UNITED STATES
SECURITY AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019December 31, 2018
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 333-170315
AngioSoma Inc.
(Exact name of registrant as specified in its charter)
Nevada |
| 27-3480481 |
(State or other jurisdiction of Incorporation or organization) |
| (I.R.S. Employer Identification Number) |
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2500 Wilcrest Drive, 3rd Floor |
| 77042 |
(Address of principal executive offices) |
| (Zip code) |
Registrant’s telephone number, including area code: 832-781-8521
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
| (Do not check is smaller reporting company) | Emerging growth company | ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act: None.
Title of each class | Trading Symbol | Name of each exchange on which registered |
N/A | N/A | N/A |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of February 13,May 14, 2019, 91,848,197106,502,721 shares of common stock were issued and outstanding.
PART I — FINANCIAL INFORMATION | 4 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosures about Market Risk |
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PART II — OTHER INFORMATION |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
OTHER PERTINENT INFORMATION
When used in this report, the terms, “we,” the “Company,” “our,” and “us” refers to AngioSoma Inc., a Nevada corporation and its subsidiaries unless the context specifically indicates otherwise.
PART I — FINANCIAL INFORMATION
CONSOLIDATEDCONSOLIDATED BALANCE SHEETS
DECEMBERMARCH 31,, 2018 2019 and SEPTEMBER 30, 20182018
(UNAUDITED)
December 31, | September 30, | March 31, | September 30, | |||||||||||||
2018 | 2018 | 2019 | 2018 | |||||||||||||
CURRENT ASSETS | ||||||||||||||||
Cash and cash equivalents | $ | 53,909 | $ | 91,597 | $ | 84,142 | $ | 91,597 | ||||||||
Prepaid expenses and other current assets | 3,150 | 16,395 | 2,362 | 16,395 | ||||||||||||
Inventory | 40,377 | 3,815 | 40,274 | 3,815 | ||||||||||||
Total current assets | 97,436 | 111,807 | 126,778 | 111,807 | ||||||||||||
Plant, property, and equipment, net of accumulated depreciation of $236 and $118 | 1,176 | 1,294 | ||||||||||||||
Plant, property, and equipment, net of accumulated depreciation of $354 and $118 | 1,058 | 1,294 | ||||||||||||||
Available for sale securities, at market value | 11,644 | 11,644 | 11,644 | 11,644 | ||||||||||||
TOTAL ASSETS | $ | 110,256 | $ | 124,745 | $ | 139,480 | $ | 124,745 | ||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Accounts payable and accrued liabilities | $ | 143,523 | $ | 136,867 | $ | 144,031 | $ | 136,867 | ||||||||
Accounts payable to related party | 286,372 | 281,372 | 286,372 | 281,372 | ||||||||||||
Advances payable | 59,650 | 59,650 | 59,650 | 59,650 | ||||||||||||
Current portion of convertible notes payable, net of discount of $32,587 and $8,720, respectively | 129,413 | 185,280 | ||||||||||||||
Current portion of convertible notes payable, net of discount of $6,899 and $8,720, respectively | 160,101 | 185,280 | ||||||||||||||
Note payable, default | 100,000 | 100,000 | 100,000 | 100,000 | ||||||||||||
Current portion of accrued interest payable | 235,810 | 232,307 | 232,497 | 232,307 | ||||||||||||
Total current liabilities | 954,768 | 995,476 | 982,651 | 995,476 | ||||||||||||
TOTAL LIABILITIES | 954,768 | 995,476 | 982,651 | 995,476 | ||||||||||||
COMMITMENTS AND CONTINGENCIES | - | - | - | |||||||||||||
STOCKHOLDERS’ DEFICIT | ||||||||||||||||
Common stock, $0.001 par value; 480,000,000 shares authorized; 85,088,853 and 69,323,021 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively | 85,089 | 69,323 | ||||||||||||||
Common stock, $0.001 par value; 480,000,000 shares authorized; 100,241,851 and 69,323,021 shares issued and outstanding at March 31, 2019 and September 30, 2018, respectively | 100,243 | 69,323 | ||||||||||||||
Preferred stock, $0.001 par value; 20,000,000 shares authorized: | ||||||||||||||||
Series A Preferred Stock, 5,000,000 shares issued and outstanding at December 31, 2018 and September 30, 2018 | 2,990,535 | 2,990,535 | ||||||||||||||
Series B Preferred Stock, $0.001 par value; 0 and 30,000 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively | - | - | ||||||||||||||
