BIOFORCE NANOSCIENCES HOLDINGS, INC. - Quarter Report: 2020 June (Form 10-Q)

The following persons were elected to the board of directors to serve until the next annual meeting or until their replacement is elected:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overall Operating Results:

Three Months – June 30, 2020 and 2019 Statements

The Sales Revenue from the Company’s BioForce Eclipse vitamin supplements for the three months ended June 30, 2020 and for the three months ended June 30, 2019 were $-0- and $5,962, respectively. During the three months ended June 30, 2020 the Company received no orders, -0- units of its Bioforce Eclipse supplement product, and for the same period ending June 30, 2019 the Company received one order for 265 units of its Bioforce Eclipse supplement product.

The Cost of Goods Sold for the three months ended June 30, 2020 was $-0- and the Cost of Goods Sold for the three months ended June 30, 2019 was $5,015, the cost associated with the sales of its BioForce Eclipse supplement product.

Gross Margins for the three months ended June 30, 2020 was 0% from the sale of -0- units of the BioForce Eclipse supplement product, and during the same period in 2019 was 15.88%. The decrease for the three months ended June 30, 2020 in comparison to three month ended June 30, 2019 is contributed to no unit sales of supplement sold.

Gross Profit for the three months ended June 30, 2020 was $-0- and for the three months ended June 30, 2019 was $947.

Operating expenses for three months ended June 30, 2020, totaled $126,710 from Board of Director compensation and General and Administrative Expenses, compared to $8,129 for the three months ended June 30, 2019. This increase in June 30, 2020 compared to the same period ended June 30, 2019 was attributed to higher expenses with fees for Board of Director compensation.

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Six Months – June 30, 2020 and 2019 Statements

The Sales Revenue from the Company’s "BioForce Eclipse" vitamin supplement for the six months ended June 30, 2020 and for the six months ended June 30, 2019 were $-0- and $11,812,  respectively. During the six months ended June 30, 2020 the Company sold -0- units of its "BioForce Eclipse" vitamin supplement product for $-0- and during the six months ended June 30, 2019 the Company sold 490 units of its "BioForce Eclipse" vitamin supplement product for $11,812.

The Cost of Sales for the six months ended June 30, 2020 was $-0- and for the six months ended June 30, 2019 was $9,175 respectively.  For the six months ended June 30, 2020, the Company had $-0- in costs associated with the sale of its "Bioforce Eclipse" vitamin supplement product, and for the six month ended June 30, 2019 the Company had $9,175 associated cost due to sales of its vitamin supplement.

Gross Margins for the six months ended June 30, 2020 was 0% from the sale of -0- units of the “BioForce Eclipse” supplement product, and for six months ended June 30, 2019 was 22.32% from sale of 490 units of the supplement product. The decrease for the six months ended June 30, 2020 in comparison to six month ended June 30, 2019 is that no sales of the vitamin supplement occurred during the six month ended June 30, 2020.

Gross Profit for the six months ended June 30, 2020 was $-0- and for the six months ended June 30, 2019 was $2,637.  The Company had sales of -0- units of the "BioForce Eclipse" vitamin supplement product for the six months ended June 30, 2020, and during six months ended June 30, 2019 had sales of 490 units of the vitamin supplement.

Operating expenses for six months ended June 30, 2020, totaled $158,168,068 for Board of Director Compensation and General and Administrative Expenses, compared to $22,617 for the six months ended June 30, 2019. This increase during the same six month period ended June 30, 2020 was attributed to the cost of the issuance of convertible Preferred 'A' shares and higher fees relates to accounting and legal fees associated with the Company being a full-reporting issuer.

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Net Loss:

Net loss for the three month ended June 30, 2020 and 2019 were $126,710 and $7,182 , respectively. Net loss for the six month ended June 30, 2020 and 2019 were $158,168,068 and $20,034, respectively.

Liquidity and Capital Resources:

As of June 30, 2020, the Company’s assets totaled $42,818, which consisted of cash and prepaid expenses. Our total liabilities were $162,239 from accrued director compensation expenses and amounts due to related parties. As of June 30, 2020, the Company had an accumulated deficit of $158,929,820 and working capital deficit $119,421.

As indicated herein, we need capital for the implementation of our business plan, and we will need additional capital for continuing our operations. We do not have sufficient revenues to pay our operating expenses at this time. Unless the company is able to raise working capital, it is likely that the Company will either have to cease operations or substantially change its methods of operations or change its business plan (See Note 4 in Financial Statements). For the next 12 months the Company has a written commitment from its CEO in Mr. Merle Ferguson's employment contract ( See Exhibit 10.01) to advance funds as necessary in meeting the Company's operating requirements.

BioForce NanoSciences Holdings, Inc. does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company, or any of its subsidiaries’ operating results, financial position, or cash flow.

