Washington, D.C. 20549
FORM 10-Q
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended April 30, 2015
☐	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 000-53551
NUTRANOMICS, INC.
(Exact name of registrant as specified in its charter)
Nevada		98-0603540
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
11487 South 700 East Salt Lake City, UT 84020
(Address of principal executive offices, including zip code)
(801) 576-8350
(Registrant's telephone number, including area code)
n/a
(Former name, former address and former fiscal year, if changed since last report)

 

Yes

☒

No

☐

Yes

☒

No

☐

Large accelerated filer  ☐	Accelerated filer  ☐
Non-accelerated filer  ☐	Smaller reporting company  ☒

Yes

☐

No

☒

NUTRANOMICS, INC.

FORM 10-Q

 

For the Quarterly Period Ended April 30, 2015

 

INDEX

 

 

 

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PART I – FINANCIAL INFORMATION 

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

 

HEALTH EDUCATION CORPORATION

d.b.a NUTRANOMICS, INC.

Consolidated Balance Sheets

ASSETS
		April 30,				July 31,
		2015				2014
CURRENT ASSETS		(Unaudited)
Cash and cash equivalents		$	39,273			$	79,235
Accounts receivable, net of allowance			151,810				152,879
Prepaid expenses			1,283				4,516
Other current assets			49,313				23,254
Inventory			136,542				271,941
Total Current Assets			378,221				531,825
PROPERTY & EQUIPMENT, net			10,583				16,355
INTANGIBLES, net			44,833				-
OTHER ASSETS
Rent deposit			2,000				2,000
Total Assets		$	435,637			$	550,180
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	494,411			$	518,890
Lines of credit			36,234				33,098
Convertible notes payable-current portion net of discount			467,560				58,999
Loan payable-current portion			35,426				51,071
Note Derivative Liability			188,391				177,907
Warrant Liability			115,782				-
Related party payable			17,239				21,083
Related party notes payable			-				36,608
Unearned revenue			315,327				338,263
Total Current Liabilities			1,670,370				1,235,919
LONG-TERM LIABILITIES
Convertible notes payable			181,426				525,000
Loan payable			142,190				157,830
Total Liabilities			1,993,986				1,918,749
STOCKHOLDERS' DEFICIT
Common stock; par value of $.001, 750,000,000 shares authorized; 161,481,887 and 51,151,766 shares issued and outstanding at April 30, 2015 and July 31, 2014, respectively			161,482				51,153
Additional paid in capital			4,159,137				3,337,911
Accumulated deficit			(5,878,855	)			(4,757,633	)
Accumulated Other Comprehensive Income			(113	)			-
Total Stockholders' Deficit			(1,558,349	)			(1,368,569	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	435,637			$	550,180

HEALTH EDUCATION CORPORATION

d.b.a NUTRANOMICS, INC.

Consolidated Statements of Operations

(Unaudited)

		For the Three Months Ended								For the Nine Months Ended
		April 30,								Apr 30,
		2015				2014				2015				2014
REVENUES		$	432,414			$	716,763			$	1,345,110			$	1,943,742
COST OF SALES			197,052				370,129				659,379				1,269,526
			235,362				346,634				685,731				674,216
OPERATING EXPENSES
General and administrative			86,661				161,951				265,704				402,048
Professional fees			111,939				338,197				310,337				930,350
Research and development			-				616				93				32,233
Salaries and wages			139,928				146,780				931,499				760,886
Total Operating Expenses			338,528				647,544				1,507,633				2,125,517
OPERATING (LOSS)			(103,166	)			(300,910	)			(821,902	)			(1,451,301	)
OTHER INCOME (EXPENSE)
Other income			999				-				999				-
Loss on settlement of fraudulent activity			-				-				-				(37,300	)
Change in Fair Value of Derivative			33,305				5,981				49,878				6,598
Interest expense			(69,197	)			(32,425	)			(350,197	)			(71,326	)
Total Other Income (Expense)			(34,893	)			(26,444	)			(299,320	)			(102,028	)
NET (LOSS) BEFORE INCOME TAXES			(138,059	)			(327,354	)			(1,121,222	)			(1,553,329	)
Provision for income taxes
NET (LOSS)		$	(138,059	)		$	(327,354	)		$	(1,121,222	)		$	(1,553,329	)
BASIC AND DILUTED LOSS PER SHARE		$	(0.00	)		$	(0.01	)		$	(0.01	)		$	(0.03	)
WEIGHTED AVERAGE NUMBER			152,764,167				49,180,788				89,138,400				47,446,714
OF SHARES OUTSTANDING
Weighted Average Shares Outstanding - Basic and Diluted			152,764,167				49,180,788				89,138,400				47,446,714
NET INCOME (LOSS)			(138,059	)			(327,354	)			(1,121,222	)			(1,553,329	)
Foreign Currency Translation			(5	)			-				(113	)			-
TOTAL COMPREHENSIVE INCOME (LOSS)			(138,064	)			(327,354	)			(1,121,335	)			(1,553,329	)

The following table summarizes the consideration given for Nutriband and the fair values of the assets acquired and liabilities assumed recognized at the acquisition date.  The entire amount of the excess of the estimated consideration given over the working capital acquired, has been provisionally allocated to goodwill.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basic loss per share ("EPS") is computed by dividing net loss (the numerator) by the weighted-average number of common shares outstanding for the period (the denominator). Diluted EPS is computed by dividing net loss by the weighted-average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include common shares to be issued related to convertible debentures and stock pending issue under the ratchet provision.