Series D Preferred Stock, $0.001 par value; 509,988 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively | 510 | 510 | ||||||||||||||
Series E Preferred Stock, $0.001 par value; 1,000,000 shares issued and outstanding at December 31, 2018 and September 30, 2018 | 1,000 | 1,000 | ||||||||||||||
Series F Preferred Stock; $0.001 par value; 471,975 and 471,975 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively | 447 | 447 | ||||||||||||||
Series A Preferred Stock, 5,000,000 shares issued and outstanding at March 31, 2019 and September 30, 2018 | 2,990,535 | 2,990,535 | ||||||||||||||
Series B Preferred Stock, $0.001 par value; 0 shares issued and outstanding at March 31, 2019 and September 30, 2018 | - | - | ||||||||||||||
Series D Preferred Stock, $0.001 par value; 509,988 shares issued and outstanding at March 31, 2019 and September 30, 2018, respectively | 510 | 510 | ||||||||||||||
Series E Preferred Stock, $0.001 par value; 1,000,000 shares issued and outstanding at March 31, 2019 and September 30, 2018 | 1,000 | 1,000 | ||||||||||||||
Series F Preferred Stock; $0.001 par value; 446,975 and 446,975 shares issued and outstanding at March 31, 2019 and September 30, 2018, respectively | 447 | 447 | ||||||||||||||
Additional paid-in capital | 2,403,714 | 2,065,018 | 2,580,164 | 2,065,018 | ||||||||||||
Accumulated other comprehensive income | 971 | 971 | 971 | 971 | ||||||||||||
Accumulated deficit | (6,326,778 | ) | (5,998,535 | ) | (6,517,041 | ) | (5,998,535 | ) | ||||||||
TOTAL STOCKHOLDERS’ DEFICIT | (844,512 | ) | (870,731 | ) | (843,171 | ) | (870,731 | ) | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 110,256 | $ | 124,745 | $ | 139,480 | $ | 124,745 | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
CONSOLIDATEDCONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED DECEMBERMARCH 31,, 2019 AND 2018 AND 2017
(UNAUDITED)
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
Three Months Ended December 31, | March 31, | March 31, | ||||||||||||||||||||||
2018 | 2017 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
REVENUE | $ | 275 | - | $ | - | $ | - | $ | 275 | $ | - | |||||||||||||
Cost of goods sold | 47 | - | - | - | 47 | - | ||||||||||||||||||
Gross Profit | 228 | - | - | - | 228 | - | ||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
General and administrative expenses | 129,623 | 128,695 | 70,786 | 41,724 | 200,409 | 170,419 | ||||||||||||||||||
Total operating expenses | 129,623 | 128,695 | 70,786 | 41,724 | 200,409 | 170,419 | ||||||||||||||||||
LOSS FROM OPERATIONS | (129,395 | ) | (128,695 | ) | (70,786 | ) | (41,724 | ) | (200,181 | ) | (170,419 | ) | ||||||||||||
| �� | ||||||||||||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||||||
Oil lease income | - | 5,531 | - | 5,531 | ||||||||||||||||||||
Loss on conversion of preferred stock | - | (7,250 | ) | - | - | - | (7,250 | ) | ||||||||||||||||
Loss on conversion of debt | (115,311 | ) | (328,200 | ) | (16,236 | ) | - | (131,547 | ) | (328,200 | ) | |||||||||||||
Interest expense | (83,537 | ) | (1,205 | ) | (103,241 | ) | (4,019 | ) | (186,778 | ) | (5,224 | ) | ||||||||||||
NET LOSS | $ | (328,243 | ) | $ | (465,350 | ) | $ | (190,263 | ) | $ | (40,212 | ) | $ | (518,506 | ) | $ | (505,562 | ) | ||||||
NET LOSS PER COMMON SHARE - Basic and diluted | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | |||||||
WEIGHTED AVERAGE SHARES OUTSTANDING | 74,910,986 | 51,356,893 | 92,551,946 | 54,056,289 | 83,543,153 | 52,691,759 | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
CONSOLIDATEDCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMELOSS
FOR THE THREE AND SIX MONTHS ENDED DECEMBERMARCH 31,, 2019 AND 2018 AND 2017
(UNAUDITED)
Three Months Ended December 31, | Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||||||||||
2018 | 2017 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
NET LOSS | $ | (328,243 | ) | $ | (465,350 | ) | $ | (190,263 | ) | $ | (40,212 | ) | $ | (518,506 | ) | $ | (505,562 | ) | ||||||
Change in fair value of AFS securities | $ | - | $ | 1,941 | - | 1,941 | - | 3,882 | ||||||||||||||||
COMPREHENSIVE LOSS | $ | (328,243 | ) | $ | (463,409 | ) | $ | (190,263 | ) | $ | (38,271 | ) | $ | (518,506 | ) | $ | (501,680 | ) | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
ANGIOSOMA INC.
