NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND HISTORY
Description of business
BioAdaptives, Inc. (“BioAdaptives” or the ”Company”) was incorporated in Delaware on April 19, 2013, under the name Apex 8, Inc. Shortly afterwards, the Company’s control person sold his interest; new owners appointed management and changed its name to BioAdaptives, Inc. The Company acquired assets relating to the investigation, development and marketing of nutraceutical products; equipment designed to improve the bioavailability of nutrients in humans and animals; and licenses for specific products. It commenced investigation of the role of various botanicals in primitive cell development and proliferation, including certain algae along with herbs used in Traditional Chinese Medicine and Ayurvedic Practice. In the course of this investigation, BioAdaptives identified several potential human and animal products. The Company terminated further work on the equipment and products licensed in its early stages to concentrate on these products, for both human and animals.
We currently market and distribute natural plant- and algal-based products that improve health and wellness for humans and animals, with an emphasis on pain relief and anti-aging properties. The Company’s current products include dietary supplements for humans developed with our knowledge of natural foods. These products are designed to aid memory, cognition and focus; assist in sleep and fatigue reduction; provide pain relief and healing; and improve overall emotional and physical wellness. The science behind our products has proven to be effective for performance enhancement and pain relief for horses and dogs as well as providing improvements in appearance and we have developed products to utilize these advances.
Our current product line includes PrimiCell®, PluriPain® and PrimiLung™ for humans, and Canine Regen® and Equine Regen® for dogs and horses, along with Equine All-in-One® and a related Booster. The All-in-One products combine minerals, vitamins, amino acids and other botanicals along with the Regen® compounds, and have demonstrated improved performance and appearance in competition and show animals. All of these products are sold under licensing and manufacturing agreements with third-parties. While we continue to investigate our own nutraceutical products for humans and animals, most of our current activities are reliant on marketing and distributing products developed and owned by others.
The Company’s corporate office is located at 2620 Regatta Drive, Suite 102, Las Vegas, NV 89128, and it maintains fulfillment facilities at 4385 Cameron Street, Suite B, Las Vegas, NV 89103.
COVID-19
A novel strain of coronavirus (COVID-19) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations and in markets served. The Company has instituted some and may take additional temporary precautionary measures intended to help ensure the well-being of its employees and minimize business disruption. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position on June 30, 2021. The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to collect accounts receivable and the ability of the Company to continue to provide high quality services to its clients. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur, and additional information is obtained.
2. SUMMARY OF SIGNIFICANT POLICIES
Basis of presentation
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10K. In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of financial position and the results of operations for the interim period presented, have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10K filed with SEC on March 30, 2021, have been omitted.
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 100% owned subsidiary, Blenders Choice Inc. All inter-company balances and transactions have been eliminated. The Company and its subsidiary will be collectively referred to herein as the “Company.”
Use of estimates
The preparation of consolidated financial statements in conformity with US GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company, and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.
Earnings (loss) per share
Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. Diluted earnings per share excludes all dilutive potential shares if their effect is anti-dilutive.
Financial Instruments and Fair Value Measurements
As defined in ASC 820” Fair Value Measurements,” fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The following table summarizes fair value measurements by level on June 30, 2021 and December 31, 2020, measured at fair value on a recurring basis:
|
|
Total Carrying Value
|
|
|
Quoted Market Prices in Active Markets
|
|
|
Significant Other Observable Inputs
|
|
|
Significant Unobservable Inputs
|
|
|
|
as of June 30, 2021
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
$
|
761
|
|
|
$
|
761
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
881,311
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
881,311
|
|
Fair Value Measurements as of December 31, 2020 Using:
|
|
Total Carrying
Value as of
December 31,
|
|
|
Quoted Market
Prices in Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
|
2020
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
$
|
444
|
|
|
$
|
444
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
827,119
|
|
|
|
-
|
|
|
|
-
|
|
|
|
827,119
|
|
Intangible Assets
The Company capitalizes certain costs to acquire intangible assets; if such assets are determined to have a finite useful life they are amortized on a straight-line basis over the estimated useful life.
The Company tests its intangible assets for impairment at least annually and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others and without limitation: a significant decline in the Company’s expected future cash flows; a sustained, significant decline in the Company’s stock price and market capitalization; a significant adverse change in legal factors or in the business climate of the Company’s segments; unanticipated competition; and slower growth rates.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.
3. GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and had an accumulated deficit of $6,415,643 as of June 30, 2021. The Company requires capital for its contemplated operational and marketing activities. The Company’s ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
In order to mitigate the risk related with this uncertainty, the Company plans to issue additional shares of common stock for cash and services during the next 12 months.
4. MARKETABLE SECURITIES
Equity securities on June 30, 2021 and December 31, 2020, were comprised of 105,736 shares of common stock of Hemp, Inc. (HEMP.PK) recorded at fair value of $761 and $444, respectively.
5. LICENSE FEE
During the six months ended June 30, 2021, the Company entered into two license and royalty agreements for human and animal nutraceutical products, which is currently markets. These agreements are for a period of one year and the Company issued 500,000 shares of Series A preferred stock valued at $102,500 in consideration of these licenses. The Company has capitalized the costs associated with licenses.
During the six months ended June 30, 2021, the Company recognized $47,500 in amortization expenses of license fees, and recorded asset value of the licenses of $55,000 as of June 30, 2021.
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities on June 30, 2021 and December 31, 2020 consists of the following.
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Accounts payable
|
|
$
|
990
|
|
|
$
|
5,374
|
|
Credit card
|
|
|
-
|
|
|
|
7,759
|
|
Accrued salary
|
|
|
23,333
|
|
|
|
-
|
|
Accrued interest
|
|
|
48,279
|
|
|
|
49,583
|
|
Accrued liabilities
|
|
|
10,981
|
|
|
|
24,845
|
|
|
|
$
|
83,583
|
|
|
$
|
87,561
|
|
7. CONVERTIBLE NOTES
Convertible notes on June 30, 2021 and December 31, 2020 consists of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Convertible Notes - originated in April 2018
|
|
$
|
95,000
|
|
|
$
|
95,000
|
|
Convertible Notes - originated in June 2018
|
|
|
166,000
|
|
|
|
166,000
|
|
Convertible Notes - originated in October 2018
|
|
|
50,000
|
|
|
|
50,000
|
|
Convertible Notes - issued fiscal year 2019
|
|
|
-
|
|
|
|
13,000
|
|
Convertible Notes - issued fiscal year 2020
|
|
|
-
|
|
|
|
86,000
|
|
Convertible Notes - issued fiscal year 2021
|
|
|
179,500
|
|
|
|
-
|
|
Total convertible notes payable
|
|
|
490,500
|
|
|
|
410,000
|
|
|
|
|
|
|
|
|
|
|
Less: Unamortized debt discount
|
|
|
(11,216
|
)
|
|
|
(4,764
|
)
|
Total convertible notes
|
|
|
479,284
|
|
|
|
405,236
|
|
|
|
|
|
|
|
|
|
|
Less: current portion of convertible notes
|
|
|
479,284
|
|
|
|
405,236
|
|
Long-term convertible notes
|
|
$
|
-
|
|
|
$
|
-
|
|
For the six months ended June 30, 2021 and 2020, the interest expense on convertible notes was $28,146 and $23,877, respectively. As of June 30, 2021, and December 31, 2020, the accrued interest was $43,786 and $46,145, respectively.
The Company recognized amortization expense related to the debt discount of $48,048 and $86,577 for the six months ended June 30, 2021 and 2020, respectively, which is included in interest expense in the statements of operation.
Conversion
During the six months ended June 30, 2021, the Company converted notes with principal amounts of $99,000 and accrued interest of $14,081 into 10,792,873 shares of common stock. The corresponding derivative liability at the date of conversion of $373,531 was credited to additional paid in capital.