As the Company has incurred losses for the nine months ended April 30, 2015 and 2014, the potentially dilutive shares are anti-dilutive and are thus not added into the loss per share calculations. As of April 30, 2015, there were 249,636,981 anti-dilutive shares related to convertible notes based on their terms and conditions with none related to warrants.

The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has generally had net losses after consideration of income taxes. Further, the Company has negative working capital and insufficient cash flows from operation as of April 30, 2015, and does not have the requisite liquidity to pay its current obligations. These factors, among others, raise substantial doubt about its ability to continue as a going concern. Management will seek to increase revenues and reduce costs, while raising capital through the sale of its stock. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("US GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from those estimates.

 

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Our revenue is derived from the service revenue from Live Blood Analysis, sale of retail products, and revenue derived from educational services.

The Company's revenue recognition policy is in accordance with the requirements of Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition ("SAB 104"), and other applicable revenue recognition guidance under US GAAP. Sales revenue is recognized for our retail and wholesale customers when: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed or determinable, (iii) title and risk of loss have transferred, and (iv) collectability is reasonably assured — generally when products are shipped to the customer and services are rendered, except in situations in which title passes upon receipt of the products by the customer. In this case, revenues are recognized upon notification that customer receipt has occurred. The Company accrues an estimated amount for sales returns and allowances related to defective or returned products at the time of sale based on its ability to estimate sales returns and allowances using historical information. For the nine months ended April 30, 2015 and 2014, the Company calculated the amount to be less than 1% of sales so no allowance was accrued in either year. Shipping and handling fees and related freight costs and supplies associated with shipping products to customers are included as a component of cost of sales. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

The Company also recognizes revenues from the distribution of its product through trade partners. Related revenues consist of product costs, distribution fees, testing and labeling costs, as well as any associated administrative fees. The Company recognizes these revenues after the product has been shipped from the outsource manufacturer to the trade partner. The Company has contractual obligation to pay the outsource manufacturers, and as a principal in these arrangements the Company includes the total product price as revenue in accordance with applicable accounting guidance. The Company has separately negotiated contractual relationships with its trade partners, and under contracts with these trade partners the Company assumes the credit risk of product produced by the outsource manufacturer and dispensed to the trade partner.

Unearned Revenues consist of cash received in advance for products to be delivered at a future date. The Company records the payments received as a liability until the products are delivered. The Company recorded unearned revenue of $315,327 and $338,263 as of April 30, 2015 and July 31, 2014, respectively.

 

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The Company includes product costs (i.e. material, direct labor and overhead costs), shipping and handling expense, insurance on inventory, production-related depreciation expense and product license agreement expense in cost of sales.

NOTE 3 – COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS

On March 20, 2014, the Company's subsidiary, Health Education Corporation ("Health Education"), was served a copy of a complaint filed by EpicEra Incorporated ("Epic") in the Utah Third Judicial District Court for the return of a $100,000 deposit paid by Epic to Health Education for the supply of nutritional products. On April 16, 2014, Health Education answered the Complaint and filed a counterclaim against Epic and third-party claims against eCosway USA, Inc. ("eCosway," which is Epic's owner), and its principals, for breach of a non-disclosure and non-circumvention agreement, unjust enrichment, fraud, and fraudulent nondisclosure. Health Education's claims alleged that (1) eCosway and its principals have defrauded Health Education and engaged in a scheme of corporate espionage to misappropriate Health Education's proprietary information and trade secrets to launch their new multilevel marketing company, Epic; (2) under the fraudulent guise of partnering with Health Education to have Health Education formulate and produce the health products to be sold by Epic's distributors, eCosway and its principals signed a non-disclosure and non-circumvention agreement that they had no intention of honoring in order to gain access to Health Education's proprietary information so that they could steal that information and use it for their own benefit; (3) Health Education relied upon the non-disclosure and non-circumvention agreement and misrepresentations of Epic, eCosway, and its principals, and disclosed the proprietary information and formulations, which Epic then appropriated as its own. Health Education's claims request general damages as well as punitive damages. On May 6, 2015, fact discovery concluded, and expert discovery has also concluded. Epic filed a motion for summary judgment on or about June 2, 2015, Health Education opposed the motion on or about June 19, 2015, and a hearing has been scheduled for September 9, 2015.

On January 16, 2015, the Company was served a copy of a complaint filed by NHK Laboratories, Inc., in the Superior Court of California, County of Los Angeles, arising out of an alleged breach of contract by the Company and seeking $79,769.92 in principal, plus interest and attorney fees. The Company retained local counsel who answered the complaint, and the case is currently in the discovery phase.

NOTE 4 – LEASES

The Company leases a 3,000 square foot office in the Draper, Utah that serves as its principal executive offices was renewed on December 15, 2014 for 2 years. Pursuant to the lease, the rent for the nine months ended April 30, 2015 and 2014, totaled $37,475 and $35,910, respectively.

The Company has the ability to sublease three rooms totaling 1,500 square feet of their Draper office space on a month to month basis. The company subleased only one room during 2014 and terminated that sublease prior to 2015. Pursuant to the sublease agreements, the monthly rent received for the nine months ended April 30, 2015 and 2014 totaled $0 and $1,850, respectively.

