UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the Quarterly Period Ended: June 30, 2020

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________________________________ to __________________ ______________

 

Commission file number File Number: 000-52218

 

ONCBIOMUNE PHARMACEUTICALS, INC.Theralink Technologies, Inc.

(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)its charter)

 

Nevada 20-2590810

(State or Other Jurisdiction ofother jurisdiction

Incorporationof incorporation or Organization)organization)

 

(I.R.S.IRS Employer

Identification No.)

11441 Industriplex Blvd,15000 W. 6th Avenue, Suite 190400

Baton Rouge, LAGolden, CO 80401

 

70809(720) 420-0074

(Address of Principal Executive Offices)principal executive offices, including zip code) (Zip Code)Registrant’s telephone number, including area code)

 

Registrant’s Telephone Number, Including Area Code:OncBioMune Pharmaceuticals, Inc.

8000 Innovation Park Dr. Baton Rouge, LA 70820

Former Fiscal Year: (225) 227-2384December 31, 2020

 

N/A

(Former Name, Former Addressname, former address and Former Fiscal Year,former fiscal year, if Changed Since Last Report)changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

 

Indicate by check mark whether the registrant: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 [X][  ] No [  ][X]

 

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 [X][  ] No [  ][X]

 

Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitionsdefinition of “accelerated filer”, “large accelerated filer,” “accelerated filer,”filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-212B-2 of the Exchange Act:Act.

 

Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
[  ][  ][X][X][X]

 

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 [X]

 

Securities Registered Pursuant to Section 12(b)The registrant had 5,555,473,158 shares of the Act:its common stock, $0.0001 par value per share, outstanding as of June 9, 2021.

 

Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
N/AN/AN/A

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 665,899 shares as of November 11, 2019.

 

 

 

ONCBIOMUNE PHARMACEUTICALS,THERALINK TECHNOLOGIES, INC. AND SUBSIDIARYSUBSIDIARIES

FORM 10-Q

Form 10-Q

SeptemberJUNE 30, 20192020

 

TABLE OF CONTENTS

 

 Page
 PART I - FINANCIAL INFORMATION 
   
Item 1.Financial Statements 
 Condensed Consolidated Balance Sheets - As of June 30, 2020 (unaudited) and September 30, 2019 (unaudited) and December 31, 2018F-14
 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended SeptemberJune 30, 20192020 and 20182019 (unaudited)F-25
 

Condensed Consolidated Statements of Changes in Stockholder’s Deficit for the Three and Nine Months Ended SeptemberJune 30, 2020 and 2019 and 2018 (unaudited)

F-36
 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended SeptemberJune 30, 2020 and 2019 and 2018 (unaudited)

F-47
 Condensed Notes to UnauditedCondensed Consolidated Financial StatementsF-58
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations325
Item 3.Quantitative and Qualitative Disclosures About Market Risk1332
Item 4.Controls and Procedures1332
   
 PART II - OTHER INFORMATION 
   
Item 1.Legal Proceedings1433
Item 1A.Risk Factors1433
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds1435
Item 3.Defaults Upon Senior Securities1435
Item 4.Mine Safety Disclosures1535
Item 5.Other Information1535
Item 6.Exhibits1535
   
Signatures1637

 

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this report, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements appear in a number of places, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements represent our reasonable judgment about the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “should,” “plan,” “potential,” “project,” “will,” “would” and other words of similar meaning, or the negatives of such terms or other variations. These include, but are not limited to, statements relating to the following:

●projected operating or financial results, including anticipated cash flows used in operations;
●expectations regarding clinical trials, capital expenditures, research and development expenses and other payments;
●our beliefs and assumptions relating to our liquidity position, including our ability to obtain additional financing; and
●our beliefs, assumptions and expectations about the regulatory approval for our technology including, but not limited to our ability to obtain regulatory approval in a timely manner. Or at all.

Any or all of our forward-looking statements may turn out to be wrong. They may be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:

●our ability to continue as a going concern;
●our ability to become current in filing all reports required to be filed by us Section 13 or 15(d) of the Securities Exchange Act of 1934;
●our ability to maintain pricing;
●our ability to employ skilled and qualified workers;
●the fact that we have incurred significant losses since inception, expect to incur net losses for at least the next several years and may never achieve or sustain profitability;
●the loss of key management personnel upon whom we depend;
●the progress and results of clinical trials;
●our ability to fund our operations;
●inadequate insurance coverage for certain losses or liabilities;
●our ability to navigate the regulatory approval process in the U.S. and other countries, and our success in obtaining required regulatory approvals on a timely basis;
●commercial developments of technologies that compete with our technology;
●the actual and perceived effectiveness of our technology, and how the technology compares to competitive technologies;
●the rate and degree of market acceptance and clinical utility of our technology;
●adverse effects of the recent and ongoing COVID-19 pandemic;
●the strength of our intellectual property protection, and our success in avoiding infringement of the intellectual property rights of others;
●regulations affecting the health care industry;
●adverse developments in our research and development activities;
●potential liability if our technology causes illness, injury or death, or adverse publicity from any such events;
●our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing when required; and
●our expectations with respect to future licensing, partnering or acquisition activity.

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included elsewhere in this report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, in our Current Report on Form 8-K filed on June 11, 2020 with the Securities and Exchange Commission (“SEC”), particularly in the ‘Risk Factors” section of such report, that could cause results or events to differ materially from the forward-looking statements that we make herein. Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement should be relied upon. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as otherwise required by applicable law.

3

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

  June 30,  September 30 
  2020  2019 
  (UNAUDITED)    
ASSETS        
CURRENT ASSETS:        
Cash $934,196  $560,407 
Accounts receivable  24,975   4,000 
Prepaid expenses and other current assets  131,138   9,054 
         
Total Current Assets  1,090,309   573,461 
         
OTHER ASSETS:        
Property and equipment, net  747,055   298,910 
Finance right-of-use asset, net  169,905   204,059 
Operating right-of-use asset, net  214,948   - 
Marketable securities  6,800   18,000 
Security deposit  19,464   7,790 
         
Total Assets $2,248,481  $1,102,220 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
         
CURRENT LIABILITIES:        
Accounts payable  352,110   668,246 
Accrued liabilities  128,907   118,241 
Accrued compensation  6,547   297,056 
Convertible debt, net  -   217,591 
Notes payable - current  1,000   40,000 
Financing right-of-use liability - current  40,969   35,096 
Operating right-of-use liability - current  34,450   - 
Due to related parties  -   180,000 
Contingent Liabilities  

62,240

   - 
Liabilities of discontinued operations  245,113   - 
         
Total Current Liabilities  871,336   1,556,230 
         
LONG-TERM LIABILITIES:        
Financing right-of-use liability  147,162   178,350 
Operating right-of-use liability  186,473   - 
         
Total Liabilities  1,204,971   1,734,580 
         
Commitments and contingencies (Note 10)      
         
STOCKHOLDERS’ EQUITY (DEFICIT):        
Preferred stock: $0.0001 par value; 26,667 authorized; 13,672 and 992
issued and outstanding at June 30, 2020 and September 30, 2019, respectively		 
 		 
 		 
-		 
 		 
 		 
 		 
-		 
 
Common stock: $0.0001 par value, 12,000,000,000 shares authorized; 1,398,070 and 0 issued and outstanding at June 30, 2020 and September 30, 2019, respectively 
 		 
 		 
140		 
 		 
 		 
 		 
-		 
 
Additional paid-in capital  40,891,726   37,378,841 
Accumulated deficit  (39,848,356)  (38,011,201)
         
Total Stockholders’ Equity (Deficit)  1,043,510   (632,360)
         
Total Liabilities and Stockholders’ Equity (Deficit) $2,248,481  $1,102,220 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

  September 30,  December 31, 
  2019  2018 
  (Unaudited)    
ASSETS        
CURRENT ASSETS:        
Cash $136,087  $201 
Prepaid expenses and other current assets  235,292   215,681 
         
Total Current Assets  371,379   215,882 
         
OTHER ASSETS:        
Property and equipment, net  2,550   4,304 
Right-of-use asset, net  32,569   - 
Security deposit  6,400   6,400 
         
Total Assets $412,898  $226,586 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
         
CURRENT LIABILITIES:        
Convertible debt, net $2,763,346  $1,434,252 
Notes payable  538,875   538,875 
Accounts payable  857,807   550,296 
Accrued liabilities  1,385,940   884,035 
Lease payable - current  32,569   - 
Derivative liabilities  7,477,494   3,364,032 
Due to related parties  347,436   315,466 
Liabilities of discontinued operations  686,547   686,547 
         
Total Current Liabilities  14,090,014   7,773,503 
         
Total Liabilities  14,090,014   7,773,503 
         
Commitments and contingencies (Note 9)        
         
STOCKHOLDERS’ DEFICIT:        
Preferred stock: $0.0001 par value; 26,667 authorized;        
Series A Preferred stock: $0.0001 par value; 1,333 shares authorized; 1,333
issued and outstanding at September 30, 2019 and December 31, 2018		  -   - 
Series B Preferred stock: $0.0001 par value; 10,523 shares authorized; 3,856 and 10,523 issued and outstanding at September 30, 2019 and December 31, 2018, respectively  -   1 
Common stock: $0.0001 par value, 6,666,667 shares authorized; 479,050 and 330,216 issued and outstanding at September 30, 2019 and December 31, 2018, respectively  48   33 
Common stock issuable: 22,828 commons stock issuable as of September 30, 2019 and December 31, 2018  2   2 
Additional paid-in capital  10,558,859   9,640,711 
Accumulated deficit  (24,236,025)  (17,187,664)
         
Total Stockholders’ Deficit  (13,677,116)  (7,546,917)
         
Total Liabilities and Stockholders’ Deficit $412,898  $226,586 
4

 

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

  For the Three Months Ended  For the Nine Months Ended 
  June 30,  June 30, 
  2020  2019  2020  2019 
             
REVENUES, NET $24,886  $-  $75,896  $- 
                 
COST OF REVENUE  7,422   -   23,421   - 
                 
GROSS PROFIT  17,464   -   52,475   - 
                 
OPERATING EXPENSES:                
Professional fees  322,921   139,780   470,638   396,089 
Consulting fee - related party  8,650   51,242   64,125   206,767 
Compensation expense  372,610   69,380   822,329   228,815 
Licensing fees  12,750   12,886   38,920   39,046 
General and administrative expenses  258,277   102,092   636,838   244,070 
                 
Total Operating Expenses  975,208   375,380   2,032,850   1,114,787 
                 
LOSS FROM OPERATIONS  (957,744)  (375,380)  (1,980,375)  (1,114,787)
                 
OTHER INCOME (EXPENSE):                
Interest expense  (7,844)  (11,951)  (23,715)  (53,755)
Gain on debt extinguishment  108,060   -   108,060   - 
Unrealized loss on marketable securities  (4,900)  (9,100)  (11,200)  (14,400)
Loss on legal judgement  -   (30,100)  -   (30,100)
Foreign currency transaction gain  60,075   -   60,075   - 
Other income  10,000       10,000   - 
                 
Total Other Income (Expense), net  165,391   (51,151)  143,220   (98,255)
                 
NET LOSS $(792,353) $(426,531) $(1,837,155) $(1,213,042)
                 
NET LOSS PER COMMON SHARE:                
Basic $(2.04) $(2.53) $(19.19) $(7.20)
Diluted $(2.04) $(2.53) $(19.19) $(7.20)
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                
Basic  388,333   168,479   95,753   168,479 
Diluted  388,333   168,479   95,753   168,479 

See accompanying notes to the unaudited condensed consolidated financial statements.

5

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2020

(UNAUDITED)

                 Total 
  Preferred Stock  Common Stock  Additional Paid-in  Accumulated  Stockholders’ Equity 
  # of Shares  Amount  # of Shares  Amount  Capital  Deficit  (Deficit) 
                      
Balance at September 30, 2019               992  $-                      -  $-  $37,378,841  $(38,011,201) $(632,360)
                             
Preferred stock issued for cash  6   -   -   -   2,200,000   -   2,200,000 
                             
Preferred stock issued upon debt conversions  -   -   -   -   277,215   -   277,215 
                             
Preferred stock issued upon settlement of accrued compensation  1   -   -   -   239,154   -   239,154 
                             
Net loss  -   -   -   -   -   (541,372)  (541,372)
                             
Balance at December 31, 2019  999   -   -   -   40,095,210   (38,552,573)  1,542,637 
                             
Preferred stock issued for cash  1   -   -   -   390,000   -   390,000 
                             
Preferred stock issued upon settlement of accrued compensation  -   -   -   -   160,000   -   160,000 
                             
Net loss  -   -   -   -   -   (503,430)  (503,430)
                             
Balance at March 31, 2020  1,000   -   -   -   40,645,210   (39,056,003)  1,589,207 
                             
Recapitalization resulting from the Asset Sale Transaction (see Note 3)  12,671   -   1,398,070   140   246,516       246,656 
                             
Net loss  -   -   -   -   -   (792,353)  (792,353)
                             
Balance at June 30, 2020  13,671  $-   1,398,070  $140  $40,891,726  $(39,848,356)  1,043,510 

See accompanying notes to the unaudited condensed consolidated financial statements

 

F-1

ONCBIOMUNE PHARMACEUTICALS,THERALINK TECHNOLOGIES, INC. AND SUBSIDIARYSUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

  For the Three Months Ended  For the Nine Months Ended 
  September 30,  September 30, 
  2019  2018  2019  2018 
             
REVENUES $-  $-  $-  $- 
                 
OPERATING EXPENSES:                
Professional fees  140,680   207,876   479,860   523,669 
Compensation expense  214,387   233,072   705,803   539,927 
Research and development expense  8,825   16,316   161,453   101,097 
General and administrative expenses  45,988   36,221   140,404   118,576 
                 
Total Operating Expenses  409,880   493,485   1,487,520   1,283,269 
                 
LOSS FROM OPERATIONS  (409,880)  (493,485)  (1,487,520)  (1,283,269)
                 
OTHER INCOME (EXPENSE):                
Interest expense  (54,257)  (650,092)  (1,431,253)  (1,391,270)
Derivative income (expense)  (523,595)  (860,084)  (4,053,257)  4,495,597 
(Loss) gain on debt extinguishment  (46)  1,359,128   (76,331)  2,109,621 
Gain (loss) on foreign currency transactions  -   -   -   33,633 
                 
Total Other Income (Expense)  (577,898)  (151,048)  (5,560,841)  5,247,581 
                 
INCOME (LOSS) FROM CONTINUING OPERATIONS  (987,778)  (644,533)  (7,048,361)  3,964,312 
                 
NET INCOME (LOSS) $(987,778) $(644,533) $(7,048,361) $3,964,312 
                 
COMPREHENSIVE INCOME (LOSS:)                
Net income (loss) $(987,778) $(644,533) $(7,048,361)  $3,964,312 
                 
Other comprehensive loss:                
Unrealized foreign currency translation gain (loss)  -   -   

-

   (25,184)
                 
Comprehensive income (loss) $(987,778) $(644,533) $(7,048,361)  $3,969,128 
                 
NET INCOME (LOSS) PER COMMON SHARE - Basic                
Continuing operations - basic $(2.31) $(1.97) $(14.71) $13.26 
Continuing operations - diluted $(2.31) $(1.97) $(14.71) $13.26 
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                
Basic  426,807   327,793   479,309   299,029 
Diluted  426,807   327,793   479,309   299,029 

See accompanying notes to the unaudited condensed consolidated financial statements

F-2

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBERJUNE 30, 2019 and 2018

(Unaudited)(UNAUDITED)

 

  

Series A

Preferred Stock

  

Series B

Preferred Stock

  Common Stock  Common Stock Issuable  Additional    Accumulated other  Total 
  # of Shares  Amount  # of Shares  Amount  # of Shares  Amount  # of Shares  Amount  Paid-in Capital  

Accumulated

Deficit

  comprehensive gain  

Stockholders’

(Deficit)

 
                                     
Balance, December 31, 2018  1,333  $          -   10,523  $          1   330,216  $     33   22,828  $        2  $9,640,711  $(17,187,664) $               -  $(7,546,917)
                                                 
Redemption of Series B Preferred  -   -   (6,667)  (1)  -   -   -   -   (499)  -   -   (500)
                                                 
Accretion of stock options  -   -   -   -   -   -   -   -   68,383   -   -   68,383 
                                                 
Common stock issued, at fair value, upon conversion of convertible debt and interest  -   -   -   -   57,242   6   -   -   439,352   -   -   439,358 
                                                 
Net loss  -   -   -   -   -   -   -   -   -   (4,448,618)  -   (4,448,618)
                                                 
Balance at March 31, 2019  1,333  $-   3,856  $-   387,458  $39   22,828  $2  $10,147,947  $(21,636,282) $-  $(11,488,294)
                                                 
Accretion of stock options  -   -   -   -   -   -   -   -   49,533   -   -   49,533 
                                                 
Common stock issued, at fair value, upon conversion of convertible debt and interest  -   -   -   -   34,980   3   -   -   181,753   -   -   181,756 
                                                 
Net loss  -   -   -   -   -   -   -   -   -   (1,611,965)  -   (1,611,965)
                                                 
Balance at June 30, 2019  1,333  $-   3,856  $-   422,438  $42   22,828  $2  $10,379,233  $(23,248,247) $-  $(12,868,970)
                                                 
Accretion of stock options  -   -   -   -   -   -   -   -   30,137   -   -   30,137 
                                                 
Common stock issued, at fair value, upon conversion of convertible debt and interest  -   -   -   -   56,612   6   -   -   149,489   -   -   149,495 
                                                 
Net loss  -   -   -   -   -   -   -   -   -   (987,778)  -   (987,778)
                                                 
Balance at September 30, 2019  1,333  $-   3,856  $-   479,050  $48   22,828  $2  $10,558,859  $(24,236,025) $-  $(13,677,116)

  

Series A

Preferred Stock

  

Series B

Preferred Stock

  Common Stock  Common Stock Issuable  Additional    Accumulated other  Total 
  # of Shares  Amount  # of Shares  Amount  # of Shares  Amount  # of Shares  Amount  Paid-in Capital  

Accumulated

Deficit

  comprehensive gain  

Stockholders’

(Deficit)

 
                                     
Balance at December 31, 2017  1,333  $-   10,523  $         1   227,115  $  33   -  $       -  $8,821,793  $(23,655,989) $25,184  $(14,808,978)
                                                 
Accretion of stock options  -   -   -   -   -   -   -   -   32,621   -   -   32,621 
                                                 
Shares issued for cash and subscription receivable pursuant to subscription agreements  -   -   -   -   800   -   -   -   6,000   -   -   6,000 
                                                 
Shares issued upon conversion of convertible debt and interest  -   -   -   -   37,933   4   -   -   335,685   -   -   335,689 
                                                 
Shares issued upon cashless warrant exercise  -   -   -   -   24,572   2   -   -   (2)  -   -   - 
                                                 
Net loss  -   -   -   -   -   -   -   -   -   9,317,940   -   9,317,940 
                                                 
Foreign currency translation adjustment  -   -   -   -   -   -   -   -   -   -   (55,262)  (55,262)
                                                 
Balance at March 31, 2018  1,333  $-   10,523  $1   290,420  $39   -  $-  $9,196,097  $(14,338,049) $(30,078) $(5,171,990)
                                                 
Accretion of stock options  -   -   -   -   -   -   -   -   12,233   -   -   12,233 
                                                 
Shares issued upon conversion of convertible debt and interest  -   -   -   -   13,260   1   -   -   35,576   -   -   35,577 
                                                 
Shares issued upon cashless warrant exercise  -   -   -   -   5,746   1   -   -   (1)  -   -   - 
                                                 
Net loss  -   -   -   -   -   -   -   -   -   (4,709,095)  -   (4,709,095)
                                                 
Foreign currency translation adjustment  -   -   -   -   -   -   -   -   -   -   30,078   30,078 
                                                 
Balance at June 30, 2018  1,333  $-   10,523  $1   309,426  $41   -  $-  $9,243,905  $(19,047,144) $-  $(9,803,197)
                                                 
Accretion of stock options  -   -   -   -   -   -   -   -   109,214   -   -   109,214 
                                                 
Common stock issued for services  -   -   -   -   3,333   -   -   -   52,500   -   -   52,500 
                                                 
Shares issued upon conversion of convertible debt and interest  -   -   -   -   10,700   1   -   -   43,146   -   -   43,147 
                                                 
Shares issued upon cashless warrant exercise  -   -   -   -   13,302   1   -   -   (1)  -   -   - 
                                                 
Net loss  -   -   -   -   -   -   -   -   -   (644,533)  -   (644,533)
                                                 
Foreign currency translation adjustment  -   -   -   -   -   -   -   -   -   -   -   - 
                                                 
Balance at September 30, 2018  1,333  $         -   10,523  $1   336,761  $43   -  $-  $9,448,764  $(19,691,677) $-  $(10,242,869)
                 Total 
  Preferred Stock  Common Stock  Additional Paid-in  Accumulated  Stockholders’ 
  # of Shares  Amount  # of Shares  Amount  Capital  Deficit  Deficit 
                      
Balance at September 30, 2018               961  $-                      -  $-  $35,600,822  $(36,413,367) $(812,545)
                             
Preferred stock issued for cash  1   -   -   -   259,470   -   259,470 
                             
Net loss  -   -   -   -   -   (468,063)  (468,063)
                             
Balance at December 31, 2018  962   -   -   -   35,860,292   (36,881,430)  (1,021,138)
                             
Preferred stock issued for cash  -   -   -   -   60,000   -   60,000 
                             
Net loss  -   -   -   -   -   (318,448)  (318,448)
                             
Balance at March 31, 2019  962   -   -   -   35,920,292   (37,199,878)  (1,279,586)
                             
Common stock issued for services  26   -   -   -   101   -   101 
                             
Preferred stock issued for cash  1   -   -   -   280,000   -   280,000 
                             
Net loss  -   -   -   -   -   (426,531)  (426,531)
                             
Balance at June 30, 2019  989  $-   -  $-  $36,200,393  $(37,626,409) $(1,426,016)

 

See accompanying notes to the unaudited condensed consolidated financial statementsstatements.

 

F-36

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)(UNAUDITED)

 

 For The Nine Months Ended 
 September 30  For The Nine Months Ended 
 2019  2018  June 30, 
      2020 2019 
CASH FLOWS USED IN OPERATING ACTIVITIES                
Net income (loss) $(7,048,361) $3,964,312 
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Net loss $(1,837,155) $(1,213,042)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation  1,754   1,753   57,060   33,365 
Stock-based compensation  148,053   154,068 
Lease expense  5,975   - 
Stock issued for services  -   52,500   -   101 
Amortization of debt discount  1,248,031   848,280   -   25,000 
Derivative expense (income)  4,053,257   (4,495,598)
Loss (gain) on debt extinguishment  76,331   (2,355,431)
Non-cash default interest on debt  (179,989)  - 
Gain on foreign currency transactions  -   (25,184)
Gain on debt extinguishment  (108,060)  - 
Foreign Currency transaction gain  (60,075)  - 
Unrealized loss on marketable securities  11,200   14,400 
Change in operating assets and liabilities:                
Accounts receivable  (20,975)  - 
Prepaid expenses and other current assets  (19,611)  (213,559)  (116,219)  (14,337)
Accounts payable  307,511   79,292   (212,840)  177,476 
Liabilities of discontinued operations  -   (8,449)
Accrued liabilities and other liabilities  581,740   701,227   (70,734)  110,369 
Due to related parties  -   100,647 
                
NET CASH USED IN OPERATING ACTIVITIES  (831,284)  (1,296,789)  (2,351,823)  (766,021)
                
CASH FLOWS FROM INVESTING ACTIVITIES        
Cash acquired from the Asset Sale Transaction (see Note 3)  675,928   - 
Purchase of property and equipment  (495,557)  (18,746)
        
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES  180,371   (18,746)
        
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from related party advances, net  31,970   72,239 
Proceeds from convertible debt, net of cost  935,700   1,921,643 
Proceeds from sale of preferred stock  2,590,000   599,470 
Proceeds from convertible debt, net of debt discount  -   100,000 
Repayment of related party advances, net  (20,000)  114,610 
Repayment of convertible debt  -   (654,191)  (24,759)  (10,000)
Redemption of Series B Preferred  (500)  - 
Proceeds from sale of common stock and subscription receivable  -   6,000 
                
NET CASH PROVIDED BY FINANCING ACTIVITIES  967,170   1,345,691   2,545,241   804,080 
                
NET INCREASE IN CASH  135,886   48,902 
NET CHANGE IN CASH  373,789   19,313 
                
CASH, beginning of the period  201   1,431   560,407   20,896 
                
CASH, end of the period $136,087  $50,333  $934,196  $40,209 
                
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
Cash paid during the period for:                
Interest $3,345  $484,151  $-  $- 
Income taxes $-  $-  $-  $- 
                
Non-cash investing and financing activities:                
Issuance of common stock for convertible debt and interest $402,011  $414,413 
Issuance of common stock for casheless exercise of warrants $-  $3,271 
Increase in debt discount and derivative liabilities $352,472  $4,160,959 
Debt issue cost $117,890  $- 
Initial amount of ROU asset and related liability $59,216  $- 
Reduction of the ROU asset and related liability $26,647  $- 
Issuance of preferred stock for convertible debt and interest $277,215  $- 
Issuance of preferred stock for settlement of accounts payable and accrued liabilities $399,154  $- 
        
Net assets acquired from Asset Sale Transaction (see Note 3)        
Cash $675,928  $- 
Prepaid expense and other current assets  17,539   - 
Accounts payable and other liabilities  (40,149)  - 
Liabilities of discontinued operations  (406,662)  - 
Net assets acquired $246,656  $- 

          

See accompanying notes to the unaudited condensed consolidated financial statements.

 

F-47

 

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SeptemberJUNE 30, 20192020

(Unaudited)(UNAUDITED)

 

NOTE 1 -ORGANIZATION AND NATURE OF OPERATIONS

 

Theralink Technologies, Inc., formerly OncBioMune Pharmaceuticals, Inc. (the “Company”) is, was a clinical-stage biopharmaceutical company engaged in the development of novel cancer immunotherapy products, with a proprietary vaccine technology that is designed to stimulate the immune system to attack its own cancer while not attacking the patient’s healthy cells. The Company has proprietary rights to an immunotherapy platform with an initial focus on prostate and breast cancers but that may be used to fight any solid tumor. The Company is also developing targeted therapies. Our mission is to improve overall patient condition through innovative bio-immunotherapy with proven treatment protocols, to lower deaths associated with cancer and to reduce the cost of cancer treatment. We believe our technology is safe, and utilizes clinically proven research methods of treatment to provide optimal likelihood of patient recovery.

technology. On March 10, 2017 (the “Closing Date”),June 5, 2020, the Company completedacquired the acquisitionassets (the “Asset Sale Transaction”) of 100% of the issued and outstanding capital stock of Vitel Laboratorios, S.A. de C.V.Avant Diagnostics, Inc., a Mexican variable stockNevada corporation established in 2009 (“Vitel”) from its shareholders Manuel Cosme Odabachian and Carlos Fernando Alaman Volnie (collectively, the “Vitel Stockholders”Avant”) pursuant to the terms and conditions of a ContributionAsset Purchase Agreement to the Property of Trust F/2868 entered into amongdated May 12, 2020 between the Company and the Vitel StockholdersAvant (the “Asset Purchase Agreement”). Avant is a commercial-stage precision medicine and molecular data-generating company that focuses on the Closing Date (the “Contribution Agreement”).development and commercialization of a series of patented, proprietary data-generating assays that may provide important actionable information for physicians and patients, as well as biopharmaceutical companies, in the areas of oncology.

Pursuant to the Asset Purchase Agreement, the Company acquired substantially all of the assets of Avant and assumed certain of its liabilities. Upon the terms and subject to the conditions of the Asset Purchase Agreement, Avant sold to the Company, all of Avant’s title and interest in, to and under all of the assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including goodwill), wherever located and whether existing or hereafter acquired, except for the specific excluded assets, which relate to, or are used or held for use in connection with, Avant’s business. The Company acquired Vitelalso hired Avant’s employees upon consummation of the Asset Sale Transaction. As consideration for the purposeAsset Sale Transaction, the Company issued to Avant 1,000 shares of commercializinga newly created Series D-1 Preferred Stock which held 54.55% of all voting rights on an as-converted basis with the common stock. Upon the effectiveness of an increase of the Company’s ProscaVax™ vaccine technologyauthorized shares of common stock from 6,666,667 shares to 12,000,000,000 shares, all such shares of Series D-1 Preferred Stock issued to Avant automatically converted into 5,081,549,184 shares of the Company’s common stock. Avant possessed majority voting control of the Company immediately following the Asset Sale Transaction and cancer technologiescontrolled the Company’s Board of Directors after the termination of the ten-day waiting period required by Rule 14f-1 under the Exchange Act. Accordingly, the Asset Sale Transaction was accounted for, in Mexico, Centralsubstance, as an asset acquisition of the Company’s net asset by Avant and Latin Americaa recapitalization of Avant. Avant is considered the historical registrant and to utilize Vitel’s distribution networkthe historical operations presented are those of Avant since Avant obtained 54.55% majority voting control of the Company (see Note 3). All share and customerper share data in the accompanying consolidated financial statements and industry relationships.footnotes has been retrospectively adjusted for the recapitalization.