CONSOLIDATEDANGIOSOMA INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREESIX MONTHS ENDED DECEMBER 31,MARCH 31, 2019 AND FROM
SEPTEMBER 30, 2017 TO SEPTEMBER 30, 2018
(UNAUDITED)
Common stock | Series A Preferred Stock | Series B Preferred Stock | Series D Preferred Stock | Series E Preferred Stock | Series F Preferred Stock | Additional paid-in | Accumulated Other Comprehensive | Accumulated | Total Equity |
| Common stock |
| Series A Preferred Stock |
| Series B Preferred Stock |
| Series D Preferred Stock |
| Series E Preferred Stock |
| Series F Preferred Stock |
| Additional paid-in |
| Accumulated Other Comprehensive |
| Accumulated |
| Total Equity |
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Shares | Par | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | Income | Deficit | (Deficit) |
| Shares |
| Par |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
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| Amount |
| capital |
| Income |
| Deficit |
| (Deficit) |
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Balance, September 30, 2017 | 45,584,067 | $ | 45,584 | 5,000,000 | $ | 2,990,535 | 30,000 | $ | 30 | 509,988 | $ | 510 | 1,000,000 | $ | 1,000 | 471,975 | $ | 472 | $ | 1,520,658 | $ | (970 | ) | $ | (5,181,794 | ) | $ | (623,975 | ) |
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| 45,584,067 |
| $ | 45,584 |
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| 5,000,000 |
| $ | 2,990,535 |
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| 30,000 |
| $ | 30 |
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| 509,988 |
| $ | 510 |
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| 1,000,000 |
| $ | 1,000 |
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| 471,975 |
| $ | 472 |
| $ | 1,520,658 |
| $ | (970 | ) | $ | (5,181,794 | ) | $ | (623,975 | ) | ||||||||||||||||||||||||||
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Conversion of Series B Preferred stock to common stock | 500,000 | 500 | - | - | (30,000 | ) | (30 | ) | - | - | - | - | - | - | 6,780 | - | - | 7,250 |
| 500,000 |
| 500 |
| - |
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| (30,000 | ) |
| (30 | ) |
| - |
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| 6,780 |
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| 7,250 |
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Common stock issued for conversion of convertible note payable | 20,738,954 | 20,739 | - | - | - | - | - | - | - | - | - | - | 88,442 | - | - | 109,181 |
| 20,738,954 |
| 20,739 |
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| 88,442 |
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| 109,181 |
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Common stock issued for conversion of Series F Preferred stock | 2,500,000 | 2,500 | - | - | - | - | - | - | - | - | (25,000 | ) | (25 | ) | (2,475 | ) | - | - | - |
| 2,500,000 |
| 2,500 |
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| (25,000 | ) |
| (25 | ) |
| (2,475 | ) |
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Beneficial conversion discount on convertible notes payable | - | - | - | - | - | - | - | - | - | - | - | - | 91,133 | - | - | 91,133 |
| - |
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| 91,133 |
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Loss on conversion of debt | - | - | - | - | - | - | - | - | - | - | - | - | 360,480 | - | - | 360,480 |
| - |
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| 360,480 |
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| 360,480 |
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Other comprehensive gain | - | - | - | - | - | - | - | - | - | - | - | - | - | 1,941 | - | 1,941 |
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Net loss for the year ended September 30, 2018 | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (816,741 | ) | (816,741 | ) |
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Balance, September 30, 2018 | 69,323,021 | $ | 69,323 | 5,000,000 | $ | 2,990,535 | - | $ | - | 509,988 | $ | 510 | 1,000,000 | $ | 1,000 | 446,975 | $ | 447 | $ | 2,065,018 | $ | 971 | $ | (5,998,535 | ) | $ | (870,731 | ) |
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| $ | 69,323 |
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| 5,000,000 |
| $ | 2,990,535 |
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| 509,988 |
| $ | 510 |
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| 1,000,000 |
| $ | 1,000 |
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| 446,975 |
| $ | 447 |
| $ | 2,065,018 |
| $ | 971 |
| $ | (5,998,535 | ) | $ | (870,731 | ) | |||||||||||||||||||||||||||
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Common stock issued for conversion of convertible note payable and accrued interest | 12,265,832 | 12,266 | - | - | - | - | - | - | - | - | - | - | 61,214 | - | - | 73,480 |
| 27,418,830 |
| 27,420 |
| - |
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| - |
| - |
| - |
| - |
| - |
| - |
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| 157,021 |
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| 184,441 |
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Common stock issued to officer as compensation | 3,500,000 | 3,500 | - | - | - | - | - | - | - | - | - | - | 64,750 | - | - | 68,250 |
| 3,500,000 |
| 3,500 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 64,750 |
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| - |
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| - |
| 68,250 |
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| Discount on convertible notes payable | - | - | - | - | - | - | - | - | - | - | - | - | 97,421 | - | - | 97,421 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 161,828 |
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| - |
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| - |
| 161,828 |
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| Loss on conversion of debt | - | - | - | - | - | - | - | - | - | - | - | - | 115,311 | - | - | 115,311 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 131,547 |
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| - |
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| - |
| 131,547 |
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Net loss for the three months ended December 31, 2018 | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (328,243 | ) | (328,243 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the six months ended March 31, 2019 |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| (518,506 | ) |
| (518,506 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Balance, December 31, 2018 | 85,088,853 | $ | 85,089 | 5,000,000 | $ | 2,990,535 | - | $ | - | 509,988 | $ | 510 | 1,000,000 | $ | 1,000 | 446,975 | $ | 447 | $ | 2,403,714 | $ | 971 | $ | (6,326,778 | ) | $ | (844,512 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2019 |
|
| 100,241,851 |
| $ | 100,243 |
|
| 5,000,000 |