Cash Provided by (Used in) Operating Activities

Net cash used in operating activities for the six months ended June 30, 2020 and 2019 were $60,406 and $12,329, respectively. The increase amount was attributed to General and Administrative cost that were used in operational and professional fee expenses.

Cash Flows from Investing Activities

Net cash used in investing activities was $-0- for both the three month periods ended June 30, 2020 and 2019. Net cash used in investing activities was $-0- for both six month periods ended June 30, 2020 and 2019.

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Cash Provided by (Used In) Financing Activities

Net cash provided by financing activities was $47,376 for six month ended June 30, 2020 from amounts Due to Related Parties, and was $23,907 for six month ended June 30, 2019 from the amount of Capital Contributions from the Company's directors .

Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies include revenue recognition and stock-based compensation. The Company has implemented all new accounting pronouncements that are in effect and is evaluating any that may impact its financial statements, including revenue recognition. The Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Revenue Recognition

In accordance with ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"), revenues are recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the company satisfies a performance obligation.

We adopted this ASC on January 1, 2018. Although the new revenue standard is expected to have an immaterial impact, if any, on our ongoing net income, we did implement changes to our processes related to revenue recognition and the control activities within them.  

Stock-Based Compensation

We account for employee and non-employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation—Stock Compensation, which requires all share-based payments, including grants of stock options, to be recognized in the financial statements based on their fair values.  The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered. 

Recent Accounting Pronouncements 

The Company has implemented all new accounting pronouncements that are in effect and is evaluating any that may impact its financial statements, including revenue recognition.  The Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. 

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Reverse Stock Split

We were authorized to issue 900,000,000 shares of our common stock, of which 15,270,588 shares were outstanding taking into account the one-for-five (1-for-5) reverse stock split effective February 28, 2020. Our shares of common stock are held by approximately 231 stockholders of record.  The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of our common stock whose shares are held in the names of various securities brokers, dealers, and registered clearing agencies.  In addition to our authorized common stock, BioForce Nanosciences Holdings, Inc. is authorized to issue 100,000,000 shares of preferred stock, par value at $0.001 per share. Based on the amended Articles of Incorporation the Company has 10,000,000 Series 'A' Preferred which have voting and conversion rights of 100 common shares, par value $0.001(see Exhibit 3.2); leaving a balance of 90,000,000 "Blank Check" Preferred.

Going Concern

We have incurred net losses since our inception. We anticipate incurring additional losses before realizing growth in revenue and we will depend on additional financing in order to meet our continuing obligations and ultimately to attain profitability. Our ability to obtain additional financing, whether through the issuance of additional equity or through the assumption of debt, is uncertain. Accordingly, our independent auditors’ report on our financial statements for the year ended December 31, 2019 includes an explanatory paragraph regarding concerns about our ability to continue as a going concern, including additional information contained in the notes to our financial statements describing the circumstances leading to this disclosure. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. 

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Based on our evaluation, our Principal Executive Officer and Principal Financial Officer, after considering the existence of material weaknesses identified, determined that our internal control over financial reporting disclosure controls and procedures were not effective as of June 30, 2020.

Management, including our Principal Executive Officer and Principal Financial Officer, assessed the effectiveness of our internal control over financial reporting as of quarter ended June 30, 2020. In making this assessment, management used May 2013 updated criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control over Financial Reporting - Guidance for Smaller Public Companies.

We identified the following deficiencies which together constitute a material weakness in our assessment of the effectiveness of internal control over financial reporting as of June 30, 2020: 

- The Company has inadequate segregation of duties within its cash disbursement control design. 

- During the Quarter ended June 30, 2020, the Company internally performed all aspects of its financial reporting process, including, but not limited to the underlying accounting records and the recording of journal entries and for the preparation of financial statements. This process was deficient, because these duties were performed often times by the same people, and therefore a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control system, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the Quarter ended June 30, 2020 to have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Coronavirus Impact (COVID-19)

Due to the recent outbreak of the coronavirus reported in many countries worldwide, local and federal governments have issued travel advisories, canceled large scale public events and closed schools. In addition, companies have begun to cancel conferences and travel plans and require employees to work from home. Global financial markets have also experienced extreme volatility and disruptions to capital and credit markets.

We are unable to predict the impact of the coronavirus on our operations at this time. Adverse events such as health-related concerns about working in our offices, the inability to travel, potential impact on our business partners and customers, and other matters affecting the general work and business environment could harm our business and delay the implementation of our business strategy. The adverse events may also adversely impact our ability to raise capital or to continue as a going concern. We continue to monitor the recent outbreak of the coronavirus on our operations. The global economic slowdown and the other risks and uncertainties associated with the pandemic could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company's business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties which the Company faces.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

At this time, there are no materials pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On February 20, 2020 the Company issued 1,072 restricted shares of common stock at $1.2495 per share based on the closing price of the Company's shares on February 20, 2020. The issuance was for product payment of the Company's "BioEclipse" Supplement and was record as stock payable in the amount of $1,339 (Adjustments to stock issuance accounts the one-for-five (1-for-5) reverse stock-split which became effective on February 28, 2020, all fractional share amounts after split round upwardly to next whole share; price per share adjusted based on the one-for-five (1-for-5) reverse split of common shares)- See Exhibit 10.6.