 

On December 29, 2017,June 5, 2020, pursuant to the Asset Purchase Agreement, the Company; (i) entered into an employment agreement with Dr. Michael Ruxin to serve as the Company’s Chief Executive Officer, President and a director (see Note 10); (ii) entered into an employment agreement with Jeffery Busch to serve as the Company’s Chairman of the Board of Directors (see Note 10) and; (iii) appointed Yvonne Fors to its Board of Directors.

On June 11, 2020, the Company filed a Certificate of Withdrawal of Designation with the Nevada Secretary of State terminating the designation, amount thereof, voting powers, preferences and relative participating, optional and other special rights of the shares of the preferred stock of the Company determined to sell or otherwise dispose of its interest in Vitel and OncBioMune México due to disputes withdesignated as Series B Preferred Stock (see Note 9).

On August 14, 2020, the original Vitel Stockholders and resulting loss of operational controlBoard appointed Mr. Andrew Kucharchuk as Acting Chief Financial Officer of the assetsCompany, effective immediately (see Note 11).

On August 14, 2020, the Board approved a change in the Company’s fiscal year end from December 31 to September 30, effective immediately for the current fiscal year, and operationsfor all subsequent years until such time as the Board resolves to amend such fiscal year end. The fiscal year has been changed to conform to the September 30 fiscal year end of Vitel and OncBioMune Mexico. Accordingly, Vitel and OncBioMune México were treatedAvant which is the historical registrant as a discontinued operation through December 31, 2017result of the Asset Sale Transaction consummated on June 5, 2020 and were deconsolidated effective January 1, 2018therefore, no transition report is required (see Note 3)11). The Company expects to terminate the Contribution Agreement, Stockholders Agreement and Trust Agreement during 2019.

 

On April 3, 2019,September 15, 2020, the Company filed an amendmenta certificate of designation, preferences and rights of Series E Preferred Stock (the “Series E Certificate of Designation”) with the Nevada Secretary of the State of to its Articles of Incorporation to increase itsauthorized common stock from 500,000,000 shares to 1,500,000,000 shares (see Note 8). The Company’s 1,520,000,000 authorized shares consisted of 1,500,000,000designate 2,000 shares of commonits previously authorized preferred stock as Series E Preferred Stock, par value $0.0001 per share and 20,000,000 sharesa stated value of preferred stock, par value $0.0001$2,000 per share. The Series E Certificate of Designation and its filing was approved by the Company’s board of directors without shareholder approval as provided for in the Company’s articles of incorporation and under Nevada law (see Note 11).

 

On August 6, 2019,September 22, 2020, the Company filed with the Nevada Secretary of State an amendment to its ArticlesCertificate of Incorporation to change its name from “OncBioMune Pharmaceutical, Inc.” to “Theralink Technologies, Inc.” and increase itsauthorized shares of common stock from 1,500,000,000 shares to 5,000,000,000 shares (see Note 8). The Company’s 5,020,000,000 authorized shares consist of 5,000,000,000 6,666,667 shares of common stock at $0.0001 per share par value and 20,000,000to 12,000,000,000 shares of preferredcommon stock at $0.0001 per share par value.

On August 28, 2019, the Company filed an amendment to its Articles of Incorporation to implement a reverse stock split of the Company’s issuedvalue, effective September 24, 2020 (see Note 9 and outstandingNote 11). The 1,000 shares of commonSeries D-1 Preferred stock and preferred4,121.6 shares of Series D-2 Preferred stock at a ratio of 1-for-750 (the “Reverse Stock Split”),which became effective onSeptember 12, 2019. In addition, the Company amended the articles to reduce the Company’s authorized shares to; (i) 6,666,667were automatically converted into 5,081,549,184 and 41,216,000 shares of common stock, and; (ii) 26,667 shares of preferred stock, including 1,333 shares of Series A Preferred and 10,523 shares of Series B Preferred. The Reverse Stock Split did not have any effect on the stated par valuerespectively, upon increase of the common and preferred stock.All share and per share amountsauthorized shares, pursuant to the Certificate of Designations (see Note 11). The change in authorize shares has been retroactively reflected in the accompanying historical condensed consolidated financial statements have been retroactively adjustedbalance sheets.

On September 24, 2020, Andrew Kucharchuk resigned from his position as Acting Chief Financial Officer, effective immediately. Mr. Kucharchuk continues to reflectserve as a director on theReverseStock Split Company’s Board of Directors. On the same day, the Company appointed Thomas E. Chilcott, III, to serve as the Chief Financial Officer (see Note 8)11).

8

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentationPresentation and principlesPrinciples of consolidationConsolidation

The Company’s consolidated financial statements include the financial statements of OncBioMune Pharmaceuticals, Inc. and its wholly-owned subsidiaries, OncBioMune, Inc. (for all periods presented) and, Vitel and OncBioMune México, S.A. De C.V. (from March 10, 2017 to December 31, 2017) were treated as a discontinued operation through December 31, 2017 and were deconsolidated effective January 1, 2018 (see Note 3). All significant intercompany accounts and transactions have been eliminated in consolidation.

Management acknowledges its responsibility for the preparation of the accompanying unauditedinterim condensed consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information, which present the consolidated financial statements of the Company and its wholly-owned subsidiary as of June 30, 2020. All intercompany transactions and balances have been eliminated. On April 4, 2021, the Company filed with the instructions Article 8-03SEC the audited restated financial statements of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expectedAvant for the fiscal year as a whole. Certain informationended September 30, 2019 and note disclosure normally included inrelated notes on Amendment No. 2 to its Current Report on Form 8-K/A. Accordingly, the interim audited condensed consolidated financial statements prepared in accordance with U.S. GAAP has been condensed or omitted from these statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for a comprehensive presentation of financial statements. These unaudited condensed consolidated financial statementsposition and results of operations and should be read in conjunction with the summaryaudited financial statements of significant accounting policiesAvant for the year ended September 30, 2019. It is management’s opinion that all material adjustments (consisting of normal recurring adjustments and notesnon-recurring adjustments) have been made, which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year ending September 30, 2020.

These interim condensed consolidated financial statements for the year ended December 31, 2018period ending June 30, 2020 consist of the interim condensed consolidated balance sheets of the Company which were includedas of June 30, 2020 and the related interim condensed consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the three and nine month periods ended June 30, 2020 and 2019, and the related notes, and reflect the acquisition of the Company’s annual reportnet assets pursuant to the Asset Sale Transaction with Avant Diagnostics, Inc. and concurrent recapitalization, which was consummated on Form 10-KJune 5, 2020, as filed with the Securities and Exchange Commission on April 1, 2019.

F-5

more fully disclosed in Note 3.

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSGoing Concern

September 30, 2019

(Unaudited)

Going concern

These 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. As reflected in the accompanying unaudited condensed consolidated financial statements, the Company had net (loss) from continuingloss and net cash used in operations of $(7,048,361)$1,837,155 and $2,351,823, respectively, for the nine months ended SeptemberJune 30, 2019. The net cash used in operations was $831,284 for the nine months ended September 30, 2019.2020. Additionally, the Company had an accumulated deficit, of $24,236,025 at September 30, 2019stockholders’ equity and had a working capital deficit of $13,718,635$39,848,356, $1,043,510 and $218,973 at SeptemberJune 30, 2019, had no revenues from continuing operations since inception, and is currently in default on certain convertible debt instruments.2020. Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report.

 

ManagementThe Company cannot provide assurance that weit will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. Management believes that ourAdditionally, the current capital resources are not currently adequate to continue operating and maintaining itsthe business strategy for a period of twelve months from the issuance date of this report. The Company will seek to raise capital through additional debt and/orand equity financings to fund its operations in the future.

 

Although the Company has historically raised capital from sales of equity and from the issuance of promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The global pandemic COVID-19, otherwise referred to as the Coronavirus, could impair our ability to raise additional funding or make such funding more costly. The ongoing global pandemic has caused cessation of normal business operations and caused capital markets to decline sharply. This could make it more difficult for the Companies to access capital. It is currently difficult to estimate with any certainty how long the pandemic and resulting curtailment of business will continue, and its effect on capital markets and the Company’s ability to raise funds is, accordingly, difficult to quantify. In addition, to the extent that any of the Company’s personnel or consultants are affected by the virus, this could cause delays or disruption in our planned research and development activities.

9

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

Use of estimatesEstimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimatesjudgments, assumptions, and assumptionsestimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Management bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. Significant estimates during the nine months ended June 30, 2020 and year ended September 30, 2019 and year ended December 31, 2018 include, but are not necessarily limited to, the valuation of assets and liabilities of discontinued operations, estimates of contingent liabilities, valuation of marketable securities, useful life of property and equipment, valuation of operating lease right-of-use (“ROU”) assets and operating lease liabilities, assumptions used in assessing impairment of long-term assets, allowances for sales returns, estimates of current and deferred income taxes and deferred tax valuation allowances and the fair value of non-cash equity transactionstransactions.

Additionally, the full impact of COVID-19 is unknown and cannot be reasonably estimated. However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are material differences between the Company’s estimates and the valuationactual results, the Company’s future consolidated results of derivative liabilities.operation will be affected.

 

Concentrations

Generally, the Company relies on one vendor as a single sourceFair Value of raw materials to produce certain components of its cancer treatment products. Any production shortfall that impairs the supply of the antigen in ProscaVax™ to the Company could have a material adverse effect on the Company’s business, financial conditionFinancial Instruments and results of operations. If the Company is unable to obtain a sufficient quantity of antigen, there could be a substantial delay in successfully developing a second source supplier.

Fair value of financial instruments and fair value measurementsValue Measurements

 

FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on SeptemberJune 30, 2019.2020. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

 

 Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
  
 Level 2—Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
  
 Level 3—Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

F-6

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement, to modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted ASU 2018-13 during the quarter ended March 31, 2020 and its adoption did not have any material impact on the Company’s consolidated financial statements.

 

The carrying amounts reported in the consolidated balance sheets for cash, due from and to related parties, prepaid expenses, accounts payable and accrued liabilities approximate their fair market value based on the short-term maturity of these instruments.

  At September 30, 2019  At December 31, 2018 
Description Level 1  Level 2  Level 3  Level 1  Level 2  Level 3 
Derivative liabilities  —   —  $7,477,494   —   —  $3,364,032 

A roll forward of the level 3 valuation financial instruments is as follows:

  Derivative Liabilities 
Balance at December 31, 2018 $3,364,032 
Initial valuation of derivative liabilities included in debt discount  352,472 
Initial valuation of derivative liabilities included in derivative income (expense)  — 
Reclassification of derivative liabilities to gain (loss) on debt extinguishment  (292,267)
Change in fair value included in derivative income (expense)  4,053,257 
Balance at September 30, 2019 $7,477,494 

ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

Cash and cash equivalents

 

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. At June 30, 2020 and September 30, 2019, and December 31, 2018, the Company did not have any cash equivalents.

 

The Company maintains its cash in bankbanks and financial institution depositsinstitutions that at times may exceed federally insured limits. There were nocash balances in excess of FDIC insured levels as of June 30, 2020 and September 30, 2019 and December 31, 2018.2019. The Company has not experienced any losses in such accounts through SeptemberJune 30, 2019.2020.

 

10

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

Property and equipmentEquipment

 

PropertyFixed assets are stated at cost and are depreciated using the straight-line method over their estimated useful lives, which range from three to five years. Leasehold improvements are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

 

Impairment of long-lived assetsLong-Lived Assets

 

In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. For the three and nine months ended September 30, 2019 and 2018, the Company did not record any impairment loss.

F-7

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Derivative liabilities

The Company has certain financial instruments that are embedded derivatives associated with capital raises. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10– Derivative and Hedging – Contract in Entity’s Own EquityStock-Based Compensation. This accounting treatment requires that the carrying amount of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.

In July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The guidance was adopted as of January 1, 2019 and the Company elected to record the effect of this adoption retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the condensed consolidated balance sheet as of the beginning of 2019, the period which the amendment is effective. The Company adopted ASU No. ASU No. 2017-11 in the first quarter of 2019, and the adoption did not have any impact on its consolidated financial statement and there was no cumulative effect adjustment.

Revenue recognition

In May 2014, FASB issued an update Accounting Standards Update, ASU 2014-09, establishing ASC 606 - Revenue from Contracts with Customers. ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The Company adopted this standard on January 1, 2018 using the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Based on an evaluation of the impact ASU 2014-09 will have on the Company’s sources of revenue, the Company has concluded that ASU 2014-09 did not have any impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers and there was no cumulative effect adjustment. The Company does not have revenues from continuing operations in 2019 and 2018.

Stock-based compensation

 

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

Through March 31, 2018, pursuantPursuant to ASC 505-50 - Equity-Based Payments to Non-Employees, all share-based payments to non-employees, including grants of stock options, were recognized in the consolidated financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the expense recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company early adopted ASU No. 2018-07 induring the second quarter ofperiod September 30, 2018, and the adoption did not have any impact on its consolidated financial statements.

 

Revenue Recognition

In May 2014, FASB issued an Accounting Standards Update, ASU 2014-09, establishing ASC 606 - Revenue from Contracts with Customers. ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The Company adopted this standard during the fiscal year ended September 30, 2018 using the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Based on an evaluation of the impact ASU 2014-09 will have on the Company’s sources of revenue, the Company has concluded that ASU 2014-09 did not have any impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers and there was no cumulative effect adjustment. The Company had $24,886 and $75,896 of revenues from operations during the three and nine months ended June 30, 2020.

Cost of Revenue

The cost of revenue consists of the cost of labor, supplies and materials.

F-811

 

ONCBIOMUNE PHARMACEUTICALS,

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARYSUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

Accounts Receivable and Allowance for Doubtful Accounts

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis and do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition.

Any charges to the allowance for doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. The allowance for doubtful accounts was $0 at June 30, 2020 and September 30, 20192019.

(Unaudited)

Basic and diluted loss per shareDiluted Loss Per Share

 

Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future. The following potentially dilutive equity securities outstanding as of SeptemberJune 30, 20192020 and 20182019 were not included in the computation of dilutive loss per common share because the effect would have been anti-dilutive:

 

  September 30, 
  2019  2018 
Stock warrants  15,964,516   275,514 
Convertible debt  12,333,669   234,282 
Stock options  52,730   28,667 
Series A preferred stock  1,333   — 
Series B preferred stock  3,856   — 
   28,356,104   538,463 
  June 30, 
  2020  2019 
Stock warrants  856,674,588   — 
Series C-1 preferred stock  445,301,289   — 
Series C-2 preferred stock  733,542,619   — 
Series D-1 preferred stock  4,441,433,275   4,392,557,509 
Series D-2 preferred stock  41,216,000   — 
   6,518,167,771   4,392,557,509 

 

Income taxesTaxes

 

The Company accounts for income tax using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

 

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740“Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of June 30, 2020, and September 30, 2019, and December 31, 2018, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties were recorded as of SeptemberJune 30, 2019.2020.

 

Research and development

Research and development costs incurred in the development of the Company’s products are expensed as incurred. For the nine months ended September 30, 2019 and 2018, research and development costs were $161,453 and $101,097, respectively, and are included in operating expenses on the accompanying consolidated statements of operations.

Related partiesParties

 

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

 

12

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

Leases

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02,Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. The updated guidance is effective for interim and annual periods beginning after December 15, 2018.

F-9

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

 

On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases and; (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not to recognize right-of-use (“ROU”) assets and lease liabilities for short-term leases that have a term of 12 months or less.

 

Operating lease ROU assetsrepresents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the condensed consolidated statements of operations.

 

Recent Accounting Pronouncements

The Company reviewed the recent accounting pronouncements

In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement, to modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not believe this will have any material impact on the Company’s consolidated financial statements.

Removals. The following disclosure requirements were removed from Topic 820:

1.The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy
2.The policy for timing of transfers between levels
3.The valuation processes for Level 3 fair value measurements
4.For nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period.

Modifications. The following disclosure requirements were modified in Topic 820:

1.In lieu of a roll forward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities.
2.For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly.
3.The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

Additions. The following disclosure requirements were added to Topic 820; however, the disclosures are not required for nonpublic entities:

1.The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period.
2.The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

F-10

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

In addition, the amendments eliminateat a minimum from the phrasean entity shall disclose at a minimum to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and to clarifydetermined that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements. The Company is evaluating the impactnone of the revised guidance and believes that it will not have a significant impact on its consolidated financial statements.

recent accounting pronouncements were applicable. Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unauditedCompany’s consolidated financial statements.

NOTE 3 –DISCONTINUED OPERATIONS OF VITELASSET SALE AND ONCBIOMUNE MEXICORECAPITALIZATION TRANSACTION

 

Avant provides personalized medical data through its Theralink® assays, initially for breast cancer, to assist the treating physician in a data-driven process for treatment decision support and to help enable predictive biomarker-based patient therapy selection. Avant is a developer of phosphoproteomic technologies for measuring the activation state of therapeutic targets and signaling pathways, a key metric for biopharmaceuticals, with applications across multiple cancer types, including breast, non-small cell lung, colorectal, gynecologic and pancreatic, among others.

On December 29, 2017, the Board of Directors ofJune 5, 2020, the Company determinedclosed the Asset Purchase Agreement entered into with Avant on May 12, 2020. Pursuant to sell or otherwise dispose of its interest in Vitel and OncBioMune Mexico due to disputes with the original Vitel Stockholders and resulting loss of operational controlAsset Purchase Agreement, the Company acquired substantially all of the assets and operationsbusiness of VitelAvant and OncBioMune Mexico. Accordingly, Vitelassumed certain of its liabilities in the Asset Sale Transaction. Upon the terms and OncBioMune Mexico are now treated as a discontinued operation for all periods presented in accordance with ASC 205-20. At December 31, 2018 and after deconsolidation,subject to the conditions of the Asset Purchase Agreement, Avant sold to the Company, has recorded the liabilitiesall of these subsidiaries that existed at December 31, 2017 as a contingent liabilityAvant’s title and therefore reflected liabilities of discontinued operation of $686,547 on the accompanying consolidated balance sheet, which consist of accounts payable balances incurred through December 31, 2017. This decision will enable the Companyinterest in, to focus more of its efforts and resources on the Phase 2 clinical trial of ProscaVax™ in the United States.

Pursuant to ASC Topic 205-20, Presentation of Financial Statements - Discontinued Operations, the businessunder all of the OncBioMune Mexicoassets, properties and Vitel are now considered discontinued operations becauserights of management’s decision of December 29, 2017.

The assetsevery kind and liabilities classified as discontinued operations in the Company’s consolidated financial statements as of September 30, 2019nature, whether real, personal or mixed, tangible or intangible (including goodwill), wherever located and December 31, 2018 are set forth below.

  September 30, 2019  December 31, 2018 
Assets:        
Current assets:        
Cash $—   — 
Total current assets  —   — 
Total assets $—  $— 
Liabilities:        
Current liabilities:        
Accounts payable $686,547  $686,547 
Due to related parties  —   — 
Payroll liabilities  —   — 
Total current liabilities  686,547   686,547 
Total liabilities $686,547  $686,547 

NOTE 4 –CONVERTIBLE DEBT

November 2016 Financing

On November 23, 2016, the Company entered into Amended and Restated Securities Purchase Agreements (the “Amended and Restated Securities Purchase Agreements”) with three institutional investors (the “Purchasers”)whether existing or hereafter acquired, except for the salespecific excluded assets, which relate to, or are used or held for use in connection with, Avant’s business. The Company also hired Avant’s employees upon consummation of the Asset Sale Transaction. As consideration for the Asset Sale Transaction, Avant was issued 1,000 shares of a newly created Series D-1 Preferred Stock which held 54.55% of all voting rights on an as-converted basis with the common stock. Upon the increase of the Company’s convertible notes and warrants. Pursuantauthorized shares of common stock from 6,666,667 shares to the Amended and Restated Securities Purchase Agreements, the Company12,000,000,000 shares effective September 24, 2020, all such shares of Series D-1 Preferred Stock issued upon closing to the Purchasers for an aggregate subscription amount of $350,000, (i) 14.29% Original Issue Discount 10% Senior Secured Convertible Notes (the “November 2016 Notes”) and (ii) warrants (the “Warrants”) to purchase aggregate of 3,111Avant automatically converted into 5,081,549,184 shares of the Company’s common stock at an initial exercise price of $131.25 (subject to adjustments under certain conditions as defined in the Warrants) (see below for reduction of warrant exercise price) which are exercisable for a period of five years from November 23, 2016. The aggregate principal amountstock. Avant possessed majority voting control of the November 2016 Notes was $350,000Company immediately following the Asset Sale Transaction and controlled the Company received $300,000 after giving effect to the original issue discountCompany’s Board of $50,000. The November 2016 Notes bore interest at a rate equal to 10% per annum (which interest rate increased to 24% per annum upon the occurrence of an Event of Default (as defined in the November 2016 Notes)), had a maturity date of July 23, 2017 and were convertible (principal, and interest) at any timeDirectors after the issuance date into sharestermination of the ten-day waiting period required by Rule 14f-1 under the Exchange Act. Accordingly, the Asset Sale Transaction was accounted for, in substance, as an asset acquisition of the Company’s common stock at an initial conversion price equal to $112.50 per share (subject to adjustmentnet assets by Avant and a recapitalization of Avant as provideddiscussed in detail below under “Accounting for the Note) (see below for reduction for reduction of conversion price), provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing,Asset Sale Transaction”. Avant is considered the November 2016 Notes were convertiblehistorical registrant and the November 2016 Warrants shall be exercisable at 60%historical operations presented are those of Avant since Avant obtained 54.55% majority voting control of the lowest closing price duringCompany.

On June 5, 2020, pursuant to the prior twenty trading daysAsset Purchase Agreement, the Company; (i) entered into an employment agreement with Dr. Michael Ruxin to serve as the Company’s Chief Executive Officer, President and a director (see Note 10); (ii) entered into an employment agreement with Jeffery Busch to serve as the Company’s Chairman of the common stock as reported on the OTCQB or other principal trading market (the “Default Conversion Price”). DueBoard of Directors (see Note 10) and; (iii) appointed Yvonne Fors to non-paymentits Board of the November 2016 Notes, an event of default occurred and accordingly, the November 2016 Notes and Warrants are convertible and exercisable based on the default terms.Directors.

 

F-1113

 

ONCBIOMUNE PHARMACEUTICALS,THERALINK TECHNOLOGIES, INC. AND SUBSIDIARYSUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SeptemberJUNE 30, 20192020

(Unaudited)(UNAUDITED)

 

On May 23, 2017, in connection with the November 2016 Notes, the Company entered into forbearance agreements (the “Forbearance Agreements”) with the Purchases whereby the Purchasers waived any event of default, as defined in the November 2016 Notes. The Company failed to make a payment on May 23, 2017 to each of the Holders as required pursuant to the November 2016 Notes which resulted in an event of default under such Notes. As of result of the event of default, the aggregate amount owing under the November 2016 Notes as of May 23, 2017 was increased to $509,135 with such amount including a mandatory default amount of $141,299 and accrued interest of $17,836 resulting in debt settlement expense of $141,299 which was recorded in May 2017. The Forbearance Agreements also provideAccounting for the Holders to forbear their right to demandAsset Sale Transaction

The Asset Sale Transaction was accounted for, in substance, as an immediate cash payment of the principal amount due plus accrued interest as a resultasset acquisition of the Company’s failure to satisfy its payment obligations to the Holder on May 23, 2017 so longnet assets by Avant and a recapitalization of Avant as the Company complies with its other obligationsdid not meet the definition of a business under the November 2016 Notesframework provided under ASC 805-10-55-5D through 55-6 - Business Combination. Avant is considered the historical registrant and the other transaction documents. historical operations presented are those of Avant since Avant obtained 54.55% majority voting control of the Company where, in effect, the Company is the legal acquirer (accounting acquiree) and Avant is the accounting acquirer (legal acquiree).

The Forbearance Agreements did not waivecost of the default interest rate of 24%. In consideration therefore, and as currently set forth in the November 2016 Notes, the Holders shall be entitled to convert such notes from time to time at their discretionAsset Sale Transaction was determined in accordance with ASC 805-50-30-1 through 30-2 Business Combinations, which states in part that assets are recognized based on their cost to the termsacquiring entity, which generally includes the transaction costs of the November 2016 Notesasset acquisition, and no gain or loss is recognized unless the November 2016 Notesfair value of noncash assets given as consideration differs from the assets’ carrying amounts on the acquiring entity’s books. If the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued), measurement is based on either the cost which shall not be subject to repayment unless agreed to bymeasured based on the Holder of such Note. In connection with the Forbearance Agreements, in May 2017, the Company increased the principal balancefair value of the November 2016 Notes by $159,135, reduced accrued interest payable by $17,836,consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, recorded debt settlement expense of $141,299. In 2017, the Company also increased the principal amount of these notes by $42,327 and charged this to interest expense for other default charges and other expenses.thus, more reliably measurable.

 

In accordance with ASC 805-50-30-1, the fair value of the 1,000 shares of Series D-1 Preferred Stock, issued as consideration, was determined to be $246,656 which was the fair value of the Company’s net assets that were acquired by Avant as of the closing date of the transaction. The cost of the Asset Sale Transaction was allocated to the acquired assets and assumed liabilities based on their estimated fair values.

The following assets and liabilities were assumed in the transaction:

Cash $675,928 
Prepaid expense and other current assets  17,539 
Total assets acquired  693,467 
     
Accounts payable and other liabilities  (40,149)
Liabilities of discontinued operations  (406,662)
Total liabilities assumed  (446,811)
     
Net assets acquired $246,656 

NOTE 4 – MARKETABLE SECURITIES

During the fiscal year ended 2017, the Purchasers converted $369,423 and $32,878 of outstanding principal and interest, respectively, of the November 2016 Notes into 11,150Company acquired 1,000,000 shares of common stock.

In 2018,stock of Amarantus BioScience Holdings, Inc. (“AMBS”) with a fair value of $40,980. The AMBS common stock is recorded as marketable securities in the Purchasers fully convertedaccompanying balance sheets and its fair value is adjusted every reporting period and the remaining outstanding principalchange in fair value is recorded in the statements of operations as unrealized gain or (loss) on investments. During the nine and interest of $139,712three months ended June 30, 2020, the Company recorded $11,200 and $21,869,$4,900, respectively, of the November 2016 Notes into 17,372 shares of common stock.unrealized loss. As of December 31 2018, there were no November 2016 Notes outstanding.

The November 2016 NotesJune 30, 2020 and related Warrants includes; (i) down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception; and (ii) default conversion and exercise price provisions where, the November 2016 Notes shall be convertible and the November 2016 Warrants shall be exercisable at 60% of the lowest closing price during the prior twenty trading days of the common stock as reported on the OTCQB or other principal trading market (the “Default Conversion Price”). Subsequent to the date of these November 2016 Notes, the Company sold stock at a share price of $56.25 per share then $37.50 per share and then $7.50 per share. Accordingly, pursuant to these ratchet provisions, the conversion price on the November 2016 Notes were lowered to $37.50 per share then to $22.50 per share and then to $4.50 per share and the exercise price of the November 2016 Warrants was lowered to $4.50. Additionally, the total number of November 2016 Warrants were increased on a full ratchet basis from 3,111 warrants to 42,346 warrants, an increase of 39,235 warrants (see Note 8). In September 2017, the Company issued 12,729 shares of its common stock upon the cashless exercise of 12,099 of these warrants (see Note 8). As of September 30, 2019, therethe fair value of these shares were 30,247 warrants outstanding under the November 2016 Warrants.$6,800 and $18,000, respectively.

 

NOTE 5 – June 2017 FinancingPROPERTY AND EQUIPMENT

 

On June 2, 2017,Property and equipment are recorded at cost and once placed in service, are depreciated on the Company entered into a Securities Purchase Agreement (the “Second Securities Purchase Agreement”) withstraight-line method over their estimated useful lives. Leasehold improvements are accreted over the Purchasers for the saleshorter of the Company’s convertible notes and warrants. Pursuant to the terms provided for in the Second Securities Purchase Agreement, the Company issued the Purchasers for an aggregate subscription amount of $233,345: (i) 14.29% Original Issue Discount 10% Senior Secured Convertible Notes (the “June 2017 Notes”); and (ii) warrants (the “June 2017 Warrants”) to purchase an aggregate of 2,074 sharesestimated economic life or related lease terms. Fixed assets consist of the Company’s common stock at an initial exercise price of $131.25 (subjectfollowing:

  Estimated Useful Life in Years  

June 30,

2020

  September 30, 2019 
       (Unaudited)     
Laboratory equipment  5  $397,432  $103,247 
Furniture  5   13,367   — 
Leasehold improvements  5   330,309   216,984 
Computer equipment  3   51,503   1,329 
       792,611   321,560 
Less accumulated depreciation      (45,556)  (22,650)
Property and equipment, net     $747,055  $298,910 

For the three and nine months ended June 30, 2020, depreciation expense related to adjustments under certain conditions as defined in the June 2017 Warrants)property and exercisable for five years after the issuance date.equipment amounted to $9,675 and $22,906, respectively.

