NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE
MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(Expressed
in US dollars)
(Unaudited)
NOTE
1 – Description of Business
The
Company incorporated in the State of Nevada on September 5, 2002, under the name “Bayview Corporation.” On April 7,
2005, the Company changed its name to Xpention Genetics, Inc. concurrent with a change in its business to researching and developing
cancer treatment drugs. On September 17, 2008, the Company changed its name to Cancer Detection Corporation. On August 13, 2009,
the Company again changed its name to Tremont Fair, Inc. From July 2009 until May 2011, the Company operated as a real estate
services firm, seeking to capitalize on the real estate opportunities resulting from the dislocation in the credit markets, and
by extension, the multifamily housing market, by acquiring, rehabilitating, stabilizing and selling distressed multifamily properties
in the southern United States, predominantly in Texas. On May 26, 2011, the Company changed its name to Vican Resources, Inc.,
and changed its business model when it sold the real estate services division and acquired all of the outstanding shares of Vican
Trading, Inc., a Montreal-based purchaser and seller of metals, ores, and other commodities (hereafter, “Vican Trading”).
Upon the acquisition of Vican Trading, there was an implied option for either party to rescind the original acquisition. During
2011, that rescission option was exercised and on December 20, 2011, the Company again changed its business when it unwound the
acquisition of Vican Trading and acquired all of the assets of Med Ex Direct, Inc., a Florida-based provider of management services
in respect of the distribution of diabetic supplies, principally to Hispanic patients (hereafter, “Med Ex Florida”).
On March 22, 2012, the Company again changed its business to become an oil & gas exploration, development, and distribution
company, unwound the purchase of the assets of Med Ex Florida, and acquired an interest in two oil & gas wells located in
Jefferson County, Mississippi.
In
April 2017, the Company underwent a change of control whereby our current Chief Executive Officer Ian Jenkins acquired a controlling
interest in the Company’s capital stock and was appointed our sole officer and director. On April 11, 2017, the Company
executed a Share Exchange Agreement with Unprescribed, LLC, later amended to include Cornerstone Medical Center LLC, whereby the
Company, among other terms, agreed to exchange shares with the ownership units of those two entities for 25,000,000 shares of
the Company’s Common Stock. The Share Exchange Agreement, as amended, terminated by its own terms on December 31, 2017.
Following the termination of the Share Exchange Agreement, the Company modified its business plan to acquire certain intellectual
property assets and to engage a new management team to effectuate the new business plan.
Effective
March 9, 2018, the Company changed its name to Frélii, Inc. From March 2018 to December 2018, the Company operated a web-based
subscription service providing personalized nutrition and wellness plans. The current business plan uses Artificial Intelligence
and whole genome analysis to improve patient outcomes and lower direct costs.
On
May 9, 2019, the Company incorporated a subsidiary in Ontario, Canada, named Frelii Canada Inc.
The
Company’s core business strategy is utilizing its proprietary DNA profiling artificial intelligence (AI) to meet the growing
demands of targeted market segments. Specifically, to provide precision medicine recommendations including medical cannabis use
analysis, consumer wellness, nutraceutical analysis, and in due course pharmaceuticals. This will be delivered through telehealth,
managed care facilities and hospital systems.
NOTE
2 — BASIS OF PRESENTATION OF UNAUDITED CONDENSED FINANCIAL INFORMATION
The
unaudited condensed financial statements of the Company for the three and nine month periods ended September 30, 2019 and 2018
have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial
information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all
the information and footnotes required by accounting principles generally accepted in the United States of America for complete
financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments),
which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations.
Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance
sheet information as of December 31, 2018 was derived from the audited financial statements included in the Company’s financial
statements as of and for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with
the Securities and Exchange Commission (the “SEC”). These financial statements should be read in conjunction with
that report.
