Attached files
| file | filename |
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| EX-32 - PetLife Pharmaceuticals, Inc. | ex32.htm |
| EX-31 - PetLife Pharmaceuticals, Inc. | ex31.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended November 30, 2016
| [ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 000-52445
Petlife Pharmaceuticals, Inc.
(Name of registrant as specified in its charter)
| Nevada | 33-1133537 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
38 West Main Street Hancock, MD |
21750 | |
| (Address of principal executive offices) | (Zip Code) |
(844)473-8543
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
Non-accelerated filer (Do not check if a smaller reporting company) |
[ ] | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]
The number of shares of the registrant’s common stock outstanding as of February 6, 2017 was 43,852,839 shares.
Petlife Pharmaceuticals, Inc.
INDEX
| 2 |
PETLIFE PHARMACEUTICALS, INC.
(Unaudited)
| November 30, 2016 | August 31, 2016 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 28,996 | $ | 1,172 | ||||
| Total current assets | 28,996 | 1,172 | ||||||
| Total asssets | $ | 28,996 | $ | 1,172 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 513,713 | $ | 374,047 | ||||
| Accounts payable and accrued expenses - related party | 383,974 | 383,974 | ||||||
| Stock payable | 2,903,120 | 2,315,000 | ||||||
| Loan from Officer | 213,363 | 153,011 | ||||||
| Note payable-related party | 150,000 | - | ||||||
| Note payable Lanham Trust | 10,000 | 10,000 | ||||||
| Total current liabilities | 4,174,170 | 3,236,032 | ||||||
| Total liabilities | 4,174,170 | 3,236,032 | ||||||
| Commitments | - | - | ||||||
| Stockholders’ deficit | ||||||||
| Preferred stock, $0.001 par value, 50,000,000 authorized, no preferred shares issued and outstanding, respectively | - | - | ||||||
| Common stock, $0.001 par value, 750,000,000 authorized, 43,852,839 and 8,399,422 shares issued and outstanding, respectively | 43,853 | 8,400 | ||||||
| Additional paid-in capital | 22,057,935 | 3,888,070 | ||||||
| Accumulated deficit | (26,246,962 | ) | (7,131,330 | ) | ||||
| Total stockholders’ deficit | (4,145,174 | ) | (3,234,860 | ) | ||||
| Total liabilities and stockholders ’ deficit | $ | 28,996 | $ | 1,172 | ||||
The accompanying notes are an integral part of these financial statements.
| 3 |
PETLIFE PHARMACEUTICALS, INC.
Consolidated Statement of Operations
(Unaudited)
| For the three | For the three | |||||||
| months | months | |||||||
| November 30, 2016 | November 30, 2015 | |||||||
| Revenue | $ | - | $ | - | ||||
| Operating Expenses | ||||||||
| General and administrative | 908,148 | 29,166 | ||||||
| Stock based compensation | 18,205,318 | 80,933 | ||||||
| 19,113,466 | 110,099 | |||||||
| Operating loss | (19,113,466 | ) | (110,099 | ) | ||||
| Other expense | ||||||||
| Interest expense | (2,166 | ) | - | |||||
| Net loss | $ | (19,115,632 | ) | $ | (110,099 | ) | ||
| Net loss per share - basic and diluted | $ | (0.88 | ) | $ | (0.01 | ) | ||
| Weighted average shares outstanding | 21,645,754 | 11,257,491 | ||||||
The accompanying notes are an integral part of these financial statements.
| 4 |
PETLIFE PHARMACEUTICALS, INC.
