NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND HISTORY
Description of business
BioAdaptives, Inc. (formerly known as APEX 8 Inc.) (“BioAdaptives”,” Company”) was incorporated under the laws of the State of Delaware on April 19, 2013. BioAdaptives is a research, development, and educational company. Our current focus is on products and strategies that improve health and wellness. These products include dietary supplements, specialty food items, and proprietary methods of optimizing the bioelectromagnetic availability of foods and beverages. Our base of intellectual property and products, which are patent pending solutions in the form of devices and nutraceuticals, are designed to aid in cognition, focus, fatigue reduction, increased testosterone, improved overall emotional and physical wellness, healing, and anti-aging.
The Company’s strategy is to develop a position as a leader in supplying science-based quality nutraceutical products to an aging population within developed countries such as the United States, Canada, APAC countries, such as China, Japan, Korea, Singapore, Taiwan, Australia and New Zealand, as well as both Western and Eastern Europe, while continuing to create new innovative, health inspired products to start generating growth in sales and profitability. Some of the products have proven to be as effective or even more effective on horses and dogs than on humans and this has caused the Company to expand the target market to include dogs and horses.
Since 2014, BioAdaptives®, has been engaged in the research of primitive cells, including stem cells and their derivatives and natural ingredients which may encourage its proliferation. Such studies were conducted both on human and animals, in particular, canine and equine. The results have been encouraging. More in depth studies on this and other wellness aspects such as anti-aging and sports performance are scheduled.
On May 22, 2019, the Company moved its corporate office to 2620 Regatta Drive, Suite 102, Las Vegas, NV 89128, but maintained fulfillment facilities at 4385 Cameron Street, Suite B, Las Vegas, NV 89103.
2. SUMMARY OF SIGNIFICANT POLICIES
Basis of presentation
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10, have been omitted.
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 100% owned subsidiary, Blenders Choice Inc. All inter-company balances and transactions have been eliminated. The Company and its subsidiary will be collectively referred to herein as the “Company.”
Use of estimates
The preparation of consolidated financial statements in conformity with US GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company, and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.
Earnings (loss) per share
Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. Diluted earnings per share excludes all dilutive potential shares if their effect is anti-dilutive.
Financial Instruments and Fair Value Measurements
As defined in ASC 820” Fair Value Measurements,” fair value is 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 (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. 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 following table summarizes fair value measurements by level at March 31, 2020 and December 31, 2019, measured at fair value on a recurring basis:
Fair Value Measurements as of March 31, 2020 Using:
|
|
Total Carrying Value as of
|
|
|
Quoted Market
Prices in Active
|
|
|
Significant
Other
Observable
|
|
|
Significant
Unobservable
|
|
|
|
March 31,
2020
|
|
|
Markets
(Level 1)
|
|
|
Inputs
(Level 2)
|
|
|
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
$
|
412
|
|
|
$
|
412
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
509,395
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
509,395
|
|
Fair Value Measurements as of December 31, 2019 Using:
|
|
Total Carrying
Value as of
December 31,
|
|
|
Quoted Market
Prices in Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
|
2019
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
$
|
772
|
|
|
$
|
772
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
464,024
|
|
|
|
-
|
|
|
|
-
|
|
|
|
464,024
|
|
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.
3. GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and had an accumulated deficit of $4,996,839 as of March 31, 2020. The Company requires capital for its contemplated operational and marketing activities. The Company’s ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
In order to mitigate the risk related with this uncertainty, the Company plans to issue additional shares of common stock for cash and services during the next 12 months.
4. MARKETABLE SECURITIES
Equity securities at March 31, 2020 and December 31, 2019, were comprised of 105,736 shares of common stock of Hemp, Inc. (HEMP.PK) recorded at fair value of $412 and $772, respectively.
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at March 31, 2020 and December 31, 2019 consists of the following.
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Accounts payable
|
|
$
|
164
|
|
|
$
|
1,297
|
|
Credit card
|
|
|
22,763
|
|
|
|
20,214
|
|
Accrued interest
|
|
|
14,570
|
|
|
|
2,457
|
|
Accrued liabilities
|
|
|
11,006
|
|
|
|
5,986
|
|
|
|
$
|
48,503
|
|
|
$
|
29,954
|
|
6. NOTE PAYABLE
During the three months ended March 31, 2020, the Company issued additional notes payable of $9,800 to a third party. The term is 6 months. During the three months ended March 31, 2020, the Company recognized interest expense of $589 and repaid $8,150. As of March 31, 2020 and December 31, 2019, the Company owed note payable of $9,711 and $7,218, respectively.