Recently
Issued Accounting Pronouncements
Between
May 2014 and December 2016, the FASB issued several ASU’s on Revenue from Contracts with Customers (Topic 606). The core
principle is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the
consideration to which an entity expects to be entitled for those goods or services. A five-step process has been defined to achieve
this core principle, and, in doing so, more judgment and estimates may be required within the revenue recognition process than
are required under former U.S. GAAP. The standards are effective for annual periods beginning after December 15, 2017, and interim
periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application
of the standards in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective
approach with the cumulative effect of initially adopting the standards recognized at the date of adoption (which includes additional
footnote disclosures). The adoption of these new standards has not had a material impact on the Company’s financial statements.
Certain
other accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective
and have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from
adoption of these standards is not expected to be material
NOTE
3 - GOING CONCERN UNCERTAINTY
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates
the realization of assets and satisfaction of liabilities in the normal course of business. The Company has sustained net losses
which have resulted in an accumulated deficit at September 30, 2019, and negative cash flows from operations, all of which raise
substantial doubt regarding the Company’s ability to continue as a going concern.
The
Company believes these conditions have resulted from the inherent risks associated with small companies. Such risks include, but
are not limited to, the ability to (i) generate revenues and sales of its products and services at levels sufficient to cover
its costs and provide a return for investors, (ii) attract additional capital in order to finance growth, (iii) further develop
and successfully market commercial products and services, and (iv) successfully compete with other comparable companies having
financial, production and marketing resources significantly greater than those of the Company.
We
expect to be dependent on additional debt and equity financing to develop our new business but we cannot assure you that any such
financings will be available or will otherwise be made on terms acceptable to us, or that our present shareholders might suffer
substantial dilution as a result.
The
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
These
financial statements have been prepared on the basis that the Company will continue as a going concern, which presumes that it
will be able to realize its assets and discharge its liabilities in the normal course of business as they come due. These financial
statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance
sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a
going concern in the normal course of operations. Such adjustments could be material.
NOTE
4 – PROMISSORY NOTE RECEIVABLE FROM RELATED PARTY
On
April 11, 2017, pursuant to a Security Agreement dated April 11, 2017, the Company paid $495,000 to Cornerstone Medical Center
LLC (“Cornerstone”). In exchange, the Company received a $500,000 Secured Promissory Note from Cornerstone (the “Promissory
Note”), dated April 11, 2017. The Promissory Note bears interest at 4% per annum, or 18% in the event of a default under
the Promissory Note. The principal and interest was due on December 31, 2017. The Promissory Note is secured by all the assets
of Cornerstone.
Cornerstone
is owned by Gregory Mongeon, who served as a former officer and director of the Company from January 17, 2018 to May 15, 2018.
NOTE
5 –LEASEHOLD IMPROVEMENTS
At
September 30, 2019 and December 31, 2018, leasehold improvements, net, consisted of:
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
Leasehold improvements at Frelii Canada Inc. office
|
|
$
|
15,857
|
|
|
$
|
-
|
|
Less accumulated amortization
|
|
|
(3,964
|
)
|
|
|
-
|
|
Net
|
|
$
|
11,893
|
|
|
$
|
-
|
|
The
leasehold improvements are being amortized using the straight-line method over the term of the lease, which is one year. For the
nine months ended September 30, 2019 and 2018, amortization expense relating to the leasehold improvements was $3,964 and $0,
respectively. Expected future amortization expense for the leasehold improvements as of September 30, 2019 follows:
Year ending December 31,
|
|
Amount
|
|
|
|
|
|
2019
|
|
$
|
3,964
|
|
2020
|
|
|
7,929
|
|
|
|
|
|
|
Total
|
|
$
|
11,893
|
|
NOTE
6 – SOFTWARE
At
September 30, 2019 and December 31, 2018, software, net, consisted of:
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
Software and intellectual property acquired from Christopher Dean pursuant to Tech Assignment Agreement on January 18, 2018 in exchange for 7,500,000 shares of Class B Common Stock (see Note 9).
|
|
$
|
234,375
|
|
|
$
|
234,375
|
|
Software and intellectual property acquired from IrisMind LLC pursuant to Technology Assignment Agreement on May 15, 2019 in exchange for 1,200,000 shares of Class B Common Stock (see Note 9).
