EVIO, INC. - Quarter Report: 2020 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________.
Commission File Number: 000-12350
EVIO, INC.
(Exact name of registrant as specified in its charter)
| Colorado | 47-1890509 | |
(State of Incorporation) |
(I.R.S. Employer Identification No.) | |
2654 W. Horizon Ridge Pkwy, Suite B5-208 Henderson, NV |
89052 | |
| (Address of principal executive offices) | (Zip Code) |
(702) 748-9944
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | [ ] | Non-accelerated filer | [ ] |
| Accelerated filer | [ ] | Smaller reporting company | [X] |
| Emerging growth company | [X] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of September 3, 2020 there were 89,142,473 shares of common stock outstanding.
EVIO, INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 31, 2020
TABLE OF CONTENTS
| 2 |
PART I — FINANCIAL INFORMATION
Consolidated Balance Sheets
| March 31, | September 30, | |||||||
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 16,457 | $ | 110,325 | ||||
| Accounts receivable, net | 172,389 | 133,022 | ||||||
| Prepaid expenses | 141,602 | 190,460 | ||||||
| Other current assets | 43,764 | 9,689 | ||||||
| Note receivable, current portion | 538,904 | 538,904 | ||||||
| Total current assets | 913,116 | 982,400 | ||||||
| Right of use assets | 2,069,538 | 2,543,976 | ||||||
| Capital assets, net | 1,206,745 | 1,383,828 | ||||||
| Land | 212,550 | 212,550 | ||||||
| Property and equipment, net | 2,834,587 | 3,080,426 | ||||||
| Security deposits | 175,981 | 178,918 | ||||||
| Prepaid expenses, net | - | 4,061 | ||||||
| Total assets | $ | 7,412,517 | $ | 8,386,159 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 4,644,361 | $ | 3,811,237 | ||||
| Client deposits | 53,009 | 108,418 | ||||||
| Interest payable | 1,517,386 | 1,387,642 | ||||||
| Capital lease obligation, current | 875,946 | 957,673 | ||||||
| Derivative liability | 2,319,938 | 2,545,735 | ||||||
| Convertible notes payable, net of discounts | 3,584,043 | 3,695,484 | ||||||
| Loans payable, net of discounts, current | 787,960 | 762,476 | ||||||
| Total current liabilities | 13,782,643 | 13,268,665 | ||||||
| Convertible debentures, net of loan discounts | 3,049,007 | 1,734,890 | ||||||
| Lease liabilities | 2,117,338 | 2,594,726 | ||||||
| Capital lease obligation, net | 241,268 | 381,786 | ||||||
| Loans payable, net | 708,550 | 657,603 | ||||||
| Loans payable, related party, net | 1,406,162 | 1,560,849 | ||||||
| Total liabilities | 21,304,968 | 20,198,519 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders’ Equity: | ||||||||
| Series B convertible preferred stock, $0.0001 par value. 5,000,000 authorized; 5,000,000 shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively | 500 | 500 | ||||||
| Series C convertible preferred stock, $0.0001 par value. 500,000 authorized; 500,000 shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively | 50 | 50 | ||||||
| Series D convertible preferred stock, $0.0001 par value. 1,000,000 authorized; 349,500 and 349,500 shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively | 34 | 34 | ||||||
| Common stock, $0.0001 par value. 1,000,000,000 authorized; 78,717,471 and 29,314,419 shares issued and outstanding at March 31, 2020 and September 30, 2019, respectively | 7,872 | 2,931 | ||||||
| Stock subscriptions receivable | - | - | ||||||
| Additional paid-in capital | 29,695,137 | 26,498,076 | ||||||
| Retained earnings (accumulated deficit) | (43,042,535 | ) | (37,775,183 | ) | ||||
| Accumulated other comprehensive income | (348,167 | ) | (353,090 | ) | ||||
| Total stockholders’ equity | (13,687,109 | ) | (11,626,682 | ) | ||||
| Noncontrolling interest | (205,342 | ) | (185,678 | ) | ||||
| Total equity | (13,892,451 | ) | (11,812,360 | ) | ||||
| Total liabilities and equity | $ | 7,412,517 | $ | 8,386,159 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
| 3 |
Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
| Three Months Ended March 31, | Three Months Ended March 31, | Six Months Ended March 31, | Six Months Ended March 31, | |||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenues | ||||||||||||||||
| Testing revenue | $ | 867,814 | $ | 735,179 | $ | 2,200,770 | $ | 1,922,417 | ||||||||
| Consulting revenue | - | - | - | - | ||||||||||||
| Total revenues | 867,814 | 735,179 | 2,200,770 | 1,922,417 | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Testing services | 820,080 | 835,186 | 1,766,840 | 1,849,166 | ||||||||||||
| Consulting services | - | - | - | - | ||||||||||||
| Depreciation and amortization | 200,366 | 321,856 | 455,920 | 612,304 | ||||||||||||
| Total cost of revenue | 1,020,446 | 1,157,042 | 2,222,760 | 2,461,470 | ||||||||||||
| Gross margin | (152,632 | ) | (421,863 | ) | (21,990 | ) | (539,053 | ) | ||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 1,419,188 | 1,205,662 | 2,687,112 | 2,702,302 | ||||||||||||
| Depreciation and amortization | 27,277 | 57,116 | 55,507 | 115,982 | ||||||||||||
| Total operating expenses | 1,446,465 | 1,262,778 | 2,742,619 | 2,836,284 | ||||||||||||
| Income (loss) from operations | (1,599,097 | ) | (1,684,641 | ) | (2,764,609 | ) | (3,375,337 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income (expense), net | (1,203,227 | ) | (692,419 | ) | (2,766,098 | ) | (2,457,297 | ) | ||||||||
| Other income (expense) | 13,874 | (33,422 | ) | 17,895 | (97,517 | ) | ||||||||||
| Gain (loss) on settlement of debt | - | - | - | - | ||||||||||||
| Impairment charge | - | - | - | - | ||||||||||||
| Gain (loss) on change in fair market value of derivative liabilities | (194,236 | ) | (1,409,275 | ) | 225,797 | (556,647 | ) | |||||||||
| Total other income (expense) | (1,383,589 | ) | (2,135,116 | ) | (2,522,406 | ) | (3,111,461 | ) | ||||||||
| Income (loss) before income taxes | (2,982,686 | ) | (3,819,757 | ) | (5,287,015 | ) | (6,486,798 | ) | ||||||||
| Provision for income taxes (benefit) | - | 613 | - | 2,969 | ||||||||||||
| Net income (loss) | (2,982,686 | ) | (3,820,370 | ) | (5,287,015 | ) | (6,489,767 | ) | ||||||||
| Net income (loss) attributable to noncontrolling interest | (30,143 | ) | (106,645 | ) | (19,664 | ) | (161,383 | ) | ||||||||
| Net income (loss) attributable to EVIO, Inc. shareholders | $ | (2,952,543 | ) | $ | (3,713,725 | ) | $ | (5,267,351 | ) | $ | (6,328,384 | ) | ||||
| Basic and diluted earnings (loss) per common share | $ | (0.06 | ) | $ | (0.15 | ) | $ | (0.10 | ) | $ | (0.25 | ) | ||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | 49,561,707 | 25,366,021 | 51,581,428 | 25,366,021 | ||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net income (loss) | $ | (2,982,686 | ) | $ | (3,820,370 | ) | $ | (5,287,015 | ) | $ | (6,489,767 | ) | ||||
| Foreign curreny translation adjustment | 6,151 | 64,261 | 4,923 | (115,561 | ) | |||||||||||
| Comprehensive income (loss) | $ | (2,976,535 | ) | $ | (3,756,109 | ) | $ | (5,282,092 | ) | $ | (6,605,328 | ) | ||||
The accompanying notes are an integral part of the consolidated financial statements.
