_________________________________
Smith Corporate Services, Inc. (dba SCS, Inc. or SCS) is owned and controlled by Karl Smith. SCS is owed $230,100 in principal and $114,231 in accrued interest by NU-MED. Under the terms of the notes, the notes may be converted into shares of the Companys common stock at the rate of one share of common stock for every $0.01 in principal and interest. The notes may not be converted, at any one time, into more than 4.9% of the Companys issued and outstanding shares of Common Stock unless a change of control occurs or a fundamental transaction which would include a merger, reorganization or asset sale. If SCSs ownership has not previously been reduced to less than 4.9% of the number of shares outstanding, then the limitation shall be 9.9%. In addition to the shares owned by SCS, a trust of Mr. Smiths wife owns 150,000 shares.
Control by Existing Stockholders
Current management owns 42% of the issued and outstanding shares of common stock. As a result, it is likely they will be able to control NU-MED and will most likely continue to be in a position to elect at least a majority of the Board of Directors of NU-MED, to dissolve, merge or sell the assets of NU-MED, and generally, to direct the affairs of NU-MED. Additionally, a principal shareholder, SCS, is owed funds under convertible promissory notes which may be converted into shares of the Company at the rate of one share of common stock for every $0.01 in principal and interest. The notes may not be converted, at any one time, into more than 4.9% of the Companys issued and outstanding shares of Common Stock unless a change of control occurs or a fundamental transaction which would include a merger, reorganization or asset sale.
Dividends
We have not declared any cash dividends with respect to our common stock, and do not intend to declare dividends in the foreseeable future. Our future dividend policy cannot be ascertained with any certainty. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our securities.
29
Securities Authorized for Issuance under Equity Compensation Plans
|
|
| |
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 under equity compensation plans excluding securities reflected in column (a)
|
|
(a)
|
(b)
|
(c)
|
Equity compensation plans approved by security holders
|
None
|
None
|
None
|
Equity compensation plans not approved by security holders
|
None
|
None
|
None
|
Total
|
NA
|
NA
|
NA
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Transactions with Officers and Directors
On January 31, 2018, the Company extended an employment agreement to Mr. Keith Merrell to become its full-time Chief Financial Officer. The agreement replaces the consulting agreement previously entered into when Mr. Merrell served as part-time CFO. The employment agreement provides for a payment of $2,000 per month and 2,000,000 shares of restricted common stock which is to be earned at the rate of 500,000 shares per calendar year.
Except as set forth above, there were no material transactions, or series of similar transactions, during our Companys last five fiscal years, or any currently proposed transactions, or series of similar transactions, to which we or any of our subsidiaries was or is to be a party, in which the amount involved exceeded the lesser of $120,000 or one percent of the average of our total assets at year-end for the last three completed fiscal years and in which any promoter or founder of ours or any member of the immediate family of any of the foregoing persons, had an interest.
At this time, we have one independent director. Four of our directors are founders and major shareholders of NU-MED. Additionally, given the limited size of our board of directors, we have not set up any committees of the board of directors such as compensation, audit or nominating committees. As our operations expand, we hope to be able to add outside directors and set up these committees, but at this time, do not know when we will be able to add additional directors and set up such committees.
Transactions with Promoters
There have been no transactions between the Company and promoters during the last fiscal year.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company has selected Sadler, Gibb and Associates, LLC as its independent public accounting firm. Fees paid for their services were:
1) Audit Fees - The aggregate fees incurred for each of the last two fiscal years for professional services rendered by our principal accountant for the audit of our annual financial statements and review of our quarterly financial statements is approximately $17,400 and $18,100 for each of the years ending December 31, 2019 and 2018, respectively.
30
2) Audit-Related Fees. $0 and $0.
3) Tax Fees. $0 and $0.
4) All Other Fees. $0.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMNET SCHEDULES
(a)(1)FINANCIAL STATEMENTS. The following financial statements are included in this report:
Title of Document
Page
Reports of Independent Registered Public Accounting Firm
F-2
Balance Sheets
F-4
Statements of Operations
F-5
Statements of Changes in Stockholders Deficit
F-6
Statements of Cash Flows
F-7
Notes to Financial Statements
F-8
(a)(2)FINANCIAL STATEMENT SCHEDULES. The following financial statement schedules are included as part of this report:
None.