| $ | 2,990,535 |
|
| - |
| $ | - |
|
| 509,988 |
| $ | 510 |
|
| 1,000,000 |
| $ | 1,000 |
|
| 446,975 |
| $ | 447 |
| $ | 2,580,164 |
| $ | 971 |
| $ | (6,517,041 | ) | $ | (843,171 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
CONSOLIDATEDCONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREESIX MONTHS ENDED DECEMBERMARCH 31,, 2019 AND 2018 AND 2017
(UNAUDITED)
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | March 31, | |||||||||||||||
2018 | 2017 | 2019 | 2018 | |||||||||||||
CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net loss | $ | (328,243 | ) | (465,350 | ) | $ | (518,506 | ) | (505,562 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Depreciation | 118 | - | 236 | - | ||||||||||||
Amortization of discount on convertible note payable | 76,554 | - | 176,148 | 1,344 | ||||||||||||
Loss on conversion of debt | 131,547 | 328,200 | ||||||||||||||
| Loss on conversion of preferred stock | - | 7,250 | - | 7,250 | ||||||||||||
Loss on conversion of debt | 115,311 | 328,200 | ||||||||||||||
| Non-cash compensation | 68,250 | - | ||||||||||||||
Stock-based compensation | 68,250 | - | ||||||||||||||
Changes in operating assets and liabilities | ||||||||||||||||
Inventory | (20,167 | ) | - | (20,064 | ) | - | ||||||||||
Prepaid expenses | (3,150 | ) | - | (2,362 | ) | (7,306 | ) | |||||||||
Accounts payable and accrued liabilities | 6,656 | 3,916 | 6,666 | 7,844 | ||||||||||||
Accounts payable to related party | 5,000 | 110,314 | 5,000 | 120,106 | ||||||||||||
Accrued interest payable | 6,983 | 1,823 | 10,630 | 574 | ||||||||||||
NET CASH USED IN OPERATING ACTIVITIES | (72,688 | ) | (13,847 | ) | (142,455 | ) | (47,550 | ) | ||||||||
NET CASH USED IN INVESTING ACTIVITIES | - | - | - | - | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||
Proceeds from convertible notes payable | 35,000 | 65,000 | ||||||||||||||
Proceeds from convertible notes payable, net | 135,000 | 100,000 | ||||||||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 35,000 | 65,000 | 135,000 | 100,000 | ||||||||||||
NET (DECREASE) INCREASE IN CASH | (37,688 | ) | 51,153 | (7,455 | ) | 52,450 | ||||||||||
Cash at beginning of period | 91,597 | 14,100 | 91,597 | 14,100 | ||||||||||||
Cash at end of period | $ | 53,909 | $ | 65,253 | $ | 84,142 | $ | 66,550 | ||||||||
Cash paid during the period for: | ||||||||||||||||
Interest | $ | - | $ | - | $ | - | $ | - | ||||||||
Taxes | $ | - | $ | - | $ | - | $ | - | ||||||||
Noncash investing and financing transactions: | ||||||||||||||||
Conversion of convertible notes payable into common stock | $ | 73,480 | $ | 6,000 | $ | 184,441 | $ | 6,000 | ||||||||
Change in fair value of available-for-sale securities | $ | - | $ | 1,940 | $ | - | $ | 3,882 | ||||||||
Preferred stock issued for debt conversion | $ | - | $ | 500 | $ | - | $ | 3,000 | ||||||||
Discount issued on convertible debt | $ | 97,421 | $ | - | ||||||||||||
Discount on convertible debt | $ | 161,828 | $ | 4,253 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DecemberMarch 31,, 2018 2019
Note 1. General Organization and Business
AngioSoma, Inc., a Nevada corporation (“AngioSoma” or the “Company”), is a clinical stage biotechnology company focused on improving the effectiveness of current standard-of-care treatments, especially related to endovascular interventions in the treatment of peripheral artery disease (PAD).
AngioSoma is developing its lead product, a drug candidate called LiprostinTM for the treatment of peripheral artery disease, or PAD, which has completed FDA Phase I and three Phase II clinical trials. We are in discussions with several contract research organizations for completion of our FDA protocol for Phase III and submission of our new drug application for marketing in the US and its territories.
The Company was incorporated on April 29, 2016. The Company’s year-end is September 30.
Note 2. Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the threesix months ended DecemberMarch 31, 2018,2019, the Company had a net loss of $328,243$518,506 and negative cash flow from operating activities of $72,688.$142,455. As of DecemberMarch 31, 2018,2019, the Company had negative working capital of $857,332.$855,873. Management does not anticipate having positive cash flow from operations in the near future.
These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.
Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.
In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company, which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.
Note 3. Summary of Significant Accounting Policies
Interim Financial Statements
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. The results of operations for the three and six months ended DecemberMarch 31, 20182019 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2019.
Consolidated Financial Statements
The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, AngioSoma Research, LLC, First Titan Energy, LLC and First Titan Technical, LLC from the date of their formations or acquisition. Significant intercompany transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period between the origination of these instruments and their expected realization.
FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 - | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
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|
Level 2 - | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
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Level 3 - | Inputs that are both significant to the fair value measurement and unobservable. |
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of DecemberMarch 31, 2018.2019. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, and accrued expenses. The fair value of the Company’s notes payable is estimated based on current rates that would be available for debt of similar terms that is not significantly different from its stated value.
The following table presents assets that were measured and recognized at fair value as of DecemberMarch 31, 20182019 and the period then ended on a recurring and nonrecurring basis:
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Available for sale securities | $ | 11,644 | $ | — | $ | — | $ | 11,644 | ||||||||
Totals | $ | 11,644 | $ | — | $ | — | $ | 11,644 | ||||||||
The following table presents assets that were measured and recognized at fair value as of September 30, 2018 and the period then ended on a recurring and nonrecurring basis:
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Available for sale securities | $ | 11,644 | $ | — | $ | — | $ | 11,644 | ||||||||
Totals | $ | 11,644 | $ | — | $ | — | $ | 11,644 | ||||||||
Inventory
The Company sells nutraceutical products online via its website www.angiosoma.com. Inventory consists of finished goods and is stated at the lower of cost by the first-in, first-out method or net realizable value.
Revenue Recognition
Effective October 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.