7. CONVERTIBLE NOTES
Convertible notes at March 31, 2020 and December 31, 2019 consists of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Convertible Notes - originated in April 2018
|
|
$
|
95,000
|
|
|
$
|
95,000
|
|
Convertible Notes - originated in June 2018
|
|
|
166,000
|
|
|
|
166,000
|
|
Convertible Notes - originated in October 2018
|
|
|
50,000
|
|
|
|
50,000
|
|
Convertible Notes - issued fiscal year 2019
|
|
|
73,500
|
|
|
|
73,500
|
|
Convertible Notes - issued fiscal year 2019
|
|
|
43,000
|
|
|
|
-
|
|
Total convertible notes payable
|
|
|
427,500
|
|
|
|
384,500
|
|
|
|
|
|
|
|
|
|
|
Less: Unamortized debt discount
|
|
|
(33,981
|
)
|
|
|
(71,607
|
)
|
Total convertible notes
|
|
|
393,519
|
|
|
|
312,893
|
|
|
|
|
|
|
|
|
|
|
Less: current portion of convertible notes
|
|
|
393,519
|
|
|
|
312,893
|
|
Long-term convertible notes
|
|
$
|
-
|
|
|
$
|
-
|
|
For the three months ended March 31, 2020 and 2018, the interest expense on convertible notes was $11,870 and $10,215, respectively. As of March 31, 2020, and December 31, 2019, the accrued interest was $13,261 and $1,391, respectively.
The Company recognized amortization expense related to the debt discount of $40,626 and $38,763 for the three months ended March 31, 2020 and 2019, respectively, which is included in interest expense in the statements of operation.
Convertible Notes – Issued during the year ended December 31, 2018
During the year ended December 31, 2018, the Company issued a total principal amount of $426,000 convertible notes for cash proceeds of $426,000. The convertible notes were also provided with a total of 107,000 common shares valued at $22,210. The terms of convertible notes are summarized as follows:
|
·
|
Term two years;
|
|
·
|
Annual interest rates 12%;
|
|
·
|
Convertible at the option of the holders at any time
|
|
·
|
Conversion prices are based on 50% discount to market value for the common stock based on a 4-week weekly average of the closing price.
|
Convertible Notes – Issued during the year ended December 31, 2019
During the year ended December 31, 2019, the Company issued a total principal amount of $73,500 in convertible notes for cash proceeds of $67,000. The terms of convertible notes are summarized as follows:
|
·
|
Term one year;
|
|
·
|
Annual interest rates 10%;
|
|
·
|
Convertible at 180 days from issuance
|
|
·
|
Conversion prices are 58 - 61% multiplied by the lowest trading price during the 20-trading day period ending on the latest complete training day prior to the conversion date.
|
Convertible Notes – Issued during the three months ended March 31, 2020
During the three months ended March 31, 2020, the Company issued a total principal amount of $43,000 in convertible note for cash proceeds of $40,000. The terms of convertible note are summarized as follows:
|
·
|
Term one year;
|
|
·
|
Annual interest rates 10%;
|
|
·
|
Convertible at 180 days from issuance
|
|
·
|
Conversion prices are 61% multiplied by the lowest trading price during the 20-trading day period ending on the latest complete training day prior to the conversion date.
|
8. DERIVATIVE LIABILITIES
The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The Company accounts for warrants as a derivative liability due to there being no explicit limit to the number of shares to be delivered upon settlement of all conversion options.
Fair Value Assumptions Used in Accounting for Derivative Liabilities.
ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.
The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of March 31, 2020. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model.
For the three months ended March 31, 2020 and year ended December 31, 2019, the estimated fair values of the liabilities measured on a recurring basis are as follows:
|
|
Three
months ended
|
|
|
Year ended
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Expected term
|
|
0.01- 0.42 years
|
|
|
0.22 - 1.43 years
|
|
Expected average volatility
|
|
226% - 317
|
%
|
|
229% - 320
|
%
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
Risk-free interest rate
|
|
0.05% - 0.15
|
%
|
|
1.55% - 2.40
|
%
|
The following table summarizes the changes in the derivative liabilities during the three months ended March 31, 2020.
Fair Value Measurements Using Significant Observable Inputs (Level 3)
|
|
|
|
|
|
Balance - December 31, 2019
|
|
$
|
464,024
|
|
|
|
|
|
|
Gain on change in fair value of the derivative
|
|
|
45,371
|
|
Balance - March 31, 2020
|
|
$
|
509,395
|
|
The aggregate (gain) loss on derivatives during the three months ended March 31, 2020 and 2019 was as follows;
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
(Gain) loss on change in fair value of the derivative liabilities
|
|
$
|
45,371
|
|
|
$
|
(208,445
|
)
|
9. STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue 5,000,000 shares of $.0001 par value preferred stock. As of March 31, 2020, and December 31, 2019, no shares of preferred stock had been issued.
Series A Preferred Stock
On February 6, 2020, the Company established its Series A Preferred Stock, par value .0001, by filing a Certificate of Designation with the Delaware Secretary of State. The Company’s board exercised “blank check” authority to establish classes of preferred stock without approval by shareholders under provision of its original Articles of Incorporation and has designated 4,000,000 shares of Series A Preferred Stock (the “Shares”).
