The accompanying notes are an integral
part of these unaudited consolidated financial statements.
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – Organization
and Significant Accounting Policies
Nature of Business
Radiant Creations Group, Inc. (“the
Company”) holds an exclusive license for the use of certain assets and processes related to innovative technologies in skin
protection and enhancement, which consist of various proprietary products including an anti-aging and revitalizing skin cream generally
sold under the "Radiant Creations" label. The Company’s principal business is the development and marketing
of unique and proprietary scientific technologies and cosmetic and over-the-counter personal enhancement products and devices and
currently sells its products exclusively over the internet to customers located globally.
NIT Enterprises, Inc.
(“NITE”) was incorporated in the state of Delaware on May 12, 2014 and is doing business in the State of Florida.
As of February 29, 2016, NITE is majority owned by the Company and was formed to permit Radiant Creations Group to
“spin-off” the Nucleotide (“NA”) technology it holds.
NITE’s mission is to improve
public safety and to provide a new measure of protection for commercial, industrial, and personal products that enhance the longevity
of living and non-living substances based upon unique proprietary NA technologies. This new technology is the infusion of ingredients,
known as nucleotides, into a multiplicity of common products enhanced by their presence. The nucleotides were derived by atomic
level research that demonstrates their ability to provide Ultraviolet (UV) rays screening capability at the molecular level.
In March 2016, the Company transferred
a portion of its interest and no longer holds a controlling interest in NITE.
Principles of Consolidation
The consolidated unaudited financial statements
include the accounts of the Company and its controlled subsidiaries. Intercompany balances and transactions have been eliminated
in consolidation.
Non-controlling Interest in
Consolidated unaudited financial statements
Through February 29, 2016, the
Company holds a controlling interest in NIT and reports amounts attributable to non-controlling interest as separate components
of deficit and net loss. (see Note 3.)
Use of Estimates
The preparation of unaudited financial statements
in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. The Company’s significant estimates include the valuation of stock-based compensation and derivative liabilities,
estimates for future charge-backs, and allowance for slow moving or obsolete inventory.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. As of February
29, 2016 and February 28, 2015, the Company had no cash equivalents.
Inventory
Inventory
consists of finished goods and is valued at the lower of cost or market value. Cost is determined using the first in first out
(FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels
and future sales forecasts.
Property
and Equipment
Property
and equipment are stated at cost, net of depreciation provided by use of a straight-line method over the estimated useful lives
of the assets, of five years. The Company reviews property and equipment for potential impairment
whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable.
Basic
and diluted net loss per share
Basic loss per share is computed
using the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the
dilutive effects of common stock equivalents on an “as if converted” basis. As of February 29, 2016, the number of
potentially dilutive shares consisted of 25,562,556 shares underlying convertible debt as well as options to acquire 30,440 shares.
As of February 28, 2015, the number of potentially dilutive shares consisted of 225,731 shares underlying convertible debt and
options to acquire 30,440 shares. For the year ended February 29, 2016 and 2015, potential dilutive securities had an anti-dilutive
effect and were not included in the calculation of diluted net loss per common share.
Related parties
The Company follows subtopic ASC
850, Related Party Disclosure, for the identification of related parties and disclosure of related party transactions.
Revenue Recognition
The Company follows guidance under
ASC 605, Revenue Recognition, in determining when to report income from operations. The Company recognizes revenues when persuasive
evidence of an arrangement exists, delivery and acceptance has occurred, the price is fixed or determinable, and collection of
the resulting receivable is reasonably assured. Revenue recognized by the Company normally occurs upon shipment of our product
to the customer.
Cost
of Revenue
Amounts
recorded as cost of revenue relate to direct expenses incurred in order to fulfill orders of our products. Such costs are recorded
as incurred. Our cost of revenue consists primarily of the cost of product; payment processing fees; and the cost of product samples.
Cash flows reporting
The Company follows ASC 230, Statement
of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing,
or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect
method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net
loss to reconcile it to net cash flows from operating activities by removing the effects of (a) all deferrals of past operating
cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are
included in net loss that do not affect operating cash receipts and payments.
Share-based Expense
ASC 718,
Compensation –
Stock Compensation
, prescribes accounting and reporting standards for all share-based payment transactions in which employee
services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity
instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including
grants of employee stock options, are recognized as compensation expense in the unaudited financial statements based on their fair values.
That expense is recognized over the period during which an employee is required to provide services in exchange for the award,
known as the requisite service period (usually the vesting period).
The Company accounts for stock-based
compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50,
Equity – Based
Payments to Non-Employees.
Measurement of share-based payment transactions with non-employees is based on the fair value
of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value
of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Share-based expense for the year
ended February 29, 2016 and 2015 was $978,724 and $3,212,910, respectively.
Income Taxes
The Company utilizes the asset
and liability method to measure and record deferred income tax assets and liabilities. Deferred tax assets and liabilities reflect
the future income tax effects of temporary differences between the unaudited financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be
realized.