Convertible Notes - Issued during the year ended December 31, 2018
During the year ended December 31, 2018, the Company issued a total principal amount of $426,000 convertible notes for cash proceeds of $426,000. The convertible notes were also provided with a total of 107,000 common shares valued at $22,210. The terms of convertible notes are summarized as follows:
|
•
|
Term two years;
|
|
|
|
|
•
|
Annual interest rates 12%;
|
|
|
|
|
•
|
Convertible at the option of the holders at any time
|
|
|
|
|
•
|
Conversion prices are based on 50% discount to market value for the common stock based on a 4-week weekly average of the closing price.
|
Convertible Notes - Issued during the year ended December 31, 2019
During the year ended December 31, 2019, the Company issued a total principal amount of $73,500 in convertible notes for cash proceeds of $67,000. The terms of convertible notes are summarized as follows:
|
•
|
Term one year;
|
|
|
|
|
•
|
Annual interest rates 10%;
|
|
|
|
|
•
|
Convertible at 180 days from issuance
|
|
|
|
|
•
|
Conversion prices are based on 42% discount to the lowest trading price during the 20-trading day period ending on the latest complete training day prior to the conversion date.
|
Convertible Notes - Issued during the year ended December 31, 2020
During the year ended December 31, 2020, the Company issued a total principal amount of $86,000 in convertible note for cash proceeds of $80,000. The terms of convertible note are summarized as follows:
|
•
|
Term one year;
|
|
|
|
|
•
|
Annual interest rates 10%;
|
|
|
|
|
•
|
Convertible at 180 days from issuance
|
|
|
|
|
•
|
Conversion prices are based on 39% discount to the lowest trading price during the 20-trading day period ending on the latest complete training day prior to the conversion date.
|
Convertible Notes - Issued during the year ended December 31, 2021
During the six months ended June 30, 2021, the Company issued a total principal amount of $179,500 in convertible note for cash proceeds of $165,000,000. The terms of convertible note are summarized as follows:
|
•
|
Term one year;
|
|
|
|
|
•
|
Annual interest rates 10%;
|
|
|
|
|
•
|
Convertible at 180 days from issuance
|
|
|
|
|
•
|
Conversion prices are based on 39% discount to the lowest trading price during the 20-trading day period ending on the latest complete training day prior to the conversion date.
|
The Company valued the conversion feature using the Binomial pricing model. The fair value of the derivative liability for all the notes that became convertible, including the notes issued in prior years, during the six months ended June 30, 2021 amounted to $141,805, and $40,000 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $101,805 was recognized as a “day 1” derivative loss.
8. DERIVATIVE LIABILITIES
The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The Company accounts for warrants as a derivative liability due to there being no explicit limit to the number of shares to be delivered upon settlement of all conversion options.
Fair Value Assumptions Used in Accounting for Derivative Liabilities.
ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.
The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of June 30, 2021. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model.
For the six months ended June 30, 2021 and year ended December 31, 2020, the estimated fair values of the liabilities measured on a recurring basis are as follows:
|
|
Six Months Ended
|
|
|
Year ended
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Expected term
|
|
0.01- 0.51 years
|
|
|
0.01- 0.51 years
|
|
Expected average volatility
|
|
128% - 315%
|
|
|
117% - 317%
|
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
Risk-free interest rate
|
|
0.03% - 0.07%
|
|
|
0.05% - 0.19%
|
|
The following table summarizes the changes in the derivative liabilities during the six months ended June 30, 2021.
Fair Value Measurements Using Significant Observable Inputs (Level 3)
|
|
|
|
|
|
Balance - December 31, 2020
|
|
$
|
827,119
|
|
|
|
|
|
|
Addition of new derivatives recognized as debt discounts
|
|
|
40,000
|
|
Addition of new derivatives recognized as loss on derivatives
|
|
|
101,805
|
|
Settled on issuance of common stock
|
|
|
(373,531
|
)
|
(Gain) loss on change in fair value of the derivative
|
|
|
285,918
|
|
Balance - June 30, 2021
|
|
$
|
881,311
|
|
The aggregate loss on derivatives during the six months ended June 30, 2021 and 2020 was as follows.
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Day one loss due to derivative liabilities on convertible notes
|
|
$
|
101,805
|
|
|
$
|
32,531
|
|
Loss on change in fair value of the derivative liabilities
|
|
|
285,918
|
|
|
|
310,773
|
|
|
|
$
|
387,723
|
|
|
$
|
343,304
|
|
9. STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue 5,000,000 shares of $.0001 par value preferred stock, of which 4,000,000 have been designated as Series A Preferred Stock.
Series A Preferred Stock
On February 6, 2020, the Company established its Series A Preferred Stock, par value .0001, by filing a Certificate of Designation with the Delaware Secretary of State. The Company’s board exercised “blank check” authority to establish classes of preferred stock without approval by shareholders under provision of its original Articles of Incorporation and has designated 4,000,000 shares of Series A Preferred Stock.