Consolidated Statements of Cash Flow
(Unaudited)
| For the | For the | |||||||
| three months | three months | |||||||
| ended | ended | |||||||
| November 30, 2016 | November 30, 2015 | |||||||
| Net Cash from (used in) operating activities | ||||||||
| Net loss | $ | (19,115,632 | ) | $ | (110,099 | ) | ||
| Stock based compensation | 18,205,318 | 80,933 | ||||||
| Accounts payable and accrued expenses | 139,666 | 29,166 | ||||||
| Stock payable | 588,120 | - | ||||||
| Net cash used in operating activities | (182,528 | ) | - | |||||
| Net cash provided by financiang activities | ||||||||
| Proceeds from note payable-related party | 150,000 | |||||||
| Proceeds from loan from officer | 60,352 | - | ||||||
| Net cash provided by financiang activities | 210,352 | - | ||||||
| Increase (decrease) in cash | 27,824 | - | ||||||
| Cash, beginning of period | 1,172 | - | ||||||
| Cash, end of period | $ | 28,996 | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
| 5 |
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
PetLife Pharmaceuticals, Inc. (“Company”) is a registered U.S. Veterinary Pharmaceutical company whose mission is to bring its scientifically proven, potentiated bioactive medication and nutraceuticals — “Escozine for Pets™” — to the world of veterinary oncology. The Company specializes in the research, development, sales and support of advanced drugs and nutraceuticals for pet cancer and autoimmune related diseases such as arthritis.
A summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows:
Basis and business presentation
The accompanying unaudited consolidated financial statements include the accounts of the Company, a Nevada corporation (“Company”) and its wholly-owned subsidiary, Petlife Corporation (“Petlife”), a Delaware corporation. The accompanying unaudited interim consolidated 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 (“SEC”) and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s annual report for the year ended August 31, 2016 filed with the SEC on Form 10-K. 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 periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the audited consolidated financial statements for the most recent fiscal year ended August 31, 2016 as reported in Form 10-K have been omitted.
The Company was incorporated on April 5, 2002 under the laws of the State of Nevada as “Aztek Ventures Inc.” Effective November 13, 2007, we filed a Certificate of Amendment to our Articles of Incorporation to change our name from “Aztek Ventures Inc.” to “Genesis Uranium Corp.” Effective April 21, 2008, we amended our Articles of Incorporation to change our name from “Genesis Uranium Corp.” to “Vault Technology Inc.” to reflect the change in our business focus beyond solely that of uranium exploration. Effective July 10, 2009, we filed a Certificate of Amendment to our Articles of Incorporation to change our name from “Vault Technology, Inc.” to “Modern Renewable Technologies, Inc.” (“Modern”). On May 27, 2011, Modern, merged with Eco Ventures Group, Inc., and the name of the Company was changed to Eco Ventures Group, Inc. On July 15, 2013, the Company entered into an Agreement and Plan of Merger with Clear TV Ventures, Inc. Under the terms of the merger, Clear TV became the surviving corporation. On June 26, 2014, Eco Ventures Group, Inc. entered into an Agreement and Plan of Merger with its subsidiary, PetLife Pharmaceuticals, Inc., a Nevada Corporation, with PetLife Pharmaceuticals, Inc. being the surviving entity. As part of that merger, the name of the Company was changed to PetLife Pharmaceuticals, Inc. and each 15 shares of our common stock were exchanged for one share in the surviving company. Effective August 12, 2014 we completed the closing of the Share Exchange Agreement and the acquisition of Petlife and changed our name to Petlife Pharmaceuticals, Inc. On July 20, 2016, Petlife Pharmaceuticals, Inc. entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, PetLife Merger Subsidiary, Inc., a Nevada Corporation, with PetLife Merger Subsidiary, Inc. being the surviving entity. As part of that merger, the name of the Petlife Merger Subsidiary was changed back to PetLife Pharmaceuticals, Inc. The purpose of the subsidiary merger was to effectuate a 1 for 5 reverse exchange of Petlife’s common stock pursuant to the terms of the merger. The combined entities continue on public markets pursuant to Rule 12g-3 of the Securities Exchange Act of 1934, as amended.
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All references that refer to (the “Company” or “PetLife Pharmaceuticals, Inc.” or “Petlife” or “we” or “us” or “our”) are PetLife Pharmaceuticals, Inc., the Registrant and its wholly and or majority owned subsidiaries.