|
|
|
1,500,000
|
|
|
|
-
|
|
Total
|
|
|
1,734,375
|
|
|
|
234,375
|
|
Less accumulated amortization
|
|
|
(192,061
|
)
|
|
|
(44,404
|
)
|
Net
|
|
$
|
1,542,314
|
|
|
$
|
189,971
|
|
The
acquired software is being amortized using the straight-line method over their estimated economic life of 5 years. For the nine
months ended September 30, 2019 and 2018, amortization expense relating to the software was $147,657 and $32,685, respectively.
Expected future amortization expense for the acquired software as of September 30, 2019 follows:
Year ending December 31,
|
|
Amount
|
|
|
|
|
|
2019
|
|
$
|
86,718
|
|
2020
|
|
|
346,875
|
|
2021
|
|
|
346,875
|
|
2022
|
|
|
346,875
|
|
2023
|
|
|
302,471
|
|
2024
|
|
|
112,500
|
|
|
|
|
|
|
Total
|
|
$
|
1,542,314
|
|
NOTE
7 – NOTES PAYABLE
At
September 30, 2019, notes payable consisted of:
Promissory note due to Company director, interest at 6.5%, due in full on January 30, 2020, unsecured
|
|
$
|
103,000
|
|
Amount due Primary Capital Funding LLC under Future Receivables Sale and Purchase Agreement dated September 13, 2019, interest of $15,750 and principal due in weekly payments of $2,200 through February 24, 2020, guaranteed by Company Chief Executive Officer
|
|
|
32,904
|
|
Promissory note due to entity operated by Company director, interest of $3,500 and principal due November 1, 2019, secured by future customer cash flows
|
|
|
35,000
|
|
Amount due Everest Business Funding under Payment Rights and Purchase and Sale Agreement dated September 16, 2019, interest of $9,350 and principal due in daily payments of $334 through January 30, 2020, guaranteed by Company Chief Executive Officer
|
|
|
21,642
|
|
Amount due Celtic Bank under Business Loan Agreement dated September 9, 2019, interest of $2,450 and principal due in monthly payments through March 10, 2020
|
|
|
10,000
|
|
|
|
$
|
202,546
|
|
NOTE
8 – SETTLEMENT AMOUNT DUE TO FORMER RELATED PARTY
On
June 1, 2018, the Company and Gregory Mongeon (see Note 4 above) executed a Separation and Release Agreement. The agreement provides
for the Company to make 20 monthly cash payments of $6,666 each to Mr. Mongeon from June 5, 2018 to January 5, 2020 (total $133,320).
The agreement also provides for limits on future sales of 7,500,000 shares of Class B Common Stock owned by Mr. Mongeon. At September
30, 2019, the remaining amount due Mr. Mongeon pursuant to the Separation and Release Agreement was $126,654. The Company failed
to make the required monthly payments from July 2018 to September 2019.
NOTE
9 - COMMON STOCK AND PREFERRED STOCK TRANSACTIONS
On
January 18, 2018, the Company entered into a technology assignment agreement (the “Tech Assignment Agreement”) whereby
the Company acquired certain intellectual property consisting of advanced computer programming software, source code, proprietary
designs, plans, processes, test procedures, and other technical data and information (the “Technology”) from Christopher
Dean in exchange for 7,500,000 shares of Class B Common Stock of the Company. Christopher Dean was the Chief Technology Officer
and a director of the Company from January 17, 2018 to March 27, 2018.
The
$234,375 estimated fair value of the 7,500,000 shares of Class B Common Stock was capitalized as software. As the trading market
of the Company’s Class B Common Stock was inactive, the fair value of the Class B Common Stock was based on the $0.03125
per share price derived from the $250,000 purchase price of the Exchange Note, which was converted to 8,000,000 shares of Class
B Common Stock on December 14, 2017.