The Company leased certain machinery and equipment in 2013 and 2012 under an agreement that is classified as an operating lease. The lease expired on July 15, 2013, and is now leased on a month-to-month basis. Rent expense under the operating lease totaled $2,648 and $3,277 at for the nine months ended April 30, 2015 and 2014, respectively.

The future minimum lease payments required under the operating leases as of July 31, 2014, are as follows:

 

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NOTE 5 – RELATED PARTY NOTES PAYABLE

In January 2012, the Company entered into a two year, zero percent note with an 8% imputed interest rate with a director in the amount of $150,000. The note was due on December 31, 2014. The Company agreed to pay royalty payments in connection with sales of a certain product line.

As of July 31, 2014 the balance on the related part note was $36,608.  On December 12, 2014, the Company settled its related party note payable in the amount of $35,036 with a Company director in exchange for $30,000 cash, additional paid in capital of $3,989, and offsets of $1,138 in related party liabilities.

NOTE 6 – RELATED PARTY PAYABLE

Related party payables consist of payments made by a director through credit cards and use of a line of credit used to pay expenses on behalf of the Company. During the nine months ended April 30, 2015 and 2014, the officer lent $0 and $0 and the Company made payments of $3,844 and $9,019, respectively. As of April 30, 2015 and July 31, 2014, the Company owed a total of $17,239 and $21,083 in related party payables.

NOTE 7 – LINES OF CREDIT AND LOAN PAYABLE

The Company maintains a Line of Credit with Key Bank (the "Lender"). The Line of Credit was opened on August 28, 2012, with an available $250,000 to be drawn on for one year, not to exceed the principal amount ("draw period"). Once the draw period is completed, advances will no longer be permitted and the Company shall repay the principal and interest outstanding, over 5 years ("repayment period"). The repayment period begins August 28, 2013, after which a minimum monthly payment amount will be determined. The initial interest rate is 5.210%, and is variable. The variable interest rate is based on an independent index which is the "prime rate" as published each business day in the "Money Rates" column of the Wall Street Journal. Interest on the note is computed on a 365/365 simple interest basis, using 1.960% points over the index. The Lender executed a commercial security agreement. With this agreement, the Lender is entitled to a security interest in the Company's inventory, chattel paper, accounts receivable and general intangibles. In August 2013, the line of credit was converted into a note, and the Company is no longer able to borrow any additional funds. Under the new terms of the note, the note has a face value of $250,000 that matures on September 1, 2018, with an interest rate of prime plus 1.960%, and as of the date of the note, the interest rate was 5.21%. The note has minimum monthly payments of $4,745 which started on October 1, 2013. The balance outstanding on this note and line of credit as of April 30, 2015 and July 31, 2014, was $177,615 and $208,901, respectively. As of April 30, 2015, the Company has paid $72,385 in principal payments. The Lender allowed the Company to absorb a prior $50,000 note into the note, not affecting the repayment date. The Company did incur issuance costs of $4,037, which were expensed upon occurrence.

Loans payable consisted of the following as of April 30, 2015 and July 31, 2014:

In 1998, the Company entered into a line of credit with Zions Bank ("Lender") with a credit limit of $40,000. The line bears a compounding per annum fixed interest rate of 5.25%. As of April 30, 2015 and July 31, 2014, the Company owed $36,234 and $33,098 in principal, respectively. The Lender executed a commercial security agreement. With this agreement, the Lender is entitled to a security interest in the Company's inventory, chattel paper, accounts receivable and general intangibles. The Company did incur a setup fee, which has been fully amortized. There is no term limit on the line and the Company is allowed to draw up to its dollar limit. The loan payable was defaulted on April 28, 2015 and corrected on June 10, 2015 with an extention fee of $1,590 and legal fees of $1,429.

 

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NOTE 8 – CONVERTIBLE NOTES PAYABLE AND LOAN PAYABLE

Convertible notes payable consisted of the following as of April 30, 2015 and July 31, 2014, respectively:

 

 

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On September 27, 2013, the Company issued a convertible note to an unrelated party for $250,000 that matures in September 27, 2015. The note bears an interest rate of 10% per annum with a floor of $.005 per share, and principal is convertible at any time after September 27, 2013 in part or in whole into shares of the Company's common stock using the average closing prices for five trading days directly preceding the conversion date. Interest is not convertible and is due upon conversion or at maturity date.

On October 18, 2013, the Company issued a convertible note to an unrelated party for $125,000 that matures in October 18, 2015. The note bears an interest rate of 10% per annum with a floor of $.005 per share, and principal is convertible at any time after October 18, 2013 in part or in whole into shares of the Company's common stock using the average closing prices for five trading days directly preceding the conversion date. Interest is not convertible and is due upon conversion or at the maturity date.

On November 22, 2013, the Company issued a convertible note to an unrelated party for $150,000 that matures in November 22, 2015. The note bears an interest rate of 10% per annum with a floor of $.005 per share, and principal is convertible at any time after November 22, 2013 in part or in whole into shares of the Company's common stock using the average closing prices for five trading days directly preceding the conversion date. Interest is not convertible and is due upon conversion or at the maturity date.