 

F-1214

 

ONCBIOMUNE PHARMACEUTICALS,THERALINK TECHNOLOGIES, INC. AND SUBSIDIARYSUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SeptemberJUNE 30, 20192020

(Unaudited)(UNAUDITED)

 

The aggregate principal amount of the June 2017 Notes was $233,345 and the Company received $190,000 after giving effect to the original issue discount of $33,345 and $10,000 of offering costs. The June 2017 Notes bear interest at a rate equal to 10% per annum (which interest rate is increased to 24% per annum upon the occurrence of an Event of Default (as defined in the June 2017 Notes)), have a maturity date of February 2, 2018 and are convertible (principal and interest) at any time after the issuance date, into shares of the Company’s common stock at an initial conversion price equal to $112.50 per share (subject to adjustment as provided in the June 2017 Notes), provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the June 2017 Notes shall be convertible and the June 2017 Warrants shall be exercisable at 60% of the lowest closing price during the prior twenty trading days of the common stock as reported on the OTCQB or other principal trading market (the “Default Conversion Price”). The June 2017 Notes are currently in default. The June 2017 Notes provide for two amortization payments on the six-month, seven-month and eight-month anniversary of the issue date with each amortization payment being one third of the total outstanding principal and interest. If the six-month amortization payment is made in cash then the payment is an amount equal to 120% of the applicable amortization payment and if the seven-month or the eight-month amortization payments are made in cash then the payment is an amount equal to 125% of the applicable amortization payment. The June 2017 Notes may be prepaid at any time until the 180th day following the Original Issue Date at an amount equal to (i) 115% of outstanding principal balance of the Note and accrued and unpaid interest during the period from the Original Issue Date through the three months following the Original Issue Date, and (ii) 120% of outstanding principal balance of the June 2017 Notes and accrued and unpaid interest during months four through six following the Original Issue Date. In order to prepay the June 2017 Notes, the Company shall provide 20 Trading Days prior written notice to the Holder, during which time the Holder may convert the June 2017 Notes in whole or in part at the Conversion Price. During the nine months ended June 30, 2018, the Company also increased the principal amount of these notes by $2,268 for other default charges and other expenses. In 2018, the Purchasers converted $118,786 and $7,036 outstanding principal and interest, respectively, of the June 2017 Notes into 19,819 shares of common stock. In addition, pursuant a securities purchase agreement dated September 24, 2018, the Company purchased back from one Purchaser, a June 2017 Note with $37,814 and $4,534 of outstanding principal and interest, respectively, (see-Puritan Settlement Agreementbelow). During the three months ended March 31, 2019, the Purchasers converted $77,782, $13,593 and $36,134 outstanding principal, interest and default interest, respectively, of the June 2017 Notes into 32,180 shares of common stock. As of September 30, 2019, the June 2017 Notes had outstanding principal and accrued interest of $1,495 and $0, respectively.NOTE 6 – LOANS PAYABLE

 

The June 2017 Notes and related June 2017 Warrants includes; (i) down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception; and (ii) default conversion and exercise price provisions where, the June 2017 Notes shall be convertible and the June 2017 Warrants shall be exercisable at Default Conversion Price as defined above. Subsequent to the date of these June 2017 Notes, the Company sold stock at a share price of $37.50 per share and then $7.50 per share. Accordingly, pursuant to these ratchet provisions, the conversion price of the notes were lowered to $4.50 per shares and the exercise price of the June 2017 Warrants were lowered to $4.50 per share and the total number of June 2017 Warrants were increased on a full ratchet basis from 2,074 warrants to 60,497 warrants, an increase of 58,423 warrants (see Note 8). In 2018, the Company issued 11,332 shares of its common stock upon the cashless exercise of 20,166 of the June 2017 Warrants. As of September 30, 2019, there were 40,331 warrants outstanding under the June 2017 Warrants.

July 2017 Financing

On July 26, 2017, the Company entered into a Securities Purchase Agreementloan agreement with a third-party investor (the “Third Securities Purchase Agreement”“Loan”) with the Purchasers for the sale of the Company’s convertible notes and warrants.. Pursuant to the terms provided for in the Third Securities Purchase Agreement,loan agreement, the Company issued toborrowed the Purchasers for an aggregate subscription amount of $300,000: (i) 10% Original Issue Discount 5% Senior Secured Convertible Notes in the aggregate principal amount of $333,883 (the “July 2017 Notes”);$1,000. The Loan bears an annual interest rate of 33.3%, is unsecured and (ii) warrants (the “July 2017 Warrants”)in default due to purchase an aggregate of 6,359 sharesnon-payment of the Company’s common stock at an exercise price of $75.00 per share (subject to adjustments under certain conditions as defined in the Warrants). The July 2017 Notes were issued on July 26, 2017. The July 2017 Notes bear interest at a rate equal to 5% per annum (which interest rate is increased to 24% per annum upon the occurrence of an Event of Default (as defined in the July 2017 Notes)), have a maturity date of March 25, 2018 and are convertible (principal, and interest) at any time after the issuance date into shares of the Company’s common stock at a conversion price equal to $52.50 per share (subject to adjustment as provided in the July 2017 Notes), provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the July 2017 Notes shall be convertible and the July 2017 Warrants shall be exercisable at 60% of the lowest closing price during the prior twenty trading days of the common stock as reported on the OTCQB or other principal trading market (the “Default Conversion Price”). The July 2017 Notes are currently in default. The July 2017 Notes provide for three amortization payments on the six-month, seven-month and eight-month anniversary of the issue date with each amortization payment being one third of the total outstanding principal and interest. If the six-month amortization payment is made in cash then the payment is an amount equal to 110% of the applicable amortization payment and if the seven-month or the eight-month amortization payments are made in cash then the payment is an amount equal to 115% of the applicable amortization payment. The July 2017 Notes may be prepaid at any time until the 210th day following the Original Issue Date at an amount equal to (i) 115% of outstanding principal balance of the Note and accrued and unpaid interest during the period from the Original Issue Date through the three months following the Original Issue Date, and (ii) 120% of outstanding principal balance of the July 2017 Notes and accrued and unpaid interest during months four through seven following the Original Issue Date. In order to prepay the July 2017 Notes, the Company shall provide 20 Trading Days prior written noticepursuant to the Purchaser, during which time the Purchaser may convert the July 2017 Notes in whole or in part at the Conversion Price. During the year ended December 31, 2018, the Purchasers converted $111,295 and $11,414 outstanding principal and interest, respectively, of the July 2017 Notes into 31,053 shares of common stock. In addition, pursuant to a securities purchase agreement dated September 24, 2018, the Company purchased back, from one Purchaser, a July 2017 Note with $155,812 and $38,395 of outstanding principal and interest, respectively (see-Puritan Settlement Agreement below).repayment terms. As of SeptemberJune 30, 2019,2020, the July 2017 Notesloan had outstanding principal and accrued interest balances of $44,518$1,000 and $24,174,$938, respectively.

NOTE 7 –LEASE LIABILITIES

 

Financing Lease Payable

Effective November 2018, the Company entered into a financing agreement with the first lessor to finance the purchase of equipment. Pursuant to the financing agreement, the Company shall make monthly payment of $379 for a period of 60 months commencing in November 2018 through October 2023. At the effective date of the financing agreement, the Company recorded a financing lease payable of $16,064.

Effective November 2018, the Company entered into a financing agreement with the second lessor to finance the purchase of equipment. Pursuant to the financing agreement, the Company shall make monthly payment of $1,439 for a period of 60 months commencing in November 2018 through October 2023. At the effective date of the financing agreement, the Company recorded a financing lease payable of $62,394.

Effective March 2019, the Company entered into a financing agreement with the third lessor to finance the purchase of equipment. Pursuant to the financing agreement, the Company shall make monthly payment of $1,496 for a period of 60 months commencing in March 2019 through April 2024. At the effective date of the financing agreement, the Company recorded a financing lease payable of $64,940.

Effective August 2019, the Company entered into a financing agreement with the fourth lessor to finance the purchase of equipment. Pursuant to the financing agreement, the Company shall make monthly payment of $397 for a period of 60 months commencing in August 2019 through August 2024. At the effective date of the financing agreement, the Company recorded a financing lease payable of $19,622.

Effective January 2020, the Company entered into a financing agreement with the fifth lessor to finance the purchase of equipment. Pursuant to the financing agreement, the Company shall make monthly payment of $1,395 for a period of 60 months commencing in January 2020 through December 2024. At the effective date of the financing agreement, the Company recorded a financing lease payable of $68,821.

The significant assumption used to determine the present value of the financing lease payables was the discount rate which ranged from between 8% and 15% based on the Company’s estimated effective rate pursuant to the financing agreements.

Financing lease right-of-use asset (“Financing ROU”) is summarized below:

  June 30, 2020 
  (Unaudited) 
Financing ROU asset $231,841 
Less accumulated depreciation  (61,936)
Balance of Financing ROU asset as of June 30, 2020 $169,905 

For the three and nine months ended June 30, 2020, depreciation expense related to Financing ROU asset amounted to $11,788 and $34,154, respectively.

Financing lease liability related to the Financing ROU asset is summarized below:

  June 30, 2020 
  (Unaudited) 
Financing lease payables for equipment $231,841 
Total financing lease payables  231,841 
Payments of financing lease liabilities  (43,710)
Total  188,131 
Less: short term portion as of June 30, 2020  (40,969)
Long term portion as of June 30, 2020 $147,162 

F-1315

 

ONCBIOMUNE PHARMACEUTICALS,THERALINK TECHNOLOGIES, INC. AND SUBSIDIARYSUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SeptemberJUNE 30, 20192020

(Unaudited)

On June 5, 2018, the original purchaser of the July 2017 Notes entered into an Assignment Agreement (“First Note Assignment”) with the assignee (“First Assignee”) for the sale of a portion of the July 2017 Notes (“First Assigned Note”) with outstanding principal of $111,295 and accrued interest of $29,180. In connection with the First Note Assignment, a default interest in the amount of $53,733 was charged, which was included in the sale price and updated principal of the First Assigned Note totaling $194,208.

On October 16, 2018, the First Assignee, in turn entered into an Assignment Agreement (“Second Note Assignment”) with a another assignee (“Second Assignee”) for the sale of the First Assigned Note with outstanding principal of $194,208 and accrued interest of $3,204. In connection with the Second Note Assignment, a prepayment premium of $49,353 was charged which was included in the sale price and updated principal of $246,765. In 2018, the Purchasers converted $17,500 of the outstanding principal of the new Note (“Second Assigned Note”), into 3,613,688 shares of common stock. During the six months ended June 30, 2019, the Purchasers converted $55,000 of the outstanding principal of the Second Assigned Note, into 10,966,166 shares of common stock. As of June 30, 2019, the Second Assigned Note had an outstanding principal balance of $174,264 and accrued interest of $0.

During the quarter ended September 30, 2019, the default interest charged on June 2018 of $53,733 and prepayment premium charged on October 2018 of $49,535, an aggregate penalties of $103,268, was contested by the Company and the penalties related to these note assignments were removed from the outstanding principal balance of the July 2017 Notes. In addition, certain amounts of the accrued liabilities had been previously included in the principal balance of $32,384 was reversed and a new accrued interest based in the agreed upon principal balance was accrued which totaled $30,612. As of September 30, 2019, the July 2017 Notes had an outstanding principal balance of $38,794 and accrued interest of $30,612.

The July 2017 Notes and related Warrants includes; (i) down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception; and (ii) default conversion and exercise price provisions where, the July 2017 Notes shall be convertible and the July 2017 Warrants shall be exercisable at the Default Conversion Price as define above. Subsequent to the date of these July 2017 Notes, the Company sold stock at a share price of $37.50 per share and then at $7.50 per share. Accordingly, pursuant to these ratchet provisions, the conversion price of the July 2017 Notes was lowered to $4.50 per share and the exercise price of the July 2017 Warrants was lowered to $4.50 per share and the total number of July 2017 Warrants was increased on a full ratchet basis from 6,359 warrants to 105,994 warrants, an increase of 99,635 warrants (see Note 8). In 2018, the Company issued 32,289 shares of its common stock upon the cashless exercise of 35,332 of these warrants. As of September 30, 2019, there were 70,662 warrants outstanding under the July 2017 Warrants.

January 2018 Financing(UNAUDITED)

 

On January 29, 2018, the Company entered into a Securities Purchase Agreement (the “Fourth Securities Purchase Agreement”) with the Purchasers for the sale of the Company’s convertible notes and warrants. Pursuant to the terms provided for in the Fourth Securities Purchase Agreement, the Company issued to the Purchasers for an aggregate subscription amount of $333,333: (i) 10% Original Issue Discount 5% Senior Secured Convertible Notes in the aggregate principal amount of $333,333 (the “January 2018 Notes”); and (ii) 5 year warrants (the “January 2018 Warrants”) to purchase an aggregate of 11,111 shares of the Company’s common stock at an exercise price of $30.00 per share (subject to adjustments under certain conditions as defined in the Warrants). The closingFuture minimum lease payments under the Fourth Securities Purchase Agreement occurred on January 29, 2018. The aggregate principal amount of the January 2018 Notes is $333,333 and the Company received $295,000 after giving effect to the original issue discount of $33,333 and offering costs of $5,000. These January 2018 Notes bear interestfinancing lease agreements at a rate equal to 5% per annum (which interest rate is increased to 18% per annum upon the occurrence of an Event of Default (as defined in the January 2018 Notes)), have a maturity date of September 29, 2018 andJune 30, 2020 are convertible (principal, and interest) at any time after the issuance date into shares of the Company’s common stock at a conversion price equal to $22.50 per share (subject to adjustment as provided in the January 2018 Notes), provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the January 2018 Notes shall be convertible and the January 2018 Warrants shall be exercisable at 60% of the lowest closing price during the prior twenty trading days of the common stock as reported on the OTCQB or other principal trading market (the “Default Conversion Price”). The January 2018 Notes are currently in default. The January 2018 Notes provide for three amortization payments on the six-month, seven-month and eight-month anniversary of the original issue date with each amortization payment being one third of the total outstanding principal and interest. If the six-month amortization payment is made in cash, then the payment is an amount equal to 110% of the applicable amortization payment and if the seven-month or the eight-month amortization payments are made in cash then the payment is an amount equal to 115% of the applicable amortization payment. The January 2018 Notes may be prepaid at any time until the 180th day following the Original Issue Date at an amount equal to (i) 115% of outstanding principal balance of the Note and accrued and unpaid interest during the period from the Original Issue Date through the five months following the Original Issue Date, and (ii) 120% of outstanding principal balance of the January 2018 Notes and accrued and unpaid interest during the six month following the Original Issue Date. In order to prepay the January 2018 Notes, the Company shall provide 20 Trading Days prior written notice to the Purchaser, during which time the Purchaser may convert the January 2018 Notes in whole or in part at the Conversion Price. Pursuant to a securities purchase agreement dated September 24, 2018, the Company purchased back, from one Purchaser, a January 2018 Note with $111,111 and $98,031 outstanding principal and interest, respectively (see-Puritan Settlement Agreement below). As of September 30, 2019, the January 2018 Notes had outstanding principal and accrued interest of $222,222 and $57,321, respectively.follows:

 

The January 2018 Notes and related Warrants includes; (i) down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception; and (ii) default conversion and exercise price provisions where, the January 2018 Notes shall be convertible and the January 2018 Warrants shall be exercisable at the Default Conversion Price as defined above. The total number of January 2018 Warrants were increased on a full ratchet basis from 11,111 warrants to 963,822, an aggregate increase of 952,711 warrants (see Note 8). Pursuant to a securities purchase agreement dated September 24, 2018, the Company purchased back, from one Purchaser, warrants to purchase 10,078 (post anti-dilution) of the Company’s common stock (see-Puritan Settlement Agreement below). As of September 30, 2019, there were 953,744 warrants outstanding under the January 2018 Warrants.

F-14

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

March 2018 Financing

On March 13, 2018, the Company entered into a Securities Purchase Agreement (the “Fifth Securities Purchase Agreement”) securities with the Purchasers for the sale of the Company’s convertible notes and warrants. Pursuant to the terms provided for in the Fifth Purchase Agreement, the Company issued for an aggregate subscription amount of $333,333: (i) 10% Original Issue Discount 5% Senior Secured Convertible Notes in the aggregate principal amount of $333,333 (the “March 2018 Notes”) and (ii) warrants (the “March 2018 Warrants”) to purchase an aggregate of 16,667 shares of the Company’s common stock at an exercise price of $30.00 per share. The aggregate principal amount of the March 2018 Notes is $333,333 and as of the date the Company received $61,000 after giving effect to the original issue discount of $33,333 and offering costs of $10,000 which are treated as a debt discount, the payment of legal and accounting fees of $29,000 not related to March 2018 Notes and the funding of an escrow account held by an escrow agent of $200,000. The March 2018 Notes bear interest at a rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the March 2018 Notes)), have a maturity date of November 13, 2018 and the principal and interest are convertible at any time at a conversion price equal to $15.00 per share (subject to adjustment as provided in the March 2018 Notes); provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the March 2018 Notes shall be convertible and the March 2018 Warrants shall be exercisable at 60% of the lowest closing price during the prior twenty trading days of the common stock as reported on the OTCQB or other principal trading market (the “Default Conversion Price”). The March 2018 Notes are currently in default. The March 2018 Notes provide for amortization payments on each of the six-month anniversary of the issue date, seven-month anniversary of the issue date and on the maturity date with each amortization payment being one third of the total outstanding principal and all interest accrued as of the payment date. If the six-month amortization payment is made in cash then the Company shall pay the holder 110% of the applicable amortization payment and if the seven-month or the maturity date amortization payments are made in cash then the Company shall pay the holder 115% of the applicable amortization payment. The holder may elect at its option to receive the amortization payments in common stock subject to certain equity conditions. The March 2018 Notes may be prepaid at any time until the 180th day following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the Note and accrued and unpaid interest through the five month anniversary of the issue date, and (ii) 120% of outstanding principal balance of the Notes and accrued and unpaid interest from the fifth month anniversary of the issue date through the six month anniversary of the issue date. In order to prepay the March 2018 Notes, the Company shall provide 20 trading days prior written notice to the holders, during which time a holder may convert its March 2018 Notes in whole or in part at the conversion price. Pursuant to a securities purchase agreement dated September 24, 2018, the Company purchased back, from one Purchaser, a convertible note with $111,111 and $97,383 outstanding principal and accrued interest, respectively (see-Puritan Settlement Agreement below). During the nine months ended September 30, 2019, the Purchasers converted $69,444 and $612 outstanding principal and accrued interest, respectively, of the March 2017 Notes into 21,779 shares of common stock. As September 30, 2019, the March 2018 Notes had outstanding principal and accrued interest of $152,778 and $39,431, respectively.

The March 2018 Notes and related March 2018 Warrants includes; (i) down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception; and (ii) default conversion and exercise price provisions where, the March 2018 Notes shall be convertible and shall be exercisable at the Default Conversion Price as defined above. Pursuant to a securities purchase agreement dated September 24, 2018, the Company purchased back, from one Purchaser, warrants to purchase 15,117 (post anti-dilution) of the Company’s common stock (see-Puritan Settlement Agreementbelow). The total number of March 2018 Warrants was increased, during the nine months ended September 30, 2019, on a full ratchet basis from 16,667 warrants to 1,445,734, an aggregate increase of 1,429,067 warrants. As of September 30, 2019, there were 1,430,616 warrants outstanding under the March 2018 Warrants (see Note 8).

July 2018 Financing

On July 25, 2018, the Company entered into a securities purchase agreement (the “Sixth Securities Purchase Agreement”) with an institutional investor for the sale of a convertible note in the aggregate principal amount of $150,000 (the “July 2018 Note”). The July 2018 Note bears interest at 8% per year and matures on July 24, 2019. The July 2018 Note is convertible into common stock at a 25% discount to the average of the closing prices of the common stock for the prior five trading days including the date upon which a notice of conversion is received by the Company or its transfer agent. The holder will not have the right to convert any portion of its note if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to its conversion. The July 2018 Note may be prepaid at the Company’s option at a 105% premium between 30 days and 180 days after issuance, and at a 110% premium between 180 days after issuance and the maturity date. Upon certain events defined in the note as “sale events”, the holder may demand repayment of the note for 125% of the principal plus accrued but unpaid interest. The note also includes certain penalties upon the occurrence of an event of default, including an increase in the principal and reduction in the conversion rate, as further described in the July 2018 Note. The Company agreed to use its best efforts to file a proxy statement and take all necessary corporate actions in order to obtain shareholder approval to increase its authorized shares of common stock or effect a reverse split to allow for reserving sufficient shares of common stock to allow for full conversion of the July 2018 Note. The July 2018 Note is currently in default. As of September 30, 2019, the July 2018 Note had outstanding principal and accrued interest of $150,000 and $19,537, respectively.

F-15

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

September 2018 Financing

On September 24, 2018, the Company entered into a securities purchase agreement (the “Seventh Purchase Agreement” and together with the Amended and Restated Purchase Agreements and the Second, Third, Fourth, Fifth and Sixth Purchase Agreement, the “Securities Purchase Agreements”) with four accredited investors (the “Seventh Round Purchasers” and together with the Purchasers, the “Note Purchasers”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Seventh Purchase Agreement, the Company issued to the Seventh Round Purchasers for an aggregate subscription amount of $1,361,111; (i) 10% Original Issue Discount 5% Senior Convertible Notes in the aggregate principal amount of $1,361,111 (the “September 2018 Notes”) and (ii) 5 year warrants (the “September 2018 Warrants”) to purchase an aggregate of 68,056 shares of the Company’s common stock at an exercise price of $30.00 per share (subject to adjustments under certain conditions as defined in the September 2018 Warrants). The Company received $1,181,643 in aggregate net proceeds from the sale, net of $136,111 original issue discount and $43,357 in legal fees. The September 2018 Notes bear interest at a rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the September 2018 Notes)), had a maturity date of May 24, 2019 and the principal and interest are convertible at any time at a conversion price equal to $15.00 per share (subject to adjustment as provided in the September 2018 Notes); provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the September 2018 Notes shall be convertible and the September 2018 Warrants shall be exercisable at 60% of the lowest closing price during the prior twenty trading days (the “Default Conversion Price”). The September 2018 Notes are currently in default. The September 2018 Notes provide for amortization payments on each of the six-month anniversary of the issue date, seven-month anniversary of the issue date and on the maturity date with each amortization payment being one third of the total outstanding principal and all interest accrued as of the payment date. If the six-month amortization payment is made in cash then the Company shall pay the holder 110% of the applicable amortization payment and if the seven-month or the maturity date amortization payments are made in cash then the Company shall pay the holder 115% of the applicable amortization payment. The holder may elect at its option to receive the amortization payments in common stock subject to certain equity conditions. The Notes may be prepaid at any time until the 180th day following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the note and accrued and unpaid interest through the five month anniversary of the issue date, and (ii) 120% of outstanding principal balance of the notes and accrued and unpaid interest during month six following the original issuance date of the notes. In order to prepay the notes, the Company shall provide 20 trading days prior written notice to the holders, during which time a holder may convert its note in whole or in part at the conversion price. During the nine months ended September 30, 2019, the Purchasers converted $58,073 and $28,234 outstanding principal and accrued interest, respectively, of the September 2018 Notes into 39,934 shares of common stock. As of September 30, 2019, the September 2018 Notes had outstanding principal and accrued interest of $1,303,038 and $90,165, respectively.

The initial exercise price of the September 2018 Warrants is $30.00 per share, subject to adjustment as described below, and are exercisable for five years after the issuance date. The September 2018 Warrants are exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants. Accordingly, pursuant to the default provisions, the September 2018 Notes shall be convertible and the September 2018 Warrants shall be exercisable at the Default Conversion Price as defined above. The total number of September 2018 Warrants was increased, during the nine months ended September 30, 2019, on a full ratchet basis from 68,056 warrants to 8,762,518, an aggregate increase of 8,694,462 warrants (see Note 8). As of September 30, 2019, there were 8,762,518 warrants outstanding under the September 2018 Warrants.

November 2018 Financing

On November 13, 2018, the Company entered into a securities purchase agreement (the “Eighth Purchase Agreement”) with an institutional accredited investor (the “Eighth Round Purchaser”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Eighth Purchase Agreement, the Company issued to the Eighth Round Purchasers for an aggregate subscription amount of $127,778: (i) 10% Original Issue Discount 5% Senior Convertible Note in the aggregate principal amount of $127,778 (the “November 2018 Note”) and (ii) 5 year warrants (the “November 2018 Warrants”) to purchase an aggregate of 6,389 shares of the Company’s common stock at an exercise price of $30.00 per share (subject to adjustments under certain conditions as defined in the November 2018 Warrants). The Company received $112,500 in aggregate net proceeds from the sale, net of $12,778 Original Issue Discount and $2,500 of legal fees. The November 2018 Note bears interest at a rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the November 2018 Note)), has a maturity date of July 13, 2019 and the principal and interest are convertible at any time at a conversion price equal to $15.00 per share (subject to adjustment as provided in the November 2018 Note); provided, however, that if an Event of Default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the November 2018 Note shall be convertible and the November 2018 Warrants shall be exercisable at 60% of the lowest closing price during the prior twenty trading days (the “Default Conversion Price”). The November 2018 Note provides for amortization payments on each of the six-month anniversary of the issue date, seven-month anniversary of the issue date and on the maturity date with each amortization payment being one third of the total outstanding principal and all interest accrued as of the payment date. If the six-month amortization payment is made in cash then the Company shall pay the holder 110% of the applicable amortization payment and if the seven-month or the maturity date amortization payments are made in cash then the Company shall pay the holder 115% of the applicable amortization payment. The holder may elect at its option to receive the amortization payments in common stock subject to certain equity conditions. The Note may be prepaid at any time until the 180th day following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the Note and accrued and unpaid interest through the five month anniversary of the issue date, and (ii) 120% of outstanding principal balance of the Note and accrued and unpaid interest during month six following the original issuance date of the notes. In order to prepay the notes, the Company shall provide 20 trading days prior written notice to the holders, during which time a holder may convert its note in whole or in part at the conversion price. As of September 30, 2019, the November 2018 Note is currently in default and had outstanding principal and accrued interest of $127,778 and $11,490, respectively.

F-16

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The initial exercise price of the November 2018 Warrants was $30.00 per share, subject to adjustment as described below, and are exercisable for five years after the issuance date. The November 2018 Warrants are exercisable for cash at any time and is exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrant in the two years after the issue date of the Warrants (“Dilutive Issuances”). Accordingly, pursuant to the default provisions, the November 2018 Warrant shall be exercisable at the Default Conversion Price as defined above. The total number of November 2018 Warrants was increased on a full ratchet basis from 6,389 warrants to 822,604, an aggregate increase of 816,215 warrants. As of September 30, 2019, there were 822,604 warrants outstanding under the November 2018 Warrants (see Note 8).

January 2019 Financing

On January 18, 2019, the Company entered into a securities purchase agreement (the “Ninth Securities Purchase Agreement”) with an institutional investor for the sale of a convertible note in the aggregate principal amount of $146,875 (the “January 2019 Note I”). The closing occurred on January 22, 2019, with the Company receiving net proceeds of $125,000, net of 12,500 OID and $9,375 of legal fees. The January 2019 Note I had an interest rate of 5% per annum and matures on January 18, 2020. During the first six months the January 2019 Note I may be converted, all or a portion, of the outstanding principal into shares of the Company’s common stock at a fixed conversion price of $15.00 per share. Starting on the six-month anniversary, the conversion price shall be equal to 60% of the lowest trading price of the common stock during the 20 prior trading days (including the day upon which a notice of conversion is received). The January 2019 Note I may not be converted to the extent that such conversion would result in beneficial ownership by the purchaser and its affiliates to exceed more than 9.9% of the Company’s issued and outstanding common stock. If the Company prepays the January 2019 Note I within 150 days of its issuance, the Company must pay the principal at a cash redemption premium of 115%, in addition to accrued interest; if such prepayment is made from the151st day to the 180th day after issuance, then such redemption premium is 120%, in addition to accrued interest. After the 180th day following the issuance of the January 2019 Note I, there shall be no further right of prepayment. During the nine months ended September 30, 2019, the Purchaser converted $46,875 and $1,246 of outstanding principal and accrued interest, respectively, into 35,216 shares of the Company’s common stock. As of September 30, 2019, the January 2019 Note I was in default and had outstanding principal and accrued interest of $100,000 and $4,325, respectively.

On January 18, 2019, the Company entered into a securities purchase agreement (the “Tenth Securities Purchase Agreement”) with an institutional investor for the sale of a convertible note in the aggregate principal amount of $88,125 (the “January 2019 Note II”). The closing occurred on January 29, 2019, with the Company receiving net proceeds of $75,000, net of $7,500 OID and $5,625 of legal fees. The January 2019 Note II had an interest rate of 5% per annum and matures on January 18, 2020. During the first six months the January 2019 Note II is in effect, the purchaser may convert all or a portion of the outstanding principal of the January 2019 Note II into shares of the Company’s common stock at a fixed conversion price of $15.00 per share. Starting on the six-month anniversary, the conversion price shall be equal to 60% of the lowest trading price of the common stock during the 20 prior trading days (including the day upon which a notice of conversion is received). The purchaser may not convert the January 2019 Note II to the extent that such conversion would result in beneficial ownership by the purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. If the Company prepays the January 2019 Note II within 150 days of its issuance, the Company must pay the principal at a cash redemption premium of 115%, in addition to accrued interest; if such prepayment is made from the151st day to the 180th day after issuance, then such redemption premium is 120%, in addition to accrued interest. After the 180th day following the issuance of the January 2019 Note II, there shall be no further right of prepayment. During the nine months ended September 30, 2019, the Purchasers converted $15,000 and $16 outstanding principal and accrued interest, respectively, into 3,708 shares of the Company’s common stock. As of September 30, 2019, the January 2019 Note II was in default and had outstanding principal and accrued interest of $73,125 and $7,128, respectively.