(a)(3)EXHIBITS. The following exhibits are included as part of this report:
SEC
Exhibit
Reference
Number
Number
Title of Document
Location
Item 3
Articles of Incorporation and Bylaws
3.01
3
Articles of Incorporation
Incorporated by reference*
3.02
3
Bylaws
Incorporated by reference*
Item 4 Instruments Defining the Rights of Security Holders
4.01
4
Specimen Stock Certificate
Incorporated by reference*
10.01
10
Consulting Contract SCS
Incorporated by reference**
10.02
10
Amended Promissory Note SCS
Incorporated by reference***
10.03
10
Promissory Note SCS
Incorporated by reference***
31.01
31
CEO certification
This Filing
31.02
31
CFO certification
This Filing
32.01
32
CEO certification
This Filing
32.02
32
CFO certification
This Filing
31
101. INS
XBRL Instance
101. XSD
XBRL Schema
101. CAL
XBRL Calculation
101. DEF
XBRL Definition
101. LAB
XBRL Label
101. PRE
XBRL Presentation
*The exhibits were filed with the original Form 10 filed by NU-MED on December 10, 2012, file number 000-54808.
**The consulting contract was filed with the Form 8-K dated January 7, 2014 and filed on January 8, 2014.
***Amended note filed with the Form 8-K dated September 27, 2013, and filed on October 1, 2013.
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NU-MED PLUS, INC.
March 30, 2020
By: /s/ Jeffrey L. Robins
Jeffrey L. Robins, CEO, Principal Executive
March 30, 2020
By: /s/ Keith L. Merrell
Keith L. Merrell, CFO/Principal Accounting
Officer
In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this registration statement to be signed on its behalf by the undersigned in the capacities and on the dates stated.
Signature
Title
Date
/s/ Jeffrey L. Robins
Director, CEO
March 30, 2020
Jeffrey L. Robins
/s/ William G. Moon
Director
March 30, 2020
William G. Moon
/s/ Dr. Craig Morrison
Director
March 30, 2020
Dr. Craig Morrison
/s/ Thomas A. Tait
Director
March 30, 2020
Thomas A. Tait
/s/ Dr. Brett Earl
Director
March 30, 2020
Dr. Brett Earl
33
Nu-Med Plus, Inc.
Financial Statements
December 31, 2019 and 2018
Table of Contents
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Page No.
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Report of Independent Registered Public Accounting Firm
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F-2
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Balance Sheets
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F-3
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|
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Statements of Operations
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|
F-4
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|
|
|
Statements of Stockholders' Equity (Deficit)
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F-5
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|
|
Statements of Cash Flows
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F-6
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Notes to the Financial Statements
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F-7
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F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Nu-Med Plus, Inc.:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Nu-Med Plus, Inc. (the Company) as of December 31, 2019 and 2018, the related statements of operations, stockholders equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2019 and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding 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 has negative working capital, net losses, negative cash flows from operating activities, and an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys 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 audit 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 Companys 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.
/s/ Sadler, Gibb & Associates, LLC
We have served as the Companys auditor since 2017.
Salt Lake City, UT
March 30, 2020
F-2
NU-MED PLUS, INC.
Balance Sheets
The accompanying notes are an integral part of these financial statements.
F-6
NU-MED PLUS, INC.
Notes to the Financial Statements
For the Years Ended December 31, 2019 and 2018
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Nu-Med Plus, Inc. (or the Company) is an emerging growth early stage medical device company principally engaged in the design, innovation, development, enhancement and commercialization of beginning, early, and selective later-stage quality medical devices. The Company's immediate focus is on the development of Nitric Oxide delivery devices, including a hospital unit, a clinical unit to be used in doctors offices and extended care facilities, a portable unit and a single use disposable unit. We are also developing a powder formulation to generate Nitric Oxide that is 99% pure, with a one-year shelf life, a "desktop" generator device with controls plus safety monitors built in that delivers inhaled Nitric Oxide to replace expensive pressurized canisters and a compact mobile rechargeable device to deliver inhaled Nitric Oxide gas. The Company is incorporated in Utah.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The Companys financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments which are necessary for a fair statement of the results for interim periods have been included.
b. Revenue Recognition
The Financial Accounting Standards Board (FSB) issued new guidance for the recognizing and reporting of revenue in contracts with customers. The effective date for implementation for public companies is January 1, 2018.
