported as operating lease liability on the condensed consolidated balance sheet as of September 30, 2020:
|
Undiscounted future minimum lease
payments:
|
|
|
|
|
|
2020 (remainder of year)
|
|
$
|
67,500
|
|
|
2021
|
|
|
283,200
|
|
|
2022
|
|
|
199,000
|
|
|
2023
|
|
|
189,400
|
|
|
2024
|
|
|
195,100
|
|
|
Total undiscounted
future minimum lease payments
|
|
|
934,200
|
|
|
Less:
amount representing imputed interest
|
|
|
(173,129
|
)
|
|
Operating
lease liability
|
|
$
|
761,071
|
|
Supplemental
cash flow information related to leases is as follows, for the nine months ended September 30,
|
|
|
September
30, 2020
|
|
|
September
30, 2019
|
|
|
Cash paid for amounts
included in the measurement of operating lease liabilities
|
|
$
|
182,214
|
|
|
$
|
404,194
|
|
Lease
expense for the operating leases was $144,661 and $54,316 for the three months ended September 30, 2020 and 2019, respectively.
Lease expense for the operating leases was $332,374 and $192,314 for the nine months ended September 30, 2020 and 2019, respectively.
Finance
Leases:
The
Company has acquired certain equipment under agreements that are classified as finance leases. The cost of the equipment under
finance leases is included in the balance sheet as property and equipment. The finance lease equipment was $110,372 as of September
30, 2020 and December 31, 2019, with related accumulated depreciation of $7,991 and $5,114, respectively.
Minimum
lease payments required by these finance leases are as follows:
Undiscounted
future minimum lease payments:
|
Undiscounted future minimum lease
payments:
|
|
|
|
|
2020 (remainder of year)
|
|
$
|
6,000
|
|
|
2021
|
|
|
24,000
|
|
|
2022
|
|
|
17,000
|
|
|
2023
|
|
|
2,100
|
|
|
Total undiscounted
future minimum lease payments
|
|
|
49,100
|
|
|
Less:
amount representing interest
|
|
|
(6,801
|
)
|
|
Less:
current portion
|
|
|
(24,000
|
)
|
|
Present
value of minimum lease payments, net of current portion
|
|
$
|
18,299
|
|
NOTE
10 - COMMITMENTS AND CONTINGENCIES
The
Company is subject to asserted claims and liabilities that arise in the ordinary course of business. The Company maintains insurance
policies to mitigate potential losses from these actions. In the opinion of management, the amount of the ultimate liability with
respect to those actions will not materially affect the Company’s financial position or results of operations.
In
June 2020, a claim was filed against the Company for a breach of confidentiality imposed by a non-disclosure agreement signed
by both the Company and plaintiff. The claim was dismissed in February 2021.
Litigation:
In
August 2020, a claim has been filed against the Company by its former attorney. The claim involves allegations that fees approximating
$150,000 charged for the calendar year 2019 were unpaid. The Company is vigorously contesting these claims and the outcome cannot
be determined at this time.
NOTE
11 - SUBSEQUENT EVENTS
In
December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in China, and began to spread around the
world in early 2020. In reaction to decreased supply of and increased demand for sanitizer products, the Company shifted its manufacturing
to produce sanitizer products. The Company’s other business operations have been impacted negatively by COVID-19 due to
government restrictions and the overall adverse effect on the global economy. The Company expects COVID-19 to continue to negatively
impact its operating results and its ability to obtain financing.
In
December 2020, the Company issued warrants totaling 4,800,000 in exchange for cash proceeds of $120,000. The warrants have an
exercise price of $0.08 and expire 3 years after issuance.
In
January 2021, the Company issued 15,000,000 warrants to its Chief Executive Officer, President and sole Director as compensation.
The warrants have an exercise price of $0.1025 and expire 3 years after issuance.
During
January and February 2021, the Company issued warrants totaling 5,600,000 as additional consideration for proceeds from notes.
The warrants have an exercise price of $0.08 and expire 3 years after issuance.