On January 14, 2014, the Company entered into a convertible promissory note with Asher Enterprises, Inc. ("Asher") a Delaware corporation for an 8% convertible promissory note with an aggregate principal amount of $78,500 which together with any unpaid accrued interest is due on October 17, 2014. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder's option 180 days from inception at a variable conversion price calculated as 58% of the Market Price, which means the average of the lowest three Trading Prices (defined as the closing bid prices) during the ten trading day period ending on the last complete trading day prior to the conversion date with a floor of $.00005 as stated in the conversion feature. In January 2014, the Company received cash in the amount of $58,600, with the remaining $19,900 being used for legal and accounting fees. The Company analyzed the note on the issuance date on January 14, 2014. The Company determined that the variable conversion price and the floor exceeding the authorized number of shares results in the need for bifurcation into a separate derivative liability valued at fair market value. On January 14, 2014, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $87,968 and a discount on the note of $78,500.

On March 19, 2014, the Company entered into a convertible promissory note with KBM Worldwide, Inc. ("KBM") a New York corporation for an 8% convertible promissory note with an aggregate principal amount of $53,000 which together with any unpaid accrued interest is due on December 26, 2014. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder's option 180 days from inception at a variable conversion price calculated as 58% of the Market Price, which means the average of the lowest three Trading Prices (defined as the closing bid prices) during the three trading day period ending on the last complete trading day prior to the conversion date with a floor of $.00005 as stated in the conversion feature. In March 2014, the Company received cash in the amount of $24,487, with the remaining $6,898 being used for legal and accounting fees. The Company analyzed the note on the issuance date on January 14, 2014. The Company determined that the variable conversion price and the floor exceeding the authorized number of shares results in the need for bifurcation into a separate derivative liability valued at fair market value. On March 19, 2014, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $47,806 and a discount on the note of $49,010.

 

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On May 15, 2014, the Company entered into a convertible promissory note with KBM Worldwide, Inc. ("KBM") a New York corporation for an 8% convertible promissory note with an aggregate principal amount of $63,000 which together with any unpaid accrued interest is due on February 2, 2015. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder's option 180 days from inception at a variable conversion price calculated as 58% of the Market Price, which means the average of the lowest three Trading Prices (defined as the closing bid prices) during the three trading day period ending on the last complete trading day prior to the conversion date with a floor of $.00005 as stated in the conversion feature. In May 2014, the Company received cash in the amount of $42,500, with the remaining $17,500 being used for legal fees. The Company analyzed the note on the issuance date on January 14, 2014. The Company determined that the variable conversion price and the floor exceeding the authorized number of shares results in the need for bifurcation into a separate derivative liability valued at fair market value. On May 15, 2014, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $56,591 and a discount on the note of $56,591.

On November 14, 2014, Asher converted an additional $15,000 of principal related to the January 14, 2014, convertible note, into 931,677 shares of the Company's common stock at $0.0161 per share. The remaining principal balance due after the conversion was $21,500.

On December 8, 2014, Asher converted an additional $12,500 of principal related to the January 14, 2014, convertible note, into 1,041,667 shares of the Company's common stock at $0.012 per share. The remaining principal balance due after the conversion was $9,000.

On December 2, 2014, the Company entered into a collateralized secured convertible promissory note with LG Capital Funding, LLC ("LG"), a New York limited liability company, for an 8% convertible promissory note with an aggregate principal amount of $73,500, which together with any unpaid accrued interest is due on December 2, 2015. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder's option 180 days from inception at a variable conversion price calculated as 58% of the average of the lowest three closing bid prices during the ten trading day period ending on the conversion date. This note was funded on December 10, 2014, when the Company received cash in the amount of $70,000, with the remaining $3,500 being used for LG's legal and other origination expenses.  On December 2, 2014, the Company also entered into a second $73,500 convertible promissory note with LG on the same terms as the first note and due on December 2, 2015, which has not yet been funded.  This note is collateralized by a secured promissory note issued by LG to the Company for $73,500, due on August 2, 2015, and accruing interest at the rate of 8% per annum. This note was canceled along with the derivative liability on June 3, 2015 due to the fact that the Company had not maintained a stock price in excess of .002 at all times.

On December 2, 2014, the Company entered into a collateralized secured convertible promissory note with Typenex Co-Investment, LLC ("Typenex"), a Utah limited liability company, for an 10% convertible promissory note with an aggregate principal amount of $224,000, of which the company is to assume $20,000 in original interest discount ("OID") and legal fees and other expenses of Typenex totaling $4,000, which together with any unpaid accrued interest is due on September 10, 2016. The note is to be issued in tranches with an initial tranche of $59,000, of which the company received $50,000 on December 10, 2014, with the remaining $4,000 being used for legal and other expenses of Typenex and the Company assuming $5,000 in OID. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at a variable conversion price calculated as 58% of the average of the lowest three closing bid prices during the ten trading day period ending on the last complete trading day prior to the conversion date. The remaining three tranches of $55,000 of funding to the Company under the note will consist of $50,000 in principal and the $5,000 in OID, which have not yet been funded, and shall correspond to three $50,000 promissory notes issued by Typenex in favor of the Company, accruing interest at 8% per annum and maturing on September 2, 2016.