| 4 |
Consolidated Statements of Cash Flows (Unaudited)
| Six Months Ended March 31, | Six Months Ended March 31, | |||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities of continuing operations: | ||||||||
| Net income (loss) | $ | (5,287,015 | ) | $ | (6,489,767 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Amortization of debt discount | 2,077,153 | 1,951,983 | ||||||
| Common stock issued in exchange for fees and services | 328,830 | 240,501 | ||||||
| Default penalties and other covenant adjustments on convertible debentures | 62,500 | - | ||||||
| Depreciation and amortization | 511,597 | 720,739 | ||||||
| Loss on disposal of assets | 2,979 | 64,095 | ||||||
| Provision for doubtful accounts | 25,253 | 35,333 | ||||||
| Stock based compensation | 890,510 | 395,850 | ||||||
| Unrealized (gain) loss on derivative liability | (225,797 | ) | 556,647 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (71,177 | ) | 74,625 | |||||
| Prepaid expenses | 52,919 | (142,911 | ) | |||||
| Other current assets | (34,075 | ) | 33,122 | |||||
| Security deposits | 1,775 | (722 | ) | |||||
| Operating lease right of use assets | (2,950 | ) | 48,332 | |||||
| Accounts payable and accrued liabilities | 675,496 | 1,179,775 | ||||||
| Customer deposits and deferred revenues | (55,409 | ) | (156,363 | ) | ||||
| Interest payable | 339,380 | 410,712 | ||||||
| Net cash provided by (used in) operating activities | (698,031 | ) | (1,078,049 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of fixed assets | (44,674 | ) | (580,075 | ) | ||||
| Net cash provided by (used in) financing activities | (44,674 | ) | (580,075 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock, net of issuance costs | - | 186,000 | ||||||
| Proceeds from issuance of convertible debentures | - | 414,183 | ||||||
| Proceeds from issuance of convertible notes, net of issuance costs | 846,791 | 971,014 | ||||||
| Proceeds from related party advances | 64,069 | 199,040 | ||||||
| Repayments of capital leases | (181,931 | ) | (93,050 | ) | ||||
| Repayments of convertible debentures | - | - | ||||||
| Repayments of loans payable | (28,993 | ) | (18,617 | ) | ||||
| Repayments of related party loans payable | (51,459 | ) | (27,151 | ) | ||||
| Net cash provided by (used in) financing activities | 648,477 | 1,631,419 | ||||||
| Effect of exchange rates on cash and cash equivalents | 360 | (7,769 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | (93,868 | ) | (34,474 | ) | ||||
| Cash and cash equivalents at beginning of period | 110,325 | 81,735 | ||||||
| Cash and cash equivalents at end of period | $ | 16,457 | $ | 47,261 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Conversion of convertible note and accrued interest into common stock | $ | 1,728,842 | $ | 708,089 | ||||
| Settlement of account payable for common stock | $ | 6,000 | $ | - | ||||
| Debt discount recorded on convertible notes and debentures payable upon initial measurement of derivative liability | $ | - | $ | 350,039 | ||||
| Debt discounts recorded for beneficial conversion features on convertible debentures and notes payable | $ | 175,320 | $ | - | ||||
| Debt discounts recorded for original issue discounts on convertible debentures | $ | - | $ | 280,144 | ||||
| Vehicles financed through notes payable | $ | 105,424 | $ | - | ||||
| Equipment financed through capital leases | $ | - | $ | 308,613 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
| 5 |
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
| Series
B Preferred Stock | Series
C Preferred Stock | Series
D Preferred Stock | Common Stock | Stock Subscriptions | Additional Paid-in | Retained | Accumulated Other Comprehensive | Total Stockholders’ | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | Receivable | Capital | Earnings | Income | Equity | Interest | Equity | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2018 | 5,000,000 | $ | 500 | 500,000 | $ | 50 | 552,500 | $ | 55 | 23,255,411 | $ | 2,326 | $ | - | $ | 21,495,621 | $ | (19,226,462 | ) | $ | (263,985 | ) | $ | 2,008,105 | $ | 1,934,634 | $ | 3,942,739 | ||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | - | - | - | (2,596,659 | ) | - | (2,596,659 | ) | (54,738 | ) | (2,651,397 | ) | |||||||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | - | - | - | - | - | - | - | - | - | - | - | (179,822 | ) | (179,822 | ) | - | (179,822 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of Series D preferred stock | - | - | - | - | (38,000 | ) | (4 | ) | 95,000 | 10 | - | (6 | ) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private offerings | - | - | - | - | - | - | 200,000 | 20 | - | 105,980 | - | - | 106,000 | - | 106,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock as compensation to employees, officers and/or directors | - | - | - | - | - | - | 50,000 | 5 | - | 35,870 | - | - | 35,875 | - | 35,875 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange for consulting, professional and other services provided | - | - | - | - | - | - | 250,000 | 25 | - | 128,375 | - | - | 128,400 | - | 128,400 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of loans payable | - | - | - | - | - | - | 779,808 | 78 | - | 317,022 | - | - | 317,100 | - | 317,100 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of debentures | - | - | - | - | - | - | 669,362 | 66 | - | 387,934 | - | - | 388,000 | - | 388,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of interest payable | - | - | - | - | - | - | 10,163 | 1 | - | 2,987 | - | - | 2,988 | - | 2,988 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of interest payable | - | - | - | - | - | - | - | - | - | 12,423 | - | - | 12,423 | - | 12,423 | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock options issued under employee equity incentive plan | - | - | - | - | - | - | - | - | - | 169,922 | - | - | 169,922 | - | 169,922 | |||||||||||||||||||||||||||||||||||||||||||||
| Recognition of beneficial conversion features related to convertible debt instruments | - | - | - | - | - | - | - | - | - | 280,144 | - | - | 280,144 | - | 280,144 | |||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of equity interests in subsidiaries | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2018 | 5,000,000 | $ | 500 | 500,000 | $ | 50 | 514,500 | $ | 51 | 25,309,744 | $ | 2,531 | $ | - | $ | 22,936,272 | $ | (21,823,121 | ) | $ | (443,807 | ) | $ | 672,476 | $ | 1,879,896 | $ | 2,552,372 | ||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | - | - | - | (3,731,725 | ) | - | (3,731,725 | ) | (106,645 | ) | (3,838,370 | ) | |||||||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | - | - | - | - | - | - | - | - | - | - | - | 64,261 | 64,261 | - | 64,261 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of Series D preferred stock | - | - | - | - | (165,000 | ) | (16 | ) | 412,500 | 41 | - | (24 | ) | - | - | 1 | - | 1 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private offerings | - | - | - | - | - | - | 200,000 | 20 | - | 79,980 | - | - | 80,000 | - | 80,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with stock subscriptions received under private offerings | - | - | - | - | - | - | 1,015,000 | 101 | (406,000 | ) | 405,899 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock as compensation to employees, officers and/or directors | - | - | - | - | - | - | 37,500 | 4 | - | 19,496 | - | - | 19,500 | - | 19,500 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange for consulting, professional and other services provided | - | - | - | - | - | - | 100,000 | 10 | - | 52,990 | - | - | 53,000 | - | 53,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock and common stock purchase warrants in satisfaction of debt issuances costs | - | - | - | - | - | - | 20,000 | 2 | - | 46,675 | - | - | 46,677 | - | 46,677 | |||||||||||||||||||||||||||||||||||||||||||||
| Recognition of beneficial conversion features related to convertible debt instruments | - | - | - | - | - | - | - | - | - | 566,841 | - | - | 566,841 | - | 566,841 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation related to employee stock options | - | - | - | - | - | - | - | - | - | 170,553 | - | - | 170,553 | - | 170,553 | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2019 | 5,000,000 | $ | 500 | 500,000 | $ | 50 | 349,500 | $ | 35 | 27,094,744 | $ | 2,709 | $ | (406,000 | ) | $ | 24,278,682 | $ | (25,554,846 | ) | $ | (379,546 | ) | $ | (2,058,416 | ) | $ | 1,773,251 | $ | (285,165 | ) | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 6 |
EVIO, INC.