The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Reclassifications
For comparability, certain prior period amounts have been reclassified, where appropriate, to conform to the financial statement presentation used in 2017. These reclassifications have no impact on net loss.
Recent Accounting Pronouncements
No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on the Consolidated Financial Statements.
NOTE 2 – 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. As shown in the accompanying consolidated financial statements at November 30, 2016, the Company had an accumulated deficit of $26,246,962. As of November 30, 2016 and through the date hereof, the Company has very limited funds on which to operate.
The Company’s existence is currently dependent upon management’s ability to develop profitable operations and or upon obtaining additional financing to carry out its planned business. Management is devoting substantially all of its efforts to the commercialization of its planned products, as well as raising additional debt or equity financing in order to accelerate the development and commercialization of additional products. There can be no assurance that the Company’s commercialization or financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems.
There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all. In the event the Company is unable to continue as a going concern, it may elect or required to seek protection from its creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative, nor does management view it as a likely occurrence.
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The accompanying consolidated statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 – STOCKHOLDERS’ DEFICIT
During the period ended November 30, 2016 the Company issued 35,453,417 common shares valued at $18,205,318 for services and recorded as stock based compensation.
NOTE 4 – RELATED PARTY TRANSACTIONS
During the year ended August 31, 2015, we received $10,000 from a shareholder advance which is unsecured, non-interest bearing, and due on demand. As of November 30, 2016, $10,000 remains outstanding.
As of November 30, 2016 and August 31, 2016, the Company has a loan from officer of $213,363 and $153,011, respectively, which accrues 2% interest (4% if in default), unsecured, and due on demand.
As of November 30, 2016 and August 31, 2016, there is related party accounts payable and accrued expense of $383,974 related to consulting services.
On October 25, 2016 the Company received $150,000 from a note payable with a related party due on November 1, 2017, accrues 10% interest, and unsecured. The Company agreed to issue 250,000 common shares to the note holder as additional consideration with a fair value of $75,620 and recorded in stock payable as of November 30, 2016 as the shares have not been issued. The balance of the note payable-related party is $150,000 as of November 30, 2016.
NOTE 5 – COMMITMENTS AND CONTINGENCIES
On February 1, 2016 the Company entered into a lease space effective June 1, 2016 through May 30, 2018. Lease payments of $750 per month payable in advance on the first day of each month for total lease payments of $18,000.
On June 9, 2016, the Company entered into an agreement with Dr. Ralph Salvagno our chief executive officer. The agreement is for 24 months or until June 30, 2018 with options to renew for additional 24 months. The Company is to pay an annual salary of $240,000, issue 8,000,000 of common stock that vest immediately. The Company granted 2,000,000 options to purchase 2,000,000 shares of common stock at 50% discount to market or $0.25, whichever is higher. The Company recorded stock based compensation of $840,000 in prior year for the common stock which is not yet issued as of November 30, 2016 and $840,000 is recorded in stock payable.
Upon receipt of FDA approval for Escozine for Pets, Dr. Salvagno will receive an additional 5,000,000 shares of common stock and will be granted options to purchase an additional 2,000,000 shares of common stock at 50% discount to market or $1.00, whichever is higher, this event has not occurred as of November 30, 2016.
On June 13, 2016, the Company entered into an agreement with a consultant for financial services. The agreement is for 36 months or until June 2019 with options to renew for additional 24 months. The Company is to issue 5,000,000 shares of common stock that vest immediately. The Company granted 2,000,000 options to purchase 2,000,000 shares of common stock at 50% discount to market or $0.25, whichever is higher. The Company recorded stock based compensation of $1,350,000 in prior year for the common stock which is not yet issued as of November 30, 2016 and $1,350,000 is recorded in stock payable.
