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EX-32 - SECTION 1350 CERTIFICATION - AngioSoma, Inc.ex_32-1.htm
EX-31 - RULE 13(A)-14(A)/15(D)-14(A) CERTIFICATION - AngioSoma, Inc.ex_31-1.htm
EX-21 - SUBSIDIARIES OF THE REGISTRANT - AngioSoma, Inc.ex_21.htm

 

 

UNITED STATES

SECURITY AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________

 

FORM 10-K

___________

 

(MARK ONE)

 

☒  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended September 30, 2020

 

or

 

☐  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File Number: 333-170315

 

 

AngioSoma, Inc.

(Exact name of registrant as specified in its charter)

 

Wyoming

 

27-3480481

(State or other jurisdiction of Incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

2500 Wilcrest Drive, 3rd Floor
Houston, TX

 

77042

(Address of principal executive offices)

 

(Zip code)

 

Registrant’s telephone number, including area code: 832-781-8521

 

Securities registered pursuant to Section 12(g) of the Act:

 

Title of Each Class

 

Name of Each Exchange on which Registered

Common stock, $0.001 par value

 

OTC Markets




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐   No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐   No ☒

 

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 ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  

Yes ☒   No ☐

 

Indicate by check mark if disclosures of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Yes ☒   No ☐

 

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

 

 

Large accelerated filer

Accelerated filer

 

Non-accelerated filer

Smaller reporting company

 

(Do not check is smaller reporting company)

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐   No ☒

 

The Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, March 31, 2020 was $409,587.

 

There were 445,493,342 shares of the Registrant’s common stock outstanding as of December 2, 2020.

 

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ANGIOSOMA, INC.

 

TABLE OF CONTENTS

 

 

 

Part I

5

Item 1. Business

5

Item 1A. Risk Factors

5

Item 1B. Unresolved Staff Comments

10

Item 2. Properties

10

Item 3. Legal Proceedings

10

Item 4. Mine Safety Disclosures

10

 

 

Part II

11

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

11

Item 6. Selected Financial Data

13

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of operations

14

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

16

Item 8. Financial Statements and Supplementary Data

17

Report of Independent Registered Public Accounting Firm

18

Consolidated Balance Sheets

19

Consolidated Statements of Operations

20

Consolidated Statements of Other Comprehensive Income (Loss)

21

Consolidated Statements of Changes in Stockholders’ Deficit

22

Consolidated Statements of Cash Flows

23

Notes to the Consolidated Financial Statements

24

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

34

Item 9A. Controls and Procedures

34

Item 9B. Other Information

35

 

 

Part III

36

Item 10. Directors, Executive Officers and Corporate Governance

36

Item 11. Executive Compensation

37

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

39

Item 13. Certain Relationships and Related Transactions, and Director Independence

39

Item 14. Principal Accounting Fees and Services

40

 

 

Part IV

40

Item 15. Exhibits, Financial Statement Schedules

40

 

 

Signatures

41

 

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Table of Contents

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

Certain statements in this report contain or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

 

OTHER PERTINENT INFORMATION

 

When used in this report, the terms, “we,” the “Company,” “SOAN,” “our,” and “us” refers to AngioSoma, Inc., a Nevada corporation.

 

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PART I

 

ITEM 1. BUSINESS

 

Overview

 

AngioSoma is a wellness company dedicated to bringing innovative, effective and high-quality supplement products to the medical, wellness and adult-use markets through our marketing subsidiary, SomaCeuticalsTM. SomaCeuticals has acquired a diversified supply of supplements, strong clinical, scientific and operating capabilities and leading product research and development infrastructure in order to create trusted products and brands in an expanding global market.

 

We have abandoned our pursuit of FDA clearance and marketing of any drugs or products, including LiprostinTM, the patented pharmaceutical for a controlled drug delivery system. When rights to the drug were acquired it was represented that the initial clinical trials had been successfully completed and the single remaining trial was eligible to go forward. Research disclosed the representations are untrue. Therefore, further efforts to seek clearance and market the product ceased.

 

Effective August 23, 2020 the issuer’s subsidiary, SomaCeuticals, Inc. entered into an exclusive global license agreement with 7 to Stand, Inc. for the rights to U.S. patent 10,610,592 issued to Fabrizio de Silvestri, Terni, Italy, as inventor, April 7, 2020 for treatment of Multiple Sclerosis(MS). On August 12, 2020 James C. Katzaroff was elected President of the subsidiary and authorized to clear the patented pharmaceutical with FDA and oversee international marketing.

 

Multiple Sclerosis (MS) is a chronic disease in which the immune system of the individual attacks the central nervous system and affects the nerve cells. The disease can manifest with a wide range of neurological symptoms and can progress to total physical and cognitive disability. There are many different symptoms of MS, including fatigue, numbness, walking and balance problems, bladder dysfunction, bowel dysfunction, vision problems, dizziness and vertigo, sexual dysfunction, pain, cognitive dysfunction, emotional changes, depression and spasticity.

 

There is no known cure using current treatments and is the most common immune-mediated disorder affecting the central nervous system. With over 2.3 million people affected and with each individual spending approximately $70,000 per year, MS ranked eighth by drug invoice spending among the top therapeutic classes in the U.S. in 2016, representing nearly $19 billion in drug spending alone.

 

ITEM 1A. RISK FACTORS

 

You should carefully consider the following risk factors discussed below and the matters addressed under “Special Note Regarding Forward-Looking Statements,” together with all the other information presented in this prospectus, including our audited financial statements and related notes. The risks described below are the only presently known risks facing us or that may materially adversely affect our business. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business. If any of the following risks develop into actual events, our business, financial condition or results of operations could be materially adversely affected and you may lose all or part of your investment.

 

We face substantial competition, which may result in others developing or commercializing products before or more successfully than we do.

 

The development and commercialization of our dietary supplements is highly competitive. We expect that we will face significant competition from other companies that develop and market dietary supplements.

 

Many of our existing and potential future competitors have significantly greater financial resources and expertise in research and development, manufacturing, and marketing dietary supplements than we do.

 

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Product liability lawsuits against us could divert our resources, cause us to incur substantial liabilities and limit marketing of our supplements.

 

We face an inherent risk of product liability claims. For example, we may be sued if any product we sell allegedly causes injury or is found to be otherwise unsuitable. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products. Regardless of the merits or eventual outcome, liability claims may result in:

 

decreased demand for our products or products that we may develop;

 

 

injury to our reputation and significant negative media attention;

 

 

significant costs to defend resulting litigation;

 

 

substantial monetary awards to users;

 

 

loss of revenue;

 

 

reduced resources of our management to pursue our business strategy; and

 

 

the inability to commercialize our products and additional products that we may develop.

 

Risks Related to Our Financial Position and Need for Additional Capital

 

Implications of Being an Emerging Growth Company

 

As a company with less than $1.0 billion of revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure and other requirements that are applicable to other public companies that are not emerging growth companies. In particular, in this 10-K, we have provided only two years of audited consolidated financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

 

We have a history of operating losses and expect to continue to realize losses in the near future. Currently our operations are producing inadequate revenue to fund all operating costs, and we rely on investments by third parties to fund our business. Even as our revenue grows, we may not become profitable or be able to sustain profitability.

 

From inception, we have incurred significant net losses and have not realized adequate revenue to support our operations. We expect to continue to incur net losses and negative cash flow from operations in the near future, and we will continue to experience losses for at least as long as it takes our company to generate revenue from the sale of products. The size of these losses will depend, in large part, on whether we develop products in a profitable manner. To date, we have had only limited operating revenues. There can be no assurance that we will achieve material revenues in the future. Should we achieve a level of revenues that make us profitable, there is no assurance that we can maintain or increase profitability levels in the future.

 

There is substantial doubt as to whether we will continue operations. If we discontinue operations, you could lose your investment.

 

The following factors raise substantial doubt regarding the ability of our business to continue as a going concern: (i) the losses we incurred since our inception; (ii) our lack of significant operating revenues since inception through the date of this prospectus; and (iii) our dependence on debt and equity funding to continue in operation. We therefore expect to incur significant losses in the foreseeable future. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. If we are unable to obtain additional financing from outside sources and eventually produce enough revenues, we may be forced to curtail or cease our operations. If this happens, you could lose all or part of your investment.

 

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Our lack of any profitable operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.

 

We do not have any substantial operating history, which makes it impossible to evaluate our business on the basis of historical operations. Our business carries both known and unknown risks. As a consequence, our past results may not be indicative of future results. Although this is true for any business, it is particularly true for us because of our lacking any profitable operating history.

 

Because our auditors have issued a going concern opinion, there is substantial uncertainty that we will be able to continue our operations.

 

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue to operate over the next 12 months. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event we cannot continue in existence. As such, if we are unable to obtain new financing to execute our business plan we may be required to cease our operations.

 

We recently added to management August 12, 2020 by electing James C. Katzaroff president of our subsidiary, SomaSouticals, Inc.

 

There is no assurance Mr. Katzaroff will be successful in securing FDA clearance and marking the newly acquires license for treatment of Muscular Dystrophy

 

One of our stockholders has the ability to significantly influence any matters to be decided by the stockholders, which may prevent or delay a change in control of our company.

 

Alex Blankenship, currently owns 1,000,000 shares of series E preferred stock. The owner of the series E preferred stock is entitled to the number of votes equal to double the number of votes of all other stockholders.  Therefore, Ms. Blankenship has voting rights equal to two-thirds of all votes cast at any action of stockholders and can exert decisive influence over the outcome of any corporate matter submitted to our stockholders for approval, including the election of directors, removal of the entire board of directors and any transaction that might cause a change in control, such as a merger or acquisition. Any stockholders in favor of a matter that is opposed by this stockholder cannot overrule the vote of Alex Blankenship.

 

Alex Blankenship is our sole director and CEO. The loss of Ms. Blankenship could adversely affect our business.