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
| Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Additional Paid-in | Additional Paid-in | Retained | Accumulated Other Comprehensive | Total Stockholders’ | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Capital | Earnings | Income | Equity | Interest | Equity | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2019 | 5,000,000 | $ | 500 | 500,000 | $ | 50 | 339,500 | $ | 34 | 29,314,419 | $ | 2,931 | $ | - | $ | 26,498,076 | $ | (37,775,183 | ) | $ | (353,090 | ) | $ | (11,626,682 | ) | $ | (185,678 | ) | $ | (11,812,360 | ) | |||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | - | - | - | (2,314,808 | ) | - | (2,314,808 | ) | 10,479 | (2,304,329 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | - | - | - | - | - | - | - | - | - | - | - | (1,230 | ) | (1,230 | ) | - | (1,230 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock as compensation to employees, officers and/or directors | - | - | - | - | - | - | 422,500 | 42 | - | 234,335 | - | - | 234,377 | - | 234,377 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange for consulting, professional and other services provided | - | - | - | - | - | - | 359,212 | 36 | - | 16,694 | - | - | 16,730 | - | 16,730 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in satisfaction of debt issuances costs | - | - | - | - | - | - | 2,285,449 | 229 | - | 62,271 | - | - | 62,500 | - | 62,500 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the settlement of accounts payable | - | - | - | - | - | - | 26,666 | 3 | - | 5,997 | - | - | 6,000 | - | 6,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of debentures | - | - | - | - | - | - | 18,317,481 | 1,832 | - | 1,239,950 | - | - | 1,241,782 | - | 1,241,782 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of interest payable | - | - | - | - | - | - | 3,466,353 | 346 | - | 171,876 | - | - | 172,222 | - | 172,222 | |||||||||||||||||||||||||||||||||||||||||||||
| Recognition of beneficial conversion features related to convertible debt instruments | - | - | - | - | - | - | - | - | - | 175,320 | - | - | 175,320 | - | 175,320 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation related to employee stock options | - | - | - | - | - | - | - | - | - | 126,581 | - | - | 126,581 | - | 126,581 | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | 5,000,000 | $ | 500 | 500,000 | $ | 50 | 339,500 | $ | 34 | 54,192,080 | $ | 5,419 | $ | - | $ | 28,531,100 | $ | (40,089,991 | ) | $ | (354,320 | ) | $ | (11,907,208 | ) | $ | (175,199 | ) | $ | (12,082,407 | ) | |||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | - | - | - | (2,952,543 | ) | - | (2,952,543 | ) | (30,143 | ) | (2,982,686 | ) | |||||||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | - | - | - | - | - | - | - | - | - | - | - | 6,153 | 6,153 | - | 6,153 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock as compensation to employees, officers and/or directors | - | - | - | - | - | - | 7,031,038 | 703 | - | 508,032 | - | - | 508,735 | - | 508,735 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange for consulting, professional and other services provided | - | - | - | - | - | - | 4,916,458 | 492 | - | 311,608 | - | - | 312,100 | - | 312,100 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the settlement of a legal matter | - | - | - | - | - | - | 144,928 | 14 | - | 9,986 | - | - | 10,000 | - | 10,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of debentures | - | - | - | - | - | - | 11,288,957 | 1,129 | - | 276,474 | - | - | 277,603 | - | 277,603 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of interest payable | - | - | - | - | - | - | 1,144,012 | 115 | - | 37,120 | - | - | 37,235 | - | 37,235 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation related to employee stock options | - | - | - | - | - | - | - | - | - | 20,817 | - | - | 20,817 | - | 20,817 | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2020 | 5,000,000 | $ | 500 | 500,000 | $ | 50 | 339,500 | $ | 34 | 78,717,473 | $ | 7,872 | $ | - | $ | 29,695,137 | $ | (43,042,534 | ) | $ | (348,167 | ) | $ | (13,687,108 | ) | $ | (205,342 | ) | $ | (13,892,450 | ) | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 7 |
EVIO, INC.
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
| Series
B Preferred Stock | Series
C Preferred Stock | Series
D Preferred Stock | Common Stock | Additional Paid-in | Retained | Accumulated Other Comprehensive | Total Stockholders’ | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Earnings | Income | Equity | Interest | Equity | |||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2018 | 5,000,000 | $ | 500 | 500,000 | $ | 50 | 552,500 | $ | 55 | 23,255,411 | $ | 2,326 | $ | 21,495,621 | $ | (19,226,462 | ) | $ | (263,985 | ) | $ | 2,008,105 | $ | 1,934,634 | $ | 3,942,739 | ||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | - | - | (18,548,721 | ) | - | (18,548,721 | ) | (2,120,312 | ) | (20,669,033 | ) | ||||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | - | - | - | - | - | - | - | - | - | - | (89,105 | ) | (89,105 | ) | - | (89,105 | ) | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of Series D preferred stock | - | - | - | - | (213,000 | ) | (21 | ) | 532,500 | 53 | (32 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private offerings | - | - | - | - | - | - | 1,415,000 | 141 | 591,859 | - | - | 592,000 | - | 592,000 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with stock subscriptions received under private offerings | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the exercise of common stock purchase warrants | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock as compensation to employees, officers and/or directors | - | - | - | - | - | - | 287,500 | 29 | 397,691 | - | - | 397,720 | - | 397,720 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange for consulting, professional and other services provided | - | - | - | - | - | - | 1,038,017 | 104 | 331,047 | - | - | 331,151 | - | 331,151 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in satisfaction of debt issuances costs | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the settlement of accounts payable | - | - | - | - | - | - | 31,579 | 3 | 14,997 | - | - | 15,000 | - | 15,000 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the settlement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| of notes payable | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of loans payable | - | - | - | - | - | - | 2,054,887 | 205 | 686,995 | - | - | 687,200 | - | 687,200 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of debentures | - | - | - | - | - | - | 669,362 | 67 | 387,933 | - | - | 388,000 | - | 388,000 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of related party notes payable | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of interest payable | - | - | - | - | - | - | 10,163 | 1 | 25,109 | - | - | 25,110 | - | 25,110 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock purchase warrants in satisfaction of debt issuances costs | - | - | - | - | - | - | 20,000 | 2 | 11,758 | - | - | 11,760 | - | 11,760 | ||||||||||||||||||||||||||||||||||||||||||
| Reclassification of derivative liability to additional paid-in capital | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Recognition of beneficial conversion features related to convertible debt instruments | - | - | - | - | - | - | - | - | 1,844,834 | - | - | 1,844,834 | - | 1,844,834 | ||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation related to employee stock options | - | - | - | - | - | - | - | - | 710,264 | - | - | 710,264 | - | 710,264 | ||||||||||||||||||||||||||||||||||||||||||
| Acquisition of equity interests in subsidiaries | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2019 | 5,000,000 | $ | 500 | 500,000 | $ | 50 | 339,500 | $ | 34 | 29,314,419 | $ | 2,931 | $ | 26,498,076 | $ | (37,775,183 | ) | $ | (353,090 | ) | $ | (11,626,682 | ) | $ | (185,678 | ) | $ | (11,812,360 | ) | |||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | - | - | (5,267,351 | ) | - | (5,267,351 | ) | (19,664 | ) | (5,287,015 | ) | ||||||||||||||||||||||||||||||||||||||
| Change in foreign currency translation | - | - | - | - | - | - | - | - | - | - | 4,923 | 4,923 | - | 4,923 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of Series D preferred stock | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private offerings | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with stock subscriptions received under private offerings | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the exercise of common stock purchase warrants | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock as compensation to employees, officers and/or directors | - | - | - | - | - | - | 7,453,538 | 745 | 742,367 | - | - | 743,112 | - | 743,112 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in exchange for consulting, professional and other services provided | - | - | - | - | - | - | 5,275,670 | 528 | 328,302 | - | - | 328,830 | - | 328,830 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in satisfaction of debt default penalties | - | - | - | - | - | - | 2,285,449 | 229 | 62,271 | - | - | 62,500 | - | 62,500 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the settlement of accounts payable | - | - | - | - | - | - | 26,666 | 3 | 5,997 | - | - | 6,000 | - | 6,000 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the settlement of a legal matter | - | - | - | - | - | - | 144,928 | 14 | 9,986 | - | - | 10,000 | - | 10,000 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the settlement of notes payable | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of loans payable | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of debentures | - | - | - | - | - | - | 29,606,438 | 2,961 | 1,516,424 | - | - | 1,519,385 | - | 1,519,385 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of related party notes payable | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with the conversion of interest payable | - | - | - | - | - | - | 4,610,365 | 461 | 208,996 | - | - | 209,457 | - | 209,457 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock purchase warrants in satisfaction of debt issuances costs | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Reclassification of derivative liability to additional paid-in capital | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Recognition of beneficial conversion features related to convertible debt instruments | - | - | - | - | - | - | - | - | 175,320 | - | - | 175,320 | - | 175,320 | ||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation related to employee stock options | - | - | - | - | - | - | - | - | 147,398 | - | - | 147,398 | - | 147,398 | ||||||||||||||||||||||||||||||||||||||||||
| Acquisition of equity interests in subsidiaries | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2020 | 5,000,000 | $ | 500 | 500,000 | $ | 50 | 339,500 | $ | 34 | 78,717,473 | $ | 7,872 | $ | 29,695,137 | $ | (43,042,534 | ) | $ | (348,167 | ) | $ | (13,687,108 | ) | $ | (205,342 | ) | $ | (13,892,450 | ) | |||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 8 |
Notes To Unaudited Consolidated Financial Statements
For The Three Month Periods Ended March 31, 2020, and 2019
NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
EVIO, Inc., a Colorado corporation and its subsidiaries provide analytical testing and advisory services to the emerging legalized cannabis industry. EVIO, Inc. was originally incorporated in the State of New York, December 12, 1977, under the name 3171 Holding Corporation. On February 22, 1979, the name was changed to Electronomic Industries Corp. and on February 23, 1983, the name was changed to Quantech Electronics Corp. The Company was reincorporated in the State of Colorado on December 15, 2003. On August 29, 2014, the Company completed a reverse merger with Signal Bay Research, Inc., a Nevada Corporation, and assumed its operations. In September 2014, the Company changed its name from Quantech Electronics Corp. to Signal Bay, Inc. then to EVIO, INC. in August 2018. The Company has selected September 30 as its fiscal year-end. The Company is domiciled in the State of Colorado, and its corporate headquarters are located in Henderson, Nevada.