F-17

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

March 2019 Financing

On March 25, 2019, the Company entered into a securities purchase agreement (the “Eleventh Purchase Agreement”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Eleventh Purchase Agreement, the Company issued to the Eleventh Round Purchaser for an aggregate subscription amount of $50,000: (i) 10% Original Issue Discount and 5% Senior Convertible Notes in the aggregate principal amount of $55,556 (the “March 2019 Note”) and (ii) 5 year warrants (the “March 2019 Warrants”) to purchase an aggregate of 2,778 shares of the Company’s common stock at an exercise price of $30.00 per share (subject to adjustments under certain conditions as defined in the March 2019 Warrants). The Company received $50,000 in net proceeds from the sale, net of $5,556 OID. The March 2019 Note bears an interest rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the March 2019 Note)), shall mature on November 25, 2019 and the principal and interest are convertible at any time at a conversion price equal to $15.00 per share (subject to adjustment as provided in the March 2019 Note); provided, however, that if an Event of Default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the March 2019 Note shall be convertible and the March 2019 Warrants shall be exercisable at 60% of the lowest closing price, as reported on the OTCQB or other principal trading market, during the prior twenty trading days (the “Default Conversion Price”). The purchaser may not convert the March 2019 Note to the extent that such conversion would result in beneficial ownership by the purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. The March 2019 Note may be prepaid at any time until the 180th following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the March 2019 Note and accrued and unpaid interest during the period from the original issue date through the five months following the original issue date, and (ii) 120% of the outstanding principal balance of the March 2019 Note and accrued and unpaid interest during month six following the original issue date. In order to prepay the March 2019 Note, the Company shall provide twenty trading days prior written notice to the lender, during which time the purchaser may convert the March 2019 Note in whole or in part at the conversion price. As of September 30, 2019, the March 2019 Note was in default (under provision Section 7(a)(i) of the note) and had outstanding principal and accrued interest of $55,556 and $3,991, respectively.

The initial exercise price of the March 2019 Warrants was $30.00 per share, subject to adjustment as described below, and are exercisable for five years after the issuance date. The March 2019 Warrants are exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants in the two years after the issue date of the Warrants (“Dilutive Issuances”). Accordingly, pursuant to the default provisions, the March 2019 Warrants shall be convertible shall be exercisable at the Default Conversion Price as defined above. The total number of March 2019 Warrants was increased, during the nine months ended September 30, 2019, on a full ratchet basis from 2,778 warrants to 357,645, an aggregate increase of 354,867 warrants. As of September 30, 2019, there were 357,645 warrants outstanding under the March 2019 Warrants (see Note 8).

April 2019 Financings

On April 1, 2019, the Company entered into a securities purchase agreement (the “Twelfth Purchase Agreement”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Twelfth Purchase Agreement, the Company issued to the Twelfth Round Purchaser a Note (“April 2019 Note I”) for a principal amount of $27,778 with 10% OID and 5 year warrants (the “April 2019 Warrants I”) to purchase an aggregate of 1,389 shares of the Company’s common stock at an exercise price of $30.00 per share (subject to adjustments under certain conditions as defined in the April 2019 Warrants I). The Company received net proceeds of $25,000, net of $2,778 OID. The April 2019 Note I bears an interest rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the April 2019 Note I)), shall mature on December 2, 2019 and the principal and interest are convertible at any time at a conversion price equal to $15.00 per share (subject to adjustment as provided in the April 2019 Note I); provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the April 2019 Note I shall be convertible and the April 2019 Warrants I shall be exercisable at 60% of the lowest closing price, as reported on the OTCQB or other principal trading market, during the prior twenty trading days (the “Default Conversion Price”). The purchaser may not convert the April 2019 Note I to the extent that such conversion would result in beneficial ownership by the purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. The April 2019 Note I may be prepaid at any time until the 180th following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the April 2019 Note I and accrued and unpaid interest during the period from the original issue date through the five months following the original issue date, and (ii) 120% of the outstanding principal balance of the April 2019 Note I and accrued and unpaid interest during month six following the original issue date. In order to prepay the April 2019 Note I, the Company shall provide twenty trading days prior written notice to the lender, during which time the purchaser may convert the April 2019 Note I in whole or in part at the conversion price. As of September 30, 2019, the April 2019 Note I was in default (under provision Section 7(a)(i) of the note) and had outstanding principal and accrued interest of $27,778 and $1,965, respectively.

F-18

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The initial exercise price of the April 2019 Warrants I was $30.00 per share, subject to adjustment as described below, and are exercisable for five years after the issuance date. The April 2019 Warrants I are exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of default, certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. Pursuant to the default provision, the April 2019 Warrants I shall be exercisable at the Default Conversion Price as defined above. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants in the two years after the issue date of the Warrants (“Dilutive Issuances”). The total number of April 2019 Warrants I was increased on a full ratchet basis, during the nine months ended September 30, 2019, from 1,389 warrants to 178,827, an aggregate increase of 177,438 warrants. As of September 30, 2019, there were 178,827 warrants outstanding under the April 2019 Warrants I (see Note 8).

On April 29, 2019, the Company entered into a securities purchase agreement (the “Thirteenth Purchase Agreements”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Thirteenth Purchase Agreements, the Company issued to the Thirteenth Round Purchasers a note (the “April 2019 Notes II”) for an aggregate principal amount of $205,279 with 10% Original Issue Discount and five-year warrants (the “April 2019 Warrants II”) to purchase an aggregate of 10,264 shares of the Company’s common stock at an exercise price of $30.00 per share (subject to adjustments under certain conditions as defined in the April 2019 Warrants II). The Company received $185,450 in aggregate net proceeds from the sale, net of $19,829 OID. The April 2019 Notes II bears an interest rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the April 2019 Notes II)), shall mature on December 29, 2019 and the principal and interest are convertible at any time at a conversion price equal to $15.00 per share (subject to adjustment as provided in the April 2019 Notes II); provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the April 2019 Notes II shall be convertible and the April 2019 Warrants II shall be exercisable at 60% of the lowest closing price, as reported on the OTCQB or other principal trading market, during the prior twenty trading days (the “Default Conversion Price”). The purchaser may not convert the April 2019 Notes II to the extent that such conversion would result in beneficial ownership by a purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. The April 2019 Notes II may be prepaid at any time until the 180th following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the April 2019 Notes II and accrued and unpaid interest during the period from the original issue date through the five months following the original issue date, and (ii) 120% of the outstanding principal balance of the April 2019 Notes II and accrued and unpaid interest during month six following the original issue date. In order to prepay the April 2019 Notes II, the Company shall provide twenty trading days prior written notice to the lender, during which time the purchaser may convert the April 2019 Notes II in whole or in part at the conversion price. As of September 30, 2019, the April 2019 Notes II were in default and had outstanding principal and accrued interest of $205,279 and $13,763, respectively.

The initial exercise price of the April 2019 Warrants II is $30.00 per share, subject to adjustment as described below, and are exercisable for five years after the issuance date. The April 2019 Warrants II are exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of default, certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. Pursuant to the default provision, the April 2019 Warrants II shall be exercisable at the Default Conversion Price as defined above. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants in the two years after the issue date of the Warrants (“Dilutive Issuances”). The total number of April 2019 Warrants II was increased on a full ratchet basis, during the nine months ended September 30, 2019, from 10,264 warrants to 1,321,531, an aggregate increase of 1,311,267 warrants. As of September 30, 2019, there were 1,321,531 warrants outstanding under the April 2019 Warrants II (see Note 8).

May 2019 Financing

On May 29, 2019, the Company entered into a securities purchase agreement (the “Fourteenth Purchase Agreement”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Fourteenth Purchase Agreement, the Company issued to the Fourteenth Round Purchasers a note (the “May 2019 Notes”) for an aggregate principal of $10,000 with 10% OID and five-year warrants (the “May 2019 Warrants”) to purchase an aggregate of 500 shares of the Company’s common stock at an exercise price of $30.00 per share (subject to adjustments under certain conditions as defined in the May 2019 Warrants). The Company received $9,000 in aggregate net proceeds from the sale, net of $1,000 OID. The May 2019 Notes bears an interest rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the May 2019 Notes)), shall mature on January 29, 2020 and the principal and interest are convertible at any time at a conversion price equal to $15.00 per share (subject to adjustment as provided in the May 2019 Notes); provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the May 2019 Notes shall be convertible and the May 2019 Warrants shall be exercisable at 60% of the lowest closing price, as reported on the OTCQB or other principal trading market, during the prior twenty trading days (the “Default Conversion Price”). The purchaser may not convert the May 2019 Notes to the extent that such conversion would result in beneficial ownership by a purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. The May 2019 Notes may be prepaid at any time until the 180th following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the May 2019 Notes and accrued and unpaid interest during the period from the original issue date through the five months following the original issue date, and (ii) 120% of the outstanding principal balance of the May 2019 Notes and accrued and unpaid interest during month six following the original issue date. In order to prepay the May 2019 Notes, the Company shall provide twenty trading days prior written notice to the lender, during which time the purchaser may convert the May 2019 Notes in whole or in part at the conversion price. As of September 30, 2019, the May 2019 Notes were in default and had outstanding principal and accrued interest of $10,000 and $451, respectively.

F-19

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The initial exercise price of the May 2019 Warrants is $30.00 per share, subject to adjustment as described below, and are exercisable for five years after the issuance date. The May 2019 Warrants are exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of default, certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. Pursuant to the default provision, the May 2019 Warrants shall be exercisable at the Default Conversion Price as defined above. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants in the two years after the issue date of the Warrants (“Dilutive Issuances”). The total number of May 2019 Warrants was increased on a full ratchet basis, during the nine months ended September 30, 2019, from 500 warrants to 64,378, an aggregate increase of 63,878 warrants. As of September 30, 2019, there were 64,378 warrants outstanding under the May 2019 Warrants (see Note 8).

June 2019 Financing

On June 3, 2019, the Company entered into a securities purchase agreement (the “Fifteenth Purchase Agreement”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Fifteenth Purchase Agreement, the Company issued to the Fifteenth Round Purchasers a note (the “June 2019 Note I”) with an aggregate principal of $129,167 with 10% OID and five- year warrants (the “June 2019 Warrants I”) to purchase an aggregate of 6,458 shares of the Company’s common stock at an exercise price of $30.00 per share (subject to adjustments under certain conditions as defined in the June 2019 Warrants I). The Company received $116,250 in aggregate net proceeds from the sale, net of $12,917 OID. The June 2019 Note I bears an interest rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the June 2019 Note I)), shall mature on February 3, 2020 and the principal and interest are convertible at any time at a conversion price equal to $15.00 per share (subject to adjustment as provided in the June 2019 Note I); provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the June 2019 Note I shall be convertible and the June 2019 Warrants I shall be exercisable at 60% of the lowest closing price, as reported on the OTCQB or other principal trading market, during the prior twenty trading days (the “Default Conversion Price”). The purchaser may not convert the June 2019 Note I to the extent that such conversion would result in beneficial ownership by a purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. The June 2019 Note I may be prepaid at any time until the 180th following the original issue date at an amount equal to (i) 115% of outstanding principal balance and accrued and unpaid interest during the period from the original issue date through the five months following the original issue date, and (ii) 120% of the outstanding principal balance and accrued and unpaid interest during month six following the original issue date. In order to prepay the June 2019 Note I, the Company shall provide twenty trading days prior written notice to the lender, during which time the purchaser may convert the June 2019 Note I in whole or in part at the conversion price. As of September 30, 2019, the June 2019 Note I was in default and had outstanding principal and accrued interest of $129,167 and $5,740, respectively.

The initial exercise price of the June 2019 Warrants I is $30.00 per share, subject to adjustment as described below, and are exercisable for five years after the issuance date. The June 2019 Warrants I are exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of default, certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. Pursuant to the default provision, the June 2019 Warrants I shall be exercisable at the Default Conversion Price as defined above. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants in the two years after the issue date of the Warrants (“Dilutive Issuances”). The total number of June 2019 Warrants I was increased, during the nine months ended September 30, 2019, on a full ratchet basis from 6,458 warrants to 831,545, an aggregate increase of 825,087 warrants. As of September 30, 2019, there were 831,545 warrants outstanding under the June 2019 Warrants I (see Note 8).

F-20

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

On June 26, 2019, the Company entered into a securities purchase agreement (the “Sixteenth Purchase Agreement”) for the sale of the Company’s convertible note and warrants. Pursuant to the Sixteenth Purchase Agreement, the Company issued to the Sixteenth Round Purchaser a note (the “June 2019 Note II”) with a principal amount of $55,556 with 10% OID and five- year warrants (the “June 2019 Warrants II”) to purchase an aggregate of 5,556 shares of the Company’s common stock at an exercise price of $15.00 per share (subject to adjustments under certain conditions as defined in the June 2019 Warrants II). The Company received $50,000 in aggregate net proceeds from the sale, net of $5,556 original issue discount. The June 2019 Note II bears an interest rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the June 2019 Note II)), shall mature on February 26, 2020 and the principal and interest are convertible at any time at a conversion price equal to $7.50 per share (subject to adjustment as provided in the June 2019 Note II); provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the June 2019 Note II shall be convertible and the June 2019 Warrants II shall be exercisable at 60% of the lowest closing price, as reported on the OTCQB or other principal trading market, during the prior twenty trading days (the “Default Conversion Price”). The purchaser may not convert the June 2019 Note II to the extent that such conversion would result in beneficial ownership by a purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. The June 2019 Note II may be prepaid at any time until the 180th following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the June 2019 Note I and accrued and unpaid interest during the period from the original issue date through the five months following the original issue date, and (ii) 120% of the outstanding principal balance of the June 2019 Note II and accrued and unpaid interest during month six following the original issue date. In order to prepay the June 2019 Note II, the Company shall provide twenty trading days prior written notice to the lender, during which time the purchaser may convert the June 2019 Note II in whole or in part at the conversion price. As of September 30, 2019, the June 2019 Note II was in default and had outstanding principal and accrued interest of $55,556 and $2,294, respectively.

The initial exercise price of the June 2019 Warrants II is $15.00 per share, subject to adjustment as described below, and are exercisable for five years after the issuance date. The June 2019 Warrants II are exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of default, certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. Pursuant to the default provision, the June 2019 Warrants II shall be exercisable at the Default Conversion Price as defined above. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants in the two years after the issue date of the Warrants (“Dilutive Issuances”). The total number of June 2019 Warrants II was increased, during the nine months ended September 30, 2019, on a full ratchet basis from 5,556 warrants to 357,654, an aggregate increase of 352,098 warrants. As of September 30, 2019, there were 357,654 warrants outstanding under the June 2019 Warrants II (see Note 8).

July 2019 Financing

On July 2, 2019, the Company closed a securities purchase agreement (the “Seventeenth Purchase Agreement”), dated June 26, 2019, for the sale of the Company’s convertible notes and warrants. Pursuant to the Seventeenth Purchase Agreement, the Company issued to the Seventeenth Round Purchaser a note (the “July 2019 Note I”) for a principal amount of $55,556 with 10% OID and five- year warrants (the “July 2019 Warrants I”) to purchase an aggregate of 5,556 shares of the Company’s common stock at an exercise price of $15.00 per share (subject to adjustments under certain conditions as defined in the July 2019 Warrants I). The Company received $50,000 in aggregate net proceeds from the sale, net of $5,556 original issue discount. The July 2019 Note I bears an interest rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the July 2019 Note I)), shall mature on February 26, 2020 and the principal and interest are convertible at any time at a conversion price equal to $7.50 per share (subject to adjustment as provided in the July 2019 Note I); provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the July 2019 Note I shall be convertible and the July 2019 Warrants I shall be exercisable at 60% of the lowest closing price, as reported on the OTCQB or other principal trading market, during the prior twenty trading days (the “Default Conversion Price”). The purchaser may not convert the July 2019 Note I to the extent that such conversion would result in beneficial ownership by the purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. The July 2019 Note I may be prepaid at any time until the 180th following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the July 2019 Note I and accrued and unpaid interest during the period from the original issue date through the five months following the original issue date, and (ii) 120% of the outstanding principal balance of the July 2019 Note I and accrued and unpaid interest during month six following the original issue date. In order to prepay the July 2019 Note I, the Company shall provide twenty trading days prior written notice to the lender, during which time the purchaser may convert the July 2019 Note I in whole or in part at the conversion price. As of September 30, 2019, the July 2019 Note I was in default and had outstanding principal and accrued interest of $55,556 and $2,248, respectively.

F-21

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The initial exercise price of the July 2019 Warrants I is $15.00 per share, subject to adjustment as described below, and are exercisable for five years after the issuance date. The July 2019 Warrants I are exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of default, certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. Pursuant to the default provision, the July 2019 Warrants I shall be exercisable at the Default Conversion Price as defined above. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants in the two years after the issue date of the Warrants (“Dilutive Issuances”). The total number of July 2019 Warrants I was increased, during the three months ended September 30, 2019, on a full ratchet basis from 5,556 warrants to 357,654, an aggregate increase of 352,098 warrants. As of September 30, 2019, there were 357,654 warrants outstanding under the July 2019 Warrants I (see Note 8).

On July 8, 2019, the Company closed a securities purchase agreement (the “Eighteenth Purchase Agreement”), dated June 26, 2019, for the sale of the Company’s convertible notes and warrants. Pursuant to the Eighteenth Purchase Agreement, the Company issued to the Eighteenth Round Purchaser a note (the “July 2019 Note II”) for principal amount of $55,556 with 10% OID and five-year warrants (the “July 2019 Warrants II”) to purchase an aggregate of 5,556 shares of the Company’s common stock at an exercise price of $15.00 per share (subject to adjustments under certain conditions as defined in the July 2019 Warrants II). The Company received $50,000 in aggregate net proceeds from the sale, net of $5,556 original issue discount. The July 2019 Note II bears an interest rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the July 2019 Note II)), shall mature on February 26, 2020 and the principal and interest are convertible at any time at a conversion price equal to $7.50 per share (subject to adjustment as provided in the July 2019 Note II); provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the July 2019 Note II shall be convertible and the July 2019 Warrants II shall be exercisable at 60% of the lowest closing price, as reported on the OTCQB or other principal trading market, during the prior twenty trading days (the “Default Conversion Price”). The purchaser may not convert the July 2019 Note II to the extent that such conversion would result in beneficial ownership by the purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. The July 2019 Note II may be prepaid at any time until the 180th following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the July 2019 Note I and accrued and unpaid interest during the period from the original issue date through the five months following the original issue date, and (ii) 120% of the outstanding principal balance of the July 2019 Note II and accrued and unpaid interest during month six following the original issue date. In order to prepay the July 2019 Note II, the Company shall provide twenty trading days prior written notice to the lender, during which time the purchaser may convert the July 2019 Note II in whole or in part at the conversion price. As of September 30, 2019, the July 2019 Note II was in default and had outstanding principal and accrued interest of $55,556 and $2,202, respectively.

The initial exercise price of the July 2019 Warrants II is $15.00 per share, subject to adjustment as described below and are exercisable for five years after the issuance date. The July 2019 Warrants II are exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of default, certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. Pursuant to the default provision, the July 2019 Warrants II shall be exercisable at the Default Conversion Price as defined above. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants in the two years after the issue date of the Warrants (“Dilutive Issuances”). The total number of July 2019 Warrants II was increased, during the three months ended September 30, 2019, on a full ratchet basis from 5,556 warrants to 357,654, an aggregate increase of 352,098 warrants. As of September 30, 2019, there were 357,654 warrants outstanding under the July 2019 Warrants II (see Note 8).

August 2019 Financing

On August 19, 2019, the Company closed a securities purchase agreement (the “Nineteenth Purchase Agreement”), dated July 30, 2019, for the sale of the Company’s convertible notes and warrants. Pursuant to the Nineteenth Purchase Agreement, the Company issued to the Nineteenth Round Purchaser a note (the “August 2019 Note I”) for principal amount of $27,778 with 10% OID and five-year warrants (the “August 2019 Warrants I”) to purchase an aggregate of 2,778 shares of the Company’s common stock at an exercise price of $15.00 per share (subject to adjustments under certain conditions as defined in the August 2019 Warrants I). The Company received $25,000 in aggregate net proceeds from the sale, net of $2,778 original issue discount. The August 2019 Note I bears an interest rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the August 2019 Note I)), shall mature on March 30, 2020 and the principal and interest are convertible at any time at a conversion price equal to $7.50 per share (subject to adjustment as provided in the August 2019 Note I); provided, however, that if an event of default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the August 2019 Note I shall be convertible and the August 2019 Warrants I shall be exercisable at 60% of the lowest closing price, as reported on the OTCQB or other principal trading market, during the prior twenty trading days (the “Default Conversion Price”). The purchaser may not convert the August 2019 Note I to the extent that such conversion would result in beneficial ownership by the purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. The August 2019 Note I may be prepaid at any time until the 180th following the original issue date at an amount equal to (i) 115% of outstanding principal balance of the August 2019 Note I and accrued and unpaid interest during the period from the original issue date through the five months following the original issue date, and (ii) 120% of the outstanding principal balance of the August 2019 Note I and accrued and unpaid interest during month six following the original issue date. In order to prepay the August 2019 Note I, the Company shall provide twenty trading days prior written notice to the lender, during which time the purchaser may convert the August 2019 Note I in whole or in part at the conversion price. As of September 30, 2019, the August 2019 Note I had outstanding principal and accrued interest of $27,778 and $160, respectively.

F-22

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The initial exercise price of the August 2019 Warrants I is $15.00 per share, subject to adjustment as described below, and are exercisable for five years after the issuance date. The August 2019 Warrants I are exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of default, certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. Pursuant to the default provision, the August 2019 Warrants I shall be exercisable at the Default Conversion Price as defined above. The exercise price of the warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants in the two years after the issue date of the Warrants. As of September 30, 2019, there were 2,778 warrants outstanding under the August 2019 Warrants I (see Note 8).

On August 28, 2019, the Company entered into a securities purchase agreement (the “Twentieth Securities Purchase Agreement”) with an institutional investor for the sale of a convertible note in the aggregate principal amount of $29,700 (the “August 2019 Notes II”). The Company received net proceeds of $25,000, net of OID and legal fees of $4,700. The August 2019 Note II has an interest rate of 5% per annum and matures on August 27, 2020. During the first six months the August 2019 Note II may be converted, all or a portion, of the outstanding principal into shares of the Company’s common stock at a fixed conversion price of $7.50 per share. Starting on the six-month anniversary, the conversion price shall be equal to 60% of the lowest closing bid price of the common stock during the 20 prior trading days (including the day upon which a notice of conversion is received). The August 2019 Note II may not be converted to the extent that such conversion would result in beneficial ownership by the purchaser and its affiliates to exceed more than 9.9% of the Company’s issued and outstanding common stock. The August 2019 Note II can be prepaid during the first 180 days for a redemption price equal to 140% of the sum of the outstanding principal and accrued interest and shall forfeit the right of prepayment after the 180th day following the issuance date. As of September 30, 2019, the August 2019 Note II had outstanding principal and accrued interest of $29,700 and $134, respectively.

September 2019 Financing

On September 27, 2019, the Company closed a securities purchase agreement dated September 25, 2019 (the “Twenty-first Purchase Agreement”), for the sale of the Company’s convertible notes and warrants. Pursuant to the Twenty-first Purchase Agreement, the Company issued to the Twenty-first Round Purchaser a note (the “September 2019 Note”) for principal amount of $166,667 with 10% OID and five-year warrants (the “September 2019 Warrants”) to purchase an aggregate of 16,667 shares of the Company’s common stock at an exercise price of $15.00 per share (subject to adjustments under certain conditions as defined in the September 2019 Warrants). The Company received $150,000 in net proceeds, net of $16,667 OID. The September 2019 Note bears an interest rate of 5% per year (which interest rate shall be increased to 18% per year upon the occurrence of an Event of Default (as defined in the September 2019 Note)), shall mature on May 27, 2020 and the principal and interest are convertible at any time at a conversion price equal to $7.50 per share (subject to adjustment as provided in the September 2019 Note); provided, however, that if an Event of Default has occurred, regardless of whether such Event of Default has been cured or remains ongoing, the September 2019 Note shall be convertible and the September 2019 Warrants shall be exercisable at 60% of the lowest closing price, as reported on the OTCQB or other principal trading market, during the prior twenty trading days (the “Default Conversion Price”). The purchaser may not convert the September 2019 Note to the extent that such conversion would result in beneficial ownership by the purchaser and its affiliates of more than 9.9% of the Company’s issued and outstanding common stock. The September 2019 Note may be prepaid at any time until the 180th following the original issue date at an amount equal to (i) 115% of outstanding principal balance and accrued and unpaid interest during the period from the original issue date through the five months following the original issue date, and (ii) 120% of the outstanding principal balance and accrued and unpaid interest during month six following the original issue date. The Company shall provide twenty trading days prior written notice to the lender, during which time the purchaser may convert the September 2019 Note in whole or in part at the conversion price. As of September 30, 2019, the September 2019 Note had outstanding principal and accrued interest of $166,667 and $0, respectively.

The initial exercise price of the September 2019 Warrants is $15.00 per share, subject to adjustment as described below, and is exercisable for five years after the issuance date. The September 2019 Warrants is exercisable for cash at any time and are exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the warrants. The exercise price of the warrants is subject to adjustment in the event of default, certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. The exercise price of the Warrants is also subject to full ratchet price adjustment if the Company issues common stock at a price per share lower than the then-current exercise price of the warrants in the two years after the issue date of the Warrants. In an Event of Default, pursuant to the default provision, the September 2019 Warrants shall be exercisable at the Default Conversion Price as defined above. As of September 30, 2019, there were 16,667 warrants outstanding under the September 2019 Warrants (see Note 8).

F-23

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The June 2017, July 2017, January 2018, March 2018, July 2018, September 2018, November 2018, January 2019, March 2019, April 2019, May 2019, June 2019, July 2019, August 2019 and September 2019 Notes (collectively, the “Notes”) contain certain covenants such as default provisions, restrictions on the incurrence of indebtedness, creation of liens, payment of restricted payments, redemptions, payment of cash dividends and the transfer of assets. The Notes also contains certain adjustment provisions that apply in connection with any stock split, stock dividend, stock combination, recapitalization or similar transactions. The conversion price is also subject to adjustment if the Company issues or sells shares of its common stock for a consideration per share less than the conversion price then in effect, or issue options, warrants or other securities convertible or exchange for shares of its common stock at a conversion or exercise price less than the conversion price of these Notes then in effect. If either of these events should occur, the conversion price is reduced to the lowest price at which these securities were issued or are exercisable. The Company granted the Note Purchasers certain rights of first refusal on future offerings by the Company for as long as the Note Purchasers hold the Notes. In addition, subject to limited exceptions, the Note Purchasers will not have the right to convert any portion of the Notes if the Note Purchaser, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to its conversion. The Note Purchaser may increase or decrease this ownership limitation to any percentage not exceeding 9.99% upon 61 days prior written notice to the Company.

The November 2016, June 2017, July 2017, January 2018, March 2018, September 2018, November 2018 and March 2019, April 2019, May 2019, June 2019, July 2019, August 2019 and September 2019 Warrants (collectively, the “Warrants”) are exercisable for shares of the Company’s common stock upon the payment in cash of the exercise price and they are also exercisable on a cashless basis at any time there is no effective registration statement registering the shares of common stock underlying the Warrants. The exercise price of the Warrants are subject to adjustment in the event of default, certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. The exercise price of the Warrants are also subject to full ratchet price adjustment if the Company sells or grants any option to purchase, sells or re-prices any common stock or common stock equivalents, as defined, at an exercise price lower than the then-current exercise price of the Warrants with the exception for certain exempted issuances and subject to certain limitations on the reduction of the exercise price as provided in the Warrants in the two years after the issue date of the Warrants. In the event of a fundamental transaction, as described in these warrants and generally including any reorganization, recapitalization or reclassification of the common stock, the sale, transfer or other disposition of all or substantially all of the Company’s properties or assets, the Company’s consolidation or merger with or into another person, the acquisition of more than 50% of the outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by the outstanding common stock, the holders of the Warrants will be entitled to receive upon exercise of the Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Warrants immediately prior to such fundamental transaction; provided that upon the occurrence of certain fundamental transactions, the holder can require the Company to purchase the Warrants for cash at a price equal to the higher of the Black Scholes Value of the unexercised portion of the Warrants or difference between the cash per share paid in the fundamental transaction and the exercise price per share. The holders of the Warrants will not have the right to exercise any portion of the Warrants if the holder (together with its affiliates) would beneficially own in excess of 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants.

To secure the Company’s obligations under each of the June 2017, July 2017, January 2018, March 2018, September 2018 and November 2018 Notes, the Company entered into Security Agreements, Pledge Agreements and Subsidiary Guaranty’s with Calvary Fund I LP, as agent, pursuant to which the Company granted a lien on all assets of the Company (the “Collateral”) excluding permitted indebtedness which included a first lien held by Regions Bank in connection with the $100,000 revolving promissory note entered into with Regions Bank in October 2014, for the benefit of the Note Purchasers. Upon an Event of Default (as defined in the related Notes), the Note Purchasers may, among other things, collect or take possession of the Collateral, proceed with the foreclosure of the security interest in the Collateral or sell, lease or dispose of the Collateral.