The Company follows the provisions
of Accounting for Uncertainty in Income Taxes, which clarified the accounting for uncertainties in tax positions and required that
the Company recognizes in its unaudited financial statements the impact of an uncertain tax position, if that position has more likely than
not chance of not being sustained on audit, based on technical merits of that position.
The Company is subject to the United
States federal and state income tax examinations by the tax authorities for the 2015, 2014, and 2013 tax years.
Recently issued accounting pronouncements
We do not expect the adoption of
recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash
flow.
NOTE 2 – Going Concern
The accompanying unaudited financial statements
have been prepared on the basis of accounting principles applicable to a “going concern”, which assume that the Company
will continue in operation for at least one year and will be able to realize its assets and discharge its liabilities in the normal
course of operations.
Several conditions and events cast
substantial doubt about the Company’s ability to continue as a going concern. The Company has a working capital deficit of
$1,328,307 as of February 29, 2016 and has incurred net losses since inception. The Company’s future capital requirements
will depend on numerous factors including, but not limited to, executing its marketing and business plans and the pursuit of business
opportunities. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
These unaudited financial statements do not
include any adjustments 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.
NOTE 3 – Non-controlling
Interest
NIT Enterprises, Inc. was incorporated
in the state of Delaware on May 12, 2014 and is doing business in the State of Florida. The Company is under common control with
the management of Radiant Creations Group and was formed to permit Radiant Creations Group to “spin-off” the Nucleotide
technology it holds. As of February 29, 2016, the Company holds 54.2% of NIT and 45.8% is held by non-controlling interests.
In March 2016, the Company transferred three third-party notes payable totaling $245,000, plus accrued interest
to NIT Enterprises, Inc., its minority-owned subsidiary. In addition, the Company cancelled $425,000 in intercompany loans from
NIT Enterprises, Inc, to the Company in exchange for 5,000,000 shares of NIT Enterprises, Inc. held by the Company as a Founder
of NIT Enterprises. As a result, the Company no longer has controlling interest in NITE.
NOTE 4 – Notes Payable
Notes payable
The Company has two notes with
outstanding balances as of February 29, 2016 of $75,000 and $2,500 which are subject to annual interest of 15% and matured on November
29, 2014 and January 31, 2015, respectively.
In April 2015, the Company issued
a note payable in the amount of $150,000 for cash. The note matures in 24 months and accrues interest at an annual rate of 12%.
The holder of the note also received 12,000 shares of common stock with a fair value of $33,000 based on the trading price of
the shares on the date of issuance. The Company allocated $27,049 of the proceeds from the note to the common stock, which was
recorded as a discount against the debt to be amortized through maturity. As of February 29, 2016, the note is carried at $150,000.
In October 2014, the Company issued
a demand note in the amount of $50,000 for cash. The note is due on demand and accrues interest at an annual rate of 12%. During
the year ended February 29, 2016, the Company repaid $20,250 which includes $1,250 in interest. As of February 29, 2016 and February
28, 2015, the principle balance on the note was $31,000 and $50,000, respectively.
In July 2014, the Company issued
a note payable in the amount of $40,000 for cash. The note matures in 36 months and accrues interest at an annual rate of 10%,
payable quarterly. As of February 29, 2016 and February 28, 2015, the principle balance remaining on the note was $40,000, respectively.
Notes payable - related
parties
In July 2014, the Company issued
a note payable in the aggregate amount of $250,000 for the purchase of intellectual property from a commonly owned entity. Because
of the common ownership, the intellectual property was not marked to fair value and the Company recognized a loss for the amount
of the notes, which is included in loss on acquisition of intellectual property from a commonly controlled entity on the consolidated
statement of operations for the year ended February 29, 2016. The note was non-interest bearing, matured in 24 months from issuance,
and required principal payments of at least $25,000 every 180 days. During the years ended February 29, 2016 and February 28, 2015,
the Company made payments in the amounts of $116,337 and $133,663, respectively; and as of February 29, 2016 and February 28, 2015,
the outstanding balance of the note was $0 and $116,337, respectively.
In September 2014, the Company
issued a note in the amount of $7,900 for cash. The note was payable in two years from issuance, and accrued interest, payable
monthly, at an annual rate of 10%. During the year ended February 29, 2016, the Company repaid the note in full. As of February
29, 2016 and February 28, 2015, the principle balance remaining on the note was $0 and $7,900, respectively.
At various times during the year
ended February 29, 2016, the Company received an aggregate of $31,709 from a related party for operating expenses and repaid $19,162
in the same period. The obligation is considered a non-interest bearing, demand note payable and the balance at February 29, 2016
and February 28, 2015 was $12,548 and $0, respectively.