As a part of and prior to the consummation of the reverse merger, William Waldrop and Lori Glauser, principals of Signal Bay Research, Inc., purchased 80% of the issued and outstanding common stock from WB Partners. The merger between the Company and Signal Bay Research was finalized and closed contemporaneously with the share purchase. As part of this share purchase, Mr. Waldrop and Ms. Glauser became the officers and directors of the Company. Immediately after the reverse, WB Partners owned less than 5% of the common stock. The company filed a Form 10-12G on November 25, 2014, and was determined to be a shell company by the SEC as per the Form 10-12G/A which went effective on January 24, 2015. On January 29, 2015, the company filed an 8-K stating it entered into a material agreement and was no longer a shell company.
After the reverse merger, Signal Bay Research, Inc. continues to operate as a wholly-owned subsidiary providing compliance, research, and advisory services for Signal Bay, Inc.
Signal Bay Services was formed on January 25, 2015, as the management services division of EVIO.
On September 17, 2015, EVIO entered into a share exchange agreement with CR Labs, Inc., an Oregon Corporation, pursuant to which the Company acquired 80% of the outstanding common stock of CR Labs, Inc.
EVIO Inc. was formed on April 4, 2016, to become the holding company for all laboratory operations.
EVIO Labs Eugene was formed on May 23, 2016, as a wholly-owned subsidiary of EVIO Inc. Subsequently, on May 24, 2016, EVIO Labs Eugene acquired all of the assets of Oregon Analytical Services, LLC, inclusive of client lists, equipment, trade names, and personnel.
On June 1, 2016, EVIO Inc. entered into a share purchase agreement to purchase 80% of the outstanding common stock of Smith Scientific Industries, Inc. d/b/a Kenevir Research in Medford, OR.
On October 19, 2016, the Company entered into a Membership Interest Purchase Agreement to purchase 100% of the ownership of GreenHaus Analytical Labs, LLC.
On October 26, 2016, the Company entered into an Asset Purchase Agreement with Green Style Consulting, LLC which was closed on November 1, 2016.
The Company entered into a Membership Interest Purchase Agreement with Viridis Analytics MA, LLC which was closed on August 1, 2018.
| 9 |
On December 29, 2018, the Company entered into a Membership Purchase Agreement to purchase 60% of the outstanding shares of C3 Labs, LLC which closed On January 1, 2019.
On June 27, 2018, Greenhaus Analytical Labs LLC, a wholly-owned subsidiary of EVIO, Inc. entered into a Purchase and Sale Agreement with Michael G. Myers for the property located at 14775 SW 74th Ave., Tigard, OR 97224.
On June 27, 2018, Greenhaus Analytical Labs, LLC, a wholly-owned subsidiary of EVIO, Inc., entered into an Asset Purchase Agreement with MRX Labs LLC which closed on July 5, 2019.
On April 29, 2018, the Company entered into an Asset Purchase Agreement with Leaf Detective, LLC which was closed on the same date.
On May 2, 2018, the Company entered into a Stock Purchase Agreement with Keystone, Labs, Inc. to purchase 50% of the outstanding shares of Keystone Labs which was closed on the same date.
Management’s Representation of Interim Financial Statements
The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited consolidated financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.
Basis of Presentation
The consolidated financial statements of the Company have been prepared in accordance with GAAP and are expressed in United States dollars. For the three months ended March 31, 2020, and 2019, and the year ended September 30, 2019, the consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.
The subsidiaries of EVIO, Inc. are as follows:
| Trade Name (dba) | Company Name | State of Incorporation | Ownership % | Acquisition Month | ||||||||
| EVIO Labs Medford | Smith Scientific Industries, LLC | Oregon | 80 | % | June 2016 | |||||||
| EVIO Labs Portland | Greenhaus Analytical Labs | Oregon | 100 | % | October 2016 | |||||||
| EVIO Labs MA | Viridis Analytics | Massachusetts | 100 | % | August 2017 | |||||||
| EVIO Labs Berkeley | C3 Labs, LLC | California | 90 | % | January 2018 | |||||||
| Keystone Labs | Keystone Labs, Inc. | Ontario, Canada | 50 | % | May 2018 | |||||||
| 10 |
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
| ● | Step 1: Identify the contract with the customer | |
| ● | Step 2: Identify the performance obligations in the contract | |
| ● | Step 3: Determine the transaction price | |
| ● | Step 4: Allocate the transaction price to the performance obligations in the contract | |
| ● | Step 5: Recognize revenue when the company satisfies a performance obligation |
The Company generates revenue from consulting services, licensing agreements, and testing of cannabis and hemp products for medicinal and adult-use consumption.
The Company accounts for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.
The Company evaluates the services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations. The Company’s services included in its contracts are distinct from one another.
The Company determines the transaction price for each contract based on the consideration it expects to receive for the distinct services being provided under the contract.
The Company recognizes revenue as performance obligations are satisfied and the customer obtains control of the services provided. In determining when performance obligations are satisfied, the Company considers factors such as contract terms, payment terms, and whether there is an alternative future use of the service.
The Company recognizes revenue from testing services upon delivery of its testing results to the client. Customer orders for testing services are generally completed within two weeks of receiving the order.
Consulting engagements may vary in length and scope, but will generally include the review and/or preparation of regulatory filings, business plans, and financial models, operating plans, and technology support to customers within the same industry. Revenue from consulting services is recognized upon completion of deliverables as outlined in the consulting agreement.
The Company recognizes revenue from the right of use license agreements upon transfer of control of the functional intellectual property. In certain licensing agreements, the Company may receive royalty revenues based upon performance metrics which are recognized as earned over time.
Stock-Based Compensation
In accordance with ASC No. 718, Compensation-Stock Compensation (“ASC 718”), the Company measures the cost of stock-based compensation arrangements based on the grant date fair value and recognizes the cost in the financial statements over the period during which employees are required to provide services. Stock-based compensation arrangements may include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee stock purchase plans.
The Company utilizes the Black Scholes option pricing model, which was developed for use in estimating the fair value of options. Option pricing models require the input of highly complex and subjective variables including the expected life of options granted and the expected volatility of the Company’s stock price over a period equal to or greater than the expected life of the options.
| 11 |
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at their original invoice amounts. We regularly review collectability and establish an allowance for uncollectible amounts as necessary based on our experience with historical collectability. Management recognized an allowance for uncollectible amounts, of $171,443 and $215,593 for the periods ended March 31, 2020, and September 30, 2019, respectively.
Foreign Currency Translation
The functional currency of the Company’s subsidiary in Canada is the Canadian Dollar. The subsidiary’s assets and liabilities have been translated to U.S. Dollars using the exchange rates in effect at the balance sheet dates. Statements of operations amounts have been translated using the average exchange rate for each period. Resulting gains or losses from translating foreign currency financial statements are recorded as other comprehensive income (loss).
Fair Value of Financial Instruments
The Company has adopted the guidance under ASC Topic 820 for financial instruments measured on fair value on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
Net Income (Loss) Per Share
Basic loss per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income, or loss, by the weighted average number of shares of common stock outstanding for the period. There were 49,561,707 and 26,160,911 potentially dilutive common shares outstanding as of March 31, 2020 and 2019, respectively. Because of the net losses incurred during the three months ended March 31, 2020, and 2019, the impacts of dilutive instruments would have been anti-dilutive for the period presented and have been excluded from the diluted loss per share calculations.
Recently Issued Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment”. The amendments in this update simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. This update is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 31, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing after January 1, 2017. The Company notes that this guidance applies to its reporting requirements and will implement the new guidance accordingly in performing goodwill impairment testing; however, the Company does not believe this update will have a material impact on the consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which revises the definition of a business. This update is effective for annual periods beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted. The Company notes that this guidance will impact its acquisitions beginning January 1, 2018. Management believes recently issued accounting pronouncements will have no impact on the financial statements of the Company.
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718) which simplifies certain aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Certain areas of the simplification apply only to nonpublic entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments of the ASU are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard on our consolidated financial statements.
| 12 |
In August 2018, the SEC issued Final Rule Release No. 33-10532, Disclosure Update, and Simplification. Under the final rule Company’s must now analyze changes in stockholders’ equity in the form of a reconciliation, for the current and comparative year-to-date, with subtotals for each interim period.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
Note 2 – Going concern
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have an established source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
In the coming year, the Company’s foreseeable cash requirements will relate to the continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.