The new guidance established a five-step analysis to be followed when determining the recognition of revenue.
1.
Identify the contract with a customer.
2.
Identify the performance obligations in the contract.
3.
Determine the transaction price.
4.
Allocate the transaction price to the performance obligations in the contract.
5.
Recognize revenue when, or as, the reporting organization satisfied a performance obligation.
While the Company is a development stage company with no revenue, at the time we begin to generate revenue the Company will recognize such revenue in conformity with the guidelines set forth by ASC 606.
c. 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.
d. Cash and Cash Equivalents
The Company considers all deposit accounts and investment accounts with an original maturity of 90 days or less to be cash equivalents. The cash balance we currently have on deposit is within the limits for which the FDIC insures.
e. Property and Equipment
F-7
Property and equipment is stated at cost. Expenditure for minor repairs, maintenance, and replacement parts which do not increase the useful lives of the assets are charged to expense as incurred. Expenditures, exceeding $500, for new assets or that increase the useful life of existing assets are capitalized. Depreciation is computed using the straight-line method. The lives over which the fixed assets are depreciated are five to seven years.
f. Fair Value
Fair value is defined as 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. FASB Accounting Standards Codification (ASC) Topic 820 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements), as follows:
Level 1 - Quoted market prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than level one inputs that are either directly or indirectly observable; and
Level 3 - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
All cash, accounts payable and accrued liabilities are carried at cost, which approximates fair value due to the short-term nature of these financial instruments. Additionally, we measure certain financial instruments at fair value on a recurring basis.
g. Earnings per Share
The computation of earnings per share of common stock is based on the weighted average number of shares outstanding during the period of the financial statement. The company included shares subscribed but unissued in its calculation of earnings per share.
|
| |
|
For the year ended December 31, 2019
|
For the year ended December 31, 2018
|
|
|
|
Net (loss) earnings (numerator)
|
$ (1,036,825)
|
$ (1,188,846)
|
Shares (denominator)
|
45,545,644
|
41,785,309
|
Net earnings per share amount - basic
|
$ (0.02)
|
$ (0.03)
|
Shares (denominator)
|
45,545,644
|
41,785,309
|
Net earnings per share amount - diluted
|
$ (0.02)
|
$ (0.03)
|
Diluted earnings per share is computed using the weighted average number of common shares plus dilutive common share equivalents outstanding during the period. As of December 31, 2019 and 2018 there were 34,433,100 and 32,795,200, respectively, potential dilutive shares that needed to be considered as common share equivalents.
As of December 31, 2019 and 2018 the dilutive shares were excluded from the calculation for diluted earnings per share as there was a net loss and their inclusion in the calculation would be anti-dilutive.
h. Concentrations and Credit Risk - The Company has relied on a small group of investors to fund its operations. If this group becomes unable or unwilling to provide additional funding, the Company may be unable to remain in business or to execute on its business plan.
i. Income Taxes
F-8
Deferred taxes are provided on an asset and liability approach whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
j. Stock-based Compensation
The Company, in accordance with ASC 718, Compensation Stock Compensation, records all share-based payments to employees at the grant-date fair value of the equity instruments issued. In accordance with ASC 718-10-30-9, Measurement Objective Fair Value at Grant Date, the Company uses the closing price of the stock, as quoted by NASDAQ, on the date of the grant. The Company believes this pricing method provides the best estimate of fair the fair value of the consideration given. Compensation cost is recognized over the requisite service period.