NOTE 5 – Convertible
Notes Payable
Note
Date
|
Maturity Date
|
Face
Amount
|
Eligible for Conversion
|
Conversion
Date
|
Amounts
Converted / Cash Paid*
|
Balance
Outstanding
|
05/21/2013
|
09/20/2016
|
$900,448
|
06/15/2013
|
N/A
09/19/2013
11/20/2013
|
$31,000*
$100,000
$70,000
|
$869,448
$769,448
$699,448
|
06/27/2013
|
$100,000 due 12/12/2014
(in default)
$270,000 no due date
|
$370,000
|
06/27/2013
|
-
|
-
|
$370,000
|
11/19/2013
|
08/21/2014
|
$78,500
$10,000
Default
|
05/19/2014
|
06/13/2014
07/01/2014
07/11/2014
07/21/2014
11/19/2014
12/01/2014
12/12/2014
12/16/2014
01/23/2015
|
$12,000
$12,000
$15,000
$19,500
$7,235
$5,635
$6,395
$5,780
$4,955
|
$66,500
$54,500
$39,500
$20,000
$30,000
$22,765
$17,130
$10,735
$4,955
$ -0-
|
12/17/2013
|
09/21/2014
|
$32,500
$16,250
Default
|
06/15/2014
|
-
02/02/2015
02/05/2015
03/06/2015
03/09/2015
03/16/2015
03/23/2015
03/24/2015
03/31/2015
03/31/2015
|
-
$4,430
$6,030
$3,515
$3,515
$3,515
$3,760
$9,560
$2,675
$11,750
|
$32,500
$48,750
$44,320
$38,290
$34,775
$31,260
$27,445
$23,985
$14,425
$11,750
$-0-
|
01/27/2014
|
10/29/2014
|
$32,500
$16,250
Default
|
07/26/2014
|
-
04/07/2015
04/08/2015
04/15/2015
04/22/2015
04/29/2015
05/01/2015
|
-
$7,495
$10,685
$10,500
$11,540
$8,000
$530
|
$32,500
$48,750
$41,225
$30,570
$20,070
$8,530
$530
$-0-
|
07/08/2014
|
04/09/2015
|
$21,150
$10,575
Default
|
01/04/2015
|
-
05/07/2015
05/14/2015
05/19/2015
05/26/2015
06/15/2015
06/17/2015
06/25/2015
06/26/2015
06/29/2015
07/01/2015
07/06/2015
07/09/2015
07/14/2015
|
-
$4,320
$3,165
$2,400
$1,820
2,655
2,655
2,655
2,510
2,235
2,235
2,235
2,095
745
|
$21,150
$31,725
$27,405
$24,240
$21,840
$20,020
$17,365
$14,710
$12,055
$9,545
$7,310
$5,075
$2,840
$745
$-0-
|
09/03/2014
|
06/05/2015
|
$32,500
$16,250
Default
|
03/03/2015
08/05/2015
|
-
N/A
|
-
$48,750*
|
$32,500
$48,750
$-0-
|
09/10/2014
|
09/10/2016
|
$35,000
|
09/10/2014
|
03/27/2015
03/31/2015
04/07/2015
04/15/2015
04/22/2015
05/01/2015
05/07/2015
05/15/2015
|
-
$3,320
$3,802
$4,373
$5,013
$6,630
$4,608
$5,232
$2,023
|
$35,000
$31,680
$21,878
$23,506
$18,493
$11,863
$7,255
$2,023
$-0-
|
01/12/2015
|
10/14/2015
|
$16,000
$8,000
Default
Note paid off at discount
|
07/11/2015
|
-
N/A
N/A
|
-
$21,250*
$ 2,750
|
$16,000
$24,000
$2,750
$-0-
|
Totals
|
|
$1,595,923
|
-
|
-
|
Converted
$ 425,475
Cash paid
$ 101,000*
|
$1,069,448
|
|
|
|
|
|
|
|
Convertible notes payable
During 2011, 2012 and 2013, the
Company obtained loans totaling $720,000. These loans were unsecured and bore interest at 10%. In 2013, the loans (including accrued
interest of $140,448 in the amount of $900,448 were converted to a Convertible Note Payable due to Southwest Financial bearing
interest at 10% per annum. Following cash payments of $31,000 and conversions to common stock of $170,000 later in fiscal 2013,
the Company owed $699,448. The notes were initially convertible at the option of the Holder at fixed rate of $93.75 per share
and matured on September 20, 2015. In September 2014, the conversion rate was amended to a fixed rate of $0.05 per share. The
Company recorded additional expense of $3,845,935 as a result of the reduction in conversion price which is recorded as a loss
on modification of convertible debt. The Company paid no principal cash payments on these notes during the years ended February
29, 2016 and February 28, 2015. The principle balance of the note was $699,448 at February 29, 2016 and February 28, 2015.