Historically, it has mostly relied upon convertible debentures, convertible promissory notes, internally generated funds such as shareholder loans and advances to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future public or private offerings of the Company’s stock or loans from private investors, although there can be no assurance that it will be able to obtain such financing. Additionally, due to the onset of COVID-19 obtaining financing may be more difficult to obtain currently compared to historic levels. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.
Note 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has adopted the guidance under ASC Topic 820 for financial instruments measured on a fair value on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
ASC Topic 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
| ● | Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. |
| ● | Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
| 13 |
The Company’s financial instruments consist principally cash, accounts payable, and accrued liabilities. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of the Company’s debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company.
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. Also, the fair value of freestanding derivative instruments such as warrant and option derivatives are valued using the Black-Scholes simulation model.
The Company’s derivative liabilities were adjusted to fair market value at the end of each reporting period, using Level 3 inputs.
The following table sets forth by level with the fair value hierarchy the Company’s financial assets and liabilities measured at fair value on March 31, 2020:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities | ||||||||||||||||
| Derivative financial instruments | $ | - | $ | - | $ | 2,319,938 | $ | 2,319,938 | ||||||||
The following table sets forth by level with the fair value hierarchy the Company’s financial assets and liabilities measured at fair value on September 30, 2019:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities | ||||||||||||||||
| Derivative financial instruments | $ | - | $ | - | $ | 2,545,735 | $ | 2,545,735 | ||||||||
Note 4 –leases
The Company determines if an arrangement is a lease at inception and has lease agreements for warehouses, office facilities, and equipment. These commitments have remaining non-cancelable lease terms, with lease expirations that range from 2020 to 2024.
As a result of the adoption of ASC 842, certain real estate and equipment operating leases have been recorded on the balance sheet with a lease liability and right-of-use asset (“ROU”). Application of this standard resulted in the recognition of ROU assets of $2,069,538, net of accumulated amortization, and a corresponding lease liability of $2,117,338. Accounting for finance leases is substantially unchanged.
Operating leases are included in operating lease ROU assets, operating lease obligations, current, and operating lease obligations, long term on the condensed consolidated balance sheets. Finance leases are included in property and equipment, finance lease obligations, short term, and finance lease obligations, long term, on the condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. ROU assets and liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term. The present value of lease payments is calculated using the incremental borrowing rate at lease commencement, which takes into consideration recent debt issuances as well as other applicable market data available.
| 14 |
Amortization of lease assets is included in general and administrative expenses. The future minimum lease payments of lease liabilities as of March 31, 2020, are as follows:
| For the years ended September 30, | Operating Leases | Financing Leases | ||||||
| 2020 | 972,244 | 430,591 | ||||||
| 2021 | 697,436 | 514,152 | ||||||
| 2022 | 549,390 | 183,020 | ||||||
| 2023 | 347,745 | 206,674 | ||||||
| 2024 and thereafter | 27,911 | 5,022 | ||||||
| Total lease payments | 2,594,726 | 1,339,450 | ||||||
| Less: Payments Made | (477,388 | ) | (222,236 | ) | ||||
| Total Lease Liabilities | $ | 2,117,338 | 1,117,214 | |||||
Note 5 – INTANGIBLE ASSETS
The Company’s intangible assets consist of customer lists, testing licenses, favorable leases, and websites. The components of intangible assets as of March 31, 2020, and September 30, 2019 consist of:
March 31, 2020 | September 30, 2019 | |||||||
| Customer list | $ | - | $ | 854,014 | ||||
| License | - | 503,000 | ||||||
| Favorable lease | - | 3,100 | ||||||
| Domains & Websites | - | 49,516 | ||||||
| Non-compete agreements | - | 182,388 | ||||||
| Assembled Workforce | - | 50,750 | ||||||
| Intellectual Property | - | 342,610 | ||||||
| Total | - | 1,977,661 | ||||||
| Accumulated amortization | - | (1,977,661 | ) | |||||
| Net value | $ | - | $ | - | ||||
The Company had fully amortized all intangible assets during the fiscal year ended September 30, 2019.
Note 6 – Concentration of Credit Risk
Instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits, notes receivable and accounts receivable. As of March 31, 2020, the Company did not hold cash at any financial institution in excess of the amount insured by the Federal Deposit Insurance Corporation (“FDIC”) of up to $250,000.
| 15 |
As of March 31, 2020, the Company had total accounts receivable net of allowances of $153,383. Five clients comprised a total of 29% of this balance as follows:
| Balance | Percent of Total | |||||||
| Customer 1 | $ | 26,181 | 8 | % | ||||
| Customer 2 | 20,336 | 6 | % | |||||
| Customer 3 | 18,065 | 6 | % | |||||
| Customer 4 | 14,651 | 5 | % | |||||
| Customer 5 | 14,330 | 4 | % | |||||
| All others | 231,263 | 71 | % | |||||
| Total | 324,826 | 100 | % | |||||
| Allowance for doubtful accounts | (171,443 | ) | ||||||
| Net accounts receivable | $ | 153,383 | ||||||
As of September 30, 2019, the Company had total accounts receivable, net of allowances, of $133,022. Five separate clients comprised a total of 41% of this balance as follows:
| Balance | Percent of Total | |||||||
| Customer 1 | $ | 48,606 | 14 | % | ||||
| Customer 2 | 33,572 | 10 | % | |||||
| Customer 3 | 20,336 | 6 | % | |||||
| Customer 4 | 20,321 | 6 | % | |||||
| Customer 5 | 20,208 | 6 | % | |||||
| All others | 246,456 | 59 | % | |||||
| Total | 348,955 | 100 | % | |||||
| Allowance for doubtful accounts | (215,933 | ) | ||||||
| Net accounts receivable | $ | 133,022 | ||||||
Note 7 – Property and Equipment
Property and equipment are carried at cost. Expenditures for maintenance and repairs are expensed in the period incurred. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.
Depreciation is computed for financial statement purposes on a straight-line basis over estimated useful lives of the related assets and the modified accelerated cost recovery system for federal income tax purposes. The estimated useful lives of depreciable assets are:
| Estimated | ||
| Useful Lives | ||
| Building | 39 years | |
| Laboratory and Computer Equipment | 5 years | |
| Furniture and Fixtures | 7 years | |
| Software | 3 years | |
| Domains | 15 years |
| 16 |
The Company’s property and equipment consisted of the following as of March 31, 2020, and September 30, 2019:
| March 31, 2020 | September 30, 2019 | |||||||
| Assets Not-In-Service | $ | $ | - | |||||
| Capital Assets | 1,850,093 | 1,800,347 | ||||||
| Land | 212,550 | 212,550 | ||||||
| Buildings & Real Estate | 941,857 | 941,857 | ||||||
| Furniture and Equipment | 157,614 | 152,933 | ||||||
| Laboratory Equipment | 2,054,901 | 2,188,828 | ||||||
| Software | 77,865 | 78,996 | ||||||
| Computers | 27,597 | |||||||
| Leasehold Improvements | 696,756 | 697,333 | ||||||
| Vehicles | 129,790 | 83,915 | ||||||
| Total | 6,149,825 | 6,188,777 | ||||||
| Accumulated depreciation | (1,553,052 | ) | (1,511,973 | ) | ||||
| Net value | $ | 4,596,772 | $ | 4,676,804 | ||||
Note 8 – Related Party Transactions
During the periods ended March 31, 2020 and September 30, 2019 the Company received loans from its Chief Operating Officer totaling $17,014 and $194,820, respectively, and made repayments totaling $0 and $1,040, respectively. There was $158,676 and $143,780 due as of March 31, 2020, and September 30, 2019, respectively, and are included in the accompanying consolidated balance sheets as a current portion of notes payable to related parties. The loans carry a 0% interest rate and are due on demand.
During the periods ended March 31, 2020 and September 30, 2019 the Company received loans from its Chief Executive Officer totaling $14,000 and $75,000, respectively, and made repayments totaling $0 and $19,200, respectively. There was $69,800 and $55,800 due as of March 31, 2020, and September 30 2019, respectively, and are included in the accompanying consolidated balance sheets as a current portion of notes payable to related parties. The loans carry a 0% interest rate and are due on demand.
During the periods ended March 31, 2020, and September 30, 2019, the Company made payments to Sara Lausmann, associated with the asset purchase of Oregon Analytical Services, LLC, totaling $2,000 and $0, respectively. There was $566,289 and $568,299 of principal due as of March 31, 2020 and September 30, 2019, respectively. The note carries interest at a rate of 5% per annum and had accrued interest totaling $122,095 and $107,899 due as of March 31, 2020, and September 30, 2019, respectively.