 

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In conjunction with the Company's convertible note issued to Typenex and Typenex's three promissory notes issued to the Company for the three additional tranches of funding to the Company, the Company issued four warrants for a total number of shares equal to $112,000 ($29,500 for the first warrant corresponding to funding on December 10, 2014, and $27,500 for the other three warrants corresponding to the future tranches of funding by Typenex to the Company) divided by the conversion market price in the Typenex convertible note. The warrants have an exercise price of $0.06, subject to adjustment, and expire on December 2, 2019. Each of the warrants are only exerciseable after the corresponding tranche of funding by Typenex to the company has been paid. Therefore, the first warrant is currently exerciseable, but the other three warrants are not. On December 10, 2014, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $84,512 and a discount on the note of $59,000.

On December 2, 2014, the Company entered into a convertible promissory note with JMJ Financial, a Nevada sole proprietorship ("JMJ"), with a face amount of $350,000, of which the company is to assume $35,000 in original interest discount ("OID"), which together with any unpaid accrued interest is due on Dec 2, 2016.  The note is to be funded by JMJ at its discretion, and the initial tranche was funded on December 16, 2014, when the Company received cash in the amount of $55,000. The note balance funded (plus a pro rata portion of the OID) together with any unpaid accrued interest is convertible into shares of common stock at a variable conversion price calculated as 65% of the average of the lowest trade price during a 25-day period ending on the last complete trading day prior to the conversion date. On December 16, 2014, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $71,321 and a discount on the note of $65,000.

On December 23, 2014, Asher converted an additional $12,500 of principal related to the January 14, 2014, convertible note, into 1,686,111 shares of the Company's common stock at $0.0072 per share. The remaining principal balance due after the conversion was $0.

During the nine month period ended April 30, 2015, the Company also issued 90,715,944 shares of Common Stock for share-based compensation, acquisitions, and consulting services.

The Company entered into an equity purchase agreement with Southridge Partners II, LP ("Southridge") on December 9, 2013. Pursuant to the Equity Purchase Agreement, Southridge committed to purchase up to $10,000,000 of the Company's common stock, over a period of time terminating on the earlier of: (i) 24 months from the effective date of a registration statement to be filed in connection therewith or (ii) the date on which Southridge has purchased shares of common stock pursuant to this agreement for an aggregate maximum purchase price of $10,000,000; such commitment is subject to certain conditions. The purchase price to be paid by Southridge will be 90% of the average of the lowest three (3) daily volume weighted average prices for the Company's common stock for the ten (10) trading days immediately following clearing of the Estimated Put Shares (defined below) (such purchase price the "Put Purchase Price") under the Equity Purchase Agreement.

The Company will deliver to Southridge, simultaneously with delivery of a Put Notice, a number of Shares equal to 125% of the Investment Amount divided by the closing price of the Company's common stock on the day preceding the Put Notice date (the "Estimated Put Shares"). The actual number of Shares purchased by Southridge for the Investment Amount shall then be calculated by dividing the Investment Amount by the Put Purchase Price. Any excess Estimated Put Shares shall then be returned to the Company.

The number of Shares sold to Southridge at any time shall not exceed the number of such shares that, when aggregated with all other shares of common stock of the Company then beneficially owned by Southridge, would result in Southridge owning more than 9.99% of all of the Company's common stock then outstanding. Also as part of the equity purchase agreement, the Company issued a promissory note to Southridge for $50,000, with 0% interest. This note matures on May 31, 2014 and is not convertible into common stock. Finally, as part of the equity purchase agreement, Southridge is prohibited from executing any short sales of the Company's common stock during the term of the equity purchase agreement.

 

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The Company will not be entitled to put shares to Southridge:

The Equity Purchase Agreement further provides that Southridge is entitled to customary indemnification from the Company for any losses or liabilities it suffers as a result of any breach of any provisions of the Equity Purchase Agreement or the Registration Rights Agreement, or as a result of any lawsuit brought by a third-party arising out of or resulting from Southridge's execution, delivery, performance or enforcement of the Equity Purchase Agreement or the Registration Rights Agreement or from material misstatements or omissions in the prospectus accompanying the registration statement for the resale of the shares issued to Southridge.

As of April 30, 2015, 2,107,554 shares have been issued under the Equity Purchase Agreement representing $137,120 in cash received.

NOTE 11 – DERIVATIVE LIABILITY

FASB ASC 820 defines fair value, establishes a framework for measuring fair value under U.S. generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under FASB ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, with the first two inputs considered observable and the last input considered unobservable, that may be used to measure fair value as follows:

 

·	Level one -- Quoted market prices in active markets for identical assets or liabilities;
·	Level two – Inputs, other than level one inputs, that are either directly or indirectly observable; and
·	Level three -- Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The Company has one liability measured at fair value on a recurring basis, which consists of a derivative liability on certain convertible notes payable (see note 11). As of April 30, 2015 this derivative liability had an estimated fair value of $188,391. The Company has no assets that are measured at fair value on a recurring basis.

The following table presents information about our derivative liability, which was our only financial instrument measured at fair value on a recurring basis using significant inputs other than level one inputs that are either directly or indirectly observable (Level 2) as of April 30, 2015:

 

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The fair value of this derivative liability was calculated using the multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash flow model. These models are based on future projections of the various potential outcomes. The features in the notes that were analyzed and incorporated into the model included the conversion feature with the reset provisions; redemption provisions; and the default provisions. Assumptions used to calculate the fair value of the derivative liability were as follows:

 

In addition to the assumptions above, the Company also takes into consideration whether or not the Company would participate in another round of financing and if that financing is registered or not and what that stock price would be for the financing at that time. The Company will continue to adjust the derivative liability for changes in fair value until the notes matured on October 14, 2014, and mature on December 26, 2014 and February 2, 2015.