As of February 28, 2015, the Company
owed convertible notes totaling $370,000 to third parties including accrued interest of another $4,041. Interest is 10% annually
and is to be paid currently. The notes may be converted at the option of the Holder at a fixed rate of $93.75 per share. In February
2014, the notes were amended to modify the conversion rate to $3.75 per share. In August 2015, the conversion rate was further
reduced to $0.05 per share. The Company recorded additional expense of $1,660,753 as a result of the reduction in conversion price
which is recorded as a loss on modification of convertible debt. The principle balance of the notes as of February 29, 2016 and
February 28, 2015 was $370,000 in the aggregate, respectively, and the notes are due on demand.
On November 19, 2013, the Company
signed a convertible note agreement with a third party in which the party loaned $78,500 subject to annual interest of 8%. The
note matured on August 21, 2014 and was convertible into the Company’s common stock after 180 days from the date of issuance
at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On May 18,
2014, the note became convertible and the embedded conversion option required derivative accounting for the variable conversion
rate. On May 18, 2014, a derivative liability of $64,146 was recorded as a debt discount and amortized over the term of the note.
The embedded conversion option of the note also tainted the other outstanding convertible notes. During the twelve months ended
February 28, 2015, the lender converted $78,500 in principle and $10,000 in default interest in exchange for 10,540,476 shares
of common stock and the note was paid in full.
On December 17, 2013, the Company
signed a convertible note agreement with a third party in which the party loaned $32,500 subject to annual interest of 8%. The
note matured on September 21, 2014 and was convertible into the Company’s common stock after 180 days from the date of issuance
at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On December
1, 2014, default interest in the amount of $16,250 was added to the principle balance of the note. During the year ended February
29, 2016, the lender converted $38,290 in principle in exchange for 31,801 shares of common stock and during the twelve months
ended February 28, 2015, the lender converted $10,460 in principle in exchange for 8,716,667 shares of common stock. The principle
balance of the note was $0 and $38,290 as of February 29, 2016 and February 28, 2015, respectively.
On
January 27, 2014, the Company signed a convertible note agreement with a third party in which the party loaned $32,500 subject
to annual interest of 8%. The note matured on October 29, 2014 and was convertible into the Company’s common stock after
180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding
the date of conversion. On July 26, 2014, a derivative liability of $23,228 was recorded as a debt discount and amortized over
the term of the note. During the twelve months ended February 28, 2015, default interest of $16,250 was added to the principle
balance of the note. During the year ended February 29, 2016, the lender converted $51,350 in principle and interest in exchange
for 43,421 shares of common stock and the note was paid in full.
The
principle balance of the note was $48,750 as of February 28, 2015.
On July 8, 2014, the Company signed
a convertible note agreement with a third party in which the party loaned $21,150 subject to annual interest of 8%. The note matures
on April 9, 2015 and was convertible into the Company’s common stock after 180 days from the date of issuance at 58% of
the average of the lowest prices of the common stock during the ten days preceding the date of conversion. During the twelve months
ended February 28, 2015, default interest of $10,575 was added to the principle balance of the note. During the year ended February
29, 2016, the lender converted $31,725 in principle in exchange for 134,751 shares of common stock and the note was paid in full.
The principle balance of the note as of February 28, 2015 was $31,275.
On September 3, 2014, the Company
signed a convertible note agreement with a third party in which the party loaned $32,500 subject to annual interest of 8%. The
note matures on June 5, 2015 and was convertible into the Company’s common stock after 180 days from the date of issuance
at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. During the
twelve months ended February 28, 2015, default interest of $16,250 was added to the principle balance of the note. During the year
ended February 29, 2016, the lender converted $1,740 in principle in exchange for 15,467 shares of common stock. In the same period,
the Company paid $48,750 in cash and the note was paid in full. The principle balance of the note as of February 28, 2015 was $48,750.
On September 9, 2014, the Company
executed a $35,000 Convertible Promissory Note bearing interest on the unpaid balance at the rate of 12% on the original principal
amount. The principle amount due on the note shall be prorated based upon the consideration actually received by the Company,
plus an approximate 10% original issue discount that is prorated based upon the consideration actually received as well as any
other interest or fees. Under the terms of the note, the Company is not required to repay any unfunded portion of the note. The
Maturity Date is two years from the Effective Date of each payment and is the date upon which the principal sum of this Note,
as well as any unpaid interest and other fees, shall be due and payable. The conversion price was the lesser of $56.25 or 60%
of the lowest trade price in the 25 trading days previous to the conversion. During the year ended February 29, 2016, the lender
converted $43,565 in principle in exchange for 57,504 shares of common stock and the note was paid in full. The balance of the
note as of February 28, 2015 was $35,000.
On January 12, 2015, the Company
signed a convertible note agreement with a third party in which the party loaned $16,000 subject to annual interest of 8%. The
note matured on October 14, 2015 and was convertible into the
Company’s common stock after
180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding
the date of conversion. On July 11, 2015, the note became convertible and the embedded conversion option required derivative accounting
to the variable conversion rate. During the twelve months ended February 28, 2015, default interest of $8,000 was added to the
principle balance of the note. During the year ended February 29, 2016, the Company satisfied the remaining principle of $24,000
in the form of cash payment of $21,250 and the balance of $2,750 was recorded against the discount on the note for early payment.