There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the three and six months ended DecemberMarch 31, 2018.2019.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. There are no known commitments or contingencies as of DecemberMarch 31, 2018.2019.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:
- | A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and | |
- | A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. |
Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. We are currently evaluating the impact ASU 2016-02 will have on the Company’s condensed consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09 which will supersede virtually all existing revenue guidance. Under this update, an entity is required to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. As such, an entity will need to use more judgment and make more estimates than under the current guidance. ASU 2014-09 is to be applied retrospectively either to each prior reporting period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. The Company will elect to apply the impact (if any) of applying ASU 2014-09 to the most current reporting period presented in the financial statements with a cumulative effect adjustment to retained earnings. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 deferred the effective date of ASU 2014-09 for one year, making it effective for the year beginning December 31, 2017, with early adoption permitted as of January 1, 2017. We adopted ASU 2014-09 as of October 1, 2018. The Company does not believe the adoption of ASU 2014-09 had any material impact on its condensed consolidated financial statements.
We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
Subsequent events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Note 4. Advances
As of DecemberMarch 31, 20182019 and September 30, 2018, the Company had non-interest bearing advances payable to third parties of $59,650. These advances are payable on demand.
Note 5. Convertible Notes Payable
Convertible notes payable consisted of the following at DecemberMarch 31, 20182019 and September 30, 2018:
December 31, | September 30, | |||||||
Convertible note dated April 13, 2017 in the original principal amount of $20,000, no stated maturity date, bearing interest at 3% per year, convertible into common stock at a rate of $0.01 per share. | $ | 20,000 | $ | 20,000 | ||||
Convertible note dated May 14, 2018 in the original principal amount of $58,000, maturing February 28, 2019, bearing interest at 12% per year, convertible beginning November 14, 2018 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. During the three months ended December 31, 2018, principal in the amount of $58,000 and accrued interest in the amount of $3,480 were converted into a total of 6,959,142 shares of common stock. | - | 58,000 | ||||||
Convertible note dated June 25, 2018 in the original principal amount of $43,000, maturing April 15, 2019, bearing interest at 12% per year, convertible beginning December 25, 2018 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. During the three months ended December 31, 2018, principal in the amount of $12,000 was converted into a 2,006,689 shares of common stock. | 31,000 | 43,000 | ||||||
Convertible note dated August 2, 2018 in the original principal amount of $33,000, maturing May 15, 2019, bearing interest at 12% per year, convertible beginning February 2, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. | 33,000 | 33,000 | ||||||
Convertible note dated September 7, 2018 in the original principal amount of $40,000, maturing June 30, 2019, bearing interest at 12% per year, convertible beginning March 7, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. | 40,000 | 40,000 | ||||||
Convertible note dated October 31, 2018 in the original principal amount of $38,000, maturing August 15, 2019, bearing interest at 12% per year, convertible beginning August 15, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. | 38,000 | - | ||||||
Total current convertible notes payable | 162,000 | 194,000 | ||||||
Less: discount on convertible notes payable | (32,587 | ) | (8,720 | ) | ||||
Total convertible notes payable, net of discount | $ | 129,413 | $ | 185,280 | ||||
March 31, | September 30, | |||||||
Convertible note dated April 13, 2017 in the original principal amount of $20,000, no stated maturity date, bearing interest at 3% per year, convertible into common stock at a rate of $0.01 per share. | $ | 20,000 | $ | 20,000 | ||||
Convertible note dated May 14, 2018 in the original principal amount of $58,000, maturing February 28, 2019, bearing interest at 12% per year, convertible beginning November 14, 2018 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. In November and December 2018, principal in the amount of $58,000 and accrued interest in the amount of $3,480 were converted into a total of 6,959,142 shares of common stock. | - | 58,000 | ||||||
Convertible note dated June 25, 2018 in the original principal amount of $43,000, maturing April 15, 2019, bearing interest at 12% per year, convertible beginning December 25, 2018 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. In December 2018, principal in the amount of $12,000 was converted into a 2,006,689 shares of common stock; in January 2019, principal in the amount of $19,000 and accrued interest in the amount of $2,580, respectively, were converted into an aggregate of 5,245,708 shares of common stock. | - | 43,000 | ||||||
Convertible note dated August 2, 2018 in the original principal amount of $33,000, maturing May 15, 2019, bearing interest at 12% per year, convertible beginning February 2, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. In February 2019, principal in the amount of $33,000 and accrued interest in the amount $1,980 were converted into an aggregate of 2,608,527 shares of common stock. | - | 33,000 | ||||||
Convertible note dated September 7, 2018 in the original principal amount of $40,000, maturing June 30, 2019, bearing interest at 12% per year, convertible beginning March 7, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. In March 2019, principal in the amount of $40,000 and accrued interest in the amount of $2,400 were converted into an aggregate of 7,298,763 shares of common stock. | - | 40,000 | ||||||
Convertible note dated October 31, 2018 in the original principal amount of $38,000, maturing August 15, 2019, bearing interest at 12% per year, convertible beginning April 29, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. | 38,000 | - | ||||||
Convertible note dated December 20, 2018 in the original principal amount of $33,000, maturing October 15, 2019, bearing interest at 12% per year, convertible beginning June 18, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. | 33,000 | - | ||||||
Convertible note dated January 22, 2019 in the original principal amount of $38,000, maturing November 15, 2019, bearing interest at 12% per year, convertible beginning July 21, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. | 38,000 | - | ||||||
Convertible note dated February 19, 2019 in the original principal amount of $38,000, maturing December 15, 2019, bearing interest at 12% per year, convertible beginning August 18, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. | 38,000 | - | ||||||
Total current convertible notes payable | 167,000 | 194,000 | ||||||
Less: discount on convertible notes payable | (6,899 | ) | (8,720 | ) | ||||
Total convertible notes payable, net of discount | $ | 160,101 | $ | 185,280 | ||||
All principal along with accrued interest is payable on the maturity date. The notes are convertible into common stock at the option of the holder. The holder of the notes cannot convert the notes into shares of common stock if that conversion would result in the holder owning more than 4.9% of the outstanding stock of the Company. During the six months ended March 31, 2019, the Company recorded discounts to notes payable in connection with beneficial conversion features in the aggregate amount of $161,828, and recorded amortization of discounts in the amount of $176,148.