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In June 2016, the Company entered into an agreement with our science officer. The agreement is for 36 months or until June 2019 with options to renew for additional 24 months. The Company is to pay an annual salary of $48,000 in year 1, $72,000 in year 2, and $96,000 in year 3 and to also issue up to 1,000,000 shares of common stock valued at $300,000 that vest over 2 years. For the period ended November 30, 2016, the Company recorded stock based compensation of $37,500 and there remains $237,500 to be expensed; these shares have not been issued as of November 30, 2016 and $62,500 is recorded in stock payable.
In June 2016, the Company entered into an agreement with an employee for 36 months or until June 2019 with options to renew for additional 24 months. The Company is to pay salary of $10,000 per month and to issue up to 3,000,000 shares of common stock valued at $900,000 that vest over 3 years. For the period ended November 30, 2016, the Company recorded stock based compensation of $75,000 and there remains $25,000 to be expensed as this agreement was terminated on December 29, 2016; these shares have not been issued as of November 30, 2016 and $125,000 is recorded in stock payable. On December 29, 2016, the Company entered into a Settlement and Mutual Release with the former employee and Petlife has agreed to make installment payments of $3,000 bi-monthly until April 15, 2017 totaling $31,000. Furthermore, the amount of 400,000 shares of Petlife is to be fully vested in the name of the former employee on or before February 1, 2017.
In June 2016, the Company entered into an agreement with an employee for 36 months or until June 2019 with options to renew for additional 24 months. The Company is to pay annual salary of $30,000 year, $54,000 year 2, and $78,000 year 3 and to issue up to 2,000,000 shares of common stock valued at $600,000 that vest over 2 years. For the period ended November 30, 2016, the Company recorded stock based compensation of $75,000 and there remains $475,000 to be expensed; these shares have not been issued as of November 30, 2016 and $125,000 is recorded in stock payable.
On September 1, 2016 the Company entered into a consulting agreement for investor relations with a term of six months. The compensation for the services will be $10,000 cash payment due on signing of contract and on 1st day of each month, $25,000 ancillary budget due each month for the balance of this contract, 500,000 shares of common stock to be issued upon the day of execution of the agreement with a vesting schedule of 1/3 per month for the extent of the contract. The Company will reimburse Consultant for any pre-approved travel or other expenses. As of November 30, 2016 the 500,000 shares of common stock valued at $325,000 on date of grant have not been issued and $325,000 is recorded in stock payable. In addition on November 30, 2016 this agreement was mutually terminated.
On October 5, 2016, the Company entered into an employment agreement with an employee for the term of twelve months and annually renewable. Pursuant to the agreement, the employee will be paid $6,300 per month and awarded 20,000 shares of common stock each month on the 15th for the term of the agreement, beginning December 15, 2016.
On October 11, 2016 the Company entered into an agreement with a contractor to be their Chief Science Officer for the term until October 11, 2017 and renewable for an additional 12 months. Pursuant to the agreement, the contractor will be paid a fee rate of $400 per hour paid in common shares of the Company’s stock on a quarterly basis and fully vesting at time of grant based on the average share price of the Company stock for the 5 days preceding the award. Contractor will be entitled to a bonus of 250,000 common shares upon FDA approval of a Vitalzul product. As of November 30, 2016 the contractor has not provided any services.
On November 4, 2016, the Company entered into an employment agreement with an employee. Pursuant to the agreement, the employee will be awarded 10,000 shares of common stock after the successful completion of 90 days of continuous employment following the execution of the agreement. The employee will then be entitled to another 10,000 shares per month for 9 months from the date of the agreement.
NOTE 6 – SUBSEQUENT EVENTS
On January 18, 2017, the Company entered into an employment agreement with an employee for the term until January 18, 2019 and a salary of $12,500 per month. In addition the Company issued 3,000,000 shares of restricted common stock at date of grant vesting at 350,000 shares every three months and the fair value of the shares will be evaluated during the second quarter 2017 review. In addition the employee is entitled to an additional 1,000,000 restricted common shares upon submission of Petlife INAD application for Vitalzul to the FDA and approval of application. The employee is entitled to an additional 3,000,000 restricted common shares upon final approval of Vitalzul by the FDA.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion provides information that management believes is relevant to an assessment and understanding of the financial condition and results of operations of Petlife Pharmaceuticals, Inc., formerly Clear TV Ventures, Inc. (the “Company”).