The Company may use the Series A Preferred Stock for purpose of asset acquisition or in satisfaction of recognized debt; they are not otherwise available for sale. The Series A Preferred Stock have enhanced voting privileges under certain circumstances; the collective right to appoint elect one director, at the Holders’ option; and conversion-to-common rights at a 5:1 ratio.
During the six months ended June 30, 2021, the Company issued 1,100,000 shares of series A preferred Stock as follows;
|
•
|
600,000 shares of Series A Preferred Stock valued at $75,000 for settlement of related party debt
|
|
•
|
500,000 shares of Series A Preferred Stock valued at $102,500 for consideration of licenses.
|
Common Stock
The Company is authorized to issue 200,000,000 shares of $.0001par value common stock as of June 30, 2021.
During the six months ended June 30, 2021, the Company issued 10,792,873 shares of common stock valued at $486,612 for conversion of debt.
During the six months ended June 30, 2021, the Company issued 1,000,000 shares of common stock valued at $163,900 for service.
During the six months ended June 30, 2021, the Company cancelled 352,390 shares of common stock related to our officer’ compensation.
As of June 30, 2021, and December 31, 2020, there were 33,022,425 and 20,829,552 shares of the Company’s common stock issued and outstanding, respectively. In addition, as of June 30, 2021 and December 31, 2020, there were 10,000 shares and 762,390 shares of the Company’s common stock issuable, respectively.
10. RELATED PARTY TRANSACTIONS
Notes payable - related party
During the six months ended June 30, 2021, the Company issued 600,000 shares of Series A Preferred Stock valued at $75,000 for settlement of $24,000 notes. As a result, the Company recorded a loss on settlement of debt of $51,000.
During the six months ended June 30, 2021 and 2020, the Company repaid notes payable to a related party of $10,000 and $0 and recognized interest of $1,055 and $1,096, respectively
As of June 30, 2021, and December 31, 2020, the Company recorded notes payable - related party of $43,715 and $77,715 and accrued interest of $4,493 and $3,438, respectively. The note is a4% interest bearing promissory note that the term is 1 year.
Due to related party
During the six months ended June 30, 2021, Dr. Edward E. Jacobs, M.D., our CEO, advanced $1,623 for operating expenses and $1,623 was reimbursed.
Employee agreements
Effective May 31, 2021, the Company entered into an Employment Contract with Charles Townsend to serve as its Chief Operating Officer. The Contract provides for a 12-month term and for payment of an annual salary of $100,000, payable in Restricted Stock Units calculated based on the closing market price of the Company’s shares as of the effective date. Mr. Townsend was also appointed as a director.
Effective May 31, 2021, the Company entered into an Employment Contract with Robert Ellis, to continue his service as the Company’s President. The Contract provides for a 12-month term and for payment of an annual salary of $100,000, payable in Restricted Stock Units calculated based on the closing market price of the Company’s shares each quarter. Mr. Ellis was also appointed as a director.
Effective May 31, 2021, the Company entered into an Employment Contract with Ronald Lambrecht, to continue his service as its Chief Financial Officer. The Contract provides for a 12-month term and for payment of an annual salary of $80,000, payable in Restricted Stock Units calculated based on the closing market price of the Company’s shares each quarter.
11. SUBSEQUENT EVENTS
Effective July 1, 2021, the Company entered into an Employment Agreement with Dr. Edward E. Jacobs, M.D., our Chief Executive Officer and Chairman. The Agreement provides for a one-year term and payment of annual compensation of $100,000, payable in Restricted Stock Units (RSUs) until such time as the Company’s cash-flow permits cash payment. The terms of the RSUs are set out in our 2021 Incentive Plan, which was attached to our Form 8-K filed on June 11, 2021.
The Company initiated a social media outreach campaign a the end of 2Q 2021, and we expect the expenses therefrom to accrue in 3Q and 4Q 2021, and beyond. Additionally, during 3Q 2021 we commenced expanded outreach for our Ambassador Program; we anticipate accruing expenses for samples and other marketing activities relating to this Program during 3Q and 4Q 2021, and beyond.