On
January 19, 2018, the Company entered into employment agreements with Ian Jenkins (Chief Executive Officer and Chief Financial
Officer), Christopher Dean (former Chief Technology Officer), Dr. Gregory Mongeon (former Chief Medical Officer), Seth Jones (Chief
Marketing Officer), and Julia Kline (former Chief Operating Officer). The agreements all have a term of five years and provide
for annual base salaries totaling, in the aggregate, $400,000. All of the agreements may be terminated by the Company at any time
without cause by providing written notice to the respective employee for which termination is effective 30 days therefrom. On
January 31, 2018, pursuant to the employment agreements, the Company issued a total of 17,450,000 shares of Class B Common Stock
of the Company to these five officers.
The
$545,312 estimated fair value of the 17,450,000 shares of Class B Common Stock using the $0.03125 per share price described in
the second preceding paragraph was expensed as compensation in the three months ended March 31, 2018.
On
January 21, 2018 and January 26, 2018, the Company’s Chief Executive Officer returned 100 shares of Series A Preferred Stock
and 1,830,000 shares of Class B Common Stock to the Company’s treasury that were cancelled by the Company.
On
January 31, 2018, the Company issued a total of 1,800,000 shares of Class B Common Stock of the Company to 6 service providers
(including 800,000 shares issued to two relatives of the Company’s Chief Executive Officer and 600,000 shares to two independent
directors of the Company) for services rendered.
The
$56,250 estimated fair value of the 1,800,000 shares of Class B Common Stock (using the $0.03125 per share as described in the
fifth preceding paragraph) was expensed as compensation in the three months ended March 31, 2018.
On
March 23, 2018, the Company sold 150,000 shares of Class B Common Stock to an investor at a price of $1.25 per share for $187,500
cash proceeds.
On
May 8, 2018, the Company issued 600,000 shares of Class B Common Stock of the Company to Dr. Hans Jenkins in connection with an
employment agreement signed between Dr. Jenkins and the Company on the same date. The $750,000 estimated fair value of the 600,000
shares of Class B Common Stock (based on the $1.25 per share price of the March 23, 2018 sale of 150,000 shares of Class B Common
Stock) was expensed as compensation in the three months ended June 30, 2018.
On
May 15, 2018, the Company issued a total of 800,000 shares of Class B Common Stock of the Company to 6 employees and consultants
for services rendered pursuant to the Company’s 2018 Incentive Stock Option Plan. The $1,000,000 estimated fair value of
the 800,000 shares of Class B Common Stock (based on the $1.25 per shares price of the March 23, 2018 sale of 150,000 of Class
B Common Stock) was expensed as compensation in the three months ended June 30, 2018.
On
July 6, 2018, the Company issued a total of 600,000 shares of Class B Stock to its two outside directors (300,000 shares each)
for services rendered. The $750,000 estimated fair value of the 600,000 shares of Class B Common Stock (based on the $1.25 per
share price of the March 23, 2018 sale of 150,000 shares of Class B Common Stock) was expensed as compensation in the three months
ended September 30, 2018.
On
July 6, 2018, the Company settled an outstanding debt of $91,220 for professional fees incurred and operating expenses paid on
the behalf of the Company owed to Kline Law Group, P.C. and its principal Scott Kline. Mr. Kline and Kline Law Group agreed to
waive all outstanding amounts due as of July 6, 2018, in exchange for 1,000,000 Class B Common Stock shares. The $1,158,780 excess
the $1,250,000 estimated fair value of the 1,000,000 shares of Class B Common Stock (using the $1.25 per share prices described
in the preceding paragraph) over the $91,220 debt settled was expensed as loss on settlement of debt in the three months ended
September 30, 2018.
On
July 20, 2018, the Company sold 100,000 shares of Class B Common Stock (and a three-year warrant to purchase up to 100,000 shares
of Class B Common Stock at $1.50 per share) to an investor at a price of $1.25 per share for $125,000 cash proceeds.