This discussion addresses matters we consider important for an understanding of our financial condition and results of operations as of November 30, 2016 and 2015. It consists of the following subsections:
● “Introduction and Plan of Operation” which provides a brief summary of our consolidated results and financial position and the primary factors affecting those results for the for the three month period ended November 30, 2016 and 2015, as well as a summary of our expectations for fiscal 2017;
● “Liquidity and Capital Resources,” which contains a discussion of our cash flows and liquidity, investing activities and financing activities, contractual obligations, and critical obligations;
● “Results of Operations and Comparison”,” which sets forth an analysis of the operating results for the quarter ended November 30, 2016 and 2015.
● Critical Accounting Policies,” which provides an analysis of the accounting policies we consider critical because of their effect on the reported amounts of assets, liabilities, income and/or expenses in our consolidated financial statements and/or because they require difficult, subjective or complex judgments by our management;
● “Recent Accounting Pronouncements and Developments,” which summarizes recently published authoritative accounting guidance, how it might apply to us and how it might affect our future results.
This item should be read in conjunction with our consolidated financial statements and the notes thereto included in this quarterly report.
Introduction and Plan of Operation
The following discussion updates our plan of operation for the 2017 Fiscal Year. The discussion also summarizes the results of our operations for the three months ended November 30, 2016 and 2015.
Merger Agreements
On or about April 17, 2014, the Company entered into a Share Exchange Agreement (the “Share Exchange”) with Petlife Corporation, a Delaware corporation (“Petlife”) and the shareholders of Petlife Corporation (the “Shareholders”) for the exchange of all of the issued and outstanding shares of Petlife. Effective at the Closing on August 11, 2014, these shares of Petlife were exchanged for approximately 47,000,000 fully paid non-assessable shares of the Company reflecting approximately 80% of the issued and outstanding shares of the Company and acquisition of all assets and liabilities of Petlife Corporation and was valued equated to the net assets of Petlife Corporation as of the date of the acquisition. For accounting purposes, Petlife was the accounting acquirer and or the surviving entity. Accordingly, the historical financial statements are those of Petlife, the accounting acquirer, immediately following the consummation of the reverse merger.
On June 26, 2014, Clear TV Ventures, Inc. entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, Petlife Pharmaceuticals, Inc., a Nevada Corporation. As part of that merger, the name of the Company was changed to Petlife Pharmaceuticals, Inc. and the Company exchanged one share for every 15 shares of Clear TV Ventures. Effective August 11, 2014 we completed the closing of the Share Exchange Agreement and the acquisition of Petlife Corporation.
On July 20, 2016, Petlife Pharmaceuticals, Inc. entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, PetLife Merger Subsidiary, Inc., a Nevada Corporation, with PetLife Merger Subsidiary, Inc. being the surviving entity. As part of that merger, the name of the Petlife Merger Subsidiary was changed back to PetLife Pharmaceuticals, Inc. The purpose of the subsidiary merger was to effectuate a 1 for 5 reverse exchange of Petlife’s common stock pursuant to the terms of the merger. The combined entities continue on public markets pursuant to Rule 12g-3 of the Securities Exchange Act of 1934, as amended.
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Plan of Operations
For the three months ended November 30, 2016 and 2015, we experienced the negative effects of the financial markets upheaval, which made capital acquisition extremely difficult.
We will be developing neutraceuticals and FDA approved prescription drugs for veterinary use for retail sales and distribution throughout the world.
About Petlife Pharmaceuticals, Inc.
PetLife Pharmaceuticals, Inc. (PetLife) has developed and is launching a new generation of potentiated veterinary cancer medications and nutraceuticals, based on the same patented formula “Escozine” and production processes that have been scientifically proven as an effective treatment for cancer in humans for years. Escozine (for humans) is currently sold as either a nutraceutical or prescription drug in 40 countries including the United States.