 

Since Ms. Blankenship is currently our only director and CEO, if she were to die, become disabled, or leave our company, we would be forced to retain an individual to replace her. There is no assurance that we can find a suitable person to replace her if that becomes necessary. We have no “key man” life insurance at this time.

 

Our management has had limited experience in managing the day to day operations of a public company and, thus, we may incur additional expenses associated with the management of our company.

 

Our chief executive officer, Alex Blankenship, became responsible for the operations and reporting of our company June 3, 2016. The requirements of operating as a small public company are new to Ms. Blankenship. This may require us to obtain outside assistance from legal, accounting, investor relations, or other professionals that could cost more than forecast. We may also be required to hire additional staff to comply with additional SEC reporting requirements.

 

Risks related to our common stock

 

We lack an established trading market for our common stock, and you may be unable to sell your common stock at attractive prices or at all.

 

There is currently a limited trading market for our common stock on the OTC Market Group’s Pink tier under the symbol “SOAN.” There can be no assurances given that an established public market will be obtained for our common stock or that any public market will last. As a result, we cannot assure you that you will be able to sell your common stock at attractive prices or at all.

 

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The market price for our common stock may be highly volatile.

 

The market price for our common stock may be highly volatile. A variety of factors may have a significant impact on the market price of our common stock, including:

 

the publication of earnings estimates or other research reports and speculation in the press or investment community;

 

 

changes in the supplements industry and competitors;

 

 

our financial condition, results of operations and prospects;

 

 

any future issuances of our common stock, which may include primary offerings for cash, and the grant or exercise of stock options from time to time;

 

 

general market and economic conditions; and

 

 

any outbreak or escalation of hostilities, which could cause a recession or downturn in our economy.

 

We may be subject to shareholder litigation, thereby diverting our resources that may have a material effect on our profitability and results of operations.

 

As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may become the target of similar litigation. Securities litigation will result in substantial costs and liabilities and will divert management’s attention and resources.

 

Future sales of common stock by stockholders may have an adverse effect on the then prevailing market price of our common stock.

 

In the event a public market for our common stock is sustained in the future, sales of our common stock may be made by holders of our public float or by holders of restricted securities in compliance with the provisions of Rule 144 of the Securities Act of 1933. In general, under Rule 144, a non-affiliated person who has satisfied a six-month holding period in a company registered under the Securities Exchange Act of 1934, as amended, may, sell their restricted common stock without volume limitation, so long as the issuer is current with all reports under the Exchange Act in order for there to be adequate common public information. Affiliated persons may also sell their common shares held for at least six months, but affiliated persons will be required to meet certain other requirements, including manner of sale, notice requirements and volume limitations. Non-affiliated persons who hold their common shares for at least one year will be able to sell their common stock without the need for there to be current public information in the hands of the public. Future sales of shares of our public float or by restricted common stock made in compliance with Rule 144 may have an adverse effect on the then prevailing market price, if any, of our common stock.

 

We do not expect to pay cash dividends in the foreseeable future.

 

We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.

 

As a public company, we are subject to complex legal and accounting requirements that will require us to incur significant expenses and will expose us to risk of non-compliance. 

 

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As a public company, we are subject to numerous legal and accounting requirements that do not apply to private companies. The cost of compliance with many of these requirements is material, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our relative inexperience with these requirements may increase the cost of compliance and may also increase the risk that we will fail to comply. Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely basis, loss of market confidence and/or governmental or private actions against us. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis our privately held and larger public competitors.

 

Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and pose challenges for our management.

 

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

 

We will need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms.

 

When we elect to raise additional funds or additional funds are required, we may raise such funds from time to time through public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives Additional equity or debt financing or corporate collaboration and licensing arrangements may not be available on acceptable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing acquisition, licensing, development and commercialization efforts and our ability to generate revenues and achieve or sustain profitability will be substantially harmed.

 

If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected and we may be unable to continue our operations.

 

We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

 

Our common stock is subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934 (the “Exchange Act”), commonly referred to as the “penny stock rule.” Section 15(g) sets forth certain requirements for transactions in penny stock, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act. The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. We are subject to the SEC’s penny stock rules.

 

Since our common stock is deemed to be penny stock, trading in the shares of our common stock is subject to additional sales practice requirements on broker-dealers who sell penny stock to persons other than established customers and accredited investors. “Accredited investors” are persons with assets in excess of $1,000,000 (excluding the value of such person’s primary residence) or annual income exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such security and must have the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt the rules require the delivery, prior to the first transaction of a risk disclosure document, prepared by the SEC, relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in

 

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an account and information to the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealer to trade and/or maintain a market in our common stock and may affect the ability of our stockholders to sell their shares of common stock.

 

There can be no assurance that our shares of common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock was exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock if the SEC finds that such a restriction would be in the public interest.

 

Our common stock is subject to price volatility unrelated to our operations.

 

The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or ourselves. In addition, the over-the-counter market is subject to extreme price and volume fluctuations in general. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

 

Trading in our common stock on the OTC Markets is limited and sporadic making it difficult for our shareholders to sell their shares or liquidate their investments.

 

Trading in our common stock is currently published on the OTC Markets. The trading price of our common stock has been subject to wide fluctuations. Trading prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management’s attention and resources.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

This item is not applicable to emerging growth companies.

 

ITEM 2. PROPERTIES

 

We maintain our corporate offices at 2500 Wilcrest Drive, 3rd Floor, Houston, Texas 77042. Our telephone number is 832-781-8521.

 

ITEM 3. LEGAL PROCEEDINGS

 

As of September 30, 2019, the Company was involved in litigation: Cause No. 2018-48120; Somaceuticals, Inc. and AngioSoma, Inc. v. David Summers in the 151st District Court of Harris County, Texas. Dr. Summers provided scientific expertise to AngioSoma for a number of years, and there was a dispute regarding the ownership of several patents and other intellectual property. AngioSoma obtained a favorable settlement of the lawsuit on October 16, 2019, which resulted in the settlement of all claims of both parties along with (i) the assignment by the Company of certain technology and intellectual property to Dr. Summers, (ii)  the assignment by Dr. Summers of any interest he owns in certain technology and intellectual property to the Company; and (iii) the assignment by Summers of 5,800,000 shares of Series A preferred stock of the Company to the Company.

 

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

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

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Table of Contents

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

Our common stock trades on the “Over the Counter” Bulletin Board’s Pink Tier (“OTC”) under the symbol “SOAN”. The following table sets forth, for the period indicated, the prices of the common stock in the over-the-counter market, as reported and summarized by OTC Markets Group, Inc. These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown, or commission and may not represent actual transactions. There is an absence of an established trading market for the Company’s common stock, as the market is limited, sporadic and highly volatile. 

 

Holders

 

As of the date of this filing, there were 27 holders of record of our common stock.

 

Dividends

 

To date, we have not paid dividends on shares of our common stock and we do not expect to declare or pay dividends on shares of our common stock in the foreseeable future. The payment of any dividends will depend upon our future earnings, if any, our financial condition, and other factors deemed relevant by our Board of Directors.

 

Common Stock

 

We are authorized to issue an unlimited number shares of common stock, with a par value of $0.001. The closing price of our common stock on December 2, 2020, as quoted by OTC Markets Group, Inc., was $0.0082. There were 445,493,342 shares of common stock issued and outstanding as of December 2, 2020. All shares of common stock have one vote per share on all matters including election of directors, without provision for cumulative voting. The common stock is not redeemable and has no conversion or preemptive rights. The common stock currently outstanding is validly issued, fully paid and non-assessable. In the event of liquidation of the Company, the holders of common stock will share equally in any balance of the Company’s assets available for distribution to them after satisfaction of creditors and preferred shareholders, if any. The holders of the Company’s common are entitled to equal dividends and distributions per share with respect to the common stock when, as and if, declared by the Board of Directors from funds legally available.

 

Our Articles of Incorporation, our Bylaws, and the applicable statutes of the state of Nevada contain a more complete description of the rights and liabilities of holders of our securities.

 

During the year ended September 30, 2020, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.

 

Non-cumulative voting

 

Holders of shares of our common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

The following table shows the number of shares of common stock that could be issued upon exercise of outstanding options and warrants, the weighted average exercise price of the outstanding options and warrants, and the remaining shares available for future issuance as of September 30, 2020.

 

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Table of Contents

 

Plan Category

 

Number of Securities to be issued upon exercise of outstanding options, warrants and rights

 

Weighted average exercise price of outstanding options, warrants and rights

 

Number of securities remaining available for future issuance

 

Equity compensation plans approved by security holders.

 

 

 

 

 

 

10,000,000

 

 

 

 

 

 

 

 

 

 

 

 

Equity compensation plans not approved by security holders.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

10,000,000

 

 

Preferred Stock

 

Our authorized preferred stock consists of 20,000,000 shares of $0.001 par value preferred stock.

 

Series A Preferred Stock – Our board of directors has designated up to 6,000,000 shares of Series A Preferred Stock. The Series A Preferred Stock has a liquidation value of $2.00 per share. The initial number issued is 5,000,000 with additional shares to be issued as a dividend not to exceed a total of 6,000,000 shares. The rank of the Series A is prior to all common and preferred shares. In addition, the Series A Preferred Stock retains protective provisions to maintain their seniority with respect to liquidation or dissolution. The Series A Preferred Stock holds no voting rights and earns an 8% per annum dividend, payable in additional shares of Series A Preferred Stock. As part of a legal settlement with David Summers, during the year ended September 30, 2020, 5,800,000 shares of Series A Preferred Stock were returned to the Company and cancelled. At September 30, 2020, no shares of the Series A Preferred Stock were issued and outstanding.

 

Series B Preferred Stock – Our board of directors has designated up to 1,000,000 shares of Series B Preferred Stock. The Series B Preferred Stock has a liquidation value of $1.00 per share. The holders of the Series B Preferred Stock are entitled to dividends of 8% per year payable quarterly in cash or in shares of common stock at the option of the Company. The holders of the Series B Preferred Stock have no voting rights. The Series B Preferred Stock is redeemable at the option of the Company at a price of $1.00 per share. At September 30, 2020,  no shares of Series B Preferred Stock were issued or outstanding.