During the nine months ended September 30, 2019, the Company issued an aggregate of 148,834 shares of its common stock upon conversion of $322,174 and $79,836 of outstanding principal and accrued interest, respectively, of convertible debt (see Note 8).These shares of common stock had an aggregate fair value $770,609 and the difference between the aggregate fair value and the aggregate converted amount of $368,599 was recorded as loss on debt extinguishment.

Puritan Settlement Agreement

On September 24, 2018, the Company and Puritan Partners LLC (“Puritan”) entered into a securities purchase agreement (the “Puritan Purchase Agreement”), pursuant to which the Company purchased (using proceeds from the September 2018 Notes) back from Puritan, June 2017, July 2017, January 2018, March 2018 and July 2018 Notes having an aggregate outstanding principal and accrued but unpaid interest amount of $654,191 and June 2017, January 2018 and March 2018 Puritan Warrants to purchase up to 33,262 shares of common stock as well as the securities and certain rights associated thereunder for an aggregate purchase price of $900,000, which was paid on September 26, 2018. In connection with the purchase and extinguishment of the above-mentioned notes and warrants, the Company paid $245,809 for additional penalties and interest which is reflected in loss on debt extinguishment. Additionally, the Company revalued the derivative liabilities associated with these notes and warrants and recorded a gain on debt extinguishment of $1,323,111, during the nine months ended September 30, 2018.

F-24

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Derivative Liabilities Pursuant to Notes and Warrants

In connection with the issuance of the Notes and Warrants, the Company determined that the terms of the Notes and Warrants contain terms that included a down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception and included various other terms such as default provisions that caused derivative treatment. Accordingly, under the provisions of ASC 815-40 –Derivatives and Hedging – Contracts in an Entity’s Own Stock, the embedded conversion option contained in the convertible instruments and the Warrants were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion option derivatives and Warrants were determined using the Binomial valuation model. At the end of each period, on the date that debt was converted into common shares, and on the date of a cashless exercise of warrants, the Company revalued the embedded conversion option and warrants derivative liabilities.

In July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The guidance was adopted as of January 1, 2019 and the Company elected to record the effect of this adoption retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the condensed consolidated balance sheet as of the beginning of 2019, the period which the amendment is effective. The Company adopted ASU No. 2017-11 in the first quarter of 2019, and the adoption did not have any impact on its consolidated financial statements and there were no cumulative effect adjustments as there were other notes and warrants provisions that caused derivative treatment.

In connection with the issuance of the January 2019 and March 2019, April 2019, May 2019, June 2019, July 2019, August 2019 and September 2019 Notes and related Warrants, during nine months ended September 30, 2019, on the initial measurement date, the fair values of the embedded conversion option derivative and warrants derivative of $352,472 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the January 2019 and March 2019, April 2019, May 2019, June 2019, July 2019, August 2019 and September 2019 Notes.

At the end of the period, the Company revalued the embedded conversion option and warrants derivative liabilities. In connection with these revaluations and the initial derivative expense, the Company recorded derivative expense (income) of $4,053,257 and $(4,495,597) for the nine months ended September 30, 2019 and 2018, respectively.

During the nine months ended September 30, 2019, the fair value of the derivative liabilities was estimated using the Binomial valuation model with the following assumptions:

Dividend rate—%
Term (in years)0.01 to 5.00 years
Volatility162% to 247%
Risk-free interest rate1.55% to 2.42%

At September 30, 2019 and December 31, 2018, the convertible debt consisted of the following:

  September 30, 2019  December 31, 2018 
Principal amount $2,987,822  $2,436,394 
Less: unamortized debt discount  (224,476)  (1,002,142)
Convertible note payable, net $2,763,346  $1,434,252 

For the nine months ended September 30, 2019 and 2018, amortization of debt discounts related to the Notes amounted to $1,248,031 and $848,280, respectively, which has been included in interest expense on the accompanying consolidated statements of operations.

Years ending September 30, Amount 
2020 $16,452 
2021  61,266 
2022  61,266 
2023  53,787 
2024  40,875 
2025  4,185 
Total minimum financing lease payments  237,831 
Less: discount to fair value  (49,700)
Total financing lease payable at June 30, 2020 $188,131 

 

NOTE 5 –LOANS PAYABLE

From June 2017 to September 2017, the Company entered into loan agreements with several third parties (the “Loans”). Pursuant to the loan agreements, the Company borrowed an aggregate principal amount of $538,875. The Loans bear interest at an annual rate of 33.3%, are unsecured and are in default. As of September 30, 2019, and December 31, 2018, loan principal due to these third parties amounted to $538,875 for both periods. At September 30, 2019 and December 31, 2018, accrued interest payable related to these Loans amounted to $384,993 and $250,777, respectively.

F-25

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

NOTE 6 –OPERATING LEASE RIGHT-OF-USEOperating Lease Right-of-Use (“ROU”) ASSETS AND OPERATING LEASE LIABILITIESAssets and Operating Lease Liabilities

 

In September 2015,December 2019, the Company entered into a lease agreement for its corporate and laboratory facility in Baton Rouge, Louisiana.Golden, Colorado. The lease is for a period of 60 months commencing in September 2015February 2020 and expiring in August 2020.February 2025. Pursuant to the lease agreement, the lease requires the Company to pay a monthly base rent of $3,067of; (i) $4,878 in the first year; (ii) $5,026 in the second year; (iii) $5,179 in the third year; (iv) $5,335 in the fourth year and; (v) $5,495 in the fifth year, plus a pro rata share of operating expenses beginning September 2015 and of monthly base rent $3,200 beginning plus a pro rata share of operating expenses beginning September 2018.February 2020.

 

In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2). In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. On January 1, 2019, upon adoptionAt the effective date of ASC Topic 842,the lease, the Company recorded right-of-use assets and lease liabilities of $59,216.$231,337.

 

For the nine months ended SeptemberJune 30, 2019,2020, lease costs amounted to $36,852$19,513 which included base lease costs of $28,800 and common area$10,414 and other expenses of $8,052,$9,099, all of which were expensed during the period and included in general and administrative expenses on the accompanying condensed consolidated statements of operations.

 

The significant assumption used to determine the present value of the lease liability was a discount rate of 10%12% which was based on the Company’s estimated incremental borrowing rate.

 

Right-of-use asset (“ROU”) is summarized below:

 

 June 30, 2020 
 September 30, 2019  (Unaudited) 
Operating office lease $59,216  $231,337 
Less accumulated reduction  (26,647)  (16,389)
Balance of ROU asset as of September 30, 2019 $32,569 
Balance of ROU asset as of June 30, 2020 $214,948 

 

Operating lease liability related to the ROU asset is summarized below:

 

 June 30, 2020 
 September 30, 2019  (Unaudited) 
Operating office lease $59,216  $231,337 
Total lease liabilities  59,216   231,337 
Reduction of lease liability  (26,647)  (10,414)
Total as of September 30, 2019  32,569 
Total  220,923 
Less: short term portion as of June 30, 2020  (34,450)
Long term portion as of June 30, 2020 $186,473 

16

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

Future base lease payments under the non-cancelable operating lease at SeptemberJune 30, 20192020 are as follows:

 

Years ending Amount 
December 31, 2019 $9,600 
December 31, 2020  25,600 
Total minimum non-cancelable operating lease payments  35,200 
Less: discount to fair value  (2,631)
Total lease liability at September 30, 2019 $32,569 
Years ending September 30, Amount 
2020 $14,634 
2021  59,576 
2022  61,382 
2023  63,236 
2024  65,137 
2025  27,474 
Total minimum non-cancelable operating lease payments  291,439 
Less: discount to fair value  (70,516)
Total lease liability at June 30, 2020 $220,923 

 

NOTE 78 –RELATED-PARTY TRANSACTIONS

 

Due to related partiesAndrew Kucharchuk Consulting Agreement

 

From time to time,On June 5, 2020, the Company receives advances from and repays such advancesentered into a consulting agreement with Mr. Kucharchuk, a member of the Board of Directors, to serve as a strategic advisor to the Company’s former chief executive officerChief Executive Officer. The agreement shall be effective for working capital purposes and to repay indebtedness.

Fora period of six-months, commencing on June 5, 2020 (see Note 3). Thereafter, the nine months ended September 30, 2019, due to related party activity consistedagreement shall only renew on a month-to-month basis by mutual agreement of the following:

  Total 
Balance due to related parties at December 31, 2018 $(315,466)
Working capital advances received  (31,970)
Repayments made  — 
Balance due to related parties at September 30, 2019 $(347,436)

F-26

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Septemberparties. Pursuant to the agreement, Mr. Kucharchuk shall receive compensation in the amount of $15,000 per month. The agreement was terminated subsequent to June 30, 20192020.

(Unaudited)

 

NOTE 89 –STOCKHOLDERS’ DEFICIT

 

Shares Authorized

 

On April 3, 2019,September 22, 2020, the Company filed with the Nevada Secretary of State an amendment to its ArticlesCertificate of Incorporation to change its name from “OncBioMune Pharmaceutical, Inc.” to “Theralink Technologies, Inc.” and increase its authorized shares of common stock from 500,000,000 shares to 1,500,000,000 shares (see Note 1). The Company’s 1,520,000,000 authorized shares consisted of 1,500,000,0006,666,667 shares of common stock at $0.0001 per share par value and 20,000,000 shares of preferred stock at $0.0001 per share par value.

On August 6, 2019, the Company filed an amendment to its Articles of Incorporation to increase its authorized common stock from 1,500,000,000 shares to 5,000,000,000 shares (see Note 1). The Company’s 5,020,000,000 authorized shares consist of 5,000,000,00012,000,000,000 shares of common stock at $0.0001 per share par value, effective September 24, 2020 (see Note 1 and 20,000,000Note 11). The change in authorize shares of preferred stock at $0.0001 per share par value.

On August 28, 2019, the Company filed an amendment to its Articles of Incorporation to implement a reverse stock split of the Company’s issued and outstanding shares of common and preferred stock at a ratio of 1-for-750 (the “Reverse Stock Split”),which became effective onSeptember 12, 2019. In addition, the Company amended the articles to reduce the Company’s authorized shares to; (i) 6,666,667 shares of common stock and; (ii) 26,667 shares of preferred stock, including 1,333 shares of Series A Preferred and 10,523 shares of Series B Preferred. The Reverse Stock Split did not have any effect on the stated par value of the common and preferred stock.All share and per share amountshas been retroactively reflected in the accompanying historical condensed consolidated financial statements have been retroactively adjusted to reflect theReverseStock Split (see Note 1).balance sheets.

 

Series A Preferred Stock

 

On August 20, 2015, the Company filed the Certificate of Designation with the Nevada Secretary of State, designating 1,333 shares of the authorized 26,667 Preferred Stock as Series A Preferred Stock. Each holder of Series A Preferred Stock is entitled to 500 votes for each share of Series A Preferred Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Company.

The holders of Series A Preferred Stock shall have no special voting rights and their consent is not required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for the taking of any corporate action.

On June 5, 2020, pursuant to the asset sale transaction and recapitalization (see Note 3), 667 shares of Series A were deemed to have been issued.

As of SeptemberJune 30, 2019, and December 31, 2018,2020, there were 1,333667 shares of the Company’s Series A Preferred Stock issued and outstanding. Of these shares, 667 are held by a former Chief Executive Officer and a current member of our Board of Directors and 666 shares areoutstanding held by a former member of ourthe Board of Directors.

 

Series B Preferred Stock

 

On March 7, 2017, the Company filed a certificateCertificate of designation, preferencesDesignation, Preferences and rightsRights of Series B preferred stockPreferred Stock (the “Certificate“Series B Certificate of Designation”) with the Nevada Secretary of State of the State of Nevada to designate 10,523 shares of its previously authorized preferred stock as Series B preferred stock,Preferred Stock, par value $0.0001 per share and a stated value of $0.0001 per share. The Series B Certificate of Designation and its filing was approved by the Company’s board of directors without shareholder approval as provided for in the Company’s articles of incorporation and under Nevada law. The holders of shares of Series B preferred stock arePreferred Stock were entitled to dividends or distributions share for share with the holders of the Common Stock,common stock, if, as and when declared from time to time by the Board of Directors.

On June 11, 2020, the Company filed a Certificate of Withdrawal of Designation with the Nevada Secretary of State terminating the designation, amount thereof, voting powers, preferences and relative participating, optional and other special rights of the shares of the preferred stock of the Company designated as Series B Preferred Stock (see Note 1).

As of June 30, 2020, there were no shares of the Company’s Series B Preferred Stock issued and outstanding.

17

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

Series C-1 Preferred Stock

On May 18, 2020, the Company filed a certificate of designation, preferences and rights of Series C-1 Preferred Stock (the “Series C-1 Certificate of Designation”), as amended on June 9, 2021, with the Nevada Secretary of State to designate 3,000 shares of its previously authorized preferred stock as Series C-1 Preferred Stock, par value $0.0001 per share and a stated value of $4,128.42 per share. The Series C-1 Certificate of Designation and its filing was approved by the Company’s board of directors without shareholder approval as provided for in the Company’s articles of incorporation and under Nevada law. The holders of shares of Series B preferred stockC-1 Preferred Stock have the following votingpreferences and rights:

 

 ●Each shareHolders of shares of Series B preferredC-1 Preferred Stock are entitled to dividends or distributions on each share on an “as converted” into common stock entitlesbasis, if, as and when declared from time to time by the holder to 100 votes on all matters submitted to a voteBoard of the Company’s stockholders.Directors.
   
 ●ExceptEach share of Series C-1 Preferred Stock is convertible into shares of common stock any time after the Initial Issuance Date at a conversion price of $0.0275 per share. The number of shares of common stock issuable upon conversion shall be determined by dividing (x) the conversion amount (determined by the sum of the stated value thereof plus any additional amount thereon which consist of all dividends, whether declared or not) of such share of Series C-1 by (y) the conversion price of $0.0275 per share (subject to temporary adjustment upon a triggering event as otherwise provided indefined by the Series C-1 Certificate of Designation, to 80% of the holders of Series B preferred stock,conversion price). The adjusted conversion price is only in effect until the holders of Company common stock and the holderstriggering event is cured. The convertibility of shares of anySeries C-1 Preferred Stock is limited such that a holder of Series C-1 Preferred Stock may not convert Series C-1 Preferred Stock to common stock to the extent that the number of shares of common stock to be issued pursuant to such conversion, when aggregated with all other Company capitalshares of common stock having general voting rights and shall vote together as one class onowned by the holder at such time, would result in the holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) more than 4.99% of all matters submitted to a vote of the Company’s stockholders; andcommon stock outstanding.
   
 ●CommencingIn the event the Company issues or sells any securities including options or convertible securities, except for any Exempt Issuance (as defined in the Series C-1 Certificate of Designation), at any time aftera price of or with an exercise price or conversion price of less than $0.00275 per share, then upon such issuance or sale, the date of issuance of any sharesSeries C-1 Preferred Stock conversion price shall be reduced to the sale price, the exercise price or conversion price of the Series B Preferred Stock (the “Issuance Date”) and upon the earliest of the occurrence of (i) a holder of the Series B Preferred Stock owning, directly or indirectly as a beneficiary or otherwise, shares of Common Stock which are less than 5.0% of the total outstanding shares of Common Stock, (ii) the date a holder of the Series B Preferred Stock is no longer an employee of the Company or any of its subsidiaries or (iii) five years after the Issuance Date, the Company shallsecurities sold. In addition, these preferred shareholders have the right to redeem all ofparticipate in future equity offerings from the then outstanding Series B Preferred Stock held by such holder at a price equal tocompany for twenty four months from the Stated Value (the “Redemption Price”). The Series B Preferred Stock which is redeemed as provided for in the Certificate of Designations shall be returned to the Company (and, if not so returned, shall automatically be deemed canceled). The Redemption Price shall be mailed to such holder at the holder’s address of record, and the Series B Preferred Stock owned by such holder shall be canceled.

F-27

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Corporation, the holders of the Series B Preferred Stock shall be entitled to receive, share for share with the holders of shares of Common Stock and Series A Preferred Stock, all the assets of the Corporation of whatever kind available for distribution to stockholders, after the rights of the holders of the Series A Preferred Stock have been satisfied.

In March 2017, the Company issued 3,856 shares of Series B Preferred to Jonathan F. Head, Ph. D, the Company’s Chief Executive Officer and a member of the Board of Directors of the Company as provided for in the Contribution Agreement and was recorded as compensation expense. In addition, in March 2017 the Company issued 6,667 shares of Series B Preferred to Banco Actinver for the benefit of the Vitel Stockholders as partial consideration in the exchange for 100% of the issued and outstanding capital stock of Vitel. (see Note 3).

On February 20, 2019, pursuant to the Certificate of Designation, the Company exercised its right to redeem 6,667 shares of the Series B Preferred outstanding held by to Banco Actinver, S.A., in its capacity as Trustee of the Trust Agreement for the benefit of Mr. Cosme and Mr. Alaman equal to the stated value. The total redemption price equaled $500 or $0.075 per share of Series B Preferred. As of September 30, 2019, and December 31, 2018, there were 3,856 and 10,523 shares of Series B Preferred issued and outstanding, respectively.

Common Stock

Shares issued for cash

●During the nine months ended September 30, 2018, pursuant to a unit subscription agreement, the Company issued 800 shares of its unregistered common stock to an investor for cash proceeds of $6,000, or $7.5 per share.effective date.
   
 ●DuringIn the nine months ended September 30, 2019,event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Company, did not issuethe holders of the Series C-1 Preferred Stock shall be entitled to receive, in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (“Liquidation Funds”) before any amount shall be paid to the holders of any shares of itsJunior Stock, but pari passu with any Parity Stock (as defined in the Series C-1 Certificate of Designation) then outstanding, an amount per shares of the Series C-1 Preferred Stock equal to the greater of (A) the conversion amount thereof on the date of such payment or (B) the amount per share such holder of Series C-1 Preferred Stock would receive if such holder converted such Series C-1 into common stock immediately prior to the date of the payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of Series C-1 Preferred Stock and holders of the shares of Parity Stock, then each holder of Series C-1 Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of the Liquidation Funds payable to such holder of Series C-1 Preferred Stock and such holder of the Parity Stock as a liquidation preference, in accordance with their respective certificate of designation (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series C-1 Preferred Stock and all holders of Parity Stock.

On June 5, 2020, pursuant to the asset sale and recapitalization transaction (see Note 3), 2,966.2212 shares of Series C-1 Preferred Stock was deemed to have been issued.

As of June 30, 2020, the Company had 2,966.2212 shares of Series C-1 Preferred Stock issued and outstanding.

18

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

Series C-2 Preferred Stock

On May 18, 2020, the Company filed a certificate of designation, preferences and rights of Series C-2 Preferred Stock (the “Series C-2 Certificate of Designation”) with the Nevada Secretary of State to designate 6,000 shares of its previously authorized preferred stock as Series C-2 Preferred Stock, par value $0.0001 per share and a stated value of $410.27 per share. The Series C-2 Certificate of Designation and its filing was approved by the Company’s board of directors without shareholder approval as provided for in the Company’s articles of incorporation and under Nevada law. The holders of shares of Series C-2 Preferred Stock have the following preferences and rights:

●Holders of shares of Series C-2 Preferred Stock are entitled to dividends or distributions on each share on an “as converted” into common stock basis, if, as and when declared from time to time by the Board of Directors.
●Each share of Series C-2 Preferred Stock is convertible into shares of common stock any time after the initial issuance date at a conversion price of $0.00275 per share. The number of shares of common stock issuable upon conversion shall be determined by dividing (x) the conversion amount (determined by the sum of the stated value thereof plus any additional amount thereon) of such share of Series C-2 by (y) the conversion price of $0.00275 per share (subject to temporary adjustment upon a triggering event as defined by the Series C-2 Certificate of Designation to 80% of the conversion price). The adjusted conversion price is only in effect until the triggering event is cured. The convertibility of shares of Series C-2 Preferred Stock is limited such that a holder of Series C-2 Preferred Stock may not convert Series C-2 Preferred Stock to common stock to the extent that the number of shares of common stock to be issued pursuant to such conversion, when aggregated with all other shares of common stock owned by the holder at such time, would result in the holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) more than 4.99% of all of the Company’s common stock outstanding.
●In the event the Company issues or sells any securities including options or convertible securities, except for cash.any Exempt Issuance (as defined in the Series C-2 Certificate of Designation), at a price of or with an exercise price or conversion price of less than the conversion price, then upon such issuance or sale, the Series C-2 Preferred Stock conversion price shall be reduced to the sale price, the exercise price or conversion price of the securities sold. In addition, these preferred shareholders have the right to participate in future equity offerings from the company for twenty four months from the effective date.
●In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Company, the holders of the Series C-2 Preferred Stock shall be entitled to receive, in cash out of the Liquidation Funds before any amount shall be paid to the holders of any shares of Junior Stock, but pari passu with any Parity Stock (as defined in the Series C-2 Certificate of Designation) then outstanding, an amount per shares of the Series C-2 Preferred Stock equal to the greater of (A) the conversion amount thereof on the date of such payment or (B) the amount per share such holder would receive if such holder converted such Series C-2 into common stock immediately prior to the date of the payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders of Series C-2 Preferred Stock and holders of the shares of Parity Stock, then each holder of Series C-2 Preferred Stock and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of the Liquidation Funds payable to such holder of Series C-2 Preferred Stock and such holder of the Parity Stock as a liquidation preference, in accordance with their respective certificate of designation (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series C-2 Preferred Stock and all holders of Parity Stock.

On June 5, 2020, pursuant to the asset sale and recapitalization transaction (see Note 3), 4,916.865 shares of Series C-2 Preferred Stock was deemed to have been issued.

As of June 30, 2020, the Company had 4,916.865 shares of Series C-2 Preferred Stock issued and outstanding.

Series D-1 Preferred Stock

On May 18, 2020, the Company filed a certificate of designation, preferences and rights of Series D-1 Preferred Stock (the “Series D-1 Certificate of Designation”) with the Nevada Secretary of State to designate 1,000 shares of its previously authorized preferred stock as Series D-1 Preferred Stock, par value $0.0001 per share and a stated value of $9,104.89 per share. The Series D-1 Certificate of Designation and its filing was approved by the Company’s board of directors without shareholder approval as provided for in the Company’s articles of incorporation and under Nevada law. The holders of shares of Series D-1 Preferred Stock had the following preferences and rights:

●Holders of shares of Series D-1 Preferred Stock were entitled to dividends or distributions on each share on an “as converted” into common stock basis, if, as and when declared from time to time by the Board of Directors.

 

19

Common stock issued for debt conversionTHERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

 

 ●During Each share of Series D-1 Preferred Stock is convertible into a pro rata portion of 54.55% ofthe nine months ended September 30, 2018,Fully Diluted Equity (as defined in the Series D-1 Certificate of Designation) of the Company issued an aggregateupon the effectiveness of 61,893the amendment to the Company’s Articles of Incorporation to increase the Company’s authorized common stock, par value $0.0001 per share, from 6,666,667 shares to 12,000,000,000 shares, which occurred on September 24, 2020 ( the “Conversion Date”).
●Prior to the Conversion Date, each holderof Series D-1 Preferred Stock was entitled to the whole number of votes equal to the number of shares of its common stock upon conversioninto which such holder’s Series D-1 Preferred Stock would be convertible on the record date for the vote or consent of $319,359, $39,164stockholders, and $55,890otherwise had voting rights and powers equal to the voting rights and powers of the common stock. To the extent that under the Nevada Revised Statutes (“NRS”) the vote of the holders of the Series D-1, voting separately as a class or series as applicable, was required to authorize a given action, the affirmative vote or consent of the holders of a majority of the shares of the outstanding principal, accrued interestSeries D-1, constituted the approval of such action by both the class or the series, as applicable (except as otherwise may be required under the NRS).

For the nine months ended 6/30/20, the Company issued an aggregate of 1 share of D-1 Preferred Stock in exchange for the settlement of certain accrued compensation and the conversion of debt valued at $676,369.

For the nine months ended 6/30/20, the company sold 7 shares of D-1 Preferred Stock for net proceeds of $2,590,000.

As of June 30, 2020, the Company had 1,000 shares of Series D-1 Preferred Stock issued and outstanding, all of which were converted into 5,081,549,184 shares of common stock subsequent to June 30, 2020.

Series D-2 Preferred Stock

On May 18, 2020, the Company filed a certificate of designation, preferences and rights of Series D-2 Preferred Stock (the “Series D-2 Certificate of Designation”) with the Secretary of State of the State of Nevada to designate 4,360 shares of its previously authorized preferred stock as Series D-2 Preferred Stock, par value $0.0001 per share and a stated value of $500 per share. The Series D-2 Certificate of Designation and its filing was approved by the Company’s board of directors without shareholder approval as provided for in the Company’s articles of incorporation and under Nevada law. The holders of shares of Series D-2 Preferred Stock have the following preferences and rights:

●Holders of shares of Series D-2 Preferred Stock are entitled to dividends or distributions on each share on an “as converted” into common stock basis, if, as and default interest, respectively,when declared from time to time by the Board of convertible debt.Directors.
   
 ●

During the nine months ended September 30, 2019, the Company issued an aggregateEach share of 148,834 shares of its common stock upon conversion of $322,174 and $79,836 of outstanding principal and accrued interest, respectively, ofSeries D-2 Preferred Stock are convertible debt (see Note 4). Theseinto 10,000 shares of common stock had an aggregate fair(“Conversion Rate”). Upon the terms and in the manner set forth in Section 5 of the Series D-2 Certificate of Designation, each outstanding share of the Series D-2 Preferred Stock shall automatically be converted upon the effectiveness of the amendment to the Company’s Articles of Incorporation to increase the Company’s authorized common stock, par value$770,609 $0.0001 per share, from 6,666,667 shares to 12,000,000,000 shares, which occurred on September 24, 2020 ( the “Conversion Date”)., into a number of fully-paid and the difference between the aggregate fair value and the aggregate converted amount of $368,599 was recorded as loss on debt extinguishment.

Shares issued for cashless exercise of warrants

●During the nine months ended September 30, 2018, the Company issued 43,620nonassessable shares of its common stockCommon Stock determined by multiplying such share of Series D-2 Preferred Stock by the Conversion Rate (such shares of Common Stock issuable upon Conversion, the cashless exercise of 47,431 of its warrants.“Conversion Shares”).

   
 ●DuringEach holderof Series D-2 Preferred Stock shall be entitled to the nine months ended September 30, 2019,whole number of votes equal to the number of shares of common stock into which such holder’s Series D-2 would be convertible on the record date for the vote or consent of stockholders and shall otherwise have voting rights and powers equal to the voting rights and powers of common stock. To the extent that under the NRS the vote of the holders of the Series D-2 Preferred Stock, voting separately as a class or series as applicable, is required to authorize a given action of the Corporation, the affirmative vote or consent of the holders of a majority of the shares of the outstanding Series D-2 Preferred Stock, shall constitute the approval of such action by both the class or the series, as applicable (except as otherwise may be required under the NRS).
●In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Company, did not issuethe holders of the Series D-2 Preferred Stock shall be entitled to receive, in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (“Liquidation Funds”) before any amount shall be paid to the holders of any shares of itsJunior Stock, but pari passu with any Parity Stock (as defined in the Certificate of Designation) then outstanding , an amount per shares of the Series D-2 Preferred Stock equal to the greater of (A) the Conversion Amount thereof on the date of such payment or (B) the amount per share such Holder would receive if such Holder converted such Series D-2 into common stock for cashless exerciseimmediately prior to the date of warrants.the payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the Holders and holders of the shares of Parity Stock, then each Holder and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of the Liquidation Funds payable to such Holder and such holder of the Parity Stock as a liquidation preference, in accordance with their respective certificate of designation (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series D-2 Preferred Stock and all holders of Parity Stock.

Warrants

 

Warrants issued pursuant to equity subscription agreements

In 2016, in connection with the sale of common stock, the Company issued an aggregate of 1,295 five-year warrants to purchase common shares for an exercise price of $225 per common share to investors pursuant to unit subscription agreements. As of September 30, 2019, and December 31, 2018, 1,292 and 1,295 of these warrants were issued and outstanding, respectively.

F-2820

 

ONCBIOMUNE PHARMACEUTICALS,THERALINK TECHNOLOGIES, INC. AND SUBSIDIARYSUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SeptemberJUNE 30, 20192020

(Unaudited)(UNAUDITED)

 

On June 5, 2020, the Company is deemed to have issued 4,121.64 shares of Series D-2 Preferred Stock pursuant to the Asset Sale Transaction and recapitalization.

As of June 30, 2020, the Company had 4,121.64 shares of Series D-2 Preferred Stock issued and outstanding, all of which were converted into 41,216,450 shares of common stock, subsequent to June 30, 2020.

Common Stock

On June 5, 2020, the Company is deemed to have issued 1,398,070 shares of common stock pursuant to the Asset Sale Transaction and recapitalization.

As of June 30, 2020, the Company had 1,398,070 shares of common stock issued and outstanding.

Warrants

In 2017,November 2019, in connect with the sale of series D-1 preferred stock, the Company issued certain warrants to a subscriber. On June 5, 2020, in connection with the sale of common stock,Asset Sale Transaction and recapitalization, the Companycompany issued an aggregate of 6,169 five-year656,674,588 new warrants to purchase common sharesthe same subscriber in exchange for the previously issued warrants. The new warrants are exercisable immediately at an exercise price of $225 per common share$0.00214 and expire on November 27, 2024.

On June 5, 2020 in connection with the Asset Sale Transaction and the recapitalization transaction, the Company issued 200,000,000 warrants to investors pursuant to unit subscription agreements. two investors. The warrants are exercisable three-months after the grant date at an exercise price of $0.00214 and expires on five-years form the vest date.