The Company, in accordance with ASC 505, Compensation Stock Compensation, establishes the value of equity instruments issued to non-employees for goods and services by using the closing price of the stock, as quoted by NASDAQ, on the date of the grant. The Company believes this method fairly establishes the value of the goods and/or services received.
k. Recent Accounting Pronouncements
In February 2016, the Financial Standards Accounting Board (FASB) issued ASU 2016-02, Leases, which is intended to improve financial reporting for lease transactions. This ASU will require organizations that lease assets, such as real estate and manufacturing equipment, to recognize both assets and liabilities on their balance sheet for the rights to use those assets for the lease term and obligations to make the lease payments created by those leases that have terms of greater than twelve months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. This ASU will also require disclosures to help investors and other financial statement users better understand the amount and timing of cash flows arising from leases. These disclosures will include qualitative and quantitative requirements, providing addition information about the amounts recorded in the financial statements. In 2019 the Company recorded an operating right-of-lease asset of $19,482 and an operating lease liability of $19,482 related to the lease of their office. Amortization of $11,086 was recorded in 2019, leaving an operating right-of-use asset at December 31, 2019 of $8,396 and an operating lease liability of $8,396. The ASU was adopted by the Company in the first quarter of 2019 and did not have a material impact on its financial statements. See Note 7.
In February 2018, the FASB issued Accounting Statement Update No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for certain income tax effects stranded in AOCI as a result of the Tax Act. The reclassification eliminates the stranded tax effects resulting from the Tax Act and is intended to improve the usefulness of information reported to financial statement users. ASU No. 2018-02 is effective for reporting periods beginning on January 1, 2019; early adoption is permitted. The Company does not currently have amounts to be reclassified under this and therefore believes it will not have an impact on its financial statements and statements of operations.
In June 2018, the FASB issued ASU No. 2018-07, Compensation Stock Compensation (Topic 718), (ASU 2018-07). ASU 2018-07 is intended to reduce cost and complexity of financial reporting for non-employee share-based payments. Currently, the accounting requirements for non-employee and employee share-based payments are significantly different. ASU 2018-07 expands the scope of Topic 718, which currently only includes share-based payments to employees, to include share-based payments to non-employees for goods or services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity Equity-Based Payments to Nonemployees. The amendments to ASU 2018 - 07 are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a companys adoption date of
F-9
ASU No. 2014-09, (Topic 606), Revenue from Contracts with Customers. The Company is currently evaluating ASU 2018-07 and its impact on its condensed financial statements or disclosures.
In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company is in the process of evaluating the impact of the final rule on its condensed financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes Topic 740-Simplifying the Accounting for Income Taxes (ASU 2019-12), which intended to simplify various aspects related to accounting for income taxes/. ASU 2019-12 removes certain exceptions to the general principles of Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740. The effective date will be the first quarter of fiscal year 2021 and early adoption is permitted. Adoption of Topic 740 is not expected to have a material effect on its condensed financial statements.
The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position and cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its current or future earnings or operations.
NOTE 3 - GOING CONCERN
The Company has negative working capital, net losses, negative cash flows from operating activities, and an accumulated deficit. The Company anticipates that the funds on hand as of December 31, 2019, will not be sufficient to successfully prosecute its business plan and funding through the sale of equity capital and short-term related party and other shareholder loans in order to meet the planned expenditures for development, operations, and administrative cost over the next 12 months will be required. Planned expenditures are approximately $1,250,000 for 2020. During the year ended December 31, 2018 the Company entered into subscription agreements in the amount of $20,000, $700,000 and $400,000, drew $772,605 against those agreements during the year ended December 31, 2017 and drew $93,070 during the year ended December 31, 2018. In May 2018 the Company received $110,000 for subscription agreements. In September 2018 the Board reserved for issuance 2,400,000 shares for a private placement of up to $600,000. In 2018 we accepted stock purchase agreements of $95,000, leaving an unsubscribed balance of $505,000 at December 31, 2018. The current funds available will fund operations through March 31, 2020. The Company has begun the process of arranging for additional necessary funding and currently retains consultants for that purpose. Management will adjust any salaries and expenditures based on the need for successful continuous operations. If plans to obtain further financing prove to be insufficient to fund operations, continued viability could be at risk. These factors raise substantial doubt about the Company's ability to continue as a going concern for a period of one year from the issuance of these financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 - PROPERTY AND EQUIPMENT
Fixed assets and related accumulated depreciation consisted of the following at December 31, 2019, and December 31, 2018:
|
|
| |
|
December 31, 2019
|
|
December 31, 2018
|
Computer and office equipment
|
$ 90,368
|
|
$ 90,368
|
Accumulated depreciation
|
(66,943)
|
|
(53,577)
|
Total Property and Equipment
|
$ 23,425
|
|
$ 36,791
|
F-10
Depreciation expense for the years ended December 31, 2019 and 2018 was $13,366 and $14,743, respectively.