 

Series C Preferred Stock – On September 12, 2017, our board of directors designated up to 1,200,000 shares of Series C Preferred Stock with a liquidation value of $0.50 per share. The holders of the Series C Preferred Stock have no voting rights. The Series C Preferred Stock is convertible at the option of the holder into shares of common stock at a rate of one share of common stock for each share of Series C Preferred Stock. The Series C Preferred Stock is redeemable at the option of the Company at a price of $0.50 per share. The Series C Preferred Stock has been canceled as of September 30, 2017.

 

Series D Preferred Stock – On September 21, 2017, our board of directors designated up to 539,988 shares of Series D Preferred Stock with a liquidation value of $1.00 per share. The holders of the Series D Preferred Stock have no voting rights. The Series D Preferred Stock is convertible at the option of the holder into shares of common stock at a rate of $0.01 per share of common stock. The Series D Preferred Stock is not redeemable. At September 30, 2020, 509,988 shares of the Series D Preferred Stock were issued and outstanding.

 

Series E Preferred Stock – Our board of directors has designated up to 1,000,000 shares of Series E Preferred stock. The Series E Preferred stock has voting rights on the basis of two votes for every outstanding share of common stock meaning that the holders of the Series E Preferred Stock have 2/3 of the voting rights in the Company. At September 30, 2020, 1,000,000 shares of the Series E Preferred Stock were issued and outstanding.

 

Series F Preferred Stock – On September 21, 2017, our board of directors designated up to 501,975 shares of Series F Preferred Stock with a liquidation value of $1.00 per share. The holders of the Series F Preferred Stock have no voting rights. The Series F Preferred Stock is convertible at the option of the holder into shares of common stock at a rate of $0.01 per share of common stock. The Series F Preferred Stock is not redeemable. During the year ended September 30, 2019, 60,000 shares of the Series F Preferred Stock were returned for cancellation. At September 30, 2020, 386,975 shares of the Series F Preferred Stock were issued and outstanding.

 

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Table of Contents

 

Recent Sales of Unregistered Securities

 

Set forth below is information regarding securities sold by during the quarter ended September 30, 2020 that were not registered under the Securities Act:

 

Date of Sale

 

Title of Security

 

Number Sold

 

Consideration Received
and Description of
Underwriting or Other
Discounts to Market
Price or Convertible
Security, Afforded to
Purchasers

 

Exemption from
Registration
Claimed

 

If Option, Warrant
or Convertible
Security, terms of
exercise or
conversion

July 7, 2020

 

Common Stock

 

10,909,091

 

Conversion of convertible note in the amount of $12,000

 

Section 3(a)(9) of the Securities Act

 

Convertible at 65% of the average of the two lowest bid prices of the Company’s common stock for the 15 trading days prior to the conversion date.

 

 

 

 

 

 

 

 

 

 

 

July 21, 2020

 

Common Stock

 

10,909,091

 

Conversion of convertible note in the amount of $12,000

 

Section 3(a)(9) of the Securities Act

 

Convertible at 65% of the average of the two lowest bid prices of the Company’s common stock for the 15 trading days prior to the conversion date.

 

 

 

 

 

 

 

 

 

 

 

July 27, 2020

 

Common Stock

 

16,280,000

 

Conversion of convertible note in the amount of $14,000 and accrued interest of $2,280

 

Section 3(a)(9) of the Securities Act

 

Convertible at 65% of the average of the two lowest bid prices of the Company’s common stock for the 15 trading days prior to the conversion date.

 

 

 

 

 

 

 

 

 

 

 

August 14, 2020

 

Common Stock

 

10,000,000

 

Services rendered

 

Section 3(a)(9) of the Securities Act

 

N/A

 

 

 

 

 

 

 

 

 

 

 

August 14, 2020

 

Common Stock

 

5,000,000

 

Cash of $500 and Services rendered

 

Section 3(a)(9) of the Securities Act

 

N/A

 

ITEM 6. SELECTED FINANCIAL DATA

 

This item is not applicable to emerging growth companies.

 

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Table of Contents

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS “ANTICIPATED,” “BELIEVE,” “EXPECT,” “PLAN,” “INTEND,” “SEEK,” “ESTIMATE,” “PROJECT,” “WILL,” “COULD,” “MAY,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY’S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.

 

The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives, and performance that involve risk, uncertainties, and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.

 

Plan of Operations

 

We believe we do not have adequate funds to fully execute our business plan for the next twelve months unless we obtain additional funding. However, should we not raise this capital, we will allocate our funding to first assure that all State, Federal and SEC requirements are met.

 

Results of Operations

 

Revenue

 

Revenue for the year ended September 30, 2020 was $77 compared to revenue of $425 during the year ended September 30, 2019.

 

Cost of Goods Sold

 

Cost of goods sold was $37,682 during the year ended September 30, 2020, compared to $154 during the prior year. Cost of sales increased primarily due to the write down of slow-moving and expired inventory during the current year of $37,667.

 

Sales, General, and Administrative Expenses

 

We incurred sales, general and administrative expenses of $266,066 during the year ended September 30, 2020 compared to $316,141 during the year ended September 30, 2019, a decrease of $50,075 or approximately 16%. The decrease was due primarily to a decrease in non-cash compensation of $32,750, a decrease in legal fees of $9,445 and a decrease in website related costs of $15,312, partially offset by an increase in accounting fees of $11,527.

 

Gain on Forgiveness of Debt

 

We recognized a gain on the forgiveness of debt in the amount of $110,834 during the year ended September 30, 2019 with no such gain during the year ended September 30, 2020..

 

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Table of Contents

 

Loss on Conversion of Debt

 

We recognized loss on the conversion of debt in the amount of $99,000 for the year ended September 30, 2019, with no such loss during the year ended September 30, 2020.

 

Loss on Marketable Securities

 

We recognized a loss on marketable securities in the amount of $10,673 during the year ended September 30, 2019. During the year ended September 30, 2019, the Company wrote off its investment in AFS Securities, as the Company believes that our investment in AFS Securities is no longer recoverable.

 

Interest Expense

 

We recognized interest expense in the amount of $238,060 for the year ended September 30, 2020, a decrease of $122,303 or approximately 34% compared to $360,363 for the year ended September 30, 2019. The decrease was due primarily to a decrease in the amount of discount on convertible note payable amortized to interest expense.

 

Net Loss

 

For the reasons above, our net loss for the year ended September 30, 2020 was $541,731 a decrease of $133,341 or approximately 20% compared to a net loss of $675,072 for the year ended September 30, 2019.

 

Other Comprehensive Income (Loss)

 

The Company had other comprehensive loss of $0 for the year ended September 30, 2020, compared to other comprehensive income of ($971) for the year ended September 30, 2019. Other comprehensive income (loss) consists of the change in market value of the stock of our investment in AFS Securities.

 

Dividends on Preferred Stock

 

The Company paid dividends on its Series A Preferred Stock in the amount of 800,000 shares with a liquidation value of $1,600,000 during the year ended September 30, 2019. In October 2019, a legal settlement with the holder of the Series A Preferred stock was reached, resulting in cancellation of all outstanding shares of Series A Preferred Stock.

 

Liquidity and Capital Resources

 

At September 30, 2020, we had cash of $81,442 and a working capital deficit in the amount of $660,497. During the year ended September 30, 2020, we had cash used in operating activities of $239,735, consisting of our net loss of $541,731, partially offset by non-cash compensation of $35,500, depreciation of $1,329, inventory impairment of $37,667 and amortization of discount on notes payable of $225,282. Our cash position also increased by a net change in the components of working capital in the amount of $2,218 during the period. We have an accumulated deficit at September 30, 2020 in the amount of $7,215,338. We generated cash flows from financing activities in the amount of $222,000 from the issuance of convertible notes payable and $500 from the sale of common stock to our CEO.

 

We had no material commitments for capital expenditures or inventory purchases as of September 30, 2020. However, should we execute our business plan as anticipated, we will incur substantial capital expenditures and require financing in addition to what is required to fund our present operation.

 

We intend to pursue capital through public or private financing, as well as borrowing and other sources in order to finance our business activities. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then our ability to continue our operations may be significantly hindered.

 

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Table of Contents

 

Additional Financing

 

Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Critical Accounting Policies and Estimates

 

We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the financial statements are prepared; actual results could differ from our estimates and such differences could be material. We have identified below the critical accounting policies, which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation our financial statements.

 

Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Going concern - The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the year ended September 30, 2020, the Company had a net loss of $541,731 and generated negative cash flow from operating activities in the amount of $239,735. In view of these matters, there is substantial doubt regarding the Company’s ability to continue as a going concern, which is dependent upon its ability to achieve a level of profitability or to obtain additional capital to finance its operations. The Company intends on financing its future activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

New Accounting Pronouncements

 

For a description of recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial statements, see “Note 3: Significant Accounting Polices: Recently Issued Accounting Pronouncements” in Part II, Item 8 of this Form 10-K.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

This item is not applicable to smaller reporting companies.

 

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Table of Contents

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

AngioSoma, Inc.

 

Consolidated Financial Statements

 

September 30, 2020

 

Contents 

 

Report of Independent Registered Public Accounting Firm

18

Consolidated Balance Sheets

19

Consolidated Statements of Operations

20

Consolidated Statements of Comprehensive Income (Loss)

21

Consolidated Statements of Changes in Stockholders’ Deficit

22

Consolidated Statements of Cash Flows

23

Notes to the Consolidated Financial Statements

24

 

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Table of Contents

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of AngioSoma, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of AngioSoma, Inc. and subsidiaries (the Company) as of September 30, 2020 and 2019 and the related consolidated statements of operations, statements of other comprehensive income (loss), stockholders’ deficit, and cash flows for each of the years ended September 30, 2020 and 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of its operations and its cash flows for each of the years ended September 30, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ M&K CPAS, PLLC

 

We have served as the Company’s auditor since 2012.