As of SeptemberJune 30, 2019, and December 31, 2018, 6,169 of these2020, the Company had 856,674,588 warrants were issued and outstanding.

Outstanding warrants related to equity subscription agreements as of September 30, 2019 are summarized as follows:

  Original
warrants
issued		  Anti-dilution
adjustment		  

Expired,
Cancelled
or
Forfeited

  Total
warrants
exercised
(Cashless
exercise)		  

Outstanding
warrants
as of
September 30,
2019

  

Exercise
price at
September 30,

2019

 
Warrants related to the 2016 subscription agreements  1,295        —   (3)  —   1,292  $225 
Warrants related to the 2017 subscription agreements  6,169   —   —   —   6,169  $       225 
   7,464   —   (3)  —   7,461     

Warrants issued pursuant to Securities Purchase Agreements

The warrants detailed below, issued pursuant to the Securities Purchase Agreements (see Note 4), have initial exercise price between $15 and $131 (subject to adjustments under certain conditions as defined in the agreements) and includes a down-round provision under which the exercise price could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception. It also includes a default provision pursuant to which, these Warrants shall be exercisable at the Default Conversion Price as defined in the related Notes (see Note 4).

Outstanding warrants related to Securities Purchase Agreements as of September 30, 2019 are summarized as follows:

  Original
warrants
issued		  

Cumulative

Anti-dilution
adjustment		  

Warrants
purchased
back -
Puritan
Settlement

Agreement
(post anti-
dilution)

  Total
warrants
exercised
(Cashless
exercise)		  

Outstanding
warrants
as of
September 30,
2019

  

Exercise
price at
September 30,
2019

 
November 2016 Warrants  3,111   39,235   —   (12,099)  30,247  $4.50 
June 2017 Warrants  2,074   58,423   —   (20,166)  40,331  $4.50 
July 2017 Warrants  6,359   99,635   —   (35,332)  70,662  $4.50 
January 2018 Warrants  11,111   952,711   (10,078)  —   953,744  $0.23 
March 2018 Warrants  16,667   1,429,067   (15,117)  —   1,430,616  $0.23 
September 2018 Warrants  68,056   8,694,462   —   —   8,762,518  $0.23 
November 2018 Warrants  6,389   816,215   —   —   822,604  $0.23 
March 2019 Warrants  2,778   354,867   —   —   357,645  $0.23 
April 2019 Warrants I  1,389   177,438   —   —   178,827  $0.23 
April 2019 Warrants II  10,264   1,311,267   —   —   1,321,531  $0.23 
May 2019 Warrants  500   63,878   —   —   64,378  $0.23 
June 2019 Warrants I  6,458   825,087   —   —   831,545  $0.23 
June 2019 Warrants II  5,556   352,098   —   —   357,654  $0.23 
July 2019 Warrants I  5,556   352,098   —   —   357,654  $0.23 
July 2019 Warrants II  5,556   352,098   —   —   357,654  $0.23 
August 2019 Warrants  2,778   —   —   —   2,778  $15.00 
September 2019 Warrants  16,667   —   —   —   16,667  $15.00 
   171,268   15,878,579   (25,195)  (67,597)  15,957,055     

F-29

ONCBIOMUNE PHARMACEUTICALS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

During the nine months ended September 30, 2018, the Company issued 43,620 shares of its common stock upon the cashless exercise of 47,431 of its warrants. No warrants were exercised during the nine months ended September 30, 2019.

 

Warrants activities for the nine months ended SeptemberJune 30, 2019 are2020 is summarized as follows:

 

  Number of
Warrants		  Weighted
Average
Exercise Price		  Weighted
Average
Remaining
Contractual
Term (Years)		  Aggregate
Intrinsic Value		 
Balance Outstanding at December 31, 2018  339,619  $15.75         
Issued in connection with financings  57,502   5.25   4.71     
Increase in warrants related to default adjustment  15,567,398   0.23   4.10     
Expired  (3)  225.00   —     
Exercised  —   —   —     
Balance Outstanding at September 30, 2019  15,964,516  $0.39   4.05  $— 
Exercisable at September 30, 2019  15,964,516  $0.39   4.05  $— 

        Weighted    
     Weighted  Average    
     Average  Remaining  Aggregate 
  Number of  Exercise  Contractual   Intrinsic 
   Warrants    Price  Term (Years)  Value 
Balance Outstanding at September 30, 2019  —  $—   —  $— 
Warrants issued in connection with the sale of Series D-1 preferred stock  656,674,588   0.002   4.41   — 
Deemed issuance in connection with the asset sale and recapitalization transaction (see Note 3)  200,000,000   0.003   5.19   — 
                 
Balance Outstanding at June 30, 2020  856,674,588  $0.002   4.59  $— 
Exercisable at June 30, 2020  656,674,588  $0.002   4.41  $— 

 

Stock options

 

Effective February 18, 2011, our boardthe Company’s Board of directorsDirectors (“Board”) adopted and approved the 2011 stock option plan. The purpose of the 2011 stock option plan is to enhance the long-term stockholder value of our Company by offering opportunities to directors, key employees, officers, independent contractors and consultants of our Company to acquire and maintain stock ownership in our Company in order to give these persons the opportunity to participate in our Company’s growth and success, and to encourage them to remain in the service of our Company. A total of 57 options to acquire shares of ourthe Company’s common stock were authorized under the 2011 stock option plan and during the 12 monthtwelve-month period after the first anniversary of the adoption of the 2011 stock option plan, by ourthe Company’s board of directors and during each 12 monthtwelve-month period thereafter, our board of directors is authorized to increase the amountnumber of options authorized under this plan by up to 14 shares. No options were granted under the 2011 stock option plan as of SeptemberJune 30, 2019.2020.

 

Stock-option issued duringOn April 28, 2020, the nineBoard approved the 2020 Equity Incentive Plan (the “Plan”), as amended on May 29, 2020. The Plan shall be effective upon approval by the Stockholders which shall be within twelve (12) months endedafter the approval of the Board. No Incentive Stock Option shall be exercised unless and until the Plan has been approved by the Stockholders. Upon the effective date of the Plan and the effectiveness of the authorized share increase, which occurred on September 30, 2018

On May 8, 2018, the Company granted an aggregate of 23,334 stock options to purchase 23,33424, 2020, 3,043,638,781 shares of the Company’s common stock at $10.13 per share as follows: 20,000 options were granted to officers and directors ofbe reserved for issuance under the Company, 667 options were granted to an employee, and 2,667 optionPlan (the “Reserved Share Amount”), subject to the Company’s scientific advisory board. These options vestadjustments described in one year fromthe Plan, and such Reserved Share Amount, when issued in accordance with the Plan, shall be validly issued, fully paid, and non-assessable. Pursuant to the Plan, the option price of each incentive stock option (except those that constitute substitute awards under the Plan) shall be at least the fair market value of a share of common stock on the respective grant date; provided, however, that in the event that a grantee is a ten-percent stockholder as of the grant date, and expire on May 8, 2028. Thethe option price of an incentive stock option shall be not less than 110% of the fair market value of these option grants was estimateda share on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield of 0%; expected volatility of 243%; risk-free interest rate of 2.81%; and, an estimated term based on the simplified method of 5.5 years. In connection with these options, the Company valued these options at a fair value of approximately $233,000 and will record stock-based compensation expense over the vesting term.

Stock-option issued during the nine months ended September 30, 2019

On April 24, 2019 the board of directors of the Company granted an aggregate of 23,130 stock options, outside of the plan, to purchase shares of the Company’s common stock to Dr. Barnett and three non-employee members of the Board, Daniel S. Hoverman, Charles L. Rice and Neal Holcomb.

Pursuant to Dr. Barnett’s employment agreement dated December 26, 2018, Dr. Barnett was granted 11,130 stock options with exercise price of $9.00 per share, vest dates of; (i) 3,710 on January 9, 2020; (ii) 3,710 on January 9, 2021; and (iii) 3,710 on January 9, 2022 and expire on April 24, 2030.date. The stock options vest so long asoption plan has not yet been approved by the optionee remains an employee of the Company on the vesting date (except as otherwise provided for in the employment agreement between the Company and the optionee). The fair value of this option grant was estimated on the date of grant using the Black-Scholes option-pricing model and the Company valued these options at a grant date fair value of $81,803 which will be expensed over the vesting period as stock-based compensation.

The three non-employee members of the Board were each granted 4,000 stock options for a total of 12,000 stock options with exercise price of $7.50 per share, vest date of April 24, 2020 and expires on April 24, 2030. The stock options vest so long as the optionee remains a member of the Board on the vesting date. The fair value of this option grant was estimated on the date of grant using the Black-Scholes option-pricing model and the Company valued these options at a grant date fair value of $88,200 which will be expensed over the vesting period as stock-based compensation

During the nine months ended September 30, 2019 and 2018, the Company recorded stock-based compensation expense of $148,053 and $154,068 related to stock options, respectively.shareholders.

 

F-3021

 

ONCBIOMUNE PHARMACEUTICALS,THERALINK TECHNOLOGIES, INC. AND SUBSIDIARYSUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SeptemberJUNE 30, 20192020

(Unaudited)(UNAUDITED)

 

The Company uses the Black-Scholes pricing model to determine the fair valueAs of its stock options which requiresJune 30, 2020, the Company to make several key judgments including:

●the value of the Company’s common stock;
●the expected life of issued stock options;
●the expected volatility of the Company’s stock price;
●the expected dividend yield to be realized over the life of the stock option; and
●the risk-free interest rate over the expected life of the stock options.

The Company’s computation of the expected life of issued stock options was based on the simplified method as the Company does not have adequate exercise experience to determine the expected term. The interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. The computation of volatility was based on the historical volatility of the Company’s common stock.

At September 30, 2019, there were 52,730had no options issued and outstanding out of which 29,600 options were vested and exercisable. As of September 30, 2019, there was $109,728 of unvested stock-based compensation expense to be recognized through April 24, 2020. The aggregate intrinsic value at September 30, 2019 was $0 which was calculated based on the difference between the quoted share price on September 30, 2019 and the exercise price of the underlying options.outstanding.

Stock option activities for the nine months ended September 30, 2019 are summarized as follows:

  

Number of
Option

  Weighted
Average
Exercise Price		  Weighted
Average
Remaining
Contractual
Term (Years)		  

Aggregate
Intrinsic
Value

 
Balance Outstanding at December 31, 2018  29,600  $45.00         
Granted  23,130  $9.00   10.57     
Expired  —  $—   —     
Balance Outstanding at September 30, 2019  52,730  $30.84   9.34  $— 
Exercisable at September 30, 2019  29,600  $47.91   8.37  $— 

 

NOTE 910 –COMMITMENTSCOMMITMENT AND CONTINGENCIES

Employment Agreements

Michael Ruxin, M.D.

 

On February 2, 2016,June 5, 2020, the Company and Dr. Michael Ruxin. entered into an employment agreement with Jonathan F. Head, Ph.D. (“(the “Ruxin Employment Agreement”) for Dr. Head”)Ruxin to serve as the Company’s Chief Executive Officer, President and a director (see Note 3).

The Ruxin Employment Agreement provides that Dr. Ruxin will be employed for a five-year term commencing on June 5, 2020, automatically extended for one additional year upon the fifth anniversary of the effective date without any affirmative action, unless either party to the agreement provides at least sixty (60) days’ advance written notice to the other party that the employment period will not be extended. Dr. Ruxin will be entitled to receive an annual base salary of $300,000 and will be eligible for an annual discretionary bonus of 150% of such base salary. In the Ruxin Employment Agreement, Dr. Ruxin is also promised, subject to the approval of the Board or a committee thereof, and under the 2020 Equity Incentive Plan (i) a one-time grant of 49,047,059 Restricted Stock Units (“RSUs”) and (ii) a one-time grant of options to purchase 420,691,653 shares of Common Stock, both of which will be subject to the terms and conditions of the applicable award agreement when executed. Dr. Ruxin is entitled to participate in any and all benefit plans, from time to time, in effect for senior management, along with vacation, sick and holiday pay in accordance with the Company’s policies established and in effect from time to time. As of June 30, 2020, the RSUs and options have not yet been granted or issued since the Board has not yet approved the grants and the Equity Incentive Plan has not been approved by the shareholders.

Dr. Ruxin is an “at-will” employee and his employment may be terminated by the Company at any time, with or without cause. In the event Dr. Ruxin’s termination of employment is the result of termination by the Company without Cause (as defined in the Ruxin Agreement), with Good Reason (as defined in the Ruxin Agreement) or as a result of a non-renewal of the term of employment under the Ruxin Agreement, Dr. Ruxin shall be entitled to receive the sum of (I) the Severance Multiple (as defined below), multiplied by his base salary immediately prior to such termination and (II) a pro-rata portion of his bonus for the year in which runssuch termination occurs equal to (a) his bonus for three years (from February 2, 2016the most recently completed calendar year (if any), multiplied by (b) a fraction, the numerator of which is the number of days that have elapsed from the beginning of such calendar year through February 1, 2019) and renews automatically for one year periods unless a written noticethe date of termination and the denominator of which is the total number of days in such calendar year. “Severance Multiple” shall mean 3.0; provided, not less than 120 dayshowever, that if the date of termination occurs on or at any time during the twelve (12)-month period following a Change in Control (as defined in the Ruxin Agreement), the Severance Multiple shall mean 4.0. In addition, the Company shall accelerate the vesting of any outstanding, unvested equity awards granted to Dr. Ruxin prior to the automatic renewal date. The employment agreement with Dr. Head provides that Dr. Head’s salary for calendar year 2016date of termination and he shall be $275,000 and for calendar year 2017 and for each calendar year thereafterentitled to reimbursement of any COBRA payment made during the 18-month period following the date of termination.

The Ruxin Agreement also contains covenants (a) restricting the executive from engaging in any activity competitive with our business during the term of the employment agreement with Dr. Head shall be an amount determined byand in the Boardevent of Directors, which in no event shall be less thantermination, for a period of one year thereafter, (b) prohibiting the annual salary that was payable byexecutive from disclosing confidential information regarding the Company, to Dr. Head for the immediately preceding calendar year.

On February 2, 2016, the Company entered into an employment agreement with Andrew Kucharchuk (“Mr. Kucharchuk) to serve as the Company’s President and Chief Financial Officer, the term of which runs for three years (from February 2, 2016 through February 1, 2019)(c) soliciting employees, customers and renews automatically for one year periods unless a written notice of termination is provided not less than 120 days prior to the automatic renewal date. The employment agreement with Mr. Kucharchuk provides that Mr. Kucharchuk’s salary for calendar year 2016 shall be $200,000 and for calendar year 2017 and for each calendar year thereafterprospective customers during the term of the employment agreement with Mr. Kucharchuk shall be an amount determined by the Boardand for a period of Directors, which in no event shall be less than the annual salary that was payable byone year thereafter.

Jeffrey Busch

On June 5, 2020, the Company and Jeffrey Busch entered into an employment agreement (the “Busch Employment Agreement”) for Mr. Busch to Mr. Kucharchuk for the immediately preceding calendar year.

The above executives shall be eligible for an annual target bonus payment in an amount equal to ten percent of his base salary (“Bonus”). The Bonus is determined based on the achievement of certain performance objectives of the Company as established by the Board of Directors. The Bonus may be greater or less than the target Bonus, based on the level of achievement of the applicable performance objectives.

Effective December 26, 2018, the Company replaced Dr. Jonathan Head and appointed Dr. Brian Barnettserve as the new Chief Executive Officer. Dr. Head will continue to serve the Company as theCompany’s Chairman of the Board of Directors (see Note 3).

The Busch Employment Agreement provides that Mr. Busch will be employed for a five-year term commencing on June 5, 2020, automatically extended for one additional year upon the fifth anniversary of the effective date without any affirmative action, unless either party to the agreement provides at least sixty (60) days’ advance written notice to the other party that the employment period will not be extended. Mr. Busch will be entitled to receive an annual base salary of $60,000 and now as its Chief Scientific Officer effective December 26, 2018. Dr. Headwill be eligible for an annual discretionary bonus. In the Busch Employment Agreement, Mr. Busch is still negotiatingalso promised, subject to the approval of the Board or committee thereof, and under the 2020 Equity Incentive Plan (i) a one-time grant of 49,047,059 Restricted Stock (“RSUs”) and (ii) a one-time grant of options to purchase 420,691,653 shares of Common Stock, both of which will be subject to the terms and conditions of his new employmentthe applicable award agreement when executed. Mr. Busch is entitled to participate in any and all benefit plans, from time to time, in effect for his new position as the Chief Scientific Officer,senior management, along with vacation, sick and holiday pay in accordance with the Company, asCompany’s policies established and in effect from time to time. As of June 30, 2020, the date of this report.RSUs and options have not yet been granted or issued since the Board has not yet approved the grants and the Equity Incentive Plan has not been approved by the shareholders.

 

F-3122

 

ONCBIOMUNE PHARMACEUTICALS,THERALINK TECHNOLOGIES, INC. AND SUBSIDIARYSUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SeptemberJUNE 30, 20192020

(Unaudited)(UNAUDITED)

 

On December 26, 2018, Dr. Barnett entered intoMr. Busch is an “at-will” employee and his employment agreementmay be terminated by the Company at any time, with us (“Barnett Employment Agreement”) to serveor without cause. In the event Mr. Busch’s termination of employment is the result of termination by the Company without Cause (as defined in the Busch Agreement), with Good Reason (as defined in the Busch Agreement) or as a result of a non-renewal of the Company’s Chief Executive Officer for a term of three years (from December 26, 2018employment under the Busch Agreement, Mr. Busch shall be entitled to receive the sum of (I) the Severance Multiple (as defined below), multiplied by his base salary immediately prior to such termination and (II) a pro-rata portion of his bonus for the year in which such termination occurs equal to (a) his bonus for the most recently completed calendar year (if any), multiplied by (b) a fraction, the numerator of which is the number of days that have elapsed from the beginning of such calendar year through December 26, 2021) that renews automatically for one year periods unless a written noticethe date of termination and the denominator of which is the total number of days in such calendar year. “Severance Multiple” shall mean 3.0; provided, not less than 180 dayshowever, that if the date of termination occurs on or at any time during the twelve (12)-month period following a Change in Control (as defined in the Busch Agreement), the Severance Multiple shall mean 4.0. In addition, the Company shall accelerate the vesting of any outstanding, unvested equity awards granted to Mr. Busch prior to the automatic renewal date. The Barnett Employment Agreement provides that Dr. Barnett’s salary for calendar year 2019date of termination and he shall be $250,000 and for each calendar year thereafterentitled to reimbursement of any COBRA payment made during the 18-month period following the date of termination.

The Busch Agreement also contains covenants (a) restricting the executive from engaging in any activity competitive with our business during the term of the Barnett Employmentemployment agreement and in the event of termination, for a period of one year thereafter, (b) prohibiting the executive from disclosing confidential information regarding the Company, and (c) soliciting employees, customers and prospective customers during the term of the employment agreement and for a period of one year thereafter.

Lease

In December 2019, the Company entered into a lease agreement its corporate and laboratory facility in Golden, Colorado. The lease is for a period of 60 months commencing in February 2020 and expiring in February 2025 (see Note 7).

Other Contingencies

On June 5, 2020, the Company recorded a contingent liability of $62,240 resulting from certain liabilities of Avant prior to the asset sale and recapitalization transaction (see Note 3). Pursuant to ASC 450-20 - Loss Contingencies, liabilities for contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

NOTE 11 – SUBSEQUENT EVENTS

On August 14, 2020, the Board approved a change in the Company’s fiscal year end from December 31 to September 30, effective immediately for the current fiscal year, and for all subsequent years until such time as the Board resolves to amend such fiscal year end. The fiscal year has been changed to conform to the September 30 fiscal year end of Avant which is the historical registrant as a result of the Asset Sale Transaction consummated on June 5, 2020 and therefore, no transition report is required (see Note 1).

On September 15, 2020, the Company filed a certificate of designation, preferences and rights of Series E Preferred Stock (the “Series E Certificate of Designation”) with the Nevada Secretary of the State to designate 2,000 shares of its previously authorized preferred stock as Series E Preferred Stock, par value $0.0001 per share and a stated value of $2,000 per share. The Series E Certificate of Designation and its filing was approved by the Company’s board of directors without shareholder approval as provided for in the Company’s articles of incorporation and under Nevada law (see Note 1). The holders of shares of Series E Preferred Stock have the following preferences and rights:

●From the initial issuance date, cumulative dividends on each share of Series E shall accrue, on a quarterly basis in arrears (with any partial quarter calculated on a pro-rata basis), at the rate of 8% per annum on the Stated Value, plus any additional amount thereon. Dividends shall be paid within 15 days after the end of each fiscal quarter (“Dividend Payment Date”), at the option of the Holder in cash or through the issuance of shares of common stock. In the event that the Holder elects to receive its dividends in shares of common stock the number of shares of common stock to be issued to each applicable Holder shall be determined by dividing the total dividend outstanding to such Holder by the average closing price of the common stock during the five trading days on the principal market prior to the Dividend Payment Date.
●Holders of shares of Series E Preferred Stock are entitled to dividends or distributions on each share on an “as converted” into common stock basis, if, as and when declared from time to time by the Board of Directors.

23

THERALINK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

(UNAUDITED)

●Each share of Series E Preferred Stock is convertible into shares of common stock any time after the initial issuance date at the Conversion Price which is the lesser of: (i) $0.00375 or (ii) 75% of the average closing price of the common stock during the prior five trading days on the principal market, subject to adjustment as provided in the Series E Certificate of Designation. Provided, however, the Conversion Price shall never be less than $0.0021. The number of shares of common stock issuable upon conversion shall be determined by multiplying the number of outstanding shares by the stated value per share of $2,000 plus accrued dividends and dividing that number by (y) the Conversion Price.

●

In connection with, (i) a Change of Control of the Corporation or (ii) on the closing of, a Qualified Public Offering by the Corporation, all of the outstanding shares of Series E (including any fraction of a share) shall automatically convert into an aggregate number of shares of Common Stock (including any fraction of a share) by multiplying the number of outstanding shares by the stated value per share of $2,000 plus accrued dividends and dividing that number (including any fraction of a share) by the lesser of: (i) $0.00375 or (ii) 75% of the average closing price of the common stock during the prior five trading days on the principle market. However, the conversion price shall never be less than $0.0021. If a closing of a Change of Control transaction or a Qualified Public Offering occurs, such automatic conversion of all of the outstanding shares of Series E shall be deemed to have been converted into shares of Common Stock immediately prior to the closing of such transaction or Qualified Public Offering.

●In the event the Company issues or sells any securities including options or convertible securities, except for any Exempt Issuance (as defined in the Series E Certificate of Designation), at a price, an exercise price or conversion price of less than the conversion price, then upon such issuance or sale, the Series E Preferred Stock conversion price shall be reduced to the sale price or the exercise price or conversion price of the securities sold.
●Holder of Series E Preferred Stock have no voting rights.

On September 16, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) with an investor to purchase an aggregate amount of 1,000 shares of the newly created Series E Convertible Preferred Stock of the Company (the “Series E Preferred”) for an aggregate investment amount of $2,000,000. The Company’s Series E Preferred Stock has a stated value of $2,000 per share and shall accrue, on a quarterly basis in arrears, dividends at the rate of 8% per annum on the stated value. The dividends shall be paid quarterly at the option of the holder of the Series E Preferred in either cash or shares of common stock of the Company. The Series E Preferred is convertible at any time after the date that is two days after the filing of an amountamendment to the Company’s certificate of incorporation with the Nevada Secretary of State to increase the Company’s authorized common stock to 12,000,000,000 which became effective on September 24, 2020. The number of shares of common stock issuable on the conversion of the Series E Preferred is determined by dividing the Boardstated value of Directors, which in no eventthe number of shares being converted, plus any accrued and unpaid dividends, by the lesser of: (i) $0.00375 and (ii) 75% of the average closing price of the Company’s common stock during the prior five trading days; provided, however, the conversion price shall never be less than $0.0021. For eighteen months from the annual salary that was payable byanniversary of the closing, the Company needs to Dr. Barnett for the immediately preceding calendar year.obtain consent from a group of investors prior to engaging in any future capital raises.

 

Dr. Barnett is alsoOn September 22, 2020, the Company filed with the Nevada Secretary of State an amendment to its Certificate of Incorporation to change its name from “OncBioMune Pharmaceutical, Inc.” to “Theralink Technologies, Inc.” and increase its authorized shares of common stock from 6,666,667 shares of common stock at $0.0001 per share par value to 12,000,000,000 shares of common stock at $0.0001 per share par value, effective September 24, 2020 (see Note 1 and Note 9). The 1,000 shares of Series D-1 Preferred stock and 4,121.6 shares of Series D-2 Preferred stock were automatically converted into 5,081,549,184 and 41,216,000 shares of common stock, respectively, upon the increase in the authorized shares, pursuant to the respective Certificates of Designation (see Note 1).

On September 24, 2020, the Company appointed Thomas E. Chilcott, III, to serve as the Chief Financial Officer. The Company entered into an offer letter with Mr. Chilcott which provides that his base salary will be $225,000 per year and that he will be eligible to receive a performance-based bonus of up to $150,000 upon completion of specific metrics established bythe following bonuses: $5,000 if the Company’s Boardnext Annual Report on Form 10-K is filed on or prior to December 12, 2020; $5,000 if the Company files a registration statement on Form S-1 on or prior to January 15, 2021; $5,000 if the Company completes a capital raise of Directorsat least $3,000,000 on or prior to Apri1 15, 2021; $20,000 if the Company completes a capital raise of at least $10,000,000 on or prior to September 30, 2021; and $15,000 if the Company successfully lists on a Nasdaq stock market on or before December 31, 2021. Mr. Chilcott is entitled to participate in all medical and other benefits that the Company has established for its employees. Pursuant to the employment agreement, the CompanyThe offer letter also provides that Mr. Chilcott will also grant optionsbe granted an option to purchase a number ofup to 94,545,096 shares of the Company’s common stock equalsubject to $100,000 dividedterms including exercise price to be set by the volume weighted average priceBoard of the Company’s common stock for the ten (10) business days prior to the effective date of the employment agreement. The option grant is subject to continued employment, and will vest ratably over the first three anniversary dates of the grant date. On April 24, 2019, Dr. Barnett was granted 11,130 stock options with exercise price of $9.00 per share, vest dates of; (i) 3,710 on January 9, 2020; (ii) 3,710 on January 9, 2021; and (iii) 3,710 on January 9, 2022 and expire on April 24, 2030. The stock options vest so long as the optionee remains an employeeDirectors of the Company on(see Note 1).

From February 16, 2021 through April 14, 2021, the vesting date (except as otherwise providedCompany, entered into Subscription Agreements with fourteen accredited investors to sell, in a private placements, an aggregate of 431,309,904 shares of its common stock, par value $0.0001 per share, at a purchase price of $0.00313 per share for an aggregate purchase price of $1,350,000. The Shares sold by the Company under these Subscription Agreements were in reliance upon an exemption from the employment agreement betweenregistration requirements of the Act afforded by Section 4(a)(2) of the Act and/or Rule 506 of Regulation D thereunder. The private placements were made directly by the Company and no underwriter or placement agent was engaged by the optionee) (see Note 8).Company. The Company did not engage in general solicitation or advertising and did not offer securities to the public in connection with this offering.

 

Additionally, upon the closing of a transaction during calendar year 2019 which results in the sale of common stock ofOn May 12, 2021, the Company on terms acceptable to the Board that provides net proceeds to the Company of no less than $4,000,000 (a “Qualifying Transaction”entered into a Securities Purchase Agreement (the “SPA”), Dr. Barnett shall be granted options with an investor (the “Investor”) to purchase a numberconvertible note (the “Note”) and accompanying warrant (the “Warrant”) for an aggregate investment amount of $1,000,000. The Note has a principal value of $1,000,000 and bears an interest rate of 8% per annum (which shall increase to 10% per year upon the occurrence of an “Event of Default” (as defined in the Note)) and shall mature on May 12, 2026 (the “Maturity Date”). The Note is convertible at any time into shares of the Company’s common stock at a conversion price equal to $50,000 divided by$0.00313 per share for any amount of principal and accrued interest remaining outstanding (subject to adjustment as provided therein). The Company may prepay the transaction priceNote at any time in an amount equal to 110% of the Company’s common stock in the Qualifying Transaction. The option grant is subject to continued employment, and will vest ratably over the first three anniversary dates of the date of the closing of the Qualifying Transaction.

Lease

Effective September 1, 2015, the Company leases its facilities under a non-cancelable operating lease which expires on August 31, 2020. The Company has the right to renew certain facility leases for an additional five years. Rent expense is $3,200 base rent per month plus operating expense and other fees (see Note 6).

NOTE 10 -SUBSEQUENT EVENTS

Conversion of Convertible Debt:

Subsequent to September 30, 2019, The Purchasers converted $25,875 and $313 of outstanding principal balance and interest into 186,849accrued interest. In connection with the Note, the Investor was issued a Warrant to purchase up to 63,897,764 shares of common stock.