Petlife’s primary goal is to bring its scientifically proven, potentiated bioactive medication and Nutraceuticals to the world of veterinary oncology, with the ultimate goal of extending the life of pets with cancer and improving their quality of life. In the process of achieving these objectives, Petlife will transition into a world renowned, professionally respected veterinary pharmaceutical company that will create new industry standards as well as being profitable and innovative.
Results of Operations
Three months ended November 30, 2016 compared to three months ended November 30, 2015
Operating expenses
For the three month period ended November 30, 2016 we incurred $19,113,466 in operating expenses as compared to $110,099 in operating expenses we incurred for the prior period. Operating expenses for the three months ended November 30, 2016 increased due to the increase in activity relating to promoting the company, increased operations, and stock based compensation. Stock based compensation made up $18,205,318 and $80,933 of operating expenses for the three month period ended November 30, 2016 and 2015, respectively.
Loss from Operations
For the three month period ended November 30, 2016 we incurred a loss from operations of $19,113,466 as compared to the operating loss we incurred for the three month period ended November 30, 2015 of $110,099 increased due to the increase in activity relating to promoting the company, increased operations, and stock based compensation. Stock based compensation made up $18,205,318 and $80,933 of loss from operations for the three month period ended November 30, 2016 and 2015, respectively.
Net loss
We incurred a net loss of $19,115,632 for the three months ended November 30, 2016 as compared to the net loss we incurred for the three month period ended November 30, 2015 of $110,099. Net loss for the three months ended November 30, 2016 increased due to the increase in activity relating to promoting the company, increased operations, and stock based compensation. Stock based compensation made up $18,205,318 and $80,933 of net loss for the three month period ended November 30, 2016 and 2015, respectively.
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Liquidity and Capital Resources
The Company has received no revenue from business operations from for the three months ended November 30, 2016 and 2015. We have consequently relied on funds received in connection with our equity and debt offerings to finance our ongoing operations. We have experienced net losses since inception, and we expect we will continue to incur losses for the next year. As of the date of this filing, we do not have any available external source of funds. We require additional capital in the near term to maintain our current operations. Although we are actively seeking additional equity and debt financing, such financing may not be available on acceptable terms, if at all.
Our consolidated financial statements have been prepared assuming that we will continue as a going concern. Since our inception on December 12, 2012, we have not generated revenue and have incurred net loss. Accordingly, we have not generated cash flow from operations and have primarily relied upon loans from officers, promissory notes and advances from related parties, and equity financing to fund our operations. The report of our Independent Registered Public Accounting Firm include an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern.
We do not have sufficient cash resources or current assets to pay our obligations, and we have been meeting many of our obligations through the issuance of our common stock to our employees, consultants and advisors as payment for goods and services. Considering the foregoing, we are dependent on additional financing to continue our operations. Our significant capital requirements for the foreseeable future include development and operational costs, and our corporate overhead expenses.
We are actively seeking additional equity or debt financing. However, there can be no assurance that funds required during the next twelve months or thereafter will be available from external sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force us to substantially curtail or cease operations and would, therefore, have a material adverse effect on our business. Further, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significantly dilutive effect on our existing shareholders. All of these factors have been exacerbated by the extremely unsettled credit and capital markets presently existing.
Net Cash Used in Operating Activities
Net cash used in operating activities was $182,528 for the three month period ended November 30, 2016, as compared to net cash used of $0 in prior year’s operating activities. More net cash used in operating activities for the three month period ended November 30, 2016 was a result of the net loss of $19,115,632 offset by increased stock based compensation of $18,205,318, increased accounts payable and accrued expenses of $139,666, and increased stock payable of $588,120. In prior quarter net cash used in operating activities was a result of the net loss of $110,099 offset by increased stock based compensation of $80,933 and increased accounts payable and accrued expenses of $29,166.