 

Houston, Texas

 

December 3, 2020

 

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Table of Contents

 

ANGIOSOMA INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

September 30,

 

September 30,

 

 

 

2020

 

2019

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

81,442

 

$

100,459

 

Prepaid expenses

 

 

4,783

 

 

787

 

Inventory, net

 

 

2,412

 

 

40,115

 

Total current assets

 

 

88,637

 

 

141,361

 

 

 

 

 

 

 

 

 

Fixed assets, net of accumulated depreciation of $1,919 and $1,496, respectively

 

 

1,275

 

 

822

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

89,912

 

$

142,183

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

133,467

 

$

135,067

 

Accounts payable to related party

 

 

173,568

 

 

291,372

 

Advances payable

 

 

59,650

 

 

59,650

 

Current portion of convertible notes payable, net of discount of $34,923 and $52,205, respectively

 

 

155,077

 

 

113,795

 

Current portion of accrued interest payable

 

 

227,372

 

 

227,734

 

Total current liabilities

 

 

749,134

 

 

827,618

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

749,134

 

 

827,618

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Common stock, $0.001 par value, unlimited shares authorized; 436,218,342 and 170,467,283 shares issued and outstanding at September 30, 2020 and 2019, respectively

 

 

436,217

 

 

170,468

 

Preferred stock; 20,000,000 shares authorized:

 

 

 

 

 

 

 

Series A Preferred Stock, $0.001 par value, 6,000,000 shares authorized, 0 and 5,800,000 shares issued and outstanding at September 30, 2020 and 2019, respectively

 

 

 

 

4,590,535

 

Series D Preferred Stock, $0.001 par value, 539,988 shares authorized; 509,988 shares issued and outstanding at September 30, 2020 and 2019, respectively

 

 

510

 

 

510

 

Series E Preferred Stock, $0.001 par value, 1,000,000 shares authorized; 1,000,000 shares issued and outstanding at September 30, 2020 and 2019, respectively

 

 

1,000

 

 

1,000

 

Series F Preferred Stock; $0.001 par value 501,975 shares authorized; 386,975 shares issued and outstanding at September 30, 2020 and 2019, respectively

 

 

387

 

 

387

 

Additional paid-in capital

 

 

6,118,002

 

 

1,225,272

 

Accumulated other comprehensive income

 

 

 

 

 

Accumulated deficit

 

 

(7,215,338

)

 

(6,673,607

)

 

 

 

 

 

 

 

 

TOTAL STOCKHOLDERS’ DEFICIT

 

 

(659,222

)

 

(685,435

)

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

$

89,912

 

$

142,183

 

 

The accompanying footnotes are an integral part of these financial statements.

 

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Table of Contents

 

ANGIOSOMA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Twelve Months Ended

 

 

 

September 30,

 

 

 

2020

 

2019

 

 

 

 

 

 

 

 

 

REVENUE

 

$

77

 

$

425

 

Cost of goods sold

 

 

37,682

 

 

154

 

Gross profit (loss)

 

 

(37,605

)

 

271

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

General and administrative expenses

 

 

266,066

 

 

316,141

 

Total operating expenses

 

 

266,066

 

 

316,141

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(303,671

)

 

(315,870

)

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

Gain on forgiveness of debt

 

 

 

 

110,834

 

Loss on conversion of debt

 

 

 

 

(99,000

)

Loss on marketable securities

 

 

 

 

(10,673

)

Interest expense

 

 

(238,060

)

 

(360,363

)

 

 

 

 

 

 

 

 

Net Loss

 

$

(541,731

)

$

(675,072

)

 

 

 

 

 

 

 

 

Preferred Stock Dividend

 

 

 

 

(1,600,000

)

 

 

 

 

 

 

 

 

Net loss available to common shareholders

 

$

(541,731

)

$

(2,275,072

)

 

 

 

 

 

 

 

 

Net loss per share available to common shareholders

 

$

(0.00

)

$

(0.01

)

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic and diluted

 

 

298,091,153

 

 

104,775,749

 

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

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Table of Contents

 

ANGIOSOMA INC.

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

Twelve Months Ended December 31,

 

 

 

2020

 

2019

 

 

 

 

 

 

 

 

 

NET LOSS

 

$

(541,731

)

$

(675,072

)

 

 

 

 

 

 

 

 

Change in fair value of AFS securities

 

$

 

$

(971

)

 

 

 

 

 

 

 

 

COMPREHENSIVE LOSS

 

$

(541,731

)

$

(676,043

)

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

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Table of Contents

 

ANGIOSOMA INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

Original

 

Accumulated

 

 

 

 

 

 

 

 

 

Series A

 

Series D

 

Series E

 

Series F

 

Additional

 

Other

 

 

 

Total

 

 

Common stock

 

Preferred Stock

 

Preferred Stock

 

Preferred Stock

 

Preferred Stock

 

paid-in

 

Comprehensive

 

Accumulated

 

Equity

 

 

 

Shares

 

Par

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

capital

 

Income

 

Deficit

 

(Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2018

 

69,323,021

 

$

69,323

 

5,000,000

 

$

2,990,535

 

509,988

 

$

510

 

1,000,000

 

$

1,000

 

446,975

 

$

447

 

$

2,065,018

 

$

971

 

$

(5,998,535

)

$

(870,731

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for conversion of convertible note payable and accrued interest

 

97,644,262

 

 

97,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

341,118

 

 

 

 

 

 

438,763

 

Common stock issued to officer as compensation

 

3,500,000

 

 

3,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64,750

 

 

 

 

 

 

68,250

 

Beneficial conversion discount on convertible notes payable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

354,326

 

 

 

 

 

 

354,326

 

Cancellation of Series F

 

 

 

 

 

 

 

 

 

 

 

 

 

(60,000

)

 

(60

)

 

60

 

 

 

 

 

 

 

Dividend on Preferred A

 

 

 

 

800,000

 

 

1,600,000

 

 

 

 

 

 

 

 

 

 

 

(1,600,000

)

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(971

)

 

 

 

(971

)

Net loss for the year ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(675,072

)

 

(675,072

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2019

 

170,467,283

 

$

170,468

 

5,800,000

 

$

4,590,535

 

509,988

 

$

510

 

1,000,000

 

$

1,000

 

386,975

 

$

387

 

$

1,225,272

 

$

 

$

(6,673,607

)

$

(685,435

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for conversion of convertible note payable and accrued interest

 

250,751,059

 

 

250,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,609

)

 

 

 

 

 

232,140

 

Stock-based compensation

 

10,000,000

 

 

10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,500

 

 

 

 

 

 

35,500

 

Common stock sold to officer for cash

 

5,000,000

 

 

5,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,500

)

 

 

 

 

 

500

 

Beneficial conversion discount on convertible notes payable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

187,000

 

 

 

 

 

 

187,000

 

Return of Series A preferred shares for legal settlement

 

 

 

 

(5,800,000

)

 

(4,590,535

)

 

 

 

 

 

 

 

 

 

 

4,703,339

 

 

 

 

 

 

112,804

 

Net loss for the year ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(541,731

)

 

(541,731

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2020

 

436,218,342

 

$

436,217

 

 

$

 

509,988

 

$

510

 

1,000,000

 

$

1,000

 

386,975

 

$

387

 

$

6,118,002

 

$

 

$

(7,215,338

)

$

(659,222

)

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

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Table of Contents

 

ANGIOSOMA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Twelve Months Ended

 

 

 

September 30,

 

 

 

2020

 

2019

 

CASH FLOW FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net loss

 

$

(541,731

)

$

(675,072

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Stock compensation

 

 

35,500

 

 

68,250

 

Depreciation

 

 

1,329

 

 

472

 

Amortization of discount on convertible note payable

 

 

225,282

 

 

334,842

 

Inventory impairment

 

 

37,667

 

 

 

Gain on forgiveness of debt

 

 

 

 

(110,834

)

Loss on conversion of convertible notes payable

 

 

 

 

99,000

 

Loss on marketable securities

 

 

 

 

10,673

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

Inventory

 

 

36

 

 

(36,300

)

Prepaid expenses

 

 

(3,996

)

 

(787

)

Deposits on inventory

 

 

 

 

 

16,395

 

Accounts payable and accrued liabilities

 

 

(1,600

)

 

(1,471

)

Accounts payable and accrued liabilities to related party

 

 

(5,000

)

 

10,000

 

Accrued interest payable

 

 

12,778

 

 

24,694

 

NET CASH USED IN OPERATING ACTIVITIES

 

 

(239,735

)

 

(260,138

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

Cash used to acquire fixed assets

 

 

(1,782

)

 

 

NET CASH USED IN INVESTING ACTIVITIES

 

 

(1,782

)

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

Proceeds from convertible notes payable

 

 

222,000

 

 

269,000

 

Proceeds from sale of common stock

 

 

500

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

222,500

 

 

269,000

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH

 

 

(19,017

)

 

8,862

 

 

 

 

 

 

 

 

 

Cash at beginning of period

 

 

100,459

 

 

91,597

 

 

 

 

 

 

 

 

 

Cash at end of period

 

 

$81,442

 

 

$100,459

 

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest

 

$

 

$

 

Taxes

 

$

 

$

 

 

 

 

 

 

 

 

 

Noncash investing and financing transactions:

 

 

 

 

 

 

 

Conversion of convertible notes payable and accrued interest into common stock

 

$

232,140

 

$

340,260

 

Preferred stock returned for cancellation

 

$

 

$

60

 

Return of Series A preferred shares and settlement of related party compensation

 

$

4,703,339

 

$

 

Change in fair value of available-for-sale securities

 

$

 

$

(971

)

Beneficial conversion discount on convertible note payable

 

$

187,000

 

$

354,326

 

Dividend on Series A Preferred Stock

 

$

 

$

1,600,000

 

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

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Table of Contents

 

ANGIOSOMA, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

 

Note 1. General Organization and Business

 

AngioSoma is a wellness company dedicated to bringing innovative, effective and high-quality supplement products to the medical, wellness and adult-use markets through our marketing subsidiary, SomaCeuticalsTM. SomaCeuticals has acquired a diversified supply of supplements, strong clinical, scientific and operating capabilities and leading product research and development infrastructure in order to create trusted products and brands in an expanding global market.