Subsequentstock at an exercise price of $0.00313 per share (subject to September 30, 2019,adjustment as provided therein) until May 12, 2026. The Warrants are exercisable for cash at any time. In connection with the Company’s obligations under the Note, the Company entered into financing agreements:a security agreement (the “Security Agreement”) with Ashton Capital Corporation as agent, pursuant to which the Company granted a lien on certain pieces of laboratory equipment of the Company (the “Collateral”), for the benefit of the Investor, to secure the Company’s obligations under the Note. Upon an Event of Default (as defined in the Notes), the Investor may, among other things, collect or take possession of the Collateral, proceed with the foreclosure of the security interest in the Collateral or sell, lease or dispose of the Collateral.

 

●with a lender, for the sale of the Company’s convertible note and warrant, for a principal amount of $55,000 with 10% OID and five-year warrants to purchase an aggregate of 277,500 shares of the Company’s common stock at an exercise price of $0.20 per share. The Company received an of $50,000 in net proceeds, net of $5,000 OID.
●with a second lender, for the sale of the Company’s convertible note, for a principal amount of $55,000 with 10% OID. The Company received an of $50,000 in net proceeds, net of $5,000 OID.

On June 9, 2021, the Company filed an Amendment (the “CoD Amendment") to the Series C-1 Certificate of Designation with the Nevada Secretary of State. The filing of the CoD Amendment was approved by the Board on June 8, 2021, and by the holders of the majority of the outstanding shares of Series C-1 Preferred Stock on June 8, 2021.

The CoD Amendment sets the triggering price for the anti-dilution price protection at $0.00275 per share, the same price as is in the Series C-2 Certificate of Designation. All other terms of the Series C-1 Certificate of Designation remain unchanged and in full force and effect.

The foregoing description of the CoD Amendment is qualified in its entirety by reference to the CoD Amendment, a copy of which is attached to this Quarterly Report on Form 10-Q as Exhibit 3.3.

 

F-3224

 

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

 

Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results

This quarterly report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations and prospects. The Securities and Exchange Commission (the “SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This quarterly report on Form 10-Q and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. Factors that could cause our actual results of operations and financial condition to differ materially are set forth in the “Risk Factors” section of our annual report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC on April 1, 2019.

We caution that these factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The following discussion should be read in conjunction with our condensed consolidatedhistorical financial statements. The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, please see Part II, Item 1A of this Quarterly Report on Form 10-Q, “Risk Factors,” and the related notes that appear elsewhererisk factors included in this quarterly report on Form 10-Q.

our 2019 Annual Report.

Overview

Special Note Regarding COVID-19

 

In December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of the virus had resulted in a world-wide pandemic. The U.S. economy was largely shut down by mass quarantines and government mandated stay-at-home orders (the “Orders”) to halt the spread of the virus. These Orders have required some of our employees to work from home when possible, and other employees have been entirely prevented from performing their job duties until the Orders are relaxed or lifted. The COVID-19 pandemic has required alternative selling approaches such as through social media. We aremay be unable to avoid future reductions in net revenue using these alternative selling approaches that avoid direct contact with our customers. The world-wide response to the pandemic has resulted in a biotechnology company specializingsignificant downturn in innovative cancer treatment therapies. Weeconomic activity and there is no assurance that government stimulus programs will successfully restore the economy to the levels that existed before the pandemic. If an economic recession or depression is sustained, it could have proprietary rights to an immunotherapy platform with an initial concentrationa material adverse effect on prostate and breast cancers that can also be used to fight any solid tumor. Additionally, we have targeted therapies. Our mission is to improve the overall patient condition through innovative bio-immunotherapy with proven treatment protocols, to lower deaths associated with cancer and to reduce the cost of cancer treatment. Ourour business as demand for our technology is safe, and utilizes clinically proven research methods of treatment to provide optimal success of patient recovery.could decrease.

 

Financial Highlights

For the nine months ended September 30, 2019, we utilized $831,284 to fund our operations, compared to $1,296,789 for the nine months ended September 30, 2018. For the nine months ended September 30, 2019, we received net cashWhile some of $967,170 from financing activities. As a result, our net cash position increased by $135,886these Orders were relaxed or lifted in different jurisdictions at various times during the nine months ended SeptemberJune 30, 2019.2020, the overall impact of COVID-19 continues to have an adverse impact on business activities around the world. There is no assurance that Orders that were previously relaxed or lifted will not be reinstated as the spread of COVID-19 continues. For example, many jurisdictions have recently reinstated masking orders after test results have showed a resurgence of the pandemic. Resurgence of the pandemic in some markets has slowed the reopening process of businesses in those areas, including Europe where additional lockdowns have been recently reinstated. If COVID-19 infection trends continue to reverse and the pandemic intensifies and expands geographically, its negative impacts on our sales could be more prolonged and may become more severe. The long-term financial impact on our business cannot be reasonably estimated at this time.

Overview

 

Operating expensesTheralink is a commercial-stage precision medicine and molecular data-generating company that focuses on the development and commercialization of a series of patented, proprietary data-generating assays that may provide important actionable information for physicians and patients, as well as biopharmaceutical companies, in the nine months ended September 30, 2019 were $1,487,520, comparedareas of oncology. Avant’s near-term goal is to $1,283,269commercialize the technology originally developed by Theranostics, a company whose assets Avant acquired in May 2016. The company differentiates itself by:

●An exclusive license agreement with George Mason University (“GMU”), that has well-published scientists in our area of expertise;
●Having access to the Ph.D.’s at GMU who have completed pioneering work in phosphoproteomic-based biomarkers diagnostics;
●Domain expertise in cancer biomarker and data-generating laboratory testing data;
●Development of proprietary, cutting edge assays focused on precision oncology care;
●Building revenue streams based on our proprietary technology Theralink®.
●Having a patent portfolio licensed from GMU and the NIH.

Theralink is advancing its patented, proprietary technology in the field of phosphoproteomic research, a sector which has emerged as one of the most exciting new components in the high-growth field of precision molecular diagnostics. The Theralink® platform makes it possible to generate an accurate and comprehensive portrait of protein pathway activation in diseased cells from each patient, and thereby determining which individuals may be better responders to certain targeted molecular therapies. The platform enables the quantitative measurement of the level of activation. Moreover, the sensitivity is many times greater than conventional mass spectrometry and other protein immunoassays. Initially spun-out of GMU in 2006, and subsequently brought to the federal government’s Center for Medicare & Medicaid Services’ (“CMS”) Clinical Laboratory Improvement Amendments (“CLIA”) standards, the nine months ended September 30, 2018. The increase in operating expensesdiagnostics suite is attributable to an increase in researchhighly relevant for oncology patient management today that may improve (i) chemotherapy drug selection; (ii) immunotherapy drug selection; and development expenses(iii) optimization of $60,356 primarily due to increase in activity in our ProscaVax™ clinical trials, an increase in compensation expense of $165,876 primarily attributed to increase in stock-based compensation. Our general and administrative expenses also increased by $21,828, primarily as a result of an increase in other general and administrative expenses offset by a decrease in professional fees of $43,809.combination therapy selection.

 

We expect our researchThe biomarker and development expenses will continuedata-generating tests may provide biopharmaceutical companies, clinical scientists and physicians with molecular-based guidance as to increasewhich patients may benefit from the new, molecular targeted therapeutics being developed and used to treat various life-threatening oncology diseases, as our ProscaVax™ clinical trials continue to progress.

Forwell as existing treatment standards that are recognized as the nine months ended September 30, 2019 we had net (loss)standard of $(7,048,361) or $(14.71) per share, as compared to a net income of $3,964,312, or $13.26 per sharecare in the nine months ended September 30, 2018. The change was primarily dueoncology treatment community. This addresses the changes incore aspect of precision treatment today – identifying which individuals are more likely to respond to specific targeted molecular therapies, thus forming the valuationbasis for the initial fair value and changes in fair value of derivative liabilities from a gain in 2018 of $4,995,597 to a (loss) of $(4,053,257) in 2019.personalized medicine.

 

25

The technology is based upon the pioneering work of three noted scientists, Drs. Lance Liotta, Emanuel Petricoin and Virginia Espina in proteomic-based diagnostics. Avant benefits from a portfolio of intellectual property derived from licensing agreements with:

 3●The US Public Health Service (“PHS”), the federal agency that supervises the National Institutes of Health (“NIH”), which provides Avant with broad protection around its technology platform; and
 
●GMU which provides access to additional intellectual property around improvements to the technology platform and biomarker signatures that form the basis for future diagnostic products.

Theralink is committed to advancing the technologies from GMU and the NIH as a platform for the development of new clinical biomarkers and diagnostics. These diagnostic and monitoring products have the potential to provide biopharmaceutical companies and doctors with critical molecular-based knowledge to make the best therapeutic decisions based on a patient’s unique, individual medical needs.

Our plan of operation over the next 12 months is to:

 ●Complete the leasehold improvements and setting up all laboratory equipment to CLIA and College of American Pathologists (“CAP”) standards;
●Hire a full-time Lab Director, two additional Business Development Professionals, four LCM techs, two histotechs and an Office Manager;
●Open the laboratory under Good Laboratory Practice (“GLP”) compliance;
●Choose members to sit on our Medical and Scientific Advisory Boards;
●Establish a CAP/CLIA lab, in coordination with GMU scientists, that accesses tumor samples and other medical specimens, such as blood and hair follicles, that provide the basis to drive revenue channels;
●Continue to validate the Theralink® cancer biomarker technology under CAP/CLIA standards to provide personalized medicine regarding treatment options for biopharmaceutical companies, clinical oncologists and their cancer patients;
●Grow revenue generated from pharmaceutical companies.
●Complete partnerships with pharmaceutical companies to perform oncology-related data-generating testing services to create revenue; and
●Continue to seek financing to grow the company.

As of the date of this Quarterly Report on Form 10-Q, the following plans have been completed:

●

The leasehold improvements in the lab have been completed.

●

The lab has received CLIA certification including California CLIA certification.

●

A full-time Lab Director, two additional business development professionals, four techs and two histotechs have been hired.

●

The lab is GLP compliant.

●

Our CLIA lab, with GMU scientists as consultants, is now accessioning tumor and biopharmaceutical samples that provide the basis to drive revenue channels.

 

Results of Operations

 

Three and Nine months Ended SeptemberJune 30, 20192020 Compared to Three and Nine months Ended SeptemberJune 30, 20182019

 

Operating Revenue

●For the three months ended June 30, 2020 and 2019, total revenue was $24,886 and $0, respectively, an increase of $24,886 or 100%. The increase was primarily attributable to performance under research and development contracts for pharmaceutical companies in 2020.
●For the nine months ended June 30, 2020 and 2019, total revenue was $75,896 and $0, respectively, an increase of $75,896 or 100%. The increase was primarily attributable to performance under research and development contracts for pharmaceutical companies in 2020.

Costs of Revenues and Gross Margin

 

We did not generate any revenues from continuing operations for the three and nine months ended September 30, 2019 and 2018.

●For the three months ended June 30, 2020 and 2019, cost of revenue was $7,422 and $0, respectively, an increase of $7,422 or 100%. The increase was primarily attributable to the increase in revenue discussed above.
●For the nine months ended June 30, 2020 and 2019, cost of revenue was $23,421 and $0, respectively, an increase of $23,421 or 100%. The increase was primarily attributable to the increase in revenue discussed above.

 

Gross Margin

●For the three months ended June 30, 2020 and 2019, gross margin was $17,464 and $0, respectively, an increase of $17,464 or 100%. The increase was primarily attributable to the increase in revenue and cost of revenue discussed above.
●For the nine months ended June 30, 2020 and 2019, gross margin was $52,475 and $0, respectively, an increase of $52,475 or 100%. The increase was primarily attributable to the increase in revenue and cost of revenue discussed above.

26

Operating Expenses

 

For the three months ended SeptemberJune 30, 20192020 operating expenses from operations amounted to $409,880$975,208 as compared to $493,485$375,380 for the three months ended SeptemberJune 30, 2018, a decrease2019, an increase of $83,605,$599,828, or 17%160%.

For the nine months ended SeptemberJune 30, 20192020 operating expenses from operations amounted to $1,487,520$2,032,850 as compared to $1,283,269$1,114,787 for the nine months ended SeptemberJune 30, 2018,2019, an increase of $204,251,$918,063, or 16%82%.

 

For the three and nine months ended SeptemberJune 30, 20192020 and 2018,2019, operating expenses consisted of the following:

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

  Three Months Ended June 30,  Nine Months Ended June 30, 
 2019  2018  2019  2018  2020  2019  2020  2019 
Professional fees $140,680  $207,876  $479,860  $523,669  $322,921  $139,780  $470,638  $396,089 
Consulting fee - related party  8,650   51,242   64,125   206,767 
Compensation expense  214,387   233,072   705,803   539,927   372,610   69,380   822,329   228,815 
Research and development expense  8,825   16,316   161,453   101,097 
Licensing fees  12,750   12,886   38,920   39,046 
General and administrative expenses  45,988   36,221   140,404   118,576   258,277   102,092   639,838   244,070 
Total $409,880  $493,485  $1,487,520  $1,283,269  $975,208  $375,380  $2,032,850  $2,224,787 

 

Professional fees:fees

●For the three months ended June 30, 2020, professional fees increased by $183,141 or 131%, compared to June 30, 2019. The increase was primarily attributable to an increase in consulting fee of $63,633, IT services of $14,689, legal fees of $40,851 and talent search fee of $63,000.
●For the nine months ended June 30, 2020, professional fees increased by $74,549 or 19%, as compared to June 30, 2019. The increase was primarily attributable to a decrease in accounting fees of $12,125, a decrease in legal fees of $41,628 offset by an increase in consulting fee of $25,085, an increase in IT services of $13,423 and an increase in talent search fees of $90,000.

Consulting fee - related party

 

●For the three months ended June 30, 2020, consulting fee - related party decreased by $42,592 or 83%, compared to June 30, 2019. The decrease was the result of the Company terminating the consulting agreements with AVDX Investors Group, whose partner is on our board of directors, in May 2019 and International Infusion whose principal owner served as an officer of the Company in December 2019.
●For the nine months ended June 30, 2020, consulting fee - related party decreased by $142,642 or 69%, as compared to June 30, 2019. The decrease was the result of the Company terminating the consulting agreements with AVDX Investors Group, whose partner is on our board of directors, in May 2019 and International Infusion whose principal owner served as an officer of the Company in December 2019.

For the three months ended September 30, 2019, professional fees decreased by $67,196 or 32%, as compared to the three months ended September 30, 2018. The decrease was primarily attributable to a decrease in accounting and audit fees of approximately $3,611, a decrease in consulting fee and investor relations of $42,674 and a decrease in legal fees of $20,911.

Compensation expense

 

For the nine months ended September 30, 2019, professional fees decreased by $43,809 or 8%, as compared to the nine months ended September 30, 2018. The decrease was primarily attributable to a decrease in accounting and audit fees of approximately $35,136 and a decrease in consulting fee and investor relations of $89,208 offset by an increase in legal fees of $80,535.

●For the three months ended June 30, 2020, compensation expense increase by $303,230 or 437%, as compared June 30, 2019. The increase was attributable to an increase in administrative compensation and related expenses of $295,682 and an increase in employee benefits of $7,548 resulting from an increase of employees in 2020.
●For the nine months ended June 30, 2020, compensation expense increase by $593,514 or 259%, as compared to June 30, 2019. The increase was attributable to an increase in administrative compensation and related expenses of $308,654 and an increase in employee benefits of $22,148 resulting from an increase of employees in 2020.

 

Compensation expense:Licensing fees

 

For the three months ended September 30, 2019, compensation expense decreased by $18,715 or 8%, as compared to the three months ended September 30, 2018. The decrease was attributable to a decrease in stock-based compensation of $79,076 offset by an increase in administrative compensation of $60,361 which was a result of hiring a new CEO in December 2018.

For the nine months ended September 30, 2019, compensation expense increased by $165,876 or 31%, as compared to the nine months ended September 30, 2018. The increase was attributable to an increase in administrative compensation of $171,891 which was a result of hiring a new CEO in December 2018 offset by a decrease in stock-based compensation of $6,015 and.

Research and development expense:

For the three months ended September 30, 2019, research and development expense decreased by $7,491 or 46%, as compared to the three months ended September 30, 2018 related to a decrease in research activities related to ProscaVax™ clinical trials.

For the nine months ended September 30, 2019, research and development expense increased by $60,356 or 60%, as compared to the nine months ended September 30, 2018 related to an increase in research activities related to ProscaVax™ clinical trials.

●For the three months ended June 30, 2020, licensing fee decreased by $136 or 1%, as compared June 30, 2019.
●For the nine months ended June 30, 2020, licensing fee decreased by $126 or 0.32%, as compared to June 30, 2019.

 

General and administrative expenses:expenses

For the three months ended September 30, 2019, general and administrative expenses increased by $9,767 or 27%, as compared to the three months ended September 30, 2018. The increase was primarily due an increase in in travel and entertainment, rent expense and other general and administrative expenses.

For the nine months ended September 30, 2019, general and administrative expenses increased by $21,828 or 18%, as compared to the nine months ended September 30, 2018. The increase was primarily due an increase in in travel and entertainment, rent expense and other general and administrative expenses.

●For the three months ended June 30, 2020, general and administrative expenses increased by $156,185 or 153%, as compared to June 30, 2019. The increase was primarily due to an increase in biological expense of $99,980, an increase in repairs and maintenance of $17,943, an increase in filing fees of $14,503 and an increase in rent expense of $14,355. The increase was a result of greater revenue producing activities in 2020.

 

27

 4●For the nine months ended June 30, 2020, general and administrative expenses increased by $395,768 or 161%, as compared to June 30, 2019. The increase was primarily due to an increase in director’s fees of $45,000, an increase in biological expense of $209,261, an increase in repairs and maintenance of $50,391, an increase in rent expense of $21,583 and an increase in depreciation of $23,697. The increase was a result of greater revenue producing activities in 2020.

Loss from Operations

●For the three months ended June 30, 2020, the loss from operations amounted to $957,744 as compared to $375,380 for the three months ended June 30, 2019, an increase of $582,364, or 155%. The increase was primarily a result of greater operating expenses as discussed above.
 
●For the nine months ended June 30, 2020, the loss from operations amounted to $1,980,375 as compared to $1,114,787 for the nine months ended June 30, 2019, an increase of $865,588 or 78%. The decreases are primarily a result of greater operating expenses as discussed above.

Other Income (Expense)

 ●For the three months ended June 30, 2020, we had total other income, net of $165,391 as compared to other (expense), net of $(51,151) for the three months ended June 30, 2019, a positive change of $216,542 or 423%. This change was primarily due to a decrease in interest expense of $4,107, an increase in gain on debt extinguishment of $108,060, a decrease in loss on legal settlement of $30,100, an increase in gain on foreign exchange of $60,075, an increase in other income of $10,000 from the EIDL stimulus check and a decrease in other expenses of $4,200.
●For the nine months ended June 30, 2020, we had total other income, net of $143,220 as compared to other (expense), net of $(98,225) for the nine months ended June 30, 2019, a positive change of $241,445 or 246%. This change was primarily due to a decrease in interest expense of $30,040, an increase in gain on debt extinguishment of $108,060, a decrease in loss on legal settlement of $30,100, an increase in gain on foreign exchange of $60,075, an increase in other income of $10,000 from the EIDL stimulus check and a decrease in other expenses of $3,200.

 

Net Loss from Operations

 

For the three months ended September 30, 2019 operating expenses from operations amounted to $409,880 as compared to $493,485 for the three months ended September 30, 2018, a decrease of $83,605, or 17%. The decreases are primarily a result of a decrease in operating expenses discussed above.

For the nine months ended September 30, 2019 operating expenses from operations amounted to $1,487,520 as compared to $1,283,269 for the nine months ended September 30, 2018, an increase of $204,251, or 16%. The increases are primarily a result of an increase in operating expenses discussed above.

Other Income (Expense)

For the three months ended September 30, 2019, we had total other expense of $577,898 as compared to $151,048 for the three months ended September 30, 2018, an increase of $426,850 or 283%. This change was primarily due to the recording of a loss from the fair value of derivative liabilities of $523,595 in the 2019 period as compared to $860,084 in the 2018 period, a decrease of $336,489 or 39%. Additionally, during the three months ended September 30, 2019, we recorded a (loss) on debt extinguishment of $(46) as compared to a gain of $1,359,128 for the three months ended September 30, 2018. The total other (expense) income was offset by a decrease in interest expense of $595,835 related to interest-bearing debt and default interest.

For the nine months ended September 30, 2019, we had total other (expense) of $(5,560,841) as compared to other income of $5,247,581 for the nine months ended September 30, 2018, a change of $10,808,422 or 206%. This change was primarily due to the recording of a loss from the fair value of derivative liabilities of $(4,053,257) in the 2019 period as compared to a gain from the fair value of derivative liabilities of $4,495,597 in the 2018 period, a change of $8,548,854 or 190%. Additionally, during the nine months ended September 30, 2019, we recorded a (loss) on debt extinguishment of $(76,331) as compared to a gain of $2,109,621 for the nine months ended September 30, 2018. The total other income (expense) was offset by an increase in interest expense of $39,983 related to an increase in interest-bearing debt and default interest and decrease in foreign currency translation of $33,633.

Net (loss) income

For the three months ended September 30, 2019, loss from continuing operations amounted to $987,778, or $0.00 per share (basic and diluted), compared to $644,533, or $1.97 per share (basic and diluted) for the three months ended September 30, 2018, a change of $343,245 or 53%.

For the nine months ended September 30, 2019, (loss) from continuing operations amounted to $(7,048,361), or $(0.02) per share (basic and diluted), compared to an income of $3,964,312, or $13.26 per share (basic and diluted) for the nine months ended September 30, 2018, a change of $11,012,673 or 278%.

Foreign currency translation loss

The functional currency of our former subsidiaries operating in Mexico is the Mexican Peso (“Peso”). The financial statements of our subsidiaries are translated to U.S. dollars using period end rates of exchange for assets and liabilities, and average rates of exchange (for the period) for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations. As a result of unrealized foreign currency translations gain (loss), which are a non-cash adjustment, we reported unrealized foreign currency translation gain (loss) of $0 for both the three and nine months ended September 30, 2019 as compared to unrealized foreign currency translation gain (loss) of $0 and $(25,184) for the three and nine months ended September 30, 2018, respectively. This non-cash loss had the effect of decreasing our reported comprehensive loss.

Comprehensive (loss) income

As a result of our unrealized foreign currency translation gain (loss), we had comprehensive loss of $987,778 for the three months ended September 30, 2019, compared to $644,553 for the three months ended September 30, 2018.

As a result of our unrealized foreign currency translation gain (loss), we had comprehensive (loss) of $(7,048,361) for the nine months ended September 30, 2019, compared to comprehensive income of $3,939,128 for the nine months ended September 30, 2018.

●For the three months ended June 30, 2020, net loss amounted to $792,353, or $(2.04) per share (basic and diluted), compared to $426,531 or $(2.53) per share (basic and diluted) for the three months ended June 30, 2019, an increase of $365,822 or 86%.
●For the nine months ended June 30, 2020, net loss amounted to $1,837,155, or $(19.19) per share (basic and diluted), compared to $1,213,042, or $(7.20) per share (basic and diluted) for the nine months ended June 30, 2019, an increase of $624,113 or 51%.

 

Liquidity and Capital Resources

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had working capital of $218,973 and cash of $934,196 as of June 30, 2020 and a working capital deficit(deficit) of $13,718,635$(982,769) and cash$560,407 of $136,087cash as of September 30, 2019 and a working capital deficit of $7,557,621 and $201 of cash as of December 31, 2018.2019.

 

        Nine Months Ended September 30, 2019 
  September 30, 2019  December 31, 2018  Change  Percentage Change 
Working capital deficit:                       
Total current assets $371,379  $215,882  $155,497   72%
Total current liabilities  (14,090,014)  (7,773,503)  (6,316,511)  81%
Working capital deficit: $(13,718,635) $(7,557,621) $(6,161,014)  82%

5
  

June 30,

2020

  September 30, 2019  Change  Percentage Change 
Working capital (deficit):                
Total current assets $1,090,309  $573,461  $516,848   90%
Total current liabilities  (871,336)  (1,556,230)  684,894   44%
Working capital (deficit): $218,973  $(982,769) $1,201,742   122%

 

The increase in working capital deficit was primarily attributableattributed to anthe increase in current assets of $155,497$516,848 and an increasethe decrease in current liabilities of $6,316,511, including an increase$684,894.

28

Cash Flows

The following table sets forth a summary of changes in derivative liabilities of $4,113,462.cash flows for the nine months ended June 30, 2020 and 2019:

  Nine Months Ended June 30, 
  2020  2019 
Net cash used in operating activities $(2,351,823) $(766,021)
Net cash provided by (used in) investing activities  180,371   (18,746)
Net cash provided by financing activities  2,545,241   804,080 
Net change in cash $373,789  $19,313 

 

Cash Flows

Changes in our cash balance are summarized as follows:

  Nine Months Ended September 30, 
  2019  2018 
Cash used in operating activities $(831,284) $(1,296,789)
Cash provided by financing activities  967,170   1,345,691 
Net increase in cash $135,886  $48,902 

Net Cash Used in Operating Activities

 

Net cash flow used in operating activities was $831,284$2,351,823 for the nine months ended SeptemberJune 30, 20192020 as compared to $1,296,789$766,021 for the nine months ended SeptemberJune 30, 2018, a decrease2019, an increase of $465,505,$1,585,802, or 36%207%.

 

 ●Net cash flow used in operating activities for the nine months ended SeptemberJune 30, 20192020 primarily reflected our net loss of $7,048,361$1,837,155 adjusted for the add-back onof non-cash items such as derivativedepreciation expense of $4,053,257, stock-based compensation expense$57,060, lease cost of $148,053, amortization of debt discount of $1,248,031 and loss$5,975, gain on debt extinguishment of $76,331, non-cash interest including default interest$108,060, foreign currency transaction gain of $(179,989)$60,075, unrealized loss on marketable securities of $11,200 and changes in operating asset and liabilities consisting primarily of an increase in accounts receivable of $20,975, an increase in prepaid expenses and other current assets of $19,611,$116,219, an increase in accounts payable of $307,511 and an increase$212,840 offset by a decrease in accrued liabilities and other liabilities of $581,740.$70,734.
   
 ●Net cash flow used in operating activities for the nine months ended SeptemberJune 30, 20182019 primarily reflected our net incomeloss of $3,964,312$1,213,042 adjusted for the add-back of non-cash items such as derivative income of $4,495,598, stock-based compensationdepreciation expense of $206,568,$33,365, stock issued for services of $101, amortization of debt discount of $848,280, gain$25,000, unrealized loss on debt extinguishmentmarketable securities of $2,355,431, gain on foreign currency transactions of $25,184$14,400 and changes in operating assetassets and liabilities consisting primarily of an increase in prepaid expenses and other current assets of $213,559, an increase$14,337 offset by a decrease in accounts payable of $79,292,$177,746, a decrease in accrued liabilities and other liabilities of discontinued liabilities$110,369 and a decrease in due to related party of $8,449 and an increase in accrued liabilities of $701,227.$100,647.

 

Net Cash Provided by (Used In) Investing Activities

Net cash provided by investing activities was $180,371 for the nine months ended June 30, 2020 as compared to net cash (used in) investing activities $(18,746) for the nine months ended June 30, 2019, a positive change of $199,117, or 1,062%.

●Net cash provided by investing activities for the nine months ended June 30, 2020 resulted from the cash acquired from the Asset Sale Transaction of $675,928 offset by the purchase of property and equipment of $495,557.
●Net cash provided by investing activities for the nine months ended June 30, 2019 resulted from the purchase of property and equipment of $18,746.

Net Cash Provided by Financing Activities

 

Net cash flow provided by financing activities was $967,170$2,545,241 for the nine months ended SeptemberJune 30, 20192020 as compared to $1,345,691$804,080 for the nine months ended SeptemberJune 30, 2018,2019, a decrease of $378,521,$1,741,161, or 28%217%.

 

●Net cash provided by financing activities for the nine months ended SeptemberJune 30, 20192020 consisted of $935,700$2,590,000 of net proceeds from the sale of preferred stock offset by the repayment of a related party advance of $20,000 and repayment of convertible debt net of debt issuance costs and proceeds from related party advances of $31,970 offset by redemption of Series B Preferred of $500.$24,759.
   
●Net cash provided by financing activities for the nine months ended SeptemberJune 30, 20182019 consisted of $6,000 net proceeds from the sale of commonpreferred stock and subscription receivable, $1,921,643 of net$599,470, the proceeds of $100,000 from convertible debt, net of debt issuance costs and $72,239discount, the proceeds from related party advances of $114,610 offset by $654,191the repayment of convertible debt.debt of $10,000.

 

Cash Requirements

Our management Management does not believe that our current capital resources will be adequate to continue operating our Company and maintaining our business strategy for more than 12 months from the date of this report. Accordingly, we will have to raise additional capital in the near future to meet our working capital requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to scale down or perhaps even cease the operation of our business.

629

 

Going Concern

 

These 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. As reflected in the accompanying unaudited condensed consolidated financial statements, the Company had net (loss) from continuingloss and net cash used in operations of $(7,048,361)$1,837,155 and $2,351,823, respectively, for the nine months ended SeptemberJune 30, 2019. The net cash used in operations was $831,284 for the nine months ended September 30, 2019.2020. Additionally, the Company had an accumulated deficit, of $24,236,025 at September 30, 2019stockholders’ equity and had a working capital deficit of $13,718,635$39,848,356, $1,043,510 and $218,973, respectively, at SeptemberJune 30, 2019, had no revenues from continuing operations since inception, and is currently in default on certain convertible debt instruments.2020. Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report.