During the periods ended March 31, 2020, and September 30, 2019, the Company made payments to Anthony Smith, our Chief Science Officer, associated with the purchase of 80% of Smith Scientific Industries, totaling $44,059 and $55,090, respectively. There was $136,851 and $180,910 of principal due as of March 31, 2020 and September 31, 2019, respectively. The note carries interest at a rate of 5% per annum and had accrued interest totaling $41,828 and $41,600 due as of March 31, 2020, and September 30, 2019, respectively.
During the periods ended March 31, 2020, and September 30, 2019, the Company made repayments to Henry Grimmett, prior Company Director (retired April 2018), on an outstanding loan from member assumed by the Company, totaling a note payable of Greenhaus Analytical Services, LLC, totaling $0 and $3,859, respectively. There was $113,554 and $113,554 of principal due as of March 31, 2020 and September 30, 2019, respectively. The note bears interest at 0% per annum and requires repayments of $25,000 quarterly.
During the periods ended March 31, 2020, and September 30, 2019, the Company made no payments to Henry Grimmett, prior Company Director (retired April 2018), associated with the acquisition of Greenhaus Analytical Services, LLC. The Company entered into a $340,000 note payable as part of its acquisition of Greenhaus Analytical Services, LLC. The note carries interest at a rate of 6% per annum and matures on October 16, 2020. During the quarter ended March 31, 2020, a third party purchased the remaining balance of the $170,000 note. During the year ended September 30, 2019, a third party purchased $170,000 of the note from Henry Grimmett, refer to Note 10, Convertible Notes; Noteholder 14. There was $0 and $170,000 of principal due as of March 31, 2020 and September 30, 2019, respectively. Unamortized debt discount of $0 and $25,563 as of March 31, 2020 and September 30, 2019, respectively and $0 and $59,412 of accrued interest due as of March 31, 2020 and September 30, 2019, respectively.
| 17 |
During the periods ended March 31, 2020 and September 30, 2019, the Company received loans from a related party associate with Keystone Labs totaling $30,796 and $191,515, respectively, and made repayments totaling $19,248 and $9,034, respectively. There was $372,538 and $354,050 due as of March 31, 2020 and September 30, 2019, respectively. Amounts have been adjusted for USD. The advances are non-interest bearing and due on demand and is included in the accompanying consolidated balance sheets as a current portion of notes payable to related parties.
Note 9 – STOCKHOLDERS’ EQUITY
Series A Convertible Preferred Stock
The Company has -0- shares of Series A Convertible Stock issued and outstanding as of March 31, 2020, and September 30, 2019.
Series B Convertible Preferred Stock
The Company designated 5,000,000 shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”) with a par value of $0.0001 per share. The Company has 5,000,000 shares of Series B Convertible Stock issued and outstanding as of March 31, 2020, and September 30, 2019. These shares converted to common stock at a rate of 1 common share per each share of Series B Convertible Preferred Stock.
Series C Convertible Preferred Stock
The Company designated 500,000 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”) with a par value of $0.0001 per share. There were 500,000 shares of Series C Convertible Stock issued and outstanding as of March 31, 2020, and September 30, 2019. These shares converted to common stock at a rate of 5 common shares per each share of Series C Convertible Preferred Stock.
Series D Convertible Preferred Stock
The Company designated 1,000,000 shares of Series D Convertible Preferred Stock (“Series D Preferred Stock”) with a par value of $0.0001 per share. These shares converted to common stock at a rate of 2.5 common shares per each share of Series D Convertible Preferred Stock.
During the Year Ended September 30, 2019, the Company received conversion notices from Series D Preferred Stockholders resulting in a total of 532,500 shares of common stock being issued for the conversion of 213,000 shares of Series D Preferred Stock.
There were 349,500 shares of Series D Convertible Stock issued and outstanding as of December 30, 2019, and September 30, 2019, respectively.
Common Stock
During the three months ended March 31, 2020, the Company issued the following common shares:
Number of Shares issued | Description | $ Value | |||||
| 7,353,538 | Issuance of shares as compensation to employees, officers/directors | 525,778 | |||||
| 3,750,000 | Issuance of shares in exchange for consulting, professional and services | 262,500 | |||||
| 501,972 | Shares issued in satisfaction of debt issuance costs | 15,500 | |||||
| 144,928 | Shares issued in settlement of litigation | 10,000 | |||||
| 7,209,271 | Issuance of shares in connection with the conversion of debentures | 207,603 | |||||
| 1,144,012 | Issuance of shares in connection with the conversion of interest payable | 37,121 | |||||
| Total 20,103,721 | $ | 1,056,106 | |||||
| 18 |
During the year ended September 30, 2019, the Company issued 1,038,017 common shares valued at $336,891 for services; 1,415,000 common shares for cash proceeds of $586,000; 287,500 common shares valued at $397,980 as compensation to employees; 31,579 common shares for the settlement of $15,000 of accounts payable; 2,054,887 common shares for the settlement of $687,200 of convertible notes payable; 10,163 for the conversion of $25,110 of convertible accrued interest; 20,000 common shares for issuance of a stock purchase agreement valued at $11,760; 669,362 common shares for the settlement of $388,000 debenture conversions, and 532,500 common shares for the conversion of Preferred Series D stock. All conversions of outstanding principal and accrued interest on convertible notes payable were done so at contractual terms.
There were 78,642,473 and 29,314,419 shares of common stock issued and outstanding at March 31, 2020, and September 30, 2019
Note 10 – LOANS PAYABLE
The Company had the following loans payable outstanding as of March 31, 2020, and September 30, 2019:
| March 31, 2020 | September 30, 2019 | |||||||
| On March 16, 2018, the Company executed notes payable for the purchase of three vehicles. The notes carry interest at 6.637% annually and mature on March 31, 2023. | 43,575 | 47,551 | ||||||
| On June 28, 2018, the Company executed a note payable for $650,000 for the purchase of the building at 14775 SW 74th Ave, Tigard, OR. The note carries interest at 8% annually and is due on June 28, 2021. | 609,907 | 622,523 | ||||||
| On July 5, 2018, the Company executed a note payable for $750,000 for the asset purchase of MRX Labs. The note carries interest at 8% annually and is due on January 5, 2019. (This note is in default as of 7/5/2019, which resulted in a 5% penalty on outstanding amount.) | 750,000 | 750,000 | ||||||
| On October 20, 2019, the Company executed notes payable for the purchase of four vehicles. The notes carry interest at 5.990% annually and mature on December 31, 2023. | 93,028 | - | ||||||
| Total loans payable | 1,496,510 | 1,420,079 | ||||||
| Less: current portion of loans payable | 785,960 | 762,476 | ||||||
| Long-term portion of loans payable | $ | 708,550 | $ | 657,603 | ||||
As of March 31, 2020 and September 30, 2019, the Company accrued interest of $104,384 and $74,301 respectively
Note 11 – Convertible NOTES PAYABLE
The Company has entered into convertible notes payable that convert to common stock of the Company at variable conversion prices. As further discussed in Note 13 – Derivative Liability, the Company analyzed the conversion features of the agreements for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
| 19 |
The following table summarizes all convertible notes outstanding as of March 31, 2020:
| Holder | Issue Date | Due Date | Principal | Unamortized Debt Discount | Carrying Value | Accrued Interest | ||||||||||||||
| 31Noteholder #1 | 04/24/18 | 04/24/19 | 500,000 | - | 500,000 | - | ||||||||||||||
| Noteholder #2 | 07/01/19 | 09/30/19 | 675,930 | - | 675,930 | 47,672 | ||||||||||||||
| Noteholder #3 | 08/01/18 | 01/01/19 | 396,000 | - | 396,000 | 92,355 | ||||||||||||||
| Noteholder #3 | 10/02/18 | 01/01/19 | 264,000 | - | 264,000 | 49,458 | ||||||||||||||
| Noteholder #5 | 09/17/18 | 09/17/19 | - | - | - | 10,260 | ||||||||||||||
| Noteholder #6 | 11/15/18 | 11/15/19 | - | - | - | 15,564 | ||||||||||||||
| Noteholder #6 | 02/04/19 | 02/04/20 | 230,000 | - | 230,000 | 23,048 | ||||||||||||||