 

We have abandoned our pursuit of FDA clearance and marketing of any drugs or products, including LiprostinTM, the patented pharmaceutical for a controlled drug delivery system. When rights to the drug were acquired it was represented that the initial clinical trials had been successfully completed and the single remaining trial was eligible to go forward. Research disclosed the representations are untrue. Therefore, further efforts to seek clearance and market the product ceased.

 

The Company was incorporated on April 29, 2016. The Company’s year-end is September 30. On October 4, 2019, the Company filed Articles of Continuance with the Secretary of State of Wyoming to continue its business in the state of Wyoming. As part of these Articles of Continuance, the Company effective October 4, 2019, the Company has no limit on the authorized shares of common stock that can be issued. The Company filed its Certificate of Dissolution with the Secretary of State of Nevada on October 21, 2019 since it is no longer a Nevada corporation. The Company undertook the necessary steps to notify the Financial Industry Regulatory Authority (“FINRA”) of the move from Nevada to Wyoming, and on October 28, 2019, FINRA notified the Company that FINRA has updated their system to reflect that the Company is now a Wyoming company.

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, SomaCeuticals, Inc., First Titan Energy, LLC and First Titan Technical, LLC from the date of their formations or acquisition. Significant intercompany transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with 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. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period between the origination of these instruments and their expected realization.

 

FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures (ASC 820) defines fair value 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. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

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Table of Contents

 

Level 1 -

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

 

Level 2 -

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

 

Level 3 -

Inputs that are both significant to the fair value measurement and unobservable.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2020. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts payable and accrued expenses.

 

The following table presents assets that were measured and recognized at fair value as of September 30, 2020 and the period then ended on a recurring and nonrecurring basis:

 

Description

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Available for sale securities

 

$

 

$

 

$

 

$

 

Totals

 

$

 

$

 

$

 

$

 

 

The following table presents assets that were measured and recognized at fair value as of September 30, 2019 and the period then ended on a recurring and nonrecurring basis:

 

Description

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Available for sale securities

 

$

 

$

 

$

 

$

 

Totals

 

$

 

$

 

$

 

$

 

 

Revenue Recognition

 

During the years ended September 30, 2019 and 2018, the Company recognized revenue from product sales upon product delivery. All of our products are shipped through a third-party fulfillment center to the customer and the customer takes title to product and assumes risk and ownership of the product when it is delivered. Shipping charges to customers and sales taxes collectible from customers, if any, are included in revenues.

 

Effective June 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to each performance obligation in the contract; and (5) recognizing revenue when each performance obligation is satisfied.

 

There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the years ended September 30, 2020 or 2019. All revenue during the years ended September 30, 2020 and 2019 was from product sales.

 

Cash and Cash Equivalents

 

All cash is maintained with a major financial institution in the United States. Deposits with this bank may occasionally exceed the amount of insurance provided on such deposits. For the purpose of the financial statements, cash includes cash in banks. Cash was $81,442 and $100,459 as of September 30, 2020 and 2019, respectively. There were no cash equivalents as of September 30, 2020 and 2019.

 

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Table of Contents

 

Inventories

 

Inventories are stated at the lower of cost or net realizable value, using the first-in, first-out method. The Company reviews its inventory for obsolescence and any inventory identified as obsolete is reserved or written off. The Company’s determination of obsolescence is based on assumptions about the demand for its products, product expiration dates, estimated future sales, and management’s future plans. As of September 30, 2020, the Company record an allowance for slow-moving inventory of $36,363, which was included in cost of goods sold during the year ended September 30, 2020. The Company also wrote off $1,304 of expired inventory during the year ended September 30, 2020.

 

Property and equipment

 

Property and equipment of the Company is stated at cost. In accordance with ASC Topic 360 Property, Plant and Equipment, expenditure for fixed assets that substantially increase the useful lives of existing assets are capitalized at cost and depreciated. Routine expenditures for repairs and maintenance are expensed as incurred. Depreciation is provided principally on the straight-line method over the estimated useful lives of the asset.

 

During the year ended September 30, 2020, the Company purchased $1,782 of computer equipment. Depreciation expense was $1,329 during the year ended September 30, 2020 compared to $472 during the year ended September 30, 2019.

 

Income Taxes

 

The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of September 30, 2020 and 2019.

 

Commitments and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. There are no known commitments or contingencies as of September 30, 2020 or 2019.

 

Recently Issued Accounting Pronouncements

 

Accounting standards promulgated by the Financial Accounting Standards Board (the “FASB”) are subject to change. Changes in such standards may have an impact on our future financial statements. The following are a summary of recent accounting developments.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842): Accounting for Leases. This update requires that lessees recognize right-of-use assets and lease liabilities that are measured at the present value of the future lease payments at lease commencement date. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will largely remain unchanged and shall continue to depend on its classification as a finance or operating lease. We have performed a comprehensive review in order to determine what changes were required to support the adoption of this new standard. We elected certain practical expedients permitted under the transition guidance and the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and will not restate prior periods. Under the new guidance, the majority of our leases will continue to be classified as operating leases. The Company adopted this guidance on October 1, 2019, with no impact to the consolidated financial statements due to the Company not being a party to any lease agreements.

 

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Table of Contents

 

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU became effective for us on October 1, 2019 and did not have a material effect on our financial statements.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.

 

Note 3. Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the year ended September 30, 2020, the Company had a net loss of $541,731. As of September 30, 2020, the Company had a working capital deficit of $660,497 and an accumulated deficit of $7,215,338. The Company has minimal revenue. Without additional capital, the Company will not be able to remain in business.

 

These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

Management has plans to address the Company’s financial situation as follows:

 

In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.

 

In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company, which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.

 

Note 4. Related Party Transactions

 

For the year ended September 30, 2020

 

David Summers, a significant shareholder of the Company, formerly provided consulting services to the Company related to the development of our products. In addition, the Company had previously rented office space from Mr. Summers for $400 per month under a month to month lease. As part of the legal settlement discussed in Note 8, the Company was relieved of these outstanding claims, and the unpaid liability balance of $112,804 was retired as contributed capital, and Mr. Summers returned 5,800,000 shares of Series A Preferred stock with a book value of $4,590,535, which were cancelled.

 

Alex Blankenship is paid $5,000 per month under her employment agreement as Chief Executive Officer of the Company. As of September 30, 2020, the Company owed Ms. Blankenship $135,438 for unpaid compensation.

 

As of September 30, 2020, the Company owed Sydney Jim, our former CEO, $38,130 for accrued but unpaid compensation.

 

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Table of Contents

 

For the year ended September 30, 2019

 

David Summers, a significant shareholder of the Company, formerly provided consulting services to the Company related to the development of our products. In addition, the Company had previously rented office space from Mr. Summers for $400 per month under a month to month lease. As of September 30, 2019, the aggregate liability accrued to Mr. Summers was $112,804. The Company was also involved in a legal dispute with Mr. Summers to gather the funds due by Summers to the Company, as well as the written agreement for Summers to provide certain patents and formulas. Subsequent to September 30, 2019, the Company entered into a settlement agreement with Mr. Summers; see note 10.

 

Alex Blankenship is paid $5,000 per month under her employment agreement as Chief Executive Officer of the Company. As of September 30, 2019, the Company owed Ms. Blankenship $140,438 for unpaid compensation.

 

During the year ended September 30, 2019, the Company issued 3,500,000 shares of common stock with a fair value of $68,250 to Ms. Blankenship as a bonus.  These shares were valued at $0.195 per share, which was the closing price of the Company’s common stock on the date of the grant.

 

As of September 30, 2019, the Company owed Sydney Jim, our former CEO, $38,130 for accrued but unpaid compensation.

 

Note 5. Convertible Notes Payable

 

Convertible notes payable consisted of the following at September 30, 2020 and September 30, 2019:

 

 

 

September 30,
2020

 

September 30,
2019

 

Convertible note dated April 13, 2017 in the original principal amount of $20,000, no stated maturity date, bearing interest at 3% per year, convertible into common stock at a rate of $0.01 per share.

 

$

20,000

 

$

20,000

 

 

 

 

 

 

 

 

 

Convertible note dated April 1, 2019 in the original principal amount of $45,000, maturing February 15, 2020, bearing interest at 12% per year, convertible beginning September 28, 2019 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion. In October 2019, principal of $45,000 and accrued interest of $2,700 were converted into 19,331,169 shares of common stock. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.

 

 

 

 

45,000

 

 

 

 

 

 

 

 

 

Convertible note dated May 21, 2019 in the original principal amount of $35,000, maturing March 15, 2020, bearing interest at 12% per year, convertible beginning November 17, 2019 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion. In December 2019, principal of $35,000 and accrued interest of $2,100 were converted into 20,502,580 shares of common stock. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.

 

 

 

 

35,000

 

 

 

 

 

 

 

 

 

Convertible note dated August 2, 2019 in the original principal amount of $33,000, maturing May 15, 2020, bearing interest at 12% per year, convertible beginning January 29, 2020 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion. In February 2020, principal of $33,000 and accrued interest of $1,980 were converted into 24,886,524 shares of common stock. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.

 

 

 

 

33,000

 

 

 

 

 

 

 

 

 

Convertible note dated August 13, 2019 in the original principal amount of $33,000, maturing May 30, 2020, bearing interest at 12% per year, convertible beginning February 9, 2020 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion. In March 2020, principal of $33,000 and accrued interest of $1,980 were converted into 69,090,662 shares of common stock. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.