As of DecemberMarch 31, 20182019 and September 30, 2018, accrued interest on notes payable was $235,810$232,497 and $232,307, respectively.
During the three months ended DecemberMarch 31, 20182019 and 2017,2018, interest expense on the notes payable was $6,983$3,647 and $1,205, respectively.respectively; during the six months ended March 31, 2019 and 2018, interest expense on the notes payable was $10,630 and $3,880, respectively
Conversions of Notes Payable to Common Stock
During the threesix months ended DecemberMarch 31, 2018,2019, the holders of the Convertible Note Payable dated May 14, 2018 elected to convert, in four separate transactions, principal of $58,000 and accrued interest of $3,480 into a total of 6,959,142 shares of common stock. A loss in the aggregate amount of $12,073$13,663 was recognized on the conversions.
Also during the threesix months ended DecemberMarch 31, 2018,2019, the Company issued 3,300,001 shares of common stock with a fair value of $99,000$98,670 for the conversion of a note payable with a basis of $0. A loss in the amount of $99,000$98,670 was recorded on this transaction.
Also during the threesix months ended DecemberMarch 31, 2018,2019, the holders of the Convertible Note Payable dated June 25, 2018, elected to convert principal of $12,000 into 2,006,689 shares of common stock. The Company recorded a loss of $4,238$4,840 on this transaction.
Also during the six months ended March 31, 2019, the holders of the Convertible Note Payable dated June 25, 2018, elected to convert, in two separate transactions, principal of $31,000 and accrued interest of $2,580 into a total of 5,245,708 shares of common stock. A loss in the aggregate amount of $7,643 was recognized on the conversions.
Also during the six months ended March 31, 2019, the holders of the Convertible Note Payable dated August 2, 2018 elected to convert, in two separate transactions, principal of $33,000 and accrued interest of $1,980 into a total of 2,608,527 shares of common stock. A loss in the aggregate amount of $2,008 was recognized on the conversions.
Also during the six months ended March 31, 2019, the holders of the Convertible Note Payable dated September 7, 2018 elected to convert, in three separate transactions, principal of $40,000 and accrued interest of $2,400 into a total of 7,298,763 shares of common stock. A loss in the aggregate amount of $4,723 was recognized on the conversions.
Note 6. Note Payable
The Company entered into a promissory note with its attorney to refinance accounts payable of $68,793 as of September 30, 2016 into a promissory note. The note can be issued up to the total principal amount of $100,000 and includes the prepayment of legal fees of $31,498 to be incurred during the period from October 1, 2016 through March 1, 2017. The note payable was recorded at $68,793 (the amount of refinanced accounts payable) as of September 30, 2017. There was no prepayment recognized as of September 30, 2017. During the year ended September 30, 2018, the company increased the amount of the note to $100,000 in connection with legal fees incurred. The note bears interest at the prime rate and requires monthly payments of principal and interest of $10,000 beginning July 1, 2017, the maturity date. As of DecemberMarch 31, 2018,2019, the note is classified in current liabilities on the balance sheet; no principal payments have been made on this note. During the three and six months ended DecemberMarch 31, 2018,2019, the Company accrued interest in the amount of $1,331$1,356 and $2,687, respectively, on this note. This note is currently in default.
Note 7. Related Party Transactions
David Summers, a significant shareholder of the Company, provides consulting services to the Company related to the development of our products. In addition, the Company had previously rented office space from Mr. Summers for $400 per month under a month to month lease. As of DecemberMarch 31, 2018,2019, services, rent and other expense reimbursements in the amount of $112,804 was unpaid.
The Company is also involved in a legal dispute with Mr. Summers to gather the funds due, as well as settle claims on certain patents and formulas. There is no significant exchange of monies or ownership anticipated.
Alex Blankenship is paid $5,000 per month under her employment agreement as Chief Executive Officer of the Company. As of DecemberMarch 31, 2018,2019, the Company owed Ms. Blankenship $135,438 for unpaid compensation.
During the six months ended March 31, 2019, the Company issued 3,500,000 shares of common stock with a fair value of $68,250 to Ms. Blankenship as a bonus.
As of DecemberMarch 31, 2018,2019, the Company owed Sydney Jim, our former CEO, $38,130 for accrued but unpaid compensation.
Note 8. Stockholders’ Equity (Deficit)
Common Stock issued for conversion of Series B Preferred Stock
During the three months ended December 31, 2017, the Company issued 2,400,000 shares of common stock upon conversion of the Series B Preferred Stock. A loss of $7,250 was recognized and is recorded in Additional paid-in capital on the consolidated balance sheet.