NOTE 12 – INDUSTRY SEGMENT, GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS

Geographic Sales Regions

We currently sell and distribute our products six geographic regions: North Asia, Greater China, South Asia/Pacific, Europe, Middle East, and Americas. The following table sets forth the revenue for each of the geographic regions for the three and nine months ended April 30, 2015 and 2014:

 

 

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The table below lists our equipment, net, by geographic area for both the three and nine months ended April 30, 2015 and July 31, 2014:

 

		April 30, 2015								July 31, 2014
Americas		$	10,583				100.00	%		$	16,355				100.00	%
North Asia			-				-				-				-
Greater China			-				-				-				-
South Asia/Pacific			-				-				-				-
Europe			-				-				-				-
		$	10,583				100.00	%		$	16,355				100.00	%

 

The table below lists revenue generated by each of the Company's product lines during the three and nine months ended April 30, 2015 and 2014:

 

 

Significant Customers

Three customer's make up 36.7% and 37.2% of total sales as of the three months ended April 30, 2015 and 2014, respectively, and 32.6% and 46.1% of total sales as of the nine months ended April 30, 2015 and 2014, respectively.

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NOTE 13 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through July 7, 2015, which is the date the financial statements were available to be issued. The Company identified the following subsequent events through July 7, 2015:

Revenues derived from product sales totaled $431,893 and $1,337,130, or 99.88% and 99.41%, in the three and nine months ended April 30, 2015, as compared to $713,438 and $1,929,028, or 99.54% and 99.24%, in the comparable period in 2014, respectively. The company also derived revenue from NBA services in the amount of $521 and $7,980, or .12% and .59%, in the three and nine months ended April 30, 2015, as compared to $3,325 and $14,714, or .46% and .76%, in the three and nine months ended April 30, 2014, respectively. The company did not derive revenues from educational services in 2015 or 2014.

Our cost of sales decreased from $370,129 and $1,269,526 in the three and nine months ended April 30, 2014, to $197,052 and $659,379 in the three and nine months ended April 30, 2015, a decrease of 46.76% and 48.06% totaling $173,077 and $610,147. The decrease relates cost cutting measures implemented by management and also directly relates to the decrease in product sales in 2015.

Interest expense increased from $32,425 and $71,326 in the three and nine months ended April 30, 2014 to $69,197 and $350,197 in the three and nine months ended April 30, 2015, an increase of 113.41% and 390.98% totaling $36,772 and $278,871, respectively. The increase is due to the Company taking out six convertible notes in the current nine-month period.

Our operating expenses for the three and six-month periods ended April 30, 2015 and 2014 are outlined in the table below:

 

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Our total operating expenses for the three and nine months ended April 30, 2015, were $338,528 and $1,507,633 as compared to $647,544 and $2,125,517 for the comparable periods in 2014, a decrease of 47.72% and 29.07% totaling $309,016 and $617,884.  The decrease in operating expenses during the three and nine months ended April 30, 2015 as compared to the same periods in 2014 was due to decreases in salaries and wages, general and administrative, and professional expenses.

General and administrative expense decreased from $161,951 and $402,048 in the three and nine months ended April 30, 2014 to $86,661 and $265,704 in the comparable period in 2015, an decrease of 46.49% and 33.91% totaling $75,290 and $136,344, respectively.  The change is due mainly to decreased travel expense, insurance, and freight expense in the three and nine months ended April 30, 2015, compared to the same period in 2014.

Research and development expense decreased as a result of the Company having completed a large clinical study on the effects of the patented AES™ during the 2014 fiscal year, which decreased research and development expense from $616 and $32,233 in the three and nine months ended April 30, 2014, to $0 and $93 in the same period in 2015.

Professional fees decreased from $338,197 and $930,350 in the three and nine months ended April 30, 2014 to $119,939 and $310,337 in the three and nine months ended April 30, 2015, an decrease of $226,258 and $620,013.  The decrease is due to the Company both reducing the number of outside consultants providing management services for the public company and obtaining better rates for those services including engaging outside accountants to provide accounting services, engaging auditors to review and audit its financial statements, incurring increased legal expenses, and issuing stock for services as a result of becoming a public company.

Salaries and wages expenses decreased and increased from $146,780 and $760,886 in the three and nine months ended April 30, 2014, to $139,928 and $931,499 during the same periods in 2015, a decrease of 4.67% and an increase of 22.42% totaling $6,852 and $170,613, respectively. The overall increase is due to an increase in compensation to one of our directors and due share-based compensation to our CEO for acquiring Nutriband, his appointment to the Board of Directors, and his employment contract.

The Company issued stock bonuses of 37,657,463 million and 44,117,647 shares of common stock to the Company's CEO and Director respectively during the nine-months ended April 30, 2015.