 

 

 

 

33,000

 

 

 

 

 

 

 

 

 


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Table of Contents

 

 

 

 

 

 

 

 

 

Convertible note dated October 28, 2019 in the original principal amount of $35,000, maturing September 15, 2020, bearing interest at 12% per year, convertible beginning April 5, 2020 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion. In May 2020, principal of $35,000 and accrued interest of $2,100 were converted into 78,841,942 shares of common stock. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible note dated January 14, 2020 in the original principal amount of $38,000, maturing November 1, 2020, bearing interest at 12% per year, convertible beginning July 12, 2020 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion. In July 2020, principal of $38,000 and accrued interest of $2,280 were converted into 38,098,182 shares of common stock. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible note dated March 30, 2020 in the original principal amount of $28,000, maturing January 15, 2021, bearing interest at 12% per year, convertible beginning September 26, 2020 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion.

 

 

28,000

 

 

 

 

 

 

 

 

 

 

 

Convertible note dated June 11, 2020 in the original principal amount of $33,000, maturing April 15, 2021, bearing interest at 12% per year, convertible beginning December 8, 2020 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion.

 

 

33,000

 

 

 

 

 

 

 

 

 

 

 

Convertible note dated July 7, 2020 in the original principal amount of $38,000, maturing May 15, 2021, bearing interest at 12% per year, convertible beginning January 3, 2020 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion.

 

 

38,000

 

 

 

 

 

 

 

 

 

 

 

Convertible note dated July 30, 2020 in the original principal amount of $33,000, maturing June 15 2021, bearing interest at 12% per year, convertible beginning February 20, 2021 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion.

 

 

33,000

 

 

 

 

 

 

 

 

 

 

 

Convertible note dated August 24, 2020 in the original principal amount of $38,000, maturing June 30, 2021, bearing interest at 12% per year, convertible beginning January 26, 2021 into common stock at a rate of 65% of the average of the two lowest bid prices during the 15 trading days prior to conversion.

 

 

38,000

 

 

 

 

 

 

 

 

 

 

 

Total current convertible notes payable

 

 

190,000

 

 

166,000

 

 

 

 

 

 

 

 

 

Less: discount on convertible notes payable

 

 

(34,923

)

 

(52,205

)

Total convertible notes payable, net of discount

 

$

155,077

 

$

113,795

 

 

During the year ended September 30, 2019, the Company also converted a note payable with a remaining principal of $0 into 3,300,001 shares of common stock with a fair value of $99,000; the Company recognized a loss in the amount of $99,000 on this conversion. This debt was originally settled in a previous year through conversions, but the Company honored a current year conversion notice resulting in a loss on conversion.

 

All principal along with accrued interest is payable on the maturity date. The notes are convertible into common stock at the option of the holder. The holder of the notes cannot convert the notes into shares of common stock if that conversion would result in the holder owning more than 4.9% of the outstanding stock of the Company.

 

During the year ended September 30, 2020, the Company recognized $187,000 of new discount related to the beneficial conversion features of convertible notes payable, and recognized interest expense of $12,778 and amortization of discount on convertible notes payable of $225,282. During the year ended September 30, 2019, the Company recognized interest expense of $25,521 and amortization of discount on convertible notes payable of $334,842. As of September 30, 2020, and 2019, accrued interest was $227,372 and $227,734, respectively.

 

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Conversions to Common Stock

 

During the year ended September 30, 2020, the holders of the convertible notes payable elected to convert principal and accrued interest of $232,140 into 250,751,059 shares of common stock. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.


During the year ended September 30, 2019, the holders of the convertible notes payable elected to convert principal and accrued interest of $339,763 into 97,644,262 shares of common stock, resulting in a loss on conversion in the amount of $99,000.

 

Advances

 

As of September 30, 2020 and 2019, the Company owed non-interest bearing advances of $59,650, which are due on demand.

 

Note 6. Note Payable

 

The Company entered into a promissory note with its attorney to refinance accounts payable of $68,793 as of September 30, 2016 into a promissory note. The note can be issued up to the total principal amount of $100,000 and includes the prepayment of legal fees of $31,498 to be incurred during the period from October 1, 2016 through March 1, 2017. The note payable was recorded at $68,793 (the amount of refinanced accounts payable) as of September 30, 2017. There was no prepayment recognized as of September 30, 2017. During the year ended September 30, 2018, the company increased the amount of the note to $100,000 in connection with legal fees incurred. The note bears interest at the prime rate and requires monthly payments of principal and interest of $10,000 beginning July 1, 2017, the maturity date. During the year ended September 30, 2019, this note in the principal amount of $100,000 and accrued interest in the amount of $10,834 was forgiven by the lender; the Company recorded a gain in the amount of $110,834 in connection with the note forgiveness, and as of September 30, 2019, the balance of this note is $0.

 

Note 7. Stockholders’ deficit

 

The Company has unlimited authorized shares of common stock and 20,000,000 shares of preferred stock. As of September 30, 2020, there were 436,218,342 shares of common stock, 0 shares of Series A Preferred Stock, 509,988 shares of Series D Preferred Stock, 1,000,000 shares of Series E Preferred Stock and 386,975 shares of Series F Preferred Stock outstanding.

 

Conversions to Common Stock

 

During the year ended September 30, 2020, the holders of the convertible notes payable elected to convert principal and accrued interest of $232,140 into 250,751,059 shares of common stock. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.


During the year ended September 30, 2019, the holders of the convertible notes payable elected to convert principal and accrued interest of $339,763 into 97,644,262 shares of common stock, resulting in a loss on conversion in the amount of $99,000.

 

Common stock issued for services

 

During the year ended September 30, 2020, the Company issued 10,000,000 shares of common stock with a fair value of $24,000 to the President of SomaCeuticals, based on the closing price of the Company’s common stock of $0.0024 at the date of grant. The Company also issued 5,000,000 common shares to the President and CEO of the Company in exchange for $500 cash. Due to the sale at a value below current market pricing, the Company recognized stock-based compensation expense of $11,500 related to this issue, based on the closing price of the Company’s common stock of $0.0024 at the date of grant. The Company recognized a total of $35,500 of stock-based compensation expense for these awards.


During the year ended September 30, 2019, the Company issued 3,500,000 shares of common stock with a fair value of $68,250 to its President and CEO as a bonus. These shares were valued at $0.195 per share, which was the closing price of the Company’s common stock on the date of the grant.

 

Preferred Stock

 

Our authorized preferred stock consists of 20,000,000 shares of $0.001 par value preferred stock.

 

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Series A Preferred Stock – Our board of directors has designated up to 6,000,000 shares of Series A Preferred Stock. The Series A Preferred Stock has a liquidation value of $2.00 per share. The initial number issued is 5,000,000 with additional shares to be issued as a dividend not to exceed a total of 6,000,000 shares. The rank of the Series A is prior to all common and preferred shares. In addition, the Series A Preferred Stock retains protective provisions to maintain their seniority with respect to liquidation or dissolution. The Series A Preferred Stock holds no voting rights and earns an 8% per annum dividend, payable in additional shares of Series A Preferred Stock. During the year ended September 30, 2019, the Company issued 800,000 shares of Series A Preferred Stock with a liquidation value of $1,600,000 as a dividend. During the three months ended December 31, 2019, the Company entered into a settlement agreement with David Summers, the Company’s former CEO and a common stockholder. As part of this settlement, David Summers returned 5,800,000 Series A preferred shares with a book value of $4,590,535, to the Company which were cancelled. See Note 8 for additional information. At September 30, 2020 and 2019, there were 0 and 5,800,000 shares of our Series A Preferred Stock outstanding, respectively.

 

Series B Preferred Stock – Our board of directors has designated up to 1,000,000 shares of Series B Preferred Stock. The Series B Preferred Stock has a liquidation value of $1.00 per share. The holders of the Series B Preferred Stock are entitled to dividends of 8% per year payable quarterly in cash or in shares of common stock at the option of the Company. The holders of the Series B Preferred Stock have no voting rights. The Series B Preferred Stock is redeemable at the option of the Company at a price of $1.00 per share.

 

During the year ended September 30, 2018, the Company issued 500,000 shares of common stock upon conversion of the Series B Preferred Stock. At September 30, 2020 and 2019, there were no shares of our Series B Preferred Stock outstanding.

 

Series C Preferred Stock – On September 12, 2017, our board of directors designated up to 1,200,000 shares of Series C Preferred Stock with a liquidation value of $0.50 per share. The holders of the Series C Preferred Stock have no voting rights. The Series C Preferred Stock is convertible at the option of the holder into shares of common stock at a rate of one share of common stock for each share of Series C Preferred Stock. The Series C Preferred Stock is redeemable at the option of the Company at a price of $0.50 per share. The Series C Preferred Stock has been canceled, and there are no shares of Series C Preferred Stock outstanding as of September 30, 2020 and 2019.

 

Series D Preferred Stock – On September 21, 2017, our board of directors designated up to 539,988 shares of Series D Preferred Stock with a liquidation value of $1.00 per share. The holders of the Series D Preferred Stock have no voting rights. The Series D Preferred Stock is convertible at the option of the holder into shares of common stock at a rate of $0.01 per share of common stock. The Series D Preferred Stock is not redeemable. During the year ended September 30, 2019, the holders of 60,000 shares of the Series D Preferred stock returned these shares to the Company for cancellation. There was no gain or loss recognized on this transaction. At September 30, 2020 and 2019, there were 509,988 shares of Series D Preferred Stock outstanding.

 

Series E Preferred Stock – On August 3, 2015, our board of directors designated 1,000,000 shares of Series E Preferred stock. The Series E Preferred stock is subordinate to our common stock. It does not receive dividends and does not participate in equity distributions. The Series E Preferred stock retained 2/3 of the voting rights in the Company.

 

At September 30, 2020 and 2019, there were 1,000,000 shares of Series E Preferred stock outstanding. Dividends, when, as and if declared by the Board of Directors, shall be paid out of funds at the time legally available for such purposes.