On
July 31, 2018, the Company entered into an Asset Purchase Agreement with Kingdom Life Sciences, LLC, a Utah limited liability
company (“KLS”), and its equity holders whereby the Company agreed to purchase certain inventory and related intellectual
property of KLS in exchange for assumption of a liability of KLS in the amount of $19,133 and 20,000 Class B Common Stock shares
of the Company. KLS is controlled by Ian Jenkins, Company Chief Executive Officer, and Gregory Mongeon and Christopher Dean, former
officers and directors of the Company. Pursuant to ASC 805-50 relating to transactions between entities under common control,
the inventory was recorded at KLS’s historical carrying amount of $32,055 and the increase in stockholders’ equity
was recorded at $12,922 (the $32,055 inventory acquired less the $19,133 liability assumed).
From
August 17, 2018 to August 31, 2018, the Company sold a total of 130,000 shares of Class B Common Stock (and three year warrants
to purchase up to a total of 200,000 shares of Class B Common Stock at $1.50 per share) at prices of $1.00 and $1.25 per share
to four investors for total cash proceeds of $140,000.
On
August 31, 2018, the Company issued a total of 110,000 shares of Class B Common Stock to two consultants for services rendered.
The $137,500 estimated fair value of the 110,000 shares of Class B Common Stock (using the $1.25 per share price described in
the preceding paragraph) was expensed as compensation in the three months ended September 30, 2018.
On
October 9, 2018, the Company sold 116,000 shares of Class B Common Stock (and a three-year warrant to purchase up to a total of
116,000 shares of Class B Common Stock at $1.50 per share) at $1.25 per share to an investor for $145,000 cash proceeds.
On
December 29, 2018, the Company sold 87,000 shares of Class B Common Stock to an investor of a price of $1.50 per share for $130,500
cash proceeds (which was collected January 9, 2019).
From
February 19, 2019 to March 6, 2019, the Company sold 230,000 shares of Class B Common Stock at $1.50 per share to 8 shareholders
for $345,000 cash proceeds.
Effective
May 15, 2019, the Company executed a Technology Assignment Agreement with IrisMind, LLC (“IrisMind”), an entity owned
and controlled by Jayson Uffens, the Company’s Chief Technology Officer and a Board member. Pursuant to the Technology Agreement,
the Company acquired an exclusive license to use certain intellectual property (including a software product named the “Rapport
Platform” from IrisMind in exchange for the issuance of 1,200,000 shares of the Company Class B Common Stock (with a fair
value of $1,500,000 based on the valuation date of May 15, 2019)
From
April 26 to May 10, 2019 the Company sold 302,333 shares of Class B Common Stock at $1.50 per share to 10 investors for $410,500
cash proceeds, $18,000 for settlement of services provided, and common stock subscription receivable of $25,000.
On
May 8, 2019, the Company issued 200,000 Class B shares to Sandeep Uppal, 150,000 Class B shares to Yvan Aubin, and 200,000 Class
B shares to a former officer and director for services. The $825,000 fair value of the 550,000 shares of Class B Common Stock
on May 8, 2019 was charged to compensation expense in the three months ended June 30, 2019.
On
August 1, 2019, the Company issued 146,154 shares of Class B Common Stock to the landlord of our Canadian subsidiary pursuant
to a Commercial Lease Agreement effective July 1, 2019 (see Note 10) for one year prepaid rent ($27,989) and certain leasehold
improvements ($15,857).
Also
on August 1, 2019, the Company issued 266,667 shares of Class B Common Stock to a Company director for reimbursed travel expenses,
128,207 shares of Class B common stock to an entity consultant for reimbursed travel expenses, and a total of 850,100 shares of
Class B common stock to 10 consultants for services rendered to the Company. The $373,492 estimated fair value of the 1,244,974
shares of Class B Common Stock (using a $0.30 per share price) was expensed as compensation ($255,030) and other operating expenses
($118,462) in the three months ended September 30, 2019.
On
August 1, 2019 and August 21, 2019, the Company sold a total of 50,000 shares of Class B Common Stock at $0.30 per share to 2
investors for $15,000 cash proceeds.