| Noteholder #6 | 08/08/19 | 08/08/20 | 33,092 | (4,274 | ) | 28,818 | 1,712 | |||||||||||||
| Noteholder #6 | 11/04/19 | 11/04/20 | 33,516 | (11,301 | ) | 22,215 | 1,087 | |||||||||||||
| Noteholder #6 | 12/23/19 | 12/23/20 | 137,375 | (100,216 | ) | 37,159 | 2,981 | |||||||||||||
| Noteholder #6 | 01/21/20 | 02/21/21 | 52,500 | 52,500 | 805 | |||||||||||||||
| Noteholder #6 | 02/04/20 | 02/04/20 | 265,637 | - | 265,637 | 4,076 | ||||||||||||||
| Noteholder #7 | 12/27/18 | 12/27/19 | 20,000 | - | 20,000 | 3,297 | ||||||||||||||
| Noteholder #7 | 02/05/19 | 02/05/20 | 131,250 | - | 131,250 | 11,995 | ||||||||||||||
| Noteholder #7 | 02/11/19 | 02/11/20 | 131,250 | - | 131,250 | 11,708 | ||||||||||||||
| Noteholder #7 | 03/15/19 | 03/15/20 | 70,913 | - | 70,913 | 5,937 | ||||||||||||||
| Noteholder #7 | 08/08/19 | 08/08/20 | 33,092 | (4,274 | ) | 28,818 | 1,712 | |||||||||||||
| Noteholder #7 | 11/04/19 | 11/04/20 | 33,516 | (11,301 | ) | 22,215 | 1,087 | |||||||||||||
| Noteholder #7 | 01/03/20 | 01/03/21 | 137,375 | 137,375 | 2,740 | |||||||||||||||
| Noteholder #7 | 01/21/20 | 02/22/21 | 52,500 | - | 52,500 | 805 | ||||||||||||||
| Noteholder #7 | 02/04/20 | 02/04/20 | 265,637 | - | 265,637 | 4,076 | ||||||||||||||
| Noteholder #10 | 03/15/19 | 03/15/20 | 70,913 | - | 70,913 | 5,937 | ||||||||||||||
| Noteholder #11 | 08/30/19 | 05/30/20 | 110,000 | (24,088 | ) | 85,912 | 5,159 | |||||||||||||
| Noteholder #11 | 08/29/19 | 08/29/20 | 100,000 | 0 | 100,000 | - | ||||||||||||||
| $ | 3,744,496 | $ | (155,453 | ) | $ | 3,589,042 | $ | 303,472 | ||||||||||||
The following table summarizes all convertible notes outstanding as of September 30, 2019:
| Holder | Issue Date | Due Date | Principal | Unamortized
Debt Discount |
Carrying Value | Accrued Interest | ||||||||||||||
| Noteholder #1 | 04/24/18 | 04/24/19 | 500,000 | - | 500,000 | - | ||||||||||||||
| Noteholder #2 | 07/01/19 | 09/30/19 | 825,930 | - | 825,930 | 18,983 | ||||||||||||||
| Noteholder #3 | 08/01/18 | 01/01/19 | 396,000 | - | 396,000 | 76,471 | ||||||||||||||
| Noteholder #3 | 10/02/18 | 01/01/19 | 264,000 | - | 264,000 | 40,634 | ||||||||||||||
| Noteholder #4 | 09/06/18 | 09/06/19 | 145,000 | - | 145,000 | 15,575 | ||||||||||||||
| Noteholder #5 | 09/17/18 | 09/17/19 | 82,500 | - | 82,500 | 8,586 | ||||||||||||||
| Noteholder #6 | 11/15/18 | 11/15/19 | 222,600 | (28,054 | ) | 194,546 | 15,564 | |||||||||||||
| Noteholder #6 | 01/14/19 | 01/14/20 | 131,250 | (46,027 | ) | 85,223 | 7,364 | |||||||||||||
| Noteholder #6 | 02/04/19 | 02/04/20 | 265,000 | (92,205 | ) | 172,795 | 13,824 | |||||||||||||
| Noteholder #6 | 03/15/19 | 03/15/20 | 70,913 | - | 70,913 | 3,093 | ||||||||||||||
| Noteholder #6 | 08/08/19 | 08/08/20 | 33,092 | (10,291 | ) | 22,801 | 384 | |||||||||||||
| Noteholder #7 | 12/27/18 | 12/27/19 | 105,000 | (25,603 | ) | 79,397 | 18,204 | |||||||||||||
| Noteholder #7 | 02/05/19 | 02/05/20 | 131,250 | (48,185 | ) | 83,065 | 6,616 | |||||||||||||
| Noteholder #7 | 03/15/19 | 03/15/20 | 70,913 | - | 70,913 | 3,093 | ||||||||||||||
| Noteholder #7 | 08/08/19 | 08/08/20 | 33,092 | (10,291 | ) | 22,801 | 384 | |||||||||||||
| Noteholder #8 | 02/08/19 | 02/08/20 | 783,724 | (208,357 | ) | 575,367 | 89,627 | |||||||||||||
| Noteholder #9 | 03/15/19 | 03/15/20 | 70,913 | - | 70,913 | 3,093 | ||||||||||||||
| Noteholder #10 | 03/15/19 | 03/15/20 | 70,913 | - | 70,913 | 3,093 | ||||||||||||||
| Noteholder #11 | 08/29/19 | 05/29/20 | 100,000 | (150,146 | ) | (50,146 | ) | 964 | ||||||||||||
| Noteholder #11 | 08/30/19 | 05/30/20 | 110,000 | (97,555 | ) | 12,445 | 747 | |||||||||||||
| $ | 4,412,090 | $ | (716,714 | ) | $ | 3,695,376 | $ | 326,145 | ||||||||||||
| 20 |
Noteholder #1
On April 24, 2018, the Company entered into a convertible note payable totaling $500,000 in exchange for 100% of the assets of Leaf Detective LLC. The note bears no interest, matures on April 24, 2019, and automatically converted to common stock at $1.25 per share on the maturity date. In the event the average lowest trading price of the Company’s common stock during the five days prior to maturity is less than $1.25 per share, the Company will pay the noteholder the difference between $1.25 and the average lowest trading price during the preceding five days per share converted in cash. On or about April 30, 2020, Michele Malaret and Gordon Griswold filed, filed a breach of contract in the original principal amount of $500,000, with the Superior Court of California, County of Humboldt. The Company currently recognizes the full liability on its balance sheet. There is no interest due associated with the note.
Noteholder #2
On July 2, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $220,000 of which $20,000 was an original issue discount resulting in cash proceeds to the Company of $200,000 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 8%, was due on October 1, 2018. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at a conversion price of $0.60 per share. This note was replaced on July 1, 2019.
On September 13, 2018, the Company entered into an exchange agreement with an unrelated party for the principal amount $585,000, of which the loan payable to Palliatech, dated August 1, 2017, outstanding and principal of $549,652 would be assumed by the new note holder, with the difference of $35,348 to be treated as an original issue discount. The new convertible note payable carries an interest rate of 0% per annum is convertible into common stock of the Company at the option of the noteholder immediately at 80% of the lowest volume-weighted average price of the Company’s common stock in the preceding 20 trading days. This note was replaced on July 1, 2019.
On July 1, 2019, the two previous notes were replaced for the aggregate principal amount of $825,890. This included a default penalty of $150,000 for non-payment of the prior two notes. The note, together with accrued interest at the annual rate of 8%, is due on September 30, 2019. The note is convertible into common stock of the Company at the option of the noteholder at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $675,930 of principal and $47,672 of accrued interest on March 31, 2020.
Noteholder #3
On August 1, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $330,000 of which $30,000 was an original issue discount resulting in cash proceeds to the Company of $300,000 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 8%, was due on October 1, 2018. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time the lower of a conversion price of $0.50 per share or at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. On September 30, 2019, a fee for payment default of $66,000 was added to the principal. There was $396,000 of principal and $92,355 of accrued interest due on March 31, 2020.
| 21 |
On October 2, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $220,000 of which $20,000 was an original issue discount resulting in cash proceeds to the Company of $200,000 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 8%, is due on January 1, 2019. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at a conversion price of $0.50 per share or a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. On September 30, 2019, a fee for payment default of $44,000 was added to the principal. There was $264,000 of principal and $49,458 of accrued interest on March 31, 2020.
Noteholder #4
On September 6, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $125,000 of which $15,000 was an original issue discount resulting in cash proceeds to the Company of $110,000 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 10%, was due on September 6, 2019. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at the lower of a conversion price of $0.50 per share or at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. On July 5, 2019, a fee for payment default of $20,000 was added to the principal. There was no note principal or accrued interest due on March 31, 2020.
Noteholder #5
On September 6, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $62,500 of which $6,250 was an original issue discount resulting in cash proceeds to the Company of $56,250 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 10%, is due on September 6, 2019. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at the lower of a conversion price of $0.50 per share or at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. On July 5, 2019, a fee for payment default of $20,000 was added to the principal. There was $0 of principal and $10,260 of accrued interest due on March 31, 2020.