The principle balance of the note as of February 28, 2015 was $24,000.
Amortization expense on the debt
discounts for the year ended February 29, 2016 amounted to $ and notes are carried at $1,069,448. Amortization expense on the
debt discounts for the twelve months ended February 28, 2015 amounted to $618,110 and notes were carried at $788,752, net of unamortized
discounts of $507,211.
NOTE 6– Derivative
Liabilities
The Company records the fair value
of the conversion features of the convertible notes disclosed in Note 4 in accordance with ASC 815, Derivatives and Hedging. The
fair value of the derivative liability was calculated using a multi-nominal lattice model. The fair value of the derivative liability
is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statements of operations.
During the year ended February 29, 2016, the Company recorded a loss on the change in fair value of derivative liability of $187,208.
The following table summarizes
the changes in derivative liabilities during the year ended February 29, 2016:
Balance as of February 28, 2015
|
|
$
|
130,103
|
|
Fair value of embedded conversion derivative liability at issuance
|
|
|
280,784
|
|
Reclassification of derivatives upon conversion or redemption of convertible debt
|
|
|
(223,679
|
)
|
Unrealized derivative losses included in other expense
|
|
|
187,208
|
|
Ending balance as of February 29, 2016
|
|
$
|
-0-
|
|
The Company determined that the
instruments embedded in the convertible note should be classified as liabilities and recorded at fair value due to their being
no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The fair value of the
instruments was determined using a multinomial lattice model based on the following assumptions:
|
-
|
The projected volatility curve for each valuation period was based on the historical volatility of the Company and ranged from 191% to 198%.
|
|
-
|
An event of default would occur 5% of the time, increasing 1.00% per month to a maximum of 10%,
|
|
-
|
The monthly trading volume would average $175,000 to $136,000 and would increase at 1% per month. The variable conversion price of 58% of ask-bid or close prices over 10 trading days have effective discount rates of 42.42%,
|
|
-
|
The variable conversion price of the lesser of: (i) $0.045, or (ii) 60% of the lowest trade price over 25 trading days would have effective discount rates of 47.92% to 47.64%
|
|
-
|
The Note Holders would automatically convert fixed and variable conversion prices (with full ratchet resets) the notes at the stock price for the convertible Note if the registration was effective and the Company was not in default, and conversion price reset events are assumed every 3 months.
|
NOTE 7 – Equity
During the year ended
February 29, 2016 and February 28, 2015, amortization expense recognizing the fair value of vested stock options was $414,517
and $3,193,006, respectively. Expected future expense related to the expected vesting of options is $45,332.
The following table summarizes the Company’s
stock options activity for the years ended February 29, 2016 and February 28, 2015:
|
Options
|
|
Weighted Average Exercise Price
|
|
Aggregate Intrinsic Value
|
|
Exercisable
|
|
Weighted Average Remaining Life
|
Balance, February 28, 2014
|
-
|
$
|
-
|
|
-
|
|
-
|
|
-
|
Granted
|
30,440
|
|
0.00
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
|
Balance, February 28, 2015
|
30,440
|
|
0.00
|
|
|
|
22,440
|
|
4.29
|
Granted
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
|
Balance, February 29, 2016
|
30,440
|
$
|
0.00
|
|
|
|
22,440
|
|
3.79
|
|
|
|
|
|
|
|
|
|
|
On August 24, 2015, the Board of Directors
of the Company approved a reverse split of the Company’s commons stock at a ratio of one for one thousand two hundred and
fifty (1,250) shares, (1-for-1,250). As of August 24, 2015, (prior to the Reverse Split), we had 439,445,822 shares of common stock
outstanding and 460,554,178 common shares available for issuance. Upon effectiveness (September 25, 2015) of the Reverse Split,
the Company remained authorized to issue 900,000,000 common shares and had 351,557 shares outstanding with the ability to issue
899,648,443 additional common shares. The Company’s unaudited financial statements for all periods presented have been retroactively
adjusted to reflect the stock split made effective on September 25, 2015.
The table
below illustrates the capitalization of our outstanding shares as of September 25, 2015, before and after the Reverse Split.