Common stock issued for conversion of convertible notes payable
During threesix months ended DecemberMarch 31, 2018,2019, the Company issued 1,098,901 shares of common stock upon the conversion of principal of $15,000. A loss in the amount of $3,616 was recognized on this transaction.
During threesix months ended DecemberMarch 31, 2018,2019, the Company issued 1,442,308 shares of common stock upon the conversion of principal of $15,000. A loss in the amount of $3,365 was recognized on this transaction.
During threesix months ended DecemberMarch 31, 2018,2019, the Company issued 1,224,490 shares of common stock upon the conversion of principal of $12,000. A loss in the amount of $1,531 was recognized on this transaction.
During threesix months ended DecemberMarch 31, 2018,2019, the Company issued 3,193,443 shares of common stock upon the conversion of principal of $16,000 and accrued interest in the amount of $3,561.$3,480. A loss in the amount of $3,561 was recognized on this transaction.
During threesix months ended DecemberMarch 31, 2018,2019, the Company issued 2,006,689 shares of common stock upon the conversion of principal of $12,000. A loss in the amount of $4,238$4,840 was recognized on these transaction.
During the threesix months ended DecemberMarch 31, 2018,2019, the Company issued 3,300,001 shares of common stock with a fair value of $99,000$98,670 for the conversion of a note payable with a basis of $0. A loss in the amount of $99,000$98,670 was recorded on this transaction.
During threesix months ended DecemberMarch 31, 2017,2019, the Company issued 6,000,0005,245,708 shares of common stock upon the conversion of principal of $0.$31,000 and accrued interest of $2,580. A loss in the amount of $328,200$7,643 was recognized on this transaction.
During six months ended March 31, 2019, the transaction because it occurred after all debt had been fully convertedCompany issued 2,608,527 shares of common stock upon the conversion of principal of $33,000 and accrued interest of $1,980. A loss in the amount of $2,008 was recognized on this transaction.
During six months ended March 31, 2019, the Company issued 7,298,763 shares of common stock upon the conversion of principal of $40,000 and accrued interest of $2,400. A loss in the amount of $4,723 was recognized on this transaction.
Shares issued for services to CEO
During the six months ended March 31, 2019, the Company issued 3,500,000 shares of common stock with a fair value of $68,250 to its Chief Executive Officer as of September 30, 2017. This is recorded undera bonus.
During the six months ended March 31, 2019, the Company charged to additional paid-in capital.capital the aggregate amount of $161,828 on connection with the beneficial conversion feature of notes payable.
Note 9. Commitments and ContingentContingent Liabilities
Litigation
The Company is involved in a legal dispute with Mr. David Summers, a significant shareholder, regarding the settlement of claims on certain patents and formulas. There is no significant exchange of monies or ownership anticipated, and the Company has not accrued a liability with regard to this dispute.
Note 10. Subsequent Events
On January 3,April 1, 2019, the Company issued 2,842,809a convertible promissory note in the original principal amount of $45,000, maturing February 15, 2020, bearing interest at 12% per year, convertible beginning September 28, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion.
On May 6, 2019, the Company issued 3,000,000 shares of common stock forin connection with the conversion of notesa note payable in the principal amount of $17,000.$15,000.
On January 8,May 10, 2019, the Company issued 2,402,8993,260,870 shares of common stock forin connection with the conversion of notesa note payable in the principal amount of $14,000 and accrued interest in the amount of $2,580.
On February 13, 2019, the Company issued 1,513,636 shares of common stock for the conversion of notes payable in the principal amount of $18,000 and accrued interest in the amount of $1,980.$15,000.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
AngioSoma is a clinical stage biotechnology company focused on improving the effectiveness of current standard-of-care treatments, especially related to endovascular interventions in the treatment of peripheral artery disease (PAD).
AngioSoma is developing its lead product, a drug candidate called LiprostinTM for the treatment of peripheral artery disease, or PAD, which has completed FDA Phase I and three Phase II clinical trials. We are in discussions with several contract research organizations for completion of our FDA protocol for Phase III and submission of our new drug application for marketing in the US and its territories.
Critical Accounting Policies
We prepare our consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the condensed consolidated financial statements are prepared. We regularly review our accounting policies, and how they are applied and disclosed in our condensed consolidated financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
Results of Operations
Three Months Ended DecemberMarch 31,, 2018 2019 Compared to the Three Months Ended December March 31,, 2017 2018
Revenue. We had revenue of $275 for the three months ended December 31, 2018, compared to $0 for the three months ended DecemberMarch 31, 2017. Revenue consisted of the sale of nutriceuticals.2019 and 2018.
Cost of goods sold. We had cost of goods sold of $47 for the three months ended December 31, 2018, compared to $0 for the three months ended DecemberMarch 31, 2017. The increase was due to the increase in sales.2019 and 2018.
General and administrative expense. We recognized general and administrative expense of $129,623$70,786 for the three months ended DecemberMarch 31, 20182019 compared to $128,685$41,724 for the comparable period of 2017.2018. The increase in general and administrative expense was related to an increase in non-cash compensationlegal fees, advertising and marketing, and office expense during the period.
Oil Lease Income
The Company had other income related to an oil lease $0 for the three months ended March 31, 2019, compared to $5,531 for the three months ended March 31, 2018.