NOTE 5 - PREFERRED STOCK
On October 19, 2011, the Company filed Articles of Incorporation with the State of Utah so as to authorize 10,000,000 shares of preferred stock having a par value of $0.001 per share. No preferred shares are issued or outstanding at December 31, 2019.
NOTE 6 - COMMON STOCK
Common Stock Issued for Cash and Subscription Payable:
In May 2018, the Company entered into three stock subscriptions agreements with two investors. The subscriptions gave the investors the right to purchase up to 440,000 shares of restricted common stock at $0.25 per share. The Company received $110,000 under these subscription agreements and issued the 440,000 shares of restricted stock in June to fully satisfy its obligations under the agreements.
In October and December 2018, the Company entered into four stock purchase agreements under which the buyer may purchase up to $10,000, $15,000, $20,000, and $50,000, respectively, in shares of common stock at $0.25 per share. During 2018 the buyers the buyers exercised their rights and purchased 380,000 shares of stock under those agreements for $95,000. The Company issued 340,000 shares of restricted common stock in 2018 and the remaining 40,000 shares in 2019.
In 2019 the Company issued 200,000 shares of restricted common stock for $50,000 to an unrelated investor. Also during 2019 the Company received $367,866 in proceeds from a related party (a significant shareholder and convertible note holder), pursuant to a stock purchase agreement, which is convertible at $0.25 per share.
At December 31, 2019 and 2018, the Company had $465,541 and $849,175, respectively, in stock subscriptions payable for which it is obligated to issue 1,862,164 and 3,392,950 shares of restricted common stock, respectively. Additionally, as of December 31, 2019, an agreement for a purchase of a total of 516,256 shares of common stock for $129,064 are open to be subscribed to by the related party.
Common Stock Issued to Officer:
In February 14, 2018 the Company announced that the consulting agreement with the Chief Financial Officer (Mr. Merrell) was terminated effective December 31, 2017, and that a new agreement was entered into effective January 1, 2018 under which Mr. Merrell would receive 2,000,000 shares of restricted common stock, vesting at 500,000 shares per year, for his service. The term of the agreement is for one year, which term automatically renews for one-year extensions up to four years unless terminated by either party with 30 days written notice. The Company issued all 2,000,000 shares to Mr. Merrell on August 20, 2018. Any common shares not earned during the four-year period are to be returned or cancelled. An expense of $200,000 was recorded for the year ended December 31, 2019, which represents the fair value of the stock vested. A charge will be made each quarter as the shares are earned under the provisions of the agreement until such time as all shares have been earned.
Common Stock Issued for Services:
In September 2018, the Company issued 650,000 shares of stock to two consultants. Of these shares, 150,000 were issued under a consulting contract for services rendered and vested upon issue and 500,000 shares of restricted stock were issued to a consultant for services rendered and to be rendered through June 1, 2019. The common stock was valued at $639,000, of which $432,863 was recorded during the year ended December 31, 2018. A prepaid expense for the remaining balance of $206,250 is recorded and will be amortized over the term of the consulting agreement.
F-11
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Operating Lease Obligations
The Company entered into a lease for office space in February 2017 for $950 per month. In November 2017 the Company signed a six-month extension of the lease with a lease payment of $978 per month. In March 2018 the Company extended the lease agreement through August 31, 2019 at a rate of $1,008 per month. In July 2019 the Company extended the lease agreement through August 31, 2020 at a rate of $1,038.10 per month. Obligations under this lease are as follows:
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|
|
|
|
|
| |
|
|
|
|
|
2020
|
2021
|
2022
|
Office lease
|
|
|
|
$ 8,305
|
$ -
|
$ -
|
In 2018, the Company also entered into a 24-month lease for a nitric oxide analyzer, with a monthly payment of $1,014 per month. The final payment under this agreement was made in December 2019.