Net Cash Used in Investing Activities
The Company had no cash used for investing activities for the three months ended November 30, 2016 and 2015.
Net Cash Provided by Financing Activities
During the three months ended November 30, 2016 the Company received $150,000 from note payable-related party and $60,352 from loan from officer. During the three months ended November 30, 2015, the Company had no cash provided by financing activities.
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Going Concern
The accompanying 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 not established any sources of revenue to cover its operating expenses the three months ended November 30, 2016 and 2015. In addition, the Company has incurred accumulated deficit of $26,246,962 at November 30, 2016. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s ability to continue existence is dependent upon commencing its planned operations, management’s ability to develop and achieve profitable operations and/or upon obtaining additional financing to carry out its planned business. The Company intends to fund its business development, acquisition endeavors and operations through equity and debt financing arrangements.
There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all. In the event the Company is unable to continue as a going concern, it may elect or be required to seek protection from its creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative, nor does management view it as a likely occurrence.
The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-Balance sheet Arrangements
On February 1, 2016 the Company entered into a lease space effective June 1, 2016 through May 30, 2018. Lease payments of $750 per month payable in advance on the first day of each month for total lease payments of $18,000.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of November 30, 2016, under the supervision and with the participation of our Chief Executive Officer (Principal Executive Officer), and Chief Financial Officer (Principal Financial Officer), management has evaluated the effectiveness of the design and operations of the Company’s disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of November 30, 2016, as a result of the material weakness in internal control over financial reporting discussed below.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”).
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of November 30, 2016. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of November 30, 2016. Our Chief Executive Officer and Chief Financial Officer concluded we have a material weakness due to lack of segregation of duties and a limited corporate governance structure.
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Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. Therefore while there are some compensating controls in place, it is difficult to ensure effective segregation of accounting and financial reporting duties. Management reported a material weakness resulting from the combination of the following significant deficiencies:
| ● | Lack of segregation of duties in certain accounting and financial reporting processes including the approval and execution of disbursements; |
| ● | The Company’s corporate governance responsibilities are performed by the Board of Directors; we do not have independent Board of Directors, we do not have an audit committee or compensation committee. Because our Board of Directors only meets periodically throughout the year, several of our corporate governance functions are not performed concurrent (or timely) with the underlying transaction, evaluation, or recordation of the transaction. |
While we strive to segregate duties as much as practicable, there is an insufficient volume of transactions at this point in time to justify additional full time staff. We believe that this is typical in most exploration stage companies. We may not be able to fully remediate the material weakness until we commence mining operations at which time we would expect to hire more staff. We will continue to monitor and assess the costs and benefits of additional staffing.
In light of the above material weakness, we performed additional analyses and procedures in order to conclude that our unaudited condensed consolidated financial statements for the three month period ended November 30, 2016 included in this Quarterly Report on Form 10-Q were fairly stated in accordance with US GAAP. Accordingly, management believes that despite our material weaknesses, our unaudited condensed consolidated financial statements for the three months ended November 30, 2016 are fairly stated, in all material respects, in accordance with US GAAP.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting that occurred during the last fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
None.
Item 1A. Risk Factors.
Not required by smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None
None.
| 14 |
The following exhibits are filed as part of this quarterly report on Form 10-Q:
Exhibit Number |
Description | |
| 31.1 | Certification by the Chief Executive Officer of Petlife Pharmaceuticals, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). | |
| 31.2 | Certification by the Chief Financial Officer of Petlife Pharmaceuticals, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). | |
| 32.1 | Certification by the Chief Executive Officer of Petlife Pharmaceuticals , Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
| 32.2 | Certification by the Chief Financial Officer of Petlife Pharmaceuticals, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
| 15 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: February 10, 2017 | Petlife Pharmaceuticals, Inc. | |
| (the registrant) | ||
| By: | /s/ Ralph Salvagno | |
| Ralph Salvagno | ||
| Chief Executive Officer, Chief Financial Officer | ||
| 16 |