On
September 13, 2019, the Company issued a total of 10,670,791 shares of Class B Common Stock to five Company directors (5,750,000
shares) and 16 employees and consultants (4,920,791 shares) for services rendered to the Company. The $1,480,011 estimated fair
value of the 10,670,791 shares of Class B Common Stock (using $0.14 per share price) was expensed as compensation in the three
months ended September 30, 2019.
Warrants
A
summary of warrants activity for the period January 1, 2018 to September 30, 2019 Follows:
Balance, January 1, 2018
|
|
|
-
|
|
Issued in the three months ended September 30, 2018
|
|
|
2,300,000
|
|
Issued in the three months ended December 31, 2018
|
|
|
116,000
|
|
Balance, December 31, 2018
|
|
|
2,416,000
|
|
Cancelled in the three months ended June 30, 2019
|
|
|
(2,000,000
|
)
|
Issued in the three months ended September 30, 2019
|
|
|
700,000
|
|
Balance, September 30, 2019
|
|
|
1,116,000
|
|
Issued
and outstanding warrants at September 30, 2019 consist of:
Month Granted
|
|
Number of Warrants
|
|
|
Exercise Price
|
|
|
Expiration Date
|
|
|
|
|
|
|
|
|
|
July 2018
|
|
|
100,000
|
|
|
$
|
1.50
|
|
|
July, 2021
|
August, 2018
|
|
|
200,000
|
|
|
$
|
1.50
|
|
|
August, 2021
|
October, 2018
|
|
|
116,000
|
|
|
$
|
1.25
|
|
|
October, 2021
|
July, 2019
|
|
|
100,000
|
|
|
$
|
4.00
|
|
|
July, 2022
|
July, 2019
|
|
|
400,000
|
|
|
$
|
1.00
|
|
|
July, 2022
|
August, 2019
|
|
|
200,000
|
|
|
$
|
0.15
|
|
|
August, 2021
|
Total
|
|
|
1,116,000
|
|
|
|
|
|
|
|
In
July 2019, the Company issued a total of 500,000 warrants to two entity consultants exercisable by the holders for three years
at exercise prices of $4.00 per shares for 100,000 warrants and $1.00 per share for 400,000 warrants. The $106,430 total estimated
fair value of the 500,000 warrants (calculated using the Black Scholes options pricing model) at the grant dates was expensed
as compensation in the three months ended September 30, 2019.
In
August 2019, the Company issued 200,000 warrants to a Company director exercisable by the holder for two years at an exercise
price of $0.15 per share. The $50,220 estimated fair value of the 200,000 warrants (calculated using the Black Scholes options
pricing model) at the grant dates was expensed as compensation in the three months ended September 30, 2019.
Assumptions
used for the calculations of the fair value of the 700,000 warrants granted in July 2019 and August 2019 include (1) stock price
of $0.30 per share, (2) exercise prices ranging from $0.15 to $4.00 per share, (3) terms ranging from 2 years to 3 years, (4)
expected volatility of 166% and (5) risk free interest rates ranging from 1.67% to 1.73%.
The
Company has signed agreements where warrants may be granted upon the achievement of certain events as follows:
Month Granted
|
|
Number of Warrants
|
|
|
Exercise Price
|
|
|
Expiration Date
|
|
Contingency
|
|
|
|
|
|
|
|
|
|
|
|
July, 2019
|
|
|
100,000
|
|
|
$
|
4.00
|
|
|
Upon NASDAQ application
|
|
Completing NASDAQ application
|
July, 2019
|
|
|
100,000
|
|
|
$
|
4.00
|
|
|
Upon NASDAQ listing
|
|
Active NASDAQ listing
|
July, 2019
|
|
|
500,000
|
|
|
$
|
1.00
|
|
|
November, 2019
|
|
Securing financing
|
July, 2019
|
|
|
300,000
|
|
|
$
|
1.00
|
|
|
November, 2019
|
|
Securing financing
|
NOTE
10 – COMMITMENTS AND CONTINGENCIES
Effective
April 12, 2019, the Company entered into a Master License and Services Agreement (the “MLSA”) with Optivida Health.