NOTE 8 - RELATED PARTY TRANSACTIONS
Contributed Services
During the year ended December 31, 2019 and 2018, a Company officer contributed services to the Company in the amount of $200,000 and $232,061, respectively. During the year ended December 31, 2019 and 2018, the officer received 500,000 shares and 500,000 shares, respectively of restricted common stock as compensation for those services.
NOTE 9 - CONVERTIBLE PROMISORY NOTES RELATED PARTY
$100,000 Convertible Promissory Note
On November 12, 2012, the Company issued a $100,000 convertible promissory note to SCS, a related party and significant shareholder, as compensation for services provided and to be provided during the period April 1, 2012 through March 31, 2013. The note is due on demand, bears annual interest at 5.5%, and is convertible into shares of common stock at a conversion price to be agreed upon immediately prior to conversion. On September 27, 2013, the Company amended the note to include a conversion price which of $0.01 per share for all unpaid principal and interest. As of December 31, 2019 and December 31, 2018 interest accrued, but unpaid, was $60,953 and $55,453, respectively.
$130,100 Convertible Promissory Note
Prior to 2015, the Company entered into a convertible promissory note with SCS, a related party and significant shareholder, due on demand, bearing interest at 8% per annum, unsecured and convertible at $0.01 per share, with a price protection provision to a lower conversion price. The balance of this note was $130,100 at December 31, 2019 and December 31, 2018 with accrued interest balances of $52,557 and $42,149, respectively.
NOTE 10 INCOME TAXES
In 2017, the U.S. enacted the Tax Cuts and Jobs Act which significantly changed U.S. tax law. The Act lowered the U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018. This had an affect on the value of the Companys net operating loss carryover, but since the deferred tax asset is fully reserved, it had no impact on the Companys financial statements. The impact of the change was reflected in the 2018 financial statements.
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and applicable state income tax rates to pretax income from continuing operations for the years ended December 31, 2019, and 2018, due to the following:
F-12
|
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|
|
| |
|
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2019
|
|
2018
|
|
|
|
|
|
|
Book Income (Loss)
|
$
|
(269,575)
|
$
|
(309,100)
|
Depreciation
|
|
3,475
|
|
3,833
|
Shares issued for services
|
|
52,000
|
|
172,881
|
Meals and entertainment
|
|
49
|
|
155
|
Change in valuation allowance
|
|
214,051
|
|
132,231
|
|
|
$
|
-
|
|
-
|
Net deferred tax liabilities consist of the following components as of December 31, 2019, and 2018:
|
|
|
|
| |
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
NOL Carryover
|
$
|
1,567,296
|
$
|
1,938,113
|
Deferred tax liabilities
|
|
|
|
|
|
Depreciation
|
|
(13,366)
|
|
(3,833)
|
|
|
|
|
|
|
Valuation allowance
|
|
(1,544,009)
|
|
(1,934,280)
|
Net deferred tax asset
|
$
|
-
|
$
|
-
|
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. If a change in ownership occurs, then net operating loss carryforwards may be limited as to use in future years. At December 31, 2019, the Company had net operating loss carryforward of approximately $6,028.062 that may be offset against future taxable income from the year 2019 through 2039. The availability of some of the net operating loss will extend into 2036 if not previously utilized. During 2019, the Company evaluated its deferred tax assets and concluded that none of the asset is currently realizable and that a full valuation allowance should be recorded.
Included in the balance at December 31, 2019, are no tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.
NOTE 11 - SUBSEQUENT EVENTS
On March 15, 2020 the Company entered into a service agreement with Hanover International, Inc. to provide advisory services to the Company. The contract is a one year contract, but may be cancelled with thirty days notice any time after the 91st day of the agreement. Hanover will receive a fee of $3,500 per month, from which fee it pays all of its expenses. In addition, Hanover will receive 750,000 shares of restricted common stock, earned in quarterly tranches of 187,500 shares, deemed earned and issuable after services are provided for each quarter.
In the first three months of 2020 the Company received $106,927 in funds against a subscription agreement. The subscription has a conversion rate of $0.25 per share.
F-13