 

Series F Preferred Stock On September 21, 2017, our board of directors designated up to 501,975 shares of Series F Preferred Stock with a liquidation value of $1.00 per share. The holders of the Series F Preferred Stock have no voting rights. The Series F Preferred Stock is convertible at the option of the holder into shares of common stock at a rate of $0.01 per share of common stock. The Series F Preferred Stock is not redeemable. During the year ended September 30, 2019, 60,000 shares of the Series F Preferred Stock were returned for cancellation. At September 30, 2020 and 2019, 386,975 shares of the Series F Preferred Stock were issued and outstanding.

 

Beneficial conversion discount

 

During the year ended September 30, 2020, we recorded a beneficial conversion discount of $187,000 as a result of discounts on convertible notes payable issued during the period.

 

During the year ended September 30, 2019, we recorded a beneficial conversion discount of $354,326 as a result of discounts on convertible notes payable issued during the period.

 

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Note 8. Commitments and Contingent Liabilities

 

Litigation

 

The Company was involved in a legal dispute with Mr. David Summers, a significant shareholder, regarding the settlement of claims on certain patents and formulas. In October 2019, the Company entered into a settlement agreement with David Summers whereby all claims, disputes and litigation were dismissed. Mr. Summers returned 5,800,000 shares of Series A Preferred stock with a book value of $4,590,535 to the Company, which were cancelled. The Company was relieved of the previously recognized liability for compensation amounts due to Mr. Summers of $112,804. The Company assigned three patents that it previously held to David Summers, which had no book value as of the date of the settlement. The settlement was recorded as a capital transaction due to the related party nature and as such no gain or loss was recorded.

 

Note 9. License Agreement

 

Effective August 23, 2020 the Company’s wholly-owned subsidiary, SomaCeuticals, Inc. entered into an exclusive global license agreement with 7 to Stand, Inc. for the rights to U.S. patent 10,610,592 issued to Fabrizio de Silvestri, Terni, Italy, as inventor, April 7, 2020 for treatment of Multiple Sclerosis. In consideration for the license agreement, SomaCeuticals agreed to pay 7 to Stand a royalty of 7.1% of the net sales of any product developed under the patent on a worldwide basis. Additionally, the Company will issue shares of common stock to 7 to Stand upon completion of the following milestones:

 

Common shares representing 5% of total number of outstanding common shares of the Company immediately following any change of control of the Company;

 

 

Common shares representing 5% of total number of outstanding common shares of the Company immediately following the first round of funding under a private offer of equity or debt securities;

 

 

Common shares representing 5% of total number of outstanding common shares of the Company immediately following the first round of funding under a private offer of equity or debt securities;

 

 

Common shares representing 5% of total number of outstanding common shares of the Company immediately following the commencement of clinical trials for Federal Drug Administration clearance of the product; and

 

 

Common shares representing an adjustment to increase 7 to Stand’s total ownership to 19.99% of total number of outstanding common shares of the Company immediately following FDA clearance of the product for sale.

 

No shares have been earned under the agreement to date, and no royalties have been earned or paid to 7 to Stand. The license agreement may be terminated by 7 to Stand if 1) SomaCeuticals  does not begin clinical trials within one year of the agreement; 2) if SomaCeuticals terminates the continuation of the clinical trials; or 3) shall not commence marketing the product within reasonable time after obtaining FDA approval.

 

Note 10. Income Taxes

 

There is no current or deferred income tax expense or benefit for the period ended September 30, 2020. The Company currently has net operating loss carryforwards aggregating approximately $2,251,000 which expire beginning in 2033. The deferred tax asset related to the net operating loss carryforwards has been fully reserved.

 

The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference for the period from April 29, 2016 (date of inception) through September 30, 2020 and 2019 is the valuation allowance as follows.

 

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September 30, 2020

 

September 30, 2019

 

Net operating loss carryforward at statutory tax rate

 

$

475,000

 

$

424,000

 

Valuation allowance

 

 

(475,000

)

 

(424,000

)

Deferred tax benefit, net

 

$

 

$

 

 

The Company has not recognized an income tax benefit for the period based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the current period presented is offset by a valuation allowance (100%) established against deferred tax assets arising from operating losses and other temporary differences, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.

 

The tax returns for fiscal year 2017 and forward are still open for review by the Internal Revenue Service.

 

Note 11. Available-for-Sale Securities

 

The Company owns a non-controlling interest in certain marketable equity securities. This investment is accounted for as available-for-sale. During the year ended September 30, 2019, the Company determined that the loss in value of the available-for-sale securities was considered other than temporary due to the fact that these shares are no longer trading on public markets. As a result, the loss of $10,673 was recognized as an impairment loss in the consolidated statement of operations. Available-for-sale securities is comprised of the following as of September 30, 2020 and 2019

 

 

 

September 30, 2020

 

September 30, 2019

 

Common stock of Biofuels Power Corp. (Initial Cost)

 

$

 

$

35,000

 

Cumulative realized loss on available-for-sale securities

 

 

(—

)

 

(35,000

)

Unrealized loss on available-for-sale securities

 

 

 

 

 

Available-for-sale securities

 

$

 

$

 

 

Note 12. Subsequent Events

 

In October 2020, a lender converted all $28,000 principal and accrued interest of $16,80 of the March 30, 2020 convertible note payable into 9,275,000 shares of common stock. There was no gain or loss recognized as the conversion occurred in accordance with the original terms of the agreement.

 

On October 6, 2020, the Company entered into a convertible promissory note of $33,000, which matures on July 31, 2021 and bears interest at 12%. The promissory note is convertible beginning January 31, 2021 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. The Company received cash proceeds of $30,000 after deferred financing fees.

 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Changes in Accounts

 

None.

 

Disagreements with Accountants

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2019 (the “Evaluation Date”). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2019, our management concluded that, as of such date, our disclosure controls and procedures were not effective at the reasonable assurance level.

 

Limitations on Systems of Controls

 

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to 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, have been detected. To address the material weaknesses identified in our evaluation, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

 

Management’s Report on Internal Control over Financial Reporting

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management has conducted an assessment, including testing of the effectiveness, of our internal control over financial reporting as of Evaluation Date. Management’s assessment of internal control over financial reporting was conducted using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013 Framework).

 

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

As of September 30, 2020, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: lack of a functioning audit committee; lack of a majority of independent members and a lack of a majority of outside directors on our board of directors; inadequate segregation of duties consistent with control objectives; and, management is dominated by a single individual. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of September 30, 2020.

 

The Company recognizes the following weaknesses and deficiencies of the Company as of September 30, 2020:

 

We recognized the following deficiencies that we believe to be material weaknesses:

 

- The Company has not fully designed, implemented or assessed internal controls over financial reporting. Due to the Company being a development stage company, management’s assessment and conclusion over internal controls were ineffective this year.

 

We recognized the following deficiencies that we believe to be significant deficiencies:

 

- The Company has no formal control process related to the identification and approval of related party transactions.

 

- No formal written policy for the approval, identification and authorization of related party transactions currently exists.

 

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

ITEM 9B. OTHER INFORMATION

 

December 06, 2018 the Company issued 3,500,000 shares of common stock of the Company for valuable services rendered.

 

For the securities issuance, the Company relied upon Section 4(a)(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering. For the transaction, the Company did not use general solicitation or advertising to market the securities, the securities were offered to a limited number of persons, the purchaser had access to information regarding the Company (including information contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2017, Quarterly Report on Form 10-Q for the period ended December 31, 2017, Quarterly Report on Form 10-Q for the period ended March 31, 2018,  Quarterly Report on Form 10-Q for the period ended June 30, 2018 and Current Reports on Form 8-K filed with the Securities and Exchange Commission and press releases made by the Company). The Company reasonably believes that the investor is an accredited investor.

 

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Table of Contents

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Our officer and directors will serve until a successor is elected and qualified. Our officers are elected by the board of directors to a term of one (1) year and serve until their successor is duly elected and qualified, or until they are removed from office. The board of directors has no nominating, auditing or compensation committees.

 

The name, address, age and position of our president, secretary/treasurer, and director and vice president is set forth below:

 

Name

 

Age

 

Position

Alex Blankenship
2500 Wilcrest Drive, 3rd Floor
Houston, TX 77042

 

57

 

Chief Executive Officer, President, Secretary,
Treasurer, Principal Executive Officer, Principal
Finance and Accounting Officer and Director

 

 

 

 

 

James C. Katzaroff

 

63

 

President, SomaCeutical, Inc. subsidiary of the issuer

 

Alex Blankenship From April 1983 to February 1986, Ms. Blankenship was employed by Blake Memorial Hospital in Bradenton, Florida as a certified cardiac monitor technician in the intensive care and progressive care units.  From March 1986 until December 2002, Ms. Blankenship served as private duty eldercare for numerous patients in Florida and North Carolina.  In January 2003, Ms. Blankenship withdrew from participation in the medical care industry to devote time to her daughter and two grandchildren.

 

James C. Katzaroff. From 2007 through 2016 was Chief Executive Officer and controlling shareholder is the founder of Advanced Medical Isotope Corp. (now Vivos, Inc) a late stage radiation oncology focused medical device company engaged in the development of yttrium-90 based brachytherapy devices for the treatment of non-resectable tumors. Effective May 2020, Mr. Katzaroff became the Chief Executive officer and controlling shareholder of Poverty Dignified, Inc. (OTC PVDG).

 

Family Relationships

 

There are no family relationships among our directors, executive officers or persons nominated to become executive officers or directors.

 

Involvement in Certain Legal Proceedings

 

During the past ten (10) years, none of our directors, persons nominated to become directors, executive officers, promoters or control persons was involved in any of the legal proceedings listen in Item 401 (f) of Regulation S-K.

 

Arrangements

 

There are no arrangements or understandings between an executive officer, director or nominee and any other person pursuant to which he was or is to be selected as an executive officer or director.

 

Committees of the Board of Directors

 

There are no members of the established Audit Committee.

 

We do not have a policy regarding the consideration of any director candidates that may be recommended by our stockholders, including the minimum qualifications for director candidates, nor have our directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our directors have not considered or adopted any of these policies, as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future.