Loss on conversion of debt and preferred stock.debt. We recognized a loss on the conversion of debt in the amount of $115,311$16,236 during the three months ended DecemberMarch 31, 20182019 compared to $335,450$0 during the three months ended DecemberMarch 31, 2017.2018. The decreaseincrease was due to the loss on conversion of preferred stock and convertible notes payable.
Interest expense. We recognized interest expense of $83,537$103,241 for the three months ended DecemberMarch 31, 20182019 compared to $1,205$4,019 for the comparable period of 2017.2018. The increase was due primarily to the amortization of the discount on convertible notes payable during the current period in the amount of $76,554$99,594 compared to $2,931$996 during the comparable period of the prior year.
Net loss. For the reasons above, we recognized a net loss of $328,243$190,263 for the three months ended DecemberMarch 31, 20182019 compared to $465,350$40,212 for the three months ended DecemberMarch 31, 2017.2018.
Six Months Ended March 31, 2019 Compared to the Six Months Ended March 31, 2018
Revenue. We had revenue of $275 for the six months ended March 31, 2019 compared to $0 for the six months ended March 31, 2018.
Cost of goods sold. We had cost of goods sold of $47 for the six months ended March 31, 2019 compared to $0 for the six months ended March 31, 2018.
General and administrative expense. We recognized general and administrative expense of $200,409 for the six months ended March 31, 2019 compared to $170,419 for the comparable period of 2018. The increase in general and administrative expense was related to an increase in legal fees, advertising and marketing, and office expense during the period.
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Oil Lease Income
The Company had other income related to an oil lease $0 for the six months ended March 31, 2019, compared to $5,531 for the six months ended March 31, 2018.
Loss on conversion of preferred stock. We recognized loss on the conversion of preferred stock in the amount of $0 for the six months ended March 31, 2019 compared to $7,250 for the comparable period of 2018.
Loss on conversion of debt. We recognized a loss on the conversion of debt in the amount of $131,547 during the six months ended March 31, 2019 compared to $328,200 during the six months ended March 31, 2018.
Interest expense. We recognized interest expense of $186,778 for the six months ended March 31, 2019 compared to $5,224 for the comparable period of 2018. The increase was due primarily to the amortization of the discount on convertible notes payable during the current period in the amount of $176,148 compared to $1,334 during the comparable period of the prior year.
Net loss. For the reasons above, we recognized a net loss of $518,506 for the six months ended March 31, 2019 compared to $505,562 for the six months ended March 31, 2018.
Liquidity and Capital Resources
At DecemberMarch 31, 2018,2019, we had cash on hand of $53,909.$84,142. The Company has negative working capital of $857,332.$855,873. Net cash used in operating activities for the threesix months ended DecemberMarch 31, 20182019 was $72,688.$142,455. Cash on hand is adequate to fund our operations for less than twelve months. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to the Company. We have no material commitments for capital expenditures as of DecemberMarch 31, 2018.2019.
Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Internal Control over Financial Reporting
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of DecemberMarch 31, 2018.2019. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of DecemberMarch 31, 2018,2019, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
1. | As of |
2. | As of |
Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Change in Internal Controls Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART II — OTHER INFORMATION
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
The Company is involved in a legal dispute with Mr. David Summers, a significant shareholder, regarding the settlement of claims on certain patents and formulas. There is no significant exchange of monies or ownership anticipated, and the Company has not accrued a liability with regard to this dispute.
Not applicable to a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Set forth below is information regarding the securities sold during the quarter ended DecemberMarch 31, 20182019 that were not registered under the Securities Act:
Date of Sale | Title of Security | Number Sold | Consideration Received | Exemption from | If Option, Warrant | ||||||
| Common Stock | 2,842,809 | Conversion of Note Payable | Section 3(a)(9) of the Securities Act | Convertible at | ||||||
| Common Stock | 2,402,899 | Conversion of Note Payable | Section 3(a)(9) of the Securities Act | Convertible at | ||||||
| Common Stock | 1,094,891 | Conversion of Note Payable | Section 3(a)(9) of the Securities Act | Convertible at | ||||||
| Common Stock | 1,513,636 | Conversion of Note Payable | Section 3(a)(9) of the Securities Act | Convertible at $0.0143 per share | ||||||
March 12, 2019 | Common Stock | 2,812,500 | Conversion of Note Payable | Section 3(a)(9) of the Securities Act | Convertible at $0.0064 per share | ||||||
| Common Stock | 2,678,571 | Conversion of Note Payable | Section 3(a)(9) of the Securities Act | Convertible at $0.0064 per share | ||||||
March 22, 2019 | Common Stock | 1,807,692 | Conversion of Note Payable | Section 3(a)(9) of the Securities Act | Convertible at $0.0057 per share | ||||||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has not defaulted upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
This item is not applicable to smaller reporting companies.
None.
3.1 | |
3.2 | |
14.1 | |
31.1 | |
32.1 | |
101 | XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q (4)(5) |
(1) | Incorporated by reference to our Definitive Proxy Statement on Schedule 14A filed on April 8, 2015. |
(2) | Incorporated by reference to our Form 10-K/A Amendment No. 1 for the year ended September 30, 2015 filed on January 22, 2016. |
(3) | Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on November 3, 2010. |
(4) | Filed or furnished herewith. |
(5) | In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.” |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AngioSoma Inc. |
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Date: | By: /s/ Alex Blankenship |
| Alex Blankenship |
| Chief Executive Officer, President, Secretary, Treasurer, Principal Executive Officer, Principal Finance and Accounting Officer and Sole Director |