On March 31, 2020, Bioforce Nanosciences Holdings, Inc., (the "Company" or the "Registrant") issued in total 2,000,000 shares of its Preferred Series 'A' shares to certain officers of the company, Mr. Merle Ferguson- CEO and Mr. Richard Kaiser - CFO in accordance with their employment contracts (See Exhibits 10.1 and 10.2). The sale was a private placement pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933, and the issuance was not a public offering due to the limited number of persons that received the shares, and the manner of the issuances. No underwriter was involved with the sale and no commissions were paid in connection with such sale. All securities issued by the Company are deemed "restricted securities" within the meaning of that term as defined in Rule 144 of the Securities Act and have been issued pursuant to the "private placement" exemption under Section 4(2) of the Securities Act. Such transactions did not involve a public offering of securities. All purchasers in the private placement had access to information on the Company necessary to make an informed investment decision. The Company has been informed that all purchasers were able to bear the economic risk of this investment and are aware that the securities were not registered under the Securities Act, and cannot be re-offered or re-sold unless they are registered or are qualified for sale pursuant to an exemption from registration. The transfer agent and registrar of the Company will be instructed to mark "stop transfer" on its ledger regarding these shares (see Exhibit 10.4 and 10.5).

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINING SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

On March 16, 2020, the Company entered into a consulting agreement with Mr. Aldo Dalla-Vecchia of RSDL Enterprises to provide general consulting services to BFNH's management team. The agreement ended May 15, 2020 for a total cash consideration of $6000, $3000 per month (See Exhibit 10.3)

On March 31, 2020, the Board of Directors approved the employment agreement for Mr. Merle Ferguson as the Company's Chairman, CEO, and President. In consideration of the execution of the Agreement, and the performance of his obligations hereunder, as President shall receive a fee of Two Hundred Eighty Eight Dollars US ($288,000) per year for five (5) years of services rendered with a start date of March 23, 2020; payable in new common S3, S8, or restricted shares (dependent upon registration availability), cash or combination of cash and shares of BioForce Nanosciences Holdings, Inc. Further, Mr. Ferguson was issued One Million Five Hundred Thousand (1,500,000) Preferred 'A' Shares, par value $0.001, as a one-time signing bonus per this employment agreement (See Exhibit 10.1).

On March 31, 2020, the Board of Directors approved the employment agreement of Mr. Richard Kaiser as the Company's Director, CFO, and Secretary. In consideration of the execution of the Agreement, and the performance of his obligations hereunder, as Chief Financial Officer shall receive a fee of One Hundred Thirty Five Thousand Dollars US ($135,000) per year for five (5) years of services rendered with a start date of March 25, 2020; payable in registered shares or restricted shares (dependent upon registration availability), cash or combination of cash and shares of BioForce Nanosciences Holdings, Inc. Further, Mr. Kaiser was issued Five Hundred Thousand (500,000) Preferred 'A' Shares, par value $0.001, as a one-time signing bonus per this employment agreement agreement (See Exhibit 10.2).

On May18, 2020, BioForce NanoSciences Holdings Inc. formed a wholly owned subsidiary, Element Acquisition Corporation, a Wyoming corporation, with unlimited shares authorized, par value $0.001. Mr. Merle Ferguson and Mr. Richard Kaiser are Board of Directors of Element Acquisition Corporation.

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On May 25, 2020, the Company entered into a second consulting agreement with Mr. Aldo Dalla-Vecchia of RSDL Enterprises to provide general consulting services to BFNH's management team. The agreement is for two month ending July 27, 2020 for a total cash consideration of $7,000, $3,500 per month (See Exhibit 10.7)

On June 04, 2020, BioForce Nanosciences Holdings, Inc.' s wholly-owned subsidiary Element Acquisition Corporation, announced that it created an "Investment Committee" comprised of leading executives with extensive experience in the media, entertainment and sports sectors. The "Investment Committee" will oversee a strategy aimed at acquiring and investing in companies across these industries. Element Acquisition Corporation will serve as a potential acquisition vehicle for these type of transactions.

The members of the Investment Committee are:

- John LaViolette is the Co-Founder and Co-CEO of Element International Inc, and Co-CEO and Director of Element Global, Inc. (OTC: ELGL). Mr. LaViolette was also a senior partner in the entertainment law firm of Bloom, Hergott, Diemer, Rosenthal, LaViolette, Feldman, Schenkman & Goodman LLP. He has deep relationships with all major Hollywood studios and networks and has represented a vast number of “A-list” actors, writers, and directors. 