 

 

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The Company had current assets of $378,221 during the nine months ended April 30, 2015, as compared to $746,648 in the comparable period in 2014; the decrease is mostly due to the Company reducing the amounts of Accounts Receivable through collections, lower inventory levels, and reduced prepaid expenses, and increased cash payments to vendors in the current period.  The Company had current liabilities of $1,670,370 during the nine months ended April 30, 2015, as compared to $841,305 in the comparable period in 2014. The increase is mainly due to an increase in convertible notes, derivative liability, increase in unearned revenues, and an increase in accounts payable and accrued expenses due to a decrease in sales. The Company has incurred cumulative losses since inception of $4,757,634. As of April 30, 2015, the Company had a working capital deficit of ($1,292,149) due to reoccurring losses and borrowing to cover those losses during the nine months ended April 30, 2015, as compared to the same period in 2014.

Cash used in operating activities decreased to ($376,501) during the nine months ended April 30, 2015, as compared to ($600,315) in the comparable period in 2014. The decrease was mostly due to changes in net income (loss), accounts receivable, inventory, unearned revenue, share-based compensation, change in debt discount, and accounts payable.

Cash from financing activities decreased to $336,539 during the nine months ended April 30, 2015 as compared to 638,397 in the comparable period in 2014. The decrease was mostly due to decrease in borrowing of convertible notes coupled with a decrease in proceeds from related party notes payable and lines of credit.

Cash used in investing activities decreased to 0 during the nine months ended April 30, 2015 from $638,397 in the same period in 2014. The change is due to the company seeking funding through other sources.

The future of the Company as an operating business will depend on its ability to obtain sufficient capital contributions and/or financing as may be required to sustain its operations. Management's plan to address these issues includes a continued exercise of cost controls to conserve cash and obtaining additional debt and/or equity financing.

As we continue our business operations, we will continue to experience net negative cash flows from operations, pending receipt of significant revenues that generate a positive sales margin.

The Company expects that additional operating losses will occur until net margins gained from sales revenue is sufficient to offset the costs incurred for marketing, sales and product development. Until the Company has achieved a sales level sufficient to break even, it will not be self-sustaining or be competitive in the areas in which it intends to operate.

The Company's management team believes that its success depends on the Company's ability to raise additional capital and increase product sales. The Company is currently expanding into Southeast Asia and the European Union. By selling in multiple international markets, the Company believes that it will be able to successfully implement its business plan and achieve profitability.

 

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As of April 30, 2015, the existing capital and anticipated funds from operations were not sufficient to sustain Company operations or the business plan over the next twelve months. We anticipate substantial increases in our cash requirements which will require additional capital to be generated from the sale of Common Stock, the sale of Preferred Stock, equipment financing, debt financing and bank borrowings, to the extent available, or other forms of financing to the extent necessary to augment our working capital. In the event we cannot obtain the necessary capital to pursue our strategic business plan, we may have to significantly curtail our operations. Failure to obtain additional financing would have a material adverse effect on our business operations. There is no assurance that the Company will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to the Company.

Recent global events, as well as domestic economic factors, have limited the access of many companies to both debt and equity financing. As such, no assurance can be made that financing will be available or available on terms acceptable to the Company, and, if available, it may take the form of debt or equity. In either case, any financing will have a negative impact on our financial condition and may result in an immediate and substantial dilution to our existing stockholders.

Although the Company intends to engage in a subsequent equity offering of its securities to raise additional working capital for operations, the Company has no firm commitments for any additional equity funding at the present time. However, during the nine months ended April 30, 2015, the Company obtained total proceeds of $229,500 by issuing four convertible notes for $73,500, $59,000, $65,000, and $33,000 in principal. Insufficient financial resources may require the Company to delay or eliminate all or some of its development, marketing and sales plans, which could have a material adverse effect on the Company's business, financial condition and results of operations. There is no certainty that the expenditures to be made by the Company will result in a profitable business proposed by the Company.

Our financial statements are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 2 of our financial statements are included in the Company's Current Report on Form 10-K filed on November 13, 2014.  While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause an effect on our results of operations, financial position or liquidity for the periods presented in this report.

 

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Our revenue is derived from the service revenue from Nutritional Blood Analysis, sale of retail products, and revenue derived from educational services.

The Company's revenue recognition policy is in accordance with the requirements of Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition ("SAB 104"), and other applicable revenue recognition guidance under US GAAP. Sales revenue is recognized for our retail and wholesale customers when: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed or determinable, (iii) title and risk of loss have transferred, and (iv) collectibility is reasonably assured — generally when products are shipped to the customer and services are rendered, except in situations in which title passes upon receipt of the products by the customer. In this case, revenues are recognized upon notification that customer receipt has occurred. The Company accrues an estimated amount for sales returns and allowances related to defective or returned products at the time of sale based on its ability to estimate sales returns and allowances using historical information. As of July 31, 2013 and 2012, the Company calculated the amount to be less than 1% of sales so no allowance was accrued in either year.  Shipping and handling fees and related freight costs and supplies associated with shipping products to customers are included as a component of cost of sales. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

The Company also recognizes revenues from the distribution of its product through trade partners.  Related revenues consist of product costs, distribution fees, testing and labeling costs, as well as any associated administrative fees.  The Company recognizes these revenues after the product has been shipped from the outsource manufacturer to the trade partner.  The Company has contractual obligation to pay the outsource manufacturers, and as a principal in these arrangements the Company includes the total product price as revenue in accordance with applicable accounting guidance.   The Company has separately negotiated contractual relationships with its trade partners, and under contracts with these trade partners the Company assumes the credit risk of product produced by the outsource manufacturer and dispensed to the trade partner. 

We have no off-balance sheet arrangements.

Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's consolidated financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As the Company is a "smaller reporting company," this item is not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term "disclosure controls and procedures" to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer's management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.

 

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As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are not effective as of such date.  The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:

 

1.

A lack of independent directors;

2.

Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;

3.

Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;

4.

Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.

To remediate our internal control weaknesses, management intends to implement the following measures:

▪

The Company will add a sufficient number of independent directors to the board and form an Audit Committee.

▪

The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.

▪

The Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting.

▪

Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.

The additional hiring is wholly contingent upon the Company's ability to increase its cash flow as a result of its operations. Management hopes to have sufficient funds in the coming fiscal year to begin to institute the above measures but provides no assurances that it will be able to do so.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred in the nine months ended April 30, 2015, that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

Limitations on the Effectiveness of Controls

The Company's management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met.  Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the 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.  Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls.  The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Projections of any evaluation of controls effectiveness to future periods are subject to risks.  Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

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PART II – OTHER INFORMATION

ITEM 1.                 LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, we are currently not aware of any such pending or threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

On June 17, 2013, the Company's subsidiary, Health Education Corporation ("Health Education"), served a complaint on Ignite Naturals, Inc., a customer ("Ignite"), for breach of contract and failure to pay amounts owed by Ignite for its purchase orders with Health Education, and seeking general damages of $146,352.76.  Ignite subsequently removed the case from Utah state court to federal district court, and filed an Answer and Counterclaim, which the Company answered on September 9, 2013.  Ignite's counsel subsequently withdrew from the case, the court ordered Defendant to have new counsel appear within 21 days, and on November 18, 2013, the court entered an order ordering Defendant to, within 14 days of the order, show cause why sanctions against Defendant should not be imposed for failure to appoint counsel.  On December 10, 2013, for Defendant's failure to appear at the initial pretrial conference or show cause why sanctions against Defendant were not appropriate, the court entered an order imposing terminating sanctions on Defendant and directing the court clerk to enter judgment in favor of Health Education for $146,352.76.  On December 12, 2013, the court entered judgment in favor of Health Education against Ignite for $146,352.76.

 

On November 22, 2013, the Company, through counsel, sent a demand to Zions Bank ("Zions") in connection with the three wires sent by Zions pursuant to oral instructions received from the person fraudulently identifying himself as Dr. Gibbs via telephone (totaling $208,920), for an immediate credit to the Company's bank account of all unrecovered funds from those wires (totaling $54,028).  On January 7, 2014, the Company settled with Zions in full, and Zions paid the Company $27,014.

 

On March 20, 2014, the Company's subsidiary, Health Education Corporation ("Health Education"), was served a copy of a complaint filed by EpicEra Incorporated ("Epic") in the Utah Third Judicial District Court for the return of a $100,000 deposit paid by Epic to Health Education for the supply of nutritional products. On April 16, 2014, Health Education answered the Complaint and filed a counterclaim against Epic and third-party claims against eCosway USA, Inc. ("eCosway," which is Epic's owner), and its principals, for breach of a non-disclosure and non-circumvention agreement, unjust enrichment, fraud, and fraudulent nondisclosure. Health Education's claims alleged that (1) eCosway and its principals have defrauded Health Education and engaged in a scheme of corporate espionage to misappropriate Health Education's proprietary information and trade secrets to launch their new multilevel marketing company, Epic; (2) under the fraudulent guise of partnering with Health Education to have Health Education formulate and produce the health products to be sold by Epic's distributors, eCosway and its principals signed a non-disclosure and non-circumvention agreement that they had no intention of honoring in order to gain access to Health Education's proprietary information so that they could steal that information and use it for their own benefit; (3) Health Education relied upon the non-disclosure and non-circumvention agreement and misrepresentations of Epic, eCosway, and its principals, and disclosed the proprietary information and formulations, which Epic then appropriated as its own. Health Education's claims request general damages as well as punitive damages. On May 6, 2015, fact discovery concluded, and expert discovery has also concluded. Epic filed a motion for summary judgment on or about June 2, 2015, Health Education opposed the motion on or about June 19, 2015, and a hearing has been scheduled for September 9, 2015.

On January 16, 2015, the Company was served a copy of a complaint filed by NHK Laboratories, Inc., in the Superior Court of California, County of Los Angeles, arising out of an alleged breach of contract by the Company and seeking $79,769.92 in principal, plus interest and attorney fees. The Company retained local counsel who answered the complaint, and the case is currently in the discovery phase.

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On June 24, 2015, Vis Vires Group, Inc., one of the Company's creditors, sent the Company a notice of default for the Company's failure to comply with the reporting requirements of the Exchange Act.  

During the three months ended April 30, 2015, the Company issued 9,604,070 shares of common stock to KBM Worldwide, Inc. ("KBM") related to three conversions by KBM of a convertible promissory note dated March 19, 2014, for a total of $33,000 in principal and $2,120 of interest. A conversion on February 9, 2015, converted $11,455 in principal into 2,793,902 shares of the Company's common stock. A conversion on March 4, 2015, converted $9,055 in principal into 2,382,895 shares of the Company's common stock.  A conversion on March 23, 2015, converted an additional $12,490 in principal and $2,120 interest into 4,427,273 shares of the Company's common stock. The issuances of these shares were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act as there was no general solicitation, and the transactions did not involve a public offering.

None.

None.

None.

(1)      Filed herewith

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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