Capitalization
|
|
Prior to the
Reverse Split
|
|
After the
Reverse Split
|
Common stock (1)
|
|
|
|
|
Authorized
|
|
900,000,000
|
|
900,000,000
|
Issued and Outstanding
|
|
439,445,822
|
|
351,557
|
Available for Issuance
|
|
460,554,178
|
|
899,648,443
|
Series A Preferred stock (2,4)
|
|
|
|
|
Authorized
|
|
3,000,000
|
|
3,000,000
|
Issued and Outstanding
|
|
3,000,000
|
|
3,000,000
|
Available for Issuance
|
|
-
|
|
-
|
Series B Preferred stock (3,4)
|
|
|
|
|
Authorized
|
|
20,000,000
|
|
20,000,000
|
Issued and Outstanding
|
|
20,000,000
|
|
20,000,000
|
Available for Issuance
|
|
-
|
|
-
|
|
(1)
|
Each one (1) share of our Common Stock entitles the holder to one (1) vote per share on all matters submitted to a vote of our stockholders.
|
|
(2)
|
Each one (1) share of our Series A Preferred Stock entitles the holder to two hundred (200) votes per share on all matters submitted to a vote of our stockholders.
|
|
(3)
|
Each one (1) share of our Series B Preferred Stock entitles the holder to one (1) vote per share on all matters submitted to a vote of our stockholders.
|
|
(4)
|
As a result of the 3,000,000 Series A Preferred shares and 20,000,000 Series B Preferred shares held by Biodynamic Molecular Technologies, LLC, a commonly controlled entity, it holds an aggregate of 620,000,000 common shares or 59% of the votes, which entitle it to determine the outcome of all matters submitted to a vote of our stockholders.
|
During the year ended
February 29, 2016, the Company issued 282,944 shares of common stock upon the conversion of debt, for an aggregate value of
$182,539. (see Note 4)
During the year ended February
29, 2016, the Company issued 12,600 shares of common stock in connection with the issuance of a note payable. (see Note 4)
During the year ended February
29, 2016, the Company issued 18,196,422 shares of common stock for cash for a value of $130,140.
During the year ended February
29, 2016, the Company converted $537,000 in accrued executive compensation to 4,590,000 shares of common stock of the Company.
During the year ended February
29, 2016, the Company received $100,000 from an investor in exchange for shares of common stock in the Company equal to 5% of the
total outstanding shares of common stock as of January 31, 2016. As of February 29, 2016, 1,683,000 shares have been issued.
During the year ended February
29, 2016, the Company issued 2,000,000 shares of its Series A Preferred Stock to related parties as consideration for the purchase
of intellectual property. The fair value of the shares of $17,800, based on the value of the control feature, was recorded as expense
during the year ending February 29, 2016.
During the twelve months ended February
28, 2015, the Company issued 25,604 shares of common stock upon the conversion of debt, for an aggregate value of $215,150.
During the twelve months ended February
28, 2015, the Company issued 2,992 shares of common stock as compensation for services for a value of $19,524.
During the twelve months ended February
28, 2015, the Company granted 30,440 options to employees and directors with a term of 5 years and are exercisable at prices ranging
from $0.098 to $0.127 per share. 8,000 options vested immediately while the remaining 22,440 options vest at a rate of 33% on the
grant date, 33% one year from the grant date and the remaining 33% two years from the grant date. The fair value of the options
was determined using a Black Scholes model. The total grant date fair value of the options amounted to $3,630,278 of which $414,517
and $3,193,006 was recorded as stock compensation expense during the twelve months ended February 29, 2016 and February 28, 2015,
respectively.
On September 9, 2014 and October 13,
2014 Biodynamic Molecular Technologies, LLC (a commonly controlled shareholder) agreed to cancel a total of 20,000,000 common shares
of the Company in exchange for 1,000,000 shares of Series A Preferred stock and 20,000,000 shares of Series B Preferred stock.
Stock compensation expense totaled $978,724
and $3,212,910 for the twelve months ended February 29, 2016 and February 28, 2015, respectively.
NIT Enterprises, Inc.
During the year ended February
29, 2016, NIT Enterprises issued 110,000 shares of common stock as compensation for services rendered for a value of $11.
During the year ended February
29, 2016, NIT Enterprises issued 4,092,000 shares of common stock for cash for a value of $1,038,970.
During the year ended February
29, 2016, NIT Enterprises issued 30,982,000 preferred shares to investors according to the terms provided in NIT’s cash subscription
agreement. The shares were issued at par value.
During the year ended February
29, 2016, NIT Enterprises issued 1,000,000 Series A, Super-Voting preferred shares to a founder for a value of $100.
During the year ended February
29, 2016, NIT Enterprises issued 1,000,000 Series B, Founder preferred shares to a founder for a value of $2,600.
During the year ended February
29, 2015, NIT Enterprises issued 3,800,000 shares of common stock as compensation for services rendered for a value of $380.
During the year ended February
29, 2015, NIT Enterprises issued 560,000 shares of common stock for cash for a value of $150,002.
During the year ended February
29, 2015, NIT Enterprises issued 560,000 preferred shares to investors according to the terms provided in NIT’s cash subscription
agreement. The shares were issued at par value.
Note
8 – Income Tax Provision
Deferred
Tax Assets
At February
29, 2016, the Company had net operating loss (“NOL”) carry–forwards for Federal income tax purposes of $9,431,893
that may be offset against future taxable income through 2035. No tax benefit has been reported with respect to these net
operating loss carry-forwards because the Company believes that the realization of the Company’s net deferred tax assets
of approximately $3,092,000 was not considered more likely than not and accordingly, the potential tax benefits of the net loss
carry-forwards are offset by a full valuation allowance.