 

ManagementThe Company cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. Management believes that ourAdditionally, the current capital resources are not currently adequate to continue operating and maintaining itsthe business strategy for a period of twelve months from the issuance date of this report. The Company will seek to raise capital through additional debt and/orand equity financings to fund its operations in the future.

 

Although the Company has historically raised capital from sales of equity and from the issuance of promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Current and Future Financings

Loans Payable

From June 2017 to September 2017, we entered into loan agreements with several third parties (the “Loans”). Pursuant to the loan agreements, we borrowed an aggregate principal amount of $538,875. The Loans bear interest at an annual rate of 33.3%, are unsecured and are currently in default. As of September 30, 2019, the loan principal balance and accrued interest payable amounted to $538,875 and $384,993, respectively, with an aggregate outstanding balance of $923,868.

November 2016 Financing

On November 23, 2016, the Company entered into an Amended and Restated Securities Purchase Agreements with three institutional investors for the sale of the Company’s convertible notes and warrants which was fully converted in 2018.

As of September 30, 2019, there were 30,247 warrants outstanding under the November 2016 Warrants (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

June 2017 Financing

On June 2, 2017, the Company entered into the Second Securities Purchase Agreement with the Purchasers for the sale of the Company’s June 2017 Notes and June 2017 Warrants.

As of September 30, 2019, the June 2017 Notes had outstanding principal and accrued interest of $1,495 and $0, respectively and are currently bearing interest at the default interest rate of 24% per annum.

As of September 30, 2019, there were 40,331 warrants outstanding under the June 2018 Warrants (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

July 2017 Financing

On July 26, 2017, the Company entered into the Third Securities Purchase Agreement with the Purchasers for the sale of the Company’s July 2017 Notes and July 2017 Warrants.

As of September 30, 2019, the July 2017 Notes had outstanding principal and accrued interest of $38,794 and $30,612, respectively and are currently bearing interest at the default interest rate of 24% per annum.

As of September 30, 2019, there were 70,662 warrants outstanding under the July 2017 Warrants (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

January 2018 Financing

On January 29, 2018, the Company entered into the Fourth Securities Purchase Agreement with the Purchasers for the sale of the Company’s January 2018 Notes and January 2018 Warrants.

7

As of September 30, 2019, the January 2018 Notes had outstanding principal and accrued interest of $222,222 and $57,321, respectively and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 953,744 warrants outstanding under the January 2018 Warrants (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

March 2018 Financing

On March 13, 2018, the Company entered into the Fifth Securities Purchase Agreement with the Purchasers for the sale of the Company’s March 2018 Notes and March 2018 Warrants.

As of September 30, 2019, the March 2018 Notes had outstanding principal and accrued interest of $152,778 and $39,431, respectively and are currently bearing interest at the default interest rate of 18% per annum and have a maturity date of November 13, 2018.

As of September 30, 2019, there were 1,430,616 warrants outstanding under the March 2018 Warrants (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

July 2018 Financing

On July 25, 2018, the Company entered into Sixth Securities Purchase Agreement with an institutional investor for the sale of the July 2018 Note. The Note bears interest at 8% per year and will mature on the one-year anniversary of the date of issue.

As of September 30, 2019, the July 2018 Note had outstanding principal and accrued interest of $150,000 and $19,537, respectively and are currently bearing interest at the default interest rate of 18% per annum (see Note 4 in the accompanying unaudited condensed consolidated financial statements for additional information).

September 2018 Financing

On September 24, 2018, the Company entered into the Seventh Purchase Agreement with the Seventh Round Purchasers for the sale of the Company’s September 2018 Notes and September 2018. The September 2018 Notes bear interest at a rate of 5% per year and shall mature on May 24, 2019.

As of September 30, 2019, the September 2018 Notes had outstanding principal and accrued interest of $1,303,038 and $90,165, respectively and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 8,762,518 warrants outstanding under the September 2018 Warrants (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

November 2018 Financing

On November 13, 2018, the Company entered into the Eighth Purchase Agreement with the Eighth Round Purchaser for the sale of the Company’s November 2018 Note and November 2018 Warrant. The November 2018 Note bears interest at a rate of 5% per year and shall mature on July 29, 2019.

As of September 30, 2019, the November 2018 Note had outstanding principal and accrued interest of $127,778 and $11,490, respectively, and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 822,604 warrants outstanding under the November 2018 Warrants (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

January 2019 Financing

On January 18, 2019, the Company entered into the Ninth and Tenth Purchase Agreements with the Ninth and Tenth Round Purchasers for the sale of the Company’s January 2019 Notes. The January 2019 Notes bear interest at a rate of 5% per year and shall mature on January 18, 2020.

As of September 30, 2019, the January 2019 Notes had an aggregate outstanding principal and accrued interest of $173,125 and $11,453, respectively, and are currently bearing interest at the default interest rate of 18% per annum (see Note 4 in the accompanying unaudited condensed consolidated financial statements for additional information).

8

March 2019 Financing

On March 25, 2019, the Company entered into the Eleventh Purchase Agreement with the Eleventh Round Purchaser for the sale of the Company’s March 2019 Note and March 2019 Warrant. The March 2019 Note bears interest at a rate of 5% per year and shall mature on November 25, 2019.

As of September 30, 2019, the March 2019 Note had outstanding principal and accrued interest of $55,556 and $3,991, respectively, and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 357,645 warrants outstanding under the March 2019 Warrants (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

April 2019 Financings

On April 1, 2019, the Company entered into the Twelfth Purchase Agreement with the Twelfth Round Purchaser for the sale of the Company’s April 2019 Note I and April 2019 Warrant I. The April 2019 Note I bears interest at a rate of 5% per year and shall mature on December 2, 2019.

As of September 30, 2019, the April 2019 Note I had outstanding principal and accrued interest of $27,778 and $1,965, respectively, and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 178,827 warrants outstanding under the April 2019 Warrants I (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

On April 29, 2019, the Company entered into the Thirteenth Purchase Agreement with the Thirteenth Round Purchasers for the sale of the Company’s April 2019 Notes II and April 2019 Warrants II. The April 2019 Note II bears interest at a rate of 5% per year and shall mature on December 29, 2019.

As of September 30, 2019, the April 2019 Notes II had an aggregate outstanding principal and accrued interest of $205,279 and $13,763, respectively, and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 1,321,531 warrants outstanding under the April 2019 Warrants II (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

May 2019 Financing

On May 29, 2019, the Company entered into the Fourteenth Purchase Agreement with the Fourteenth Round Purchaser for the sale of the Company’s May 2019 Notes and May 2019 Warrants. The May 2019 Notes bears interest at a rate of 5% per year and shall mature on January 29, 2020.

As of September 30, 2019, the May 2019 Notes had an aggregate outstanding principal and accrued interest of $10,000 and $451, respectively, and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 64,378 warrants outstanding under the May 2019 Warrants (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

June 2019 Financings

On June 3, 2019, the Company entered into the Fifteenth Purchase Agreement with the Sixteenth Round Purchasers for the sale of the Company’s June 2019 Note I and June 2019 Warrants I. The June 2019 Note I bears interest at a rate of 5% per year and shall mature on February 3, 2020.

As of September 30, 2019, the June 2019 Notes I had an aggregate outstanding principal and accrued interest of $129,167 and $5,740, respectively, and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 831,545 warrants outstanding under the June 2019 Warrants I (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

On June 26, 2019, the Company entered into the Fifteenth Purchase Agreement with the Fifteenth Round Purchasers for the sale of the Company’s June 2019 Note II and June 2019 Warrants II. The June 2019 Notes II bears interest at a rate of 5% per year and shall mature on February 26, 2020.

9

As of September 30, 2019, the June 2019 Note II had an aggregate outstanding principal and accrued interest of $55,556 and $2,294, respectively, and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 357,654 warrants outstanding under the June 2019 Warrants II (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

July 2019 Financing

On July 2, 2019, the Company entered into the Seventeenth Purchase Agreement with the Seventeenth Round Purchasers for the sale of the Company’s July 2019 Note I and July 2019 Warrants I. The July 2019 Notes I bears interest at a rate of 5% per year and shall mature on February 26, 2020.

As of September 30, 2019, the July 2019 Note I had outstanding principal and accrued interest of $55,556 and $2,248, respectively, and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 357,654 warrants outstanding under the July 2019 Warrants I (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

On July 8, 2019, the Company entered into the Eighteenth Purchase Agreement with the Eighteenth Round Purchasers for the sale of the Company’s July 2019 Note II and July 2019 Warrants II. The July 2019 Notes II bear interest at a rate of 5% per year and shall mature on February 26, 2020.

As of September 30, 2019, the July 2019 Note II had outstanding principal and accrued interest of $55,556 and $2,202, respectively, and are currently bearing interest at the default interest rate of 18% per annum.

As of September 30, 2019, there were 357,654 warrants outstanding under the July 2019 Warrants II (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

August 2019 Financings

On August 19, 2019, the Company entered into the Nineteenth Purchase Agreement with the Nineteenth Round Purchasers for the sale of the Company’s August 2019 Note I and August 2019 Warrant I. The August 2019 Note I bear interest at a rate of 5% per year and shall mature on March 30, 2020.

As of September 30, 2019, the August 2019 Note I had outstanding principal and accrued interest of $27,779 and $160, respectively.

As of September 30, 2019, there were 2,778 warrants outstanding under the August 2019 Warrant I (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

On August 28, 2019, the Company entered into the Twentieth Purchase Agreement with the Twentieth Round Purchasers for the sale of the Company’s August 2019 Note II. The August 2019 Note II bears interest at a rate of 5% per year and shall mature on August 27, 2020.

As of September 30, 2019, the August 2019 Note II had outstanding principal and accrued interest of $29,700 and $134, respectively (see Note 4 in the accompanying unaudited condensed consolidated financial statements for additional information).

September 2019 Financing

On September 27, 2019, the Company entered into the Twenty-first Purchase Agreement with the Twenty-first Round Purchasers for the sale of the Company’s September 2019 Note and September 2019 Warrants. The September 2019 Note bears interest at a rate of 5% per year and shall mature on May 27, 2020.

As of September 30, 2019, the September 2019 Note had outstanding principal and accrued interest of $166,667 and $0, respectively.

As of September 30, 2019, there were 16,667 warrants outstanding under the September 2019 Warrants (see Note 4 and Note 8-Warrantsin the accompanying unaudited condensed consolidated financial statements for additional information).

To secure the Company’s obligations under the June 2017, July 2017, January 2018, March 2018, September 2018 Notes and November 2018 Notes, the Company entered into Security Agreements, Pledge Agreements and Subsidiary Guaranty’s with Calvary Fund I LP, as agent, pursuant to which the Company granted a lien on all assets of the Company (the “Collateral”) excluding permitted indebtedness which included a first lien held by Regions Bank in connection with the $100,000 revolving promissory note entered into with Regions Bank in October 2014, for the benefit of the Note Purchasers. Upon an Event of Default (as defined in the related Notes), the Note Purchasers may, among other things, collect or take possession of the Collateral, proceed with the foreclosure of the security interest in the Collateral or sell, lease or dispose of the Collateral.

10

Additional Purchaser Rights and Company Obligations

The Securities Purchase Agreements include additional purchaser rights and Company obligations including obligations on the Company to reimburse the Purchasers for legal fees and expenses, satisfy the current public information requirements under SEC Rule 144(c), obligations on the Company with respect to the use of proceeds from the sale of securities and Purchaser rights to participate in future Company financings. Reference should be made to the full text of the Securities Purchase Agreements.

Common Stock for debt conversion

During the nine months ended September 30, 2019, the Company issued an aggregate of 148,834 shares of its common stock upon conversion of $322,174 and $79,836 of outstanding principal and accrued interest, respectively, of convertible debt.These shares of common stock had an aggregate fair value $770,609 and the difference between the aggregate fair value and the aggregate converted amount of $368,599 was recorded as loss on debt extinguishment.

Future Financings

We will require additional financing to fund our planned operations. We currently do not have committed sources of additional financing and may not be able to obtain additional financing particularly, if the volatile conditions of the stock and financial markets, and more particularly the market for early development stage company stocks persist.

There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to further delay or further scale down some or all of our activities or perhaps even cease the operations of the business.

Since inception we have funded our operations primarily through equity and debt financings and we expect that we will continue to fund our operations through the equity and debt financing, either alone or through strategic alliances. If we are able to raise additional financing by issuing equity securities, our existing stockholders’ ownership will be diluted. Obtaining commercial or other loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his, her, or its investment in our common stock. Further, we may continue to be unprofitable.

Critical Accounting Policies

 

We have identified the following policies as critical to itsthe business and results of operations. Our reported results are impacted by the application of the following accounting policies certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact the quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment.

 

Use of estimatesEstimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimatesjudgments, assumptions, and assumptionsestimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Management bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. Significant estimates during the nine months ended June 30, 2020 and year ended September 30, 2019 and year ended December 31, 2018 include, but are not necessarily limited to, the valuation of assets and liabilities of discontinued operations, estimates of contingent liabilities, valuation of marketable securities, useful life of property and equipment, valuation of right-of-use (“ROU”) assets and operating lease ROU assets and liabilities, assumptions used in assessing impairment of long-term assets, allowances for sales returns , estimates of current and deferred income taxes and deferred tax valuation allowances and the fair value of non-cash equity transactions,transactions.

Additionally, the valuationfull impact of derivative liabilities,COVID-19 is unknown and cannot be reasonably estimated. However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are material differences between the Company’s estimates and the fair valueactual results, the Company’s future consolidated results of assets acquired and liabilities assumed in the business acquisition.operation will be affected.

11

 

Fair valueValue of financial instrumentsFinancial Instruments and fair value measurementsFair Value Measurements

 

FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on SeptemberJune 30, 2019.2020. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

 

 Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

30

 Level 2—Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
  
 Level 3—Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

ASC 825-10 “Financial Instruments”In August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement, allows entities to voluntarily choose to measure certain financial assets and liabilities atmodify the disclosure requirements on fair value (fair value option). The fair value option may be electedmeasurements in Topic 820, Fair Value Measurement, based on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

Derivative liabilities

The Company has certain financial instruments that are embedded derivatives associated with capital raises. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10 –Derivative and Hedging – Contract in Entity’s Own Equity. This accounting treatment requires that the carrying amount of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the changeconcepts in the fair value duringConcepts Statement, including the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise dateconsideration of costs and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.

Revenue recognition

In May 2014, FASB issued an update Accounting Standardsbenefits. The amendments in this Update ASU 2014-09, establishing ASC 606 - Revenue from Contracts with Customers. ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which isare effective for interim and annual reporting periods inall entities for fiscal years, that beginand interim periods within those fiscal years, beginning after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.2019. The Company adopted this standard on January 1, 2018 usingASU 2018-13 during the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective datequarter ended March 31, 2020 and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Based on an evaluation of the impact ASU 2014-09 will have on the Company’s sources of revenue, the Company has concluded that ASU 2014-09its adoption did not have any material impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers and there was no cumulative effect adjustment.

Company’s consolidated financial statements.

Stock-based compensation

Stock-Based Compensation

 

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

Through March 31, 2018, pursuantPursuant to ASC 505-50 - Equity-Based Payments to Non-Employees, all share-based payments to non-employees, including grants of stock options, were recognized in the consolidated financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the expense recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company early adopted ASU No. 2018-07 induring the second quarter ofperiod September 30, 2018, and the adoption did not have any impact on its consolidated financial statements.

 

12

Revenue Recognition

In May 2014, FASB issued an Accounting Standards Update, ASU 2014-09, establishing ASC 606 - Revenue from Contracts with Customers. ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The Company adopted this standard during the fiscal year ended September 30, 2018 using the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Based on an evaluation of the impact ASU 2014-09 will have on the Company’s sources of revenue, the Company has concluded that ASU 2014-09 did not have any impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers and there was no cumulative effect adjustment.

 

Leases

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02,Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. The updated guidance is effective for interim and annual periods beginning after December 15, 2018.

 

On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases and; (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not to recognize right-of-use (“ROU”) assets and lease liabilities for short-term leases that have a term of 12 months or less.

 

31

Operating lease ROU assetsrepresents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the condensed consolidated statements of operations.

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure controlsControls and proceduresProcedures

We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act isare recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of SeptemberJune 30, 2019,2020, our disclosure controls and procedures were not effective.

 

Our management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of SeptemberJune 30, 2019.2020. Our management’s evaluation of our internal control over financial reporting was based on the framework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that as of SeptemberJune 30, 2019,2020, our internal control over financial reporting was not effective.

 

The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which we identified in our internal controlcontrols over financial reporting:

 

 (1)theThe lack of multiplesmultiple levels of management review on complex accounting and financial reporting issues, and business transactions,

 13 

 (2)a lack of adequate segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function as a result of our limited financial resources to support hiring of personnel and implementation of accounting systems, and
(3)a lack of operational controls and lack of controls over assets by the acquired subsidiaries.

We expect to be materially dependent upon third parties to provide us with accounting consulting services related to accounting services for the foreseeable future. We believe this will be sufficient to remediate the material weaknesses related to our accounting discussed above. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures will not result in errors in our consolidated financial statements which could lead to a restatement of those financial statements.

 

A material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

32

Management’s Remediation Plan

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes in the future:

(i)appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and
(ii)adopt sufficient written policies and procedures for accounting and financial reporting.

The remediation efforts set out in (i) are largely dependent upon our company securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Management believes that despite our material weaknesses set forth above, our condensed consolidated financial statements for the quarter ended June 30, 2020 are fairly stated, in all material respects, in accordance with US GAAP.

Changes in internal controlInternal Control over financial reportingFinancial Reporting

There was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) during the quarter ended SeptemberJune 30, 20192020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II -– OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

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

 

ITEM 1A. RISK FACTORS

 

Not applicableThe following additional risk factors relating to smaller reporting companies.COVID-19 should be read in conjunction with the risk factors set forth under “Item 8.01 Other Events” in our Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 11, 2020. The developments described in this additional risk factor have heightened, or in some cases manifested, certain of the risks disclosed in the risk factor section of our Form 8-K, and such risk factors are further qualified by the information relating to COVID-19 that is described in this Report, including in the additional risk factor below. Except as described herein, there have been no material changes with respect to the risk factors disclosed in our Current Report Form 8-K.

You should carefully consider the risks cross-referenced above and described below, in addition to the other information set forth in this Report and in the Avant Management’s Discussion and Analysis of Financial Condition and Results of Operations section included in our Schedule 14C Information Statement filed with the Securities and Exchange Commission on August 31, 2020 and the Avant consolidated financial statements and related notes included in our Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 20, 2021. These risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our business, financial condition, results of operations or the prices of our publicly traded securities. The risks cross-referenced and described herein are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may occur or become material in the future and adversely affect our business, reputation, financial condition, results of operations or the prices of our publicly traded securities. Therefore, historical operating results, financial and business performance, events and trends are often not a reliable indicator of future operating results, financial and business performance, events or trends.

The recent COVID-19 pandemic has negatively affected and will continue to negatively affect our business, financial condition and results of operations.

The public health crisis caused by the COVID-19 pandemic and the measures that have been taken or that may be taken in the future by governments, businesses, including us, and the public at large to limit COVID-19’s spread have had, and we expect will continue to materially negatively affect our business, financial condition, and results of operation. The extent of the impact of the COVID-19 pandemic on our business and financial results will depend on numerous evolving factors that we are not able to accurately predict and which will vary by market, including the duration and scope of the pandemic, global economic conditions during and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic, and changes in consumer behavior in response to the pandemic, some of which may be more than just temporary.

33

COVID-19 has spread across the globe. Authorities in many markets have implemented numerous measures to stall the spread of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter in place orders, and business shutdowns. These measures have impacted and will further impact us, our customers, consumers, employees, contract manufacturers, distributors, suppliers and other third parties with whom we do business.

Stay-at-home and social distancing orders have required some of our employees to work from home when possible, and other employees have been entirely prevented from performing their job duties until the orders are relaxed or lifted. The world-wide response to the pandemic has resulted in a significant downturn in economic activity and there is no assurance that government stimulus programs will successfully restore the economy to the levels that existed before the pandemic. If an economic recession or depression is sustained, it would likely have a material adverse effect on our business.

In certain jurisdictions, the stay-at-home orders have been relaxed but considerable uncertainty remains about the ultimate impact on our business. Even if the orders are lifted, there is no assurance that they will not be reinstated if the spread of COVID-19 resumes. For example, many jurisdictions have recently reinstated orders requiring people to wear masks in public after test results have showed a resurgence of the pandemic. Resurgence of the pandemic in some markets has slowed the reopening process of businesses in those areas, including Europe where additional lockdowns have been recently reinstated. If COVID-19 infection trends continue to reverse and the pandemic intensifies and expands geographically, its negative impacts on our sales could be more prolonged and may become more severe. The long-term financial impact on our business cannot be reasonably estimated at this time.

The COVID-19 pandemic has required alternative selling approaches that are less effective, such as through social media. We may continue to experience reductions in revenue using these alternative selling approaches that avoid direct contact with our customers.

There is considerable uncertainty regarding how these measures and future measures in response to the pandemic will impact our business, including whether they will result in further changes in demand for our technology, further increases in operating costs whether as a result of increases in employee costs or otherwise. Compliance with governmental measures imposed in response to COVID-19 has caused and may continue to cause us to incur additional costs, and any inability to comply with such measures can subject us to restrictions on our business activities, fines, and other penalties, any of which can adversely affect our business. In addition, the increase in certain of our employees working remotely has amplified certain risks to our business, including increased demand on our information technology resources and systems, increased phishing and other cybersecurity attacks as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic, and an increase in the number of points of potential attacks, such as laptops and mobile devices (both of which are now being used in increased numbers), to be secured, and any failure to effectively manage these risks, including to timely identify and appropriately respond to any cyberattacks, may adversely affect our business. Further, we experienced, and will continue to experience, costs associated with continuing to pay certain employees who are limited in their ability to work due to the travel bans and restrictions, quarantines, curfews, shelter in place orders and, therefore, do not generate corresponding revenue.

In addition, economic uncertainty associated with the COVID-19 pandemic has resulted in volatility in the global capital and credit markets which can impair our ability to access these markets on terms commercially acceptable to us, or at all.

There can be no assurance that we will be successful in our efforts to mitigate the negative impact of COVID-19, and as a result, our business, financial condition and results of operations and the prices of our publicly traded securities may be adversely affected.

We have recently issued, and may in the future issue, a significant amount of equity securities and, as a result, your ownership interest in our company has been, and may in the future be, substantially diluted and your investment in our common stock could suffer a material decline in value.

In the Asset Sale Transaction we issued a significant amount of equity securities, including Series D-1 and D-2 Preferred, which have subsequently converted into almost 5.1 billion shares of common stock, the Series C-1 and C-2 Preferred, which are convertible into approximately 1.2 billion shares of common stock and warrants for almost 1 billion additional shares of common stock. We also promised over 1.8 billion options to our employees. As a result of these past issuances and potential future issuances, your ownership interest in the Company has been, and may in the future be, substantially diluted. In addition, we continue to issue shares of common stock and common stock equivalents to finance the business when necessary.

The market price for our common stock has been volatile, and these issuances could cause the price of our common stock to continue to fluctuate substantially. We may need to raise additional capital and may seek to do so by conducting one or more private placements of equity securities, securities convertible into equity securities or debt securities, or through a combination of one or more of such financing alternatives. Such issuances of additional securities would further dilute the equity interests of our existing shareholders, perhaps substantially, and may further exacerbate any or all of the above risks.

34

 

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

 

Except for provided below, allAll unregistered sales of our securities during the three months ended SeptemberJune 30, 2019,2020, were previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

 

1.During the three months ended September 30, 2019, the Company issued to a lender, an aggregate of 35,216 shares of common stock upon conversion of debt of $48,121, including both outstanding principal and accrued interest.
2.During the three months ended September 30, 2019, the Company issued to a second lender, an aggregate of 20,000 shares of common stock upon conversion of $33,180 including both outstanding principal and accrued interest.
3.During the three months ended September 30, 2019, the Company issued to lenders, 1,396 shares of common stock related to common shares adjustment which resulted from the reverse split.

The shares of common stock, preferred stock and warrants referenced herein were issued in reliance upon the exemption from securities registration afforded by the provisions of Section 4(a)(2) of the Securities Act of 1933, as amended, (“Securities Act”).

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

From June 2017 toIn September 2017, wethe Company entered into loan agreementsagreement with several third partiesa third-party investor (the “Loans”“Loan”). Pursuant to the loan agreements, weagreement, the Company borrowed an aggregatethe principal amount of $538,875.$1,000. The Loans bear interest atLoan bears an annual interest rate of 33.3%, areis unsecured and are in default due to non-payment as of September 30, 2019.

As of September 30, 2019, we were in default on certain convertible debt instruments and loans caused by the non-payment of outstanding balance pursuant to the repayment terms. As of June 30, 2020, loan had principal and accrued interest balances of $1,000 and 938, respectively.

14

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

Effective November 8, 2019, our Chief Executive Officer, Dr. Brian Barnett, resigned from his positionItem 5.03 Amendments to Articles of Incorporation of Bylaws; Change in Fiscal Year

On June 9, 2021, the Company filed an Amendment (the “CoD Amendment") to the Series C-1 Certificate of Designation with the Company. Andrew Kucharchuk, our Chief Financial Officer,Nevada Secretary of State. The filing of the CoD Amendment was named Chief Executive Officer effective thatapproved by the Board on June 8, 2021, and by the holders of the majority of the outstanding shares of Series C-1 Preferred Stock on June 8, 2021.

The CoD Amendment sets the triggering price for the anti-dilution price protection at $0.00275 per share, the same date.price as is in the Series C-2 Certificate of Designation. All other terms of the Series C-1 Certificate of Designation remain unchanged and in full force and effect.

The foregoing description of the CoD Amendment is qualified in its entirety by reference to the CoD Amendment, a copy of which is attached to this Quarterly Report on Form 10-Q as Exhibit 3.3.

 

ITEM 6. EXHIBITS

 

Exhibit No.Description of Exhibit
2.1Certificate of Change of OncBioMune Pharmaceuticals, Inc., dated August 28, 2019 (incorporated by reference to Exhibit 3.1 to registrant’s current report on Form 8-K filed with the SEC on September 13, 2019)
4.1*Note dated September 25, 2019
4.2*Warrant dated September 25, 2019
10.1*Securities Purchase Agreement dated September 25, 2019
31.1*Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.
32.1*Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002.
101.INS*XBRL INSTANCE DOCUMENT
101.SCH*XBRL TAXONOMY EXTENSION SCHEMA
101.CAL*XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF*XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB*XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE*XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
Exhibit   Incorporated by Reference Filed or Furnished
Number Exhibit Description Form Exhibit Filing Date Herewith
           
3.1 Amended and Restated Articles of Incorporation, as amended       X
           
3.2 Amended and Restated Bylaws 8-K 3.1 11/01/2013  
           
3.3 Amendment to Certificate of Designation for Series C-1 Convertible Preferred Stock    X
           
4.5 Form of Warrant 8-K 4.1 06/11/2020  
           
4.6 Exchange Warrant, dated June 5, 2020 8-K 4.2 06/11/2020  
           
10.1 Exchange Agreement, dated June 5, 2020, by and among OncBioMune Pharmaceuticals, Inc. and the Investors named therein 8-K 10.1 06/11/2020  
           
10.2 Exchange Agreement, dated June 5, 2020, by and among OncBioMune Pharmaceuticals, Inc. and the Investors named therein 8-K 10.2 06/11/2020  
           
10.3 Exchange Agreement, dated June 5, 2020, by and between OncBioMune Pharmaceuticals, Inc. and Jonathan F. Head, Ph.D. 8-K 10.3 06/11/2020  
           
10.4 Securities Purchase Agreement, dated June 5, 2020, by and among OncBioMune Pharmaceuticals, Inc. Cavalry Fund I LP and Lincoln Park Capital Fund, LLC 8-K 10.4 06/11/2020  

* Filed herewith.

 

1535

10.5 Separation Agreement and General Release of Claims between OncBioMune Pharmaceuticals, Inc. and Andrew Kucharchuk dated June 5, 2020 8-K 10.5 06/11/2020  
           
10.6 Consulting Agreement between OncBioMune Pharmaceuticals, Inc. and Andrew Kucharchuk dated June 5, 2020 8-K 10.6 06/11/2020  
           
31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.       

X

           
31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.       

X

           
32.1 Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002.       

X

           
101.INS XBRL INSTANCE DOCUMENT       X
101.SCH XBRL TAXONOMY EXTENSION SCHEMA       X
101.CAL XBRL TAXONOMY EXTENSION CALCULATION LINKBASE       X
101.DEF XBRL TAXONOMY EXTENSION DEFINITION LINKBASE       X
101.LAB XBRL TAXONOMY EXTENSION LABEL LINKBASE       X
101.PRE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE       X

+ Management contract or compensatory plan or arrangement.

36

 

SIGNATURES

 

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

 

 ONCBIOMUNE PHARMACEUTICALS,THERALINK TECHNOLOGIES, INC.
                                           
Dated: November 19, 2019June 10, 2021By:/s/ Andrew KucharchukMick Ruxin, MD
  Andrew KucharchukMick Ruxin, MD
  

Chief Executive Officer

Dated: June 10, 2021By:/s/ Thomas E. Chilcott, III
Thomas E. Chilcott, III
Chief Financial Officer, Treasurer and President

(principal executive officer, principal financial officer and principal accounting officer)

Secretary

 

16
37