The MLSA provides for the Company’s grant to Optivida of a non-exclusive non-transferable license to use the Company’s
DNA Kit and associated proprietary technology required to produce an “individual-specific” set of recommendations
for customers’ health and wellness. The MLSA also provides for Optivida’s payment of an annual licensing agreement
fee to the Company, which has been paid as of the date of issuance of the accompanying financial statements. The MLSA also provides
for the Company to retain a percentage of revenue from customers referred to our website by Optivida and to receive a percentage
of the profits on products designed by the Company and marketed by Optivida. The initial term of the MLSA is three years.
On
April 15, 2019, the Company entered into a Collaboration Agreement with Orn Health Inc. (“Orn”), a company controlled
by Dr. Hans Jenkins, the Company’s Chief Medical Officer and a Board member. The Collaboration Agreement provides for the
Company’s grant to Orn certain rights to act as the Company’s independent and non-exclusive sales representative and
to directly sublicense products related to the Company’s software platforms on a non-exclusive basis. The Collaboration
Agreement also provides that Gross Revenue generated by Orn and all Approved Operating Expenses incurred by Orn or the Company
will be shared equally by the parties. The initial term of the Collaboration Agreement is 5 years.
Effective
July 1, 2019, Frelii Canada Inc. (the “Tenant”) entered into a Commercial Lease Agreement to rent certain office premises
in Ontario Canada. The lease provides for Base Rent of CAD 3,000 (approximately $2,265) per month for a term of one year expiring
June 30, 2020. The lease also provides the Tenant the right to renew the lease for an additional term at a rent equal to the Base
Rent increased by 3%. The lease also provided the Tenant the right to pay amounts due under the lease with shares of Frelii Common
Stock using an exchange rate of 1.30 CAD:$1.00 and a price of $0.30 per share of Frelii Common Stock. On August 1, 2019, the Company
issued 146,154 shares to the landlord in full payment of first year rent ($27,989) and for certain leasehold improvements ($15,857).
On
July 11, 2019, the Company entered into a License Agreement (the “Agreement”) with GATC Canna Inc. (“GATC”)
of Newport Beach, CA. The Agreement provides GATC an exclusive non-transferable license to use the Company’s GATC branded
DNA Kit and the co-developed technology to produce an “individual-specific” set of Cannabis recommendations for customers’
health and wellness. The Agreement also provides the Company a reciprocal exclusive license of the co-developed authored work.
The Agreement also provides GATC a non-exclusive right to DNA Sequencing, AI processing, Individual customized Health & Wellness
Recommendations, Medical Test Recommendations, Whole Genome search and reference tool, and Psychotropic Analysis Test. The Agreement
provides for GATC’s payment of an annual licensing agreement fee to the Company, which has not yet been paid as of the date
of issuance of the accompanying financial statements. The Agreement also provides for the Company to retain a percentage of revenue
from customers referred to a co-developed website. The Agreement terminates automatically on December 31, 2119.
NOTE
11 – SUBSEQUENT EVENTS
On
October 15, 2019, the Company signed a collaboration agreement with True DNA Story, LLC where the companies will share revenues.
Frelii will incorporate True DNA Story LLC’s proprietary DNA software and market their CLIA validated health panels to its
medical network, including Orn Total Health announced earlier this year. True DNA Story LLC will incorporate Frelii’s AI
technology, Navii to improve the outputs of their CLIA validated lab developed tests.
On
October 22, 2019, the Company signed a Master Services and License Agreement with Systemic Formulations, a Utah company. The MLSA
provides for the Company’s grant to Systemic a non-exclusive non-transferable license to use the Company’s DNA Kit
and associated proprietary technology required to produce an “individual-specific” set of recommendations for customers’
health and wellness. The MLSA also provides for the Company to retain a percentage of revenue from customers as a result of the
recommendations made by the Company. The initial term of the MLSA is three years