Deferred tax assets
consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred
tax assets because of the uncertainty regarding its realization. The valuation allowance increased approximately $2,757,948 and
$1,139,172 for the years ended February 29, 2016 and February 28, 2015, respectively.
Components of deferred tax assets
are as follows:
|
|
Feb 29,
2016
|
|
Feb 28,
2015
|
Net deferred tax assets – non-current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax benefit from NOL carry-forwards
|
|
$
|
5,849,782
|
|
|
$
|
3,091,834
|
|
|
|
|
|
|
|
|
|
|
Less valuation allowance
|
|
|
(5,849,782
|
)
|
|
|
(3,091,834
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets, net of valuation allowance
|
|
$
|
—
|
|
|
$
|
—
|
|
Income Tax Provision
A reconciliation of the federal
statutory income tax rate and the effective income tax rate as a percentage of income before income tax provision is as follows:
|
|
For the Fiscal Year Ended
February 29,
2016
|
|
For the Fiscal Year Ended
February 28,
2015
|
|
|
|
|
|
|
|
|
|
Federal statutory income tax rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance on net operating loss carry-forwards
|
|
|
(34.0
|
)
|
|
|
(34.0
|
)
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
NOTE 9 – Commitments and Contingencies
Acquisition and Assignment
On June
25, 2013, the Company purchased certain assets from The Renewable Corporation, a related party. The purchases included their
license, certain assets and processes to innovative technologies in skin protection from the sun, industrial UV sources
(such as welding), and reducing collateral damage from medical radiation treatment which consists of various patented skin products generally
under the "Radiant Creations" label.
The license
purchased is with Dr. Yin-Xiong Li, MD, Ph.D. to his patent in Enhanced Broad-Spectrum UV Radiation Filters and Methods as
disclosed and claimed in U.S. Patent No. US Patent # 6,117,846 - Nucleic acid filters and US Patent Application # 20080233626 -
Enhanced broad-spectrum UV radiation filters and methods, and the following international filings European Application # 07811023.6,
and Australian Application # 2007281485 and as trade secrets associate with the above listed intellectual property and trade
secrets and potential patent applications for an anti-aging skin rejuvenation cream, an acne OTC treatment, a wrinkle reduction
cream, BioSalt redistribution technology using supplements. The License Agreement, as of June 25, 2013 has added an
addendum to it allowing Renewable to transfer the license agreement to The Radiant Creations Group.
The various
patented skin products acquired include all the patented technologies that strips out the four nucleotide code molecules from
DNA strands and uses them in a system that can provide up to 99% protection from DNA damage, which is the cause of aging and skin
cancer. A second technology is the delivery system to house the nucleotides, and also, a hydration agent that is time released
to infuse uniform hydration into the skin for up to 10 hours. The resulting products are a DNA based SPF-30 day
cream; an anti-aging and rejuvenating night cream featuring the hydration system, Chinese herbs, and aloe; a medical radiation
protection and healing cream for use by dermatologists in radiation therapy for skin cancer and a rejuvenating DNA protection cream
for the tanning bed industry for DNA damage protection.
Other
terms of the Agreement include:
Radiant
shall pay all future intellectual property costs for the Licensed Patent, including all costs incident to the United States and
foreign applications, patents and like protection, including all costs incurred for filing, prosecution, issuance and maintenance
fees as well as any costs incurred in filling continuations, continuations-in-part, divisional s or related applications
and any improvements, re-examination or reissue proceedings.
Radiant
agrees to appoint Li to the Radiant Advisory Board with compensation for such appointment to be commensurate with other members
when remuneration is commended.
Radiant
agrees to offer Li an Executive position for any subsidiary corporation responsible for operating the above Licensed Products for
which the subsidiary becomes profitable. As part of the position, salary and executive benefit compensation will be
offered, terms to be negotiated at time of offer.
Radiant
shall pay Li a royalty of twenty-two percent (22%) of the Net Profit of the Licensed Product (“the Royalty”) made during
the term of this Agreement.
The
Royalty owed to Li shall be calculated on a quarterly calendar basis (“Royalty Period”) and shall be payable no later
than thirty (30) days after the termination of the preceding full Royalty Period i.e., commencing on the first (1st) day of
January, April, July and October, except that the first and last Royalty Periods may be "short," depending on the effective
date of this Agreement.
For
each Royalty Period, Radiant shall provide Li with a written royalty statement in a form acceptable to Li. Such royalty statement
shall be certified as accurate by a duly authorized officer of Radiant. Such statements shall be furnished to Li regardless
of whether any Licensed Products were sold during the Royalty Period or whether any actual Royalty was owed. As of February 29,
2016 and February 28, 2015, no amounts were paid or accrued under the Agreement.