- Steven Gagnon is the Co-Founder and Co-CEO of Element International Inc., and Co-CEO and COO of Element Global, Inc. (OTC: ELGL). Mr. Gagnon has a 20-year history in media in the financing and production of film, television and music videos. Mr. Gagnon served as President of the sports group of Madison Sports and Entertainment Group, Inc., and worked as a supervisor in the offshore oil and construction industry for International Underwater Contractors. 

- Sasha Shapiro is President and Director of Element Global, Inc. (OTC: ELGL) and Vice Chairman and President of Element Media Group. Mr. Shapiro is Managing Director of Media Content Capital, a private equity fund focused on investments in early/medium-stage media, internet, and entertainment companies. He has held senior management positions at Warner Bros Studios and Pacifica Ventures and has served as a producer on films including Fury, Sabotage, Fading Gigolo, Dirty Grandpa, Rock the Kasbah, Naked and Ophelia. He sits on the Board of Directors of Sonifi Solutions, QED International, Covert Media and VR MediaTech. 

- Mark Greenberg is CEO of Element Media Group Inc., and Director of Element Global, Inc. (OTC: ELGL). He served as the Founder and Chief Executive Officer of EPIX from 2009 to 2017 and was previously Executive Vice President for Showtime Networks, Inc., and Director of Direct Marketing at HBO (Home Box Office).  

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- Neil Davis is the Chief Business Development Officer in Element Media Group. Mr. Davis is a seasoned digital executive who has created well over $2 billion of revenue for various companies including, AOL, Blockbuster, Dish Network and Qello Media, where he served as Chief Business Officer. He was previously CEO at Monetize, where he consulted for the media and entertainment industries. Prior to that, he was Head of Corporate and Digital Development at Blockbuster-Dish Digital. 

- Mr. Scheffer has served almost 30 years at HBO (Home Box Office) as President of Film Programming, Video and Enterprises. Mr. Scheffer was responsible for overseeing all motion picture programming for HBO. As President of HBO Pictures, he was responsible for the financing and production of HBO’s Silver Screen Partners and Cinema Plus theatrical movie ventures. Prior to HBO, Mr. Scheffer held executive positions at Time Life Films, Allied Artists, Polydor Records, MGM and Columbia Pictures.

Subsequent Event

On July 14, 2020, BioForce Nanosciences Holdings, Inc. (BFNH) filed a Form8-K that it had entered into Memorandum of Understanding ("MOU") with Element Global, Inc., a Utah Corporation which publicly trades under the symbol ELGL. The MOU sets forth the general terms and conditions for a merger, to which BFNH and the ELGL have jointly agreed to the following:

(A). Element Global, Inc. (ELGL) has subsidiaries and specific assets;

(B). ELGL (Seller) desires to sell itself, its subsidiaries, and its assets, and BFNH (Buyer) desires to purchase all of the assets from or controlled by ELGL and its subsidiaries, fully take control from ELGL and its subsidiaries, and conduct business activities with the ELGL Assets;

BFNH desires to acquire 100% of ELGL, its subsidiaries and its assets, and ELGL desires to sell the Company, its subsidiaries, and assets to BFNH. Upon successful due diligence and other customary document presentations, BFNH and ELGL believe that a final agreement could consummate itself on or before October 13, 2020 (See Exhibit 10.8).

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ITEM 6. EXHIBITS 

Index to Exhibits.

Exhibit No.     Description of Exhibit

3.1 Certificate of Incorporation*

3.2 Amended Articles of Certificate of Incorporation (previously filed at Exhibit 3.1 on DEF 14C-Definative Information Statement )*

3.3 Bylaws (previously filed as Exhibit 3.2 on FORM 10)*

10.1 Employment Agreement – Merle Ferguson*

10.2 Employment Agreement - Kaiser*

10.3 Consulting Contract RSDL Enterprises-March 16, 2020*

10.4 Subscription Agreement- Ferguson*

10.5 Subscription Agreement- Kaiser*

10.6 Supplier Agreement (Previously filed as Exhibit 10.1 Form 10/A)*

10.7 Consulting Contract RSDL Enterprises-May 25, 2020+

10.8 Memorandum of Understanding between BioForce NanoSciences Holdings, Inc. and Element Global, Inc.- July 14, 2020+

31.1 Certification Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.+

31.2 Certification Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.+

32.1 Certification Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.+

32.2 Certification Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.+  

101 Interactive Financial Data XBRL Extensions.+ 

* Previously filed

+ filed herewith

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SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BIOFORCE NANOSCIENCES HOLDINGS, INC.

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