Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results
This quarterly report on Form 10-Q contains forward-looking statements regarding
our business, financial condition, results of operations and prospects.
We caution that these factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report on Form 10-Q.
Business Overview
We were incorporated on
On
The closing of the Exchange Agreement was further conditioned upon the
resignation of
Furthermore, simultaneously with the closing, the two majority shareholders of
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Upon closing of the Exchange Agreement,
During the three months ended
Plan of Operations
The Company's strategy is to focus on development and manufacture of health promoting products based on DNA analysis.
Critical Accounting Policies and Estimates
While our significant accounting policies are more fully described in Note 2 to our unaudited consolidated financial statements, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management's discussion and analysis.
Use of Estimates
The preparation of the financial statements in conformity with
Derivative Liabilities
The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with FASB ASC 815-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any embedded conversion options be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise and repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date, and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606 Revenue from Contracts with Customers ("ASC 606"), which requires revenue to be recognized in a manner that depicts the transfer of goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASC 606 at inception date. For the license and royalty income, revenue is recognized when the Company satisfies the performance obligation based on the related license agreement.
Stock-Based Compensation
The Company accounts for employee stock-based compensation in accordance with ASC 718-10, "Share-Based Payment," which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock awards, and employee stock purchases based on estimated fair values.
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In
Determining Fair Value Under ASC 718-10
The Company estimates volatility based upon the historical stock price of the Company and estimates the expected term The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company's determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables.
For employee stock options using the simplified method for employees and directors and the contractual term for non-employees. The risk-free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities.
Results of Operations
Revenue:
For the three months ended
Three Months Ended October 31, 2019 License income - related party $ 13,287 Royalty income - related party 3,840 Total revenues 17,127
For the three months ended
Operating Expenses:
For the three months ended
Three Months Ended October 31, 2019 Compensation $ 50,682 Consulting fee - related parties 65,305 Professional and consulting fees 1,852,613 Other selling, general and administrative expenses 24,244 Total $ 1,992,844 Compensation expense:
For the three months ended
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Consulting fee - related parties:
For the three months ended
Professional and consulting fees:
For the three months ended
Other selling, general and administrative expenses:
For the three months ended
Operating Loss:
For the three months ended
Other Income (Expenses):
For the three months ended
Net Loss:
For the three months ended
Liquidity, Capital Resources, and Off-Balance Sheet Arrangements
Liquidity is the ability of an enterprise to generate adequate amounts of cash
to meet its needs for cash requirements. We had a working capital of
The increase in working capital was primarily attributable to increase prepaid
expenses of
Cash flows for the three months ended
Three Months Ended October 31, 2019 Net Cash Used in Operating Activities $ (381,961 ) Net Cash Used in Investing Activities (25,082 ) Net Cash Provided by Financing Activities 342,751 Net Decrease in Cash $ (64,292 ) -25- Table of Contents
During the three months ended
During the three months ended
Net Cash Provided by Financing Activities:
During the three months ended
Cash Requirements
Our management does not believe that our current capital resources will be adequate to continue operating our company and maintaining our business strategy for much more than 12 months. At the date hereof, we have minimal cash at hand. We require additional capital to implement our business and fund our operations.
Since inception we have funded our operations primarily through equity financings and we expect that we will continue to fund our operations through the equity and debt financing, either alone or through strategic alliances. Additional funding may not be available on favorable terms, if at all. We intend to continue to fund our business by way of equity or debt financing until natural revenues can support the Company. If we raise additional capital through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing shareholders will be reduced and those shareholders may experience significant dilution. In addition, new securities may contain certain rights, preferences or privileges that are senior to those of our common stock. We cannot assure you that we will be able to raise the working capital as needed in the future on terms acceptable to us, if at all.
If we are unable to raise capital as needed, we are required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results, or cease our operations entirely, in which case, you will lose all of your investment.
Off-Balance Sheet Arrangements
We have no 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 our stockholders.
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