Dilutive Stock Issuances
Pursuant to its sale of common stock in August 2015,
the Company is obligated to issue a number of shares equal to 5% of the total shares outstanding as of January 31, 2016. (see note
7)
Litigation
The Company may become involved
in various claims and legal actions arising in the ordinary course of business. In the opinion of management, excepts as discussed
herein, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position,
results of operations, or liquidity. As of February 29, 2016, the Company is not involved in any material legal matters.
NOTE 10 – Related Party Transactions
During the year ended February 29, 2016, the
Company enlisted a related party, Renewable Bioscience Holdings, Inc., to act as a bookkeeping and vending agent for the Company’s
majority owned subsidiary, NIT Enterprises, Inc. For the year ended February 29, 2016, the Company’s agent disbursed $438,572
in expenses on behalf of the Company which primarily consisted of staff and executive compensation, investor relations expenses,
and reimbursements of travel costs.
At various times during the year ended February
29, 2016, the Company received notes and advances from a related party for operating expenses. The obligation is considered a non-interest
bearing, demand note payable and the balance at February 29, 2016 and February 28, 2016 was $12,548 and $0, respectively.
During the year ended February 29, 2016, the
Company issued a non-interest bearing demand note receivable to a related party in the amount of $4,700. During the year ended
February 29, 2016, the remaining balance of $4,700 was paid in full.
In September 2014,
the Company issued a note in the amount of $7,900 to a commonly controlled entity for cash. The note was payable in two
years from issuance, and accrued interest, payable monthly, at an annual rate of 10%. As of February
29, 2016 and February 28, 2015, the principle remaining balance was $0 and $7,900, respectively.
In July 2014, the Company issued
a note payable in the aggregate amount of $250,000 for the purchase of intellectual property from a commonly owned entity. Because
of the common ownership, the intellectual property was not marked to fair value and the Company recognized a loss for the amount
of the notes, which is included in loss on acquisition of intellectual property from a commonly controlled entity on the consolidated
statements of operations. The note is non-interest bearing, matures in 24 months from issuance, and requires principal payments
of at least $25,000 every 180 days. During the year ended February 29, 2016, the remaining balance at February 28, 2015 of $116,337
was paid in full.
On March 3, 2014, the Company executed employment
agreements for its Officers that included annual compensation in equal amounts of $156,000 annually, a $75,000 signing bonus, and
6,000,000 shares of common stock options. Prior to the current period ending February 29, 2016, the Officers had elected to forego
their annual compensation; however, the Company elected to accrue $537,000 in related compensation to its Officers. During the
year ended February 29, 2016, the Company converted the deferred compensation to 4,590,000 shares of common stock.
During the year ended November
30, 2014, the Company issued 2,000,000 shares of its Series A Preferred Stock to related parties as consideration for services
rendered. The fair value of the shares of $17,800, based on the value of the control feature, was recorded as expense during the
year ending February 29, 2016.
NOTE 11 – Subsequent Events
On March 1, 2016, the Company accepted the
resignation of Manpreet Singh Thaper, Director and COO. There were no disagreements between Mr. Singh Thaper and the Registrant
on any matter relating to the Company’s operations, policies or practices.
On March 7, 2016, Gary R. Smith, our Chairman
of the Board of Directors, resigned his position with the Company. There were no disagreements between Mr. Smith and the Company
on any matter relating to the Company’s operations, policies or practices. Effective on the same date, to fill the vacancy
left by the removal of Mr. Smith, the Board of Directors appointed Michael S. Alexander, Chief Executive Officer and President,
as the Registrant’s Chairman of the Board Directors.
On March 11, 2016, the Company executed a General
Release and Settlement Agreement with the former Director/CEO, Gary R. Smith and other related parties, terms include:
Transfer of Notes and Inter-Company Loans -
The Company transferred three Third-Party Notes Payable totaling $245,000 plus accrued interest to NIT Enterprises, Inc., its minority-owned
subsidiary, and cancelled $425,000 in intercompany loans from NIT Enterprises, Inc., to the Company in exchange for 5,000,000 shares
of NIT Enterprises, Inc. held by the Company as a Founder of NIT Enterprises. As a result, the Company no longer has controlling
interest in NITE.
The Parties agreed to the cancellation of all
related Executive Employment Agreements of both the Company and NIT Enterprises, Inc.
The Parties agreed to transfer of ownership
of Gary R. Smith's interest in BioDynamic Molecular Technologies, LLC (the "Control Shareholder" of the Company) to Michael
S. Alexander, Director and CEO and Gary D. Alexander, Director and CFO of the Company in equal proportions.
The Parties agreed to allow the Company to
relocate its office; and to the cancellation of related office utility agreements and accounts payable held in the name of the
Company.
On May 24, 2016, the Company’s
Board of Directors agreed that the Company would issue 67,824 shares of its common stock to a related party to extinguish a demand
note payable in the amount of $12,548.