 

While there have been no nominations of additional directors proposed, in the event such a proposal is made, all current members of our Board will participate in the consideration of director nominees.

 

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Table of Contents

 

Our directors are not “audit committee financial experts” within the meaning of Item 401(e) of Regulation S-K. In general, an “audit committee financial expert” is an individual member of the audit committee or Board of Directors who:

 

 

understands generally accepted accounting principles and financial statements,

 

 

 

 

is able to assess the general application of such principles in connection with accounting for estimates, accruals and reserves,

 

 

 

 

has experience preparing, auditing, analyzing or evaluating financial statements comparable to the breadth and complexity to our financial statements,

 

 

 

 

understands internal controls over financial reporting, and

 

 

 

 

understands audit committee functions

 

Our Board of Directors is comprised of Ms. Blankenship who is involved in our day-to-day operations. On February 23, 2018, the Company was notified that Robert W. Fryer tendered his resignation as an independent director. We would prefer to have an audit committee financial expert on our board of directors. As with most small, early stage companies until such time our company further develops its business, achieves a stronger revenue base and has sufficient working capital to purchase directors and officers insurance, the Company does not have any immediate prospects to attract independent directors. When the Company is able to expand our Board of Directors to include one or more independent directors, the Company intends to establish an Audit Committee of our Board of Directors. It is our intention that one or more of these independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and the Company is not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.

 

WE DO NOT HAVE ANY INDEPENDENT DIRECTORS AND THE COMPANY HAS NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF WHICH, STOCKHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST, AND SIMILAR MATTERS.

 

Code of Business Conduct and Ethics

 

We have adopted a code of ethics meeting the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely, and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of violations; and provide accountability for adherence to the provisions of the code of ethic.

 

ITEM 11. EXECUTIVE COMPENSATION

 

Ms. Blankenship is paid $5,000 per month for her services to the company.

 

The table below summarizes all compensation awards paid to our named executive officer for all service rendered in all capacities to us for the fiscal periods ended September 30, 2019.

 

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Table of Contents

 

SUMMARY COMPENSATION TABLE

 

Name and Principal Position

 

Fiscal
Year

 

Salary
($)

 

 

Bonus
($)

 

Stock
Awards
($)

 

 

Option
Awards
($)

 

Non-Equity
Incentive Plan
Compensation
($)

 

Nonqualified
Deferred
Compensation
($)

 

All Other
Compensation
($)

 

Total ($)

 

Alex Blankenship

 

2020

 

$

65,000

(a)

 

 

 

$

12,000

(b)

 

 

 

 

 

 

 

 

 

$

72,000

 

CEO

 

2019

 

$

50,000

(a)

 

 

 

$

68,250

(c)

 

 

 

 

 

 

 

 

 

$

118,250

 

 

 

2018

 

$

10,000

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

10,000

 

__________

 

(a)

Includes amount paid to Ms. Blankenship in cash during the year;

 

 

 

 

(b)

Includes 5,000,000 shares of common stock with a fair value of $12,000 awarded to Ms. Blankenship on August 14, 2020. Ms. Blankship paid $500 in cash to the Company for these shares.

 

 

 

 

(c)

Includes 3,500,000 shares of common stock with a fair value of $73,500 awarded to Ms. Blankenship on November 30, 2018.

 

OUTSTANDING EQUITY AWARDS AT SEPTEMBER 30, 2020

 

 

 

Option Awards

 

Stock Awards

 

Name

 

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

 

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

 

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)

 

Option
Exercise
Price ($)

 

Option
Expiration
Date

 

Number of
Shares of
Stock That
Have Not
Vested (#)

 

Market
Value of
Shares of
Stock That
Have Not
Vested ($)

 

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares or
Other Rights
That Have
Not Vested
(#)

 

Equity
Incentive Plan
Awards:
market or
Payout Value
of Unearned
Shares or
Other Rights
That Have
Not Vested
($)

 

Alex Blankenship

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employment Agreements & Retirement Benefits

 

None of our executive officers is subject to employment agreements, but we may enter into such agreements with them in the future. We have no plans providing for the payment of any retirement benefits.

 

Director Compensation

 

Directors receive no compensation for serving on the Board. We have no non-employee directors.

 

Our Board of Directors is comprised of Alex Blankenship. Ms. Blankenship also serves as the CEO of the Company. None of our directors has or had a compensation arrangement with the Company for director services, nor have any of them been compensated for director services since the Company’s inception.

 

We reimburse our directors for all reasonable ordinary and necessary business related expenses, but we did not pay director’s fees or other cash compensation for services rendered as a director in the period ended September 30, 2020 to any of the individuals serving on our Board during that period. We have no standard arrangement pursuant to which our directors are compensated for their services in their capacity as directors. We may pay fees for services rendered as a director when and if additional directors are appointed to the Board of Directors.

 

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Director Independence

 

We do not currently have any independent directors and we do not anticipate appointing additional directors in the foreseeable future. If we engage further directors and officers, however, we plan to develop a definition of independence.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

We do not currently have a stock option plan in favor of any director, officer, consultant, or employee of our company. No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to our directors and officer since our inception; accordingly, no stock options have been granted or exercised by our directors and officer since we were founded.

 

The following table sets forth certain information as of December 1, 2020, with respect to the beneficial ownership of our common stock by each beneficial owner of more than 5% of the outstanding shares of common stock of the Company, each director, each executive officer named in the “Summary Compensation Table” and all executive officers and directors of the Company as a group, and sets forth the number of shares of common stock owned by each such person and group. Unless otherwise indicated, the owners have sole voting and investment power with respect to their respective shares.

 

Name of Beneficial Owner

 

Number of
Shares
Beneficially
Owned

 

 

 

Percentage of
Outstanding
Common Stock
Owned

 

Brent A. Atwood
5000 Riverside Drive
Ste 100E Bldg 6
Irving, TX 75039

 

 

25,220,000

 

(1)

 

 

5.7

%

 

 

 

 

 

 

 

 

 

 

Kenwood Capital LLC
14001 Walden Road, Suite 600
Montgomery, TX 77356

 

 

10,000,000

 

 

 

 

2.2

%

 

 

 

 

 

 

 

 

 

 

David P. Summers
14001 Walden Road, Suite 600
Montgomery, TX 77356

 

 

7,000,000

 

(2)

 

 

1.6

%

 

 

 

 

 

 

 

 

 

 

Alex Blankenship

 

 

11,000,000

 

(3)

 

 

2.5

%

 

 

 

 

 

 

 

 

 

 

James C. Katzaroff

 

 

10,000,000

 

 

 

 

2.2

%

 

 

 

 

 

 

 

 

 

 

All directors and executive officers as a group (1) person.

 

 

21,000,000

 

 

 

 

4.7

%

__________

(1) As disclosed in Schedule 13D filed by Mr. Atwood to the Securities and Exchange Commission on August 12, 2019.

 

(2) Includes 4,000,000 shares owned by Dorothy Louise Summer, Mr. Summers’ spouse.

 

(3) Does not include shares of common stock underlying 1,000,000 shares of the Company’s Series E Preferred Stock owned by Ms. Blankenship. The Series E Preferred Stock carries two votes for each outstanding share of the Company’s common stock and, as a result, has 2/3 voting control over any shareholder votes.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

None.

 

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following table summarize the fees billed to the Company by its independent accountants, M&K CPAs PLLC, for the years ended September 30, 2020 and 2019:

 

 

 

2020

 

2019

 

Audit Fees

 

$

27,500

 

$

26,750

 

 

 

 

 

 

 

 

 

Audit Related Fees (1)

 

$

 

$

 

 

 

 

 

 

 

 

 

Tax Fees (2)

 

$

 

$

 

 

 

 

 

 

 

 

 

All Other Fees (3)

 

$

 

$

 

 

 

 

 

 

 

 

 

Total Fees

 

$

27,500

 

$

26,750

 

 

Notes to the Accountants Fees Table:

 

 

(1)

Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees.”

 

 

 

 

(2)

Consists of fees for professional services rendered by our principal accountants for tax related services.

 

 

 

 

(3)

Consists of fees for products and services provided by our principal accountants, other than the services reported under “Audit Fees,” “Audit-Related Fees” and “Tax Fees” above.

 

As part of its responsibility for oversight of the independent registered public accountants, the Board has established a pre-approval policy for engaging audit and permitted non-audit services provided by our independent registered public accountants. In accordance with this policy, each type of audit, audit-related, tax and other permitted service to be provided by the independent auditors is specifically described and each such service, together with a fee level or budgeted amount for such service, is pre-approved by the Board. All of the services provided by M&K CPAs PLLC described above were approved by our Board.

 

The Company’s principal accountant did not engage any other persons or firms other than the principal accountant’s full-time, permanent employees.

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

3.1

Articles of Incorporation (1)

3.2

Bylaws (2)

14.1

Code of Ethics (3)

21

Subsidiaries of the Registrant (4)

31.1

Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and accounting officer. (4)

32.1

Section 1350 Certification of principal executive officer and principal financial and accounting officer. (4)

101*

XBRL data files of Financial Statement and Notes contained in this Annual Report on Form 10-K. (4)(5)

__________

(1)

Incorporated by reference to our Definitive Proxy Statement on Schedule 14A filed on April 8, 2015.

(2)

Incorporated by reference to our Form 10-K/A Amendment No. 1 for the year ended September 30, 2015 filed on January 22, 2016.

(3)

Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on November 3, 2010.

(4)

Filed or furnished herewith.

(5)

In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Annual Report on Form 10-K shall be deemed “furnished” and not “filed.”

 

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SIGNATURES

 

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

 

 

AngioSoma, Inc.

 

 

 

 

Date: December 3, 2020

BY: /s/ Alex Blankenship

 

Alex Blankenship

 

Chief Executive Officer, President, Secretary, Treasurer, Principal Executive Officer, Principal Financial and Accounting Officer and Director

 

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