The Company may use the Series A Preferred Stock for purpose of asset acquisition or in satisfaction of recognized debt; they are not otherwise available for sale. The Series A Preferred Stock have enhanced voting privileges under certain circumstances; the collective right to appoint elect one director, at the Holders’ option; and conversion-to-common rights at a 5:1 ratio.
As of March 31, 2020, no shares of Series A Preferred Stock had been issued.
Common Stock
On February 6, 2020, the Company’s board and a majority of its shareholders approved an amendment to the Company’s Articles of Incorporation to increase the authorized number of shares of its common stock, par value .0001, from 100,000,000 shares to 200,000,000 shares.
During the three months ended March 31, 2020, the Company recorded 272,914 common stock issuable valued at $36,000 based on an employment agreement – related party transaction.
During the three months ended March 31, 2020, the Company recorded 400,000 common stock issuable valued at $47,115 for services.
As of March 31, 2020, and December 31, 2019, there were 19,611,683 and 18,938,769 shares of the Company’s common stock issued and outstanding, respectively. In addition, as of March 31, 2020 and December 31, 2019, there were 1,105,514 shares and 832,600 shares of the Company’s common stock issuable, respectively.
Warrant
During the year ended December 31, 2018, the Company entered into an agreement with consultant to provide the Company with consulting services in exchange for 2-year warrant to purchase 200,000 shares of common stock with an exercise price of $0.1 per share. The Company recognized a warrant expense of $52,365, as stock-based compensation and additional paid-in capital. The Company determined that the warrants qualify for derivative accounting as a result of the related issuance of the convertible note on in April 2018, which led to no explicit limit to the number of shares to be delivered upon future settlement of the conversion options (see Note 8).
During the three months ended March 31, 2020, all warrant to purchase 200,000 shares of common stock were expired.
10. RELATED PARTY TRANSACTIONS
Notes payable – related party
During the year ended December 31, 2019, the Company issued a total principal amount of $50,000 notes to the company owned by our CEO. The note is a 4% interest bearing promissory note that the term is 1 year.
As of March 31, 2020 and December 31, 2019, the Company recorded notes payable – related party of $50,000 and $50,000 and accrued interest of $1,309 and $809, respectively.
Employee agreements
In June 2018, the Company originally entered into an employment agreement with Dr. Edwards E. Jacobs, Jr.,our CEO. A base compensation is $10,000 monthly and 100,000 shares of common stock valued at $27,500. In October 2018, the agreement was amended to a base compensation is $7,000 in cash or equivalent in common stock. During the three months ended March 31, 2020, the Company recorded Stock based compensation of $21,000 (See Note 9).
In August 2019, the Company entered into an employment agreement with Robert W. Ellis, our president. A base compensation is $5,000 in cash per monthly and 250,000 shares to be issued on August 31, 2020 valued at $26,375. During year ended December 31, 2019, the Company recorded Stock based compensation of $6,594. As of March 31, 2020 and December 31, 2019, the Company recorded accrued liability of $10,000 and $5,000, respectively.
In September 2019, the Company entered into an employment agreement with Ronald Lambrecht, our Chief Financial Officer. A base compensation is $5,000 equivalent in common stock monthly and 100,000 shares to be issued on September 30, 2020 valued at $11,010. The service will be provided from January 2, 2020. During the three months ended March 31, 2020, the Company recorded Stock based compensation of $18,670.
11. EARNING (LOSS) PER SHARE
The following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share ("EPS") calculations.
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Numerator:
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(237,922
|
)
|
|
$
|
92,445
|
|
Gain on change in fair value of derivatives
|
|
|
-
|
|
|
|
(208,445
|
)
|
Interest on convertible debt
|
|
|
-
|
|
|
|
10,215
|
|
Net Income (Loss) - diluted
|
|
$
|
(237,922
|
)
|
|
$
|
(105,785
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average shares of common stock
|
|
|
18,938,769
|
|
|
|
18,423,893
|
|
Dilutive effect of convertible instruments
|
|
|
-
|
|
|
|
4,134,404
|
|
Dilutive effect of outstanding warrants
|
|
|
-
|
|
|
|
62,628
|
|
Diluted weighted-average of common stock
|
|
|
18,938,769
|
|
|
|
22,620,925
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per Common Share:
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
(0.01
|
)
|
|
$
|
0.01
|
|
Diluted:
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
For the periods ended March 31, 2020, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss) per share.
For the periods ended March 31, 2019, diluted earnings per share is calculated using net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during each period determined using the treasury stock method and the if-converted method.
12. SUBSEQUENT EVENT
The Company has developed and is marketing PrimaLungs™, an enhanced formulation of nutraceuticals promoting overall health and wellness through support of pulmonary immune systems. PrimaLungs™ is packaged with PrimaCell® and PluriPain™ in the Immune Wellness Health Defense Package, which contains a 30-day supply of each compound. Additional information can be found at www.primalung.com and www.Pluripain.com.
The Company has commenced a marketing program to identify internet influencers and other notables in the TCM, Ayurvedic and animal health and wellness fields for affiliate marketing purposes. To-date, we have entered into two affiliate marketing agreements.