Noteholder #6
On November 15, 2018, the Company sold and issued a convertible promissory note to an unrelated party for the principal amount of $222,600 of which $12,600 was an original issue discount resulting in cash proceeds to the Company of $210,000 pursuant to the terms of a securities purchase agreement. The note, together with accrued interest at the annual rate of 8%, is due on November 15, 2019. The principal amount of the note and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at the lower of a conversion price of $0.50 per share or at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $0 of principal and $15,564 of accrued interest due on March 31, 2020.
On February 4, 2019, the Company entered into a convertible note payable with an unrelated party for $265,000 of which $15,000 was an original issue discount and $10,000 in third party fees resulting in net cash proceeds to the Company of $240,000. The convertible note payable carries interest at a rate of 8% per annum, is due on February 4, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $230,000 of principal and $23,048 accrued interest due on March 31, 2020.
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On August 8, 2019, the Company entered into a convertible note agreement with an unrelated party for $33,092 of which $1,576 in third party fees resulting in net cash proceeds to the Company of $31,516. The convertible note payable carries interest at a rate of 8% per annum, is due on August 8, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $33,092 of principal and $1,712 of accrued interest due on March 31, 2020.
On November 4, 2019, the Company entered into a convertible note agreement with an unrelated party for $33,516 of which $2,000 in third party fees resulting in net cash proceeds to the Company of $31,516. The convertible note payable carries interest at a rate of 8% per annum, is due on November 4, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $33,092 of principal and $1,087 of accrued interest due on March 31, 2020.
On December 23, 2019, the Company entered into a convertible note agreement with an unrelated party for $137,375 of which $16,375 in third party fees resulting in net cash proceeds to the Company of $121,000. The convertible note payable carries interest at a rate of 8% per annum, is due on December 23, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $137,375 of principal and $2,981 of accrued interest due on March 31, 2020.
On January 21, 2020, the Company entered into a convertible note agreement with an unrelated party for $52,500 of which $2,500 in third party fees resulting in net cash proceeds to the Company of $50,000. The convertible note payable carries interest at a rate of 8% per annum, is due on January 21, 2021, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $52,500 of principal and $805 of accrued interest due on March 31, 2020.
On February 4, 2020, the Company entered into an exchange agreement with an unrelated party for $265,637, of which the loan payable to Noteholder 8, dated February 8, 2019, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 8% per annum is due on February 8, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $265,637 of principal and $4,076 of accrued interest due on March 31, 2020.
Noteholder #7
On December 27, 2018, the Company sold and issued a Convertible Promissory to an unrelated party for the principal amount of $105,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on December 27, 2019, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $20,000 of principal and $3,297 of accrued interest due on March 31, 2020.
On February 5, 2019, the Company entered into a convertible note payable with an unrelated party for $131,250 of which included $6,250 in third party fees resulting in net cash proceeds to the Company of $125,000. The convertible note payable carries interest at a rate of 8% per annum, is due on February 5, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $131,250 of principal and $11,995 of accrued interest due on March 31, 2020.
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On February 11, 2019, the Company entered into a convertible note payable with an unrelated party for $131,250 of which included $6,250 in third party fees resulting in net cash proceeds to the Company of $125,000. The convertible note payable carries interest at a rate of 8% per annum, is due on January 14, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $131,250 of principal and $11,708 of accrued interest due on March 31, 2020.
On March 15, 2019, the Company entered into an exchange agreement with an unrelated party for $70,913, of which the loan payable to Noteholder 2, dated July 2, 2018, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 8% per annum is due on March 15, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $70,913 of principal and $5,937 of accrued interest due on March 31, 2020.
On August 8, 2019, the Company entered into a convertible note agreement with an unrelated party for $33,092 of which $1,576 in third party fees resulting in net cash proceeds to the Company of $31,516. The convertible note payable carries interest at a rate of 8% per annum, is due on August 8, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $33,092 of principal and $1,712 of accrued interest due on March 31, 2020.
On November 4, 2019, the Company entered into a convertible note agreement with an unrelated party for $33,516 of which $2,000 in third party fees resulting in net cash proceeds to the Company of $31,516. The convertible note payable carries interest at a rate of 8% per annum, is due on November 4, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $33,092 of principal and $1,087 of accrued interest due on March 31, 2020.
On January 3, 2020, the Company entered into a convertible note agreement with an unrelated party for $137,375 of which $16,375 in third party fees resulting in net cash proceeds to the Company of $121,000. The convertible note payable carries interest at a rate of 8% per annum, is due on December 23, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $137,375 of principal and $2,740 of accrued interest due on March 31, 2020.
On January 21, 2020, the Company entered into a convertible note agreement with an unrelated party for $52,500 of which $2,500 in third party fees resulting in net cash proceeds to the Company of $50,000. The convertible note payable carries interest at a rate of 8% per annum, is due on January 21, 2021, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $52,500 of principal and $805 of accrued interest due on March 31, 2020.
On February 4, 2020, the Company entered into an exchange agreement with an unrelated party for $265,637, of which the loan payable to Noteholder 8, dated February 8, 2019, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 8% per annum is due on February 8, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $265,637 of principal and $4,076 of accrued interest due on March 31, 2020.
Noteholder #8
On February 8, 2019, the Company entered into an exchange agreement with an unrelated party for $580,537, of which the loan payable to Palliatech, dated September 1, 2017, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 10% per annum, with one-year interest guaranteed, is due on February 8, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 30% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. A principal non-pay default was applied in the amount of $203,188. This remaining balance of this note was purchased by Noteholder 6 & 7, on February 4, 2020. There was no note principal or accrued interest due on March 31, 2020.
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Noteholder #9
On March 15, 2019, the Company entered into an exchange agreement with an unrelated party for $70,913, of which the loan payable to Noteholder 2, dated July 2, 2018, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 8% per annum is due on March 15, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was no note principal or accrued interest due on March 31, 2020.
Noteholder #10
On March 15, 2019, the Company entered into an exchange agreement with an unrelated party for $70,913, of which the loan payable to Noteholder 2, dated July 2, 2018, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 8% per annum is due on March 15, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $70,913 of principal and $5,159 of accrued interest due on March 31, 2020.
Noteholder #11
On August 30, 2019, the Company entered into a convertible note payable with an unrelated party for $110,000 which included $10,000 original issue discount resulting in net cash proceeds to the Company of $100,000. The convertible note payable carries interest at a rate of 8% per annum, is due on May 30, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $110,000 of principal and $5,159 of accrued interest due on March 31, 2020.
On August 29, 2019, the Company entered into an exchange agreement with an unrelated party for $170,000, of which the loan payable to Henry Grimmett, dated October 16, 2016, outstanding and principal would be assumed by the new note holder. The new convertible note payable carries an interest rate of 8% per annum, is due on May 29, 2020, and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days. There was $100,000 principal and $0 of accrued interest due on March 31, 2020.
NOTE 12 – CONVERTIBLE DEBENTURES
On January 29, 2018, the Company issued a total of 5,973 units of 8% unsecured convertible debentures. Each unit consists of one convertible debenture with a principal face value of $1,000 and 250 warrants. The gross proceeds were $5,973,000. Each warrant entitles the holder thereof to purchase one additional common share of the Company at an exercise price of $0.80 per warrant for 24 months. The convertible debentures have a maturity date of 36 months from issuance. Simple interest will be paid at a rate of 8% per annum in arrears until maturity or until conversion. The principal amount of the debentures and any accrued interest thereon are convertible at the option of the holder into common shares of the Company at any time at a conversion price of $0.60 per share.
In addition to the warrants associated with the convertible debentures, the Company issued an additional 597,300 warrants to purchase common stock of the Company as offering costs representing an equivalent of 6% of the fully converted debentures. The warrants are exercisable at $0.60 per share for two years.
The Company also issued three separate debentures under the same terms for additional cash proceeds of $610,000. The additional debentures carry an additional 152,500 warrants to purchase additional common shares of the Company at $0.80 per share. Additionally, the outstanding principal and interest may be converted to common stock of the Company at $0.60 per share.
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Note 13 – Derivative Liability
As of March 31, 2020 and September 30, 2019, Company had a derivative liability balance of $2,319,937 and $2,545,735 on the balance sheets and recorded an unrealized gain of $225,797 and an unrealized loss of $556,647 from derivative liability fair value adjustments during the six months ended March 31, 2020 and 2019, respectively.
On November 15, 2018, the Company issued a $222,600 convertible promissory note to an unrelated party that matures on November 15, 2019. Refer to Noteholder 8 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15, Derivatives and Hedging and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.
The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the note was $220,463 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $184,957 which was up to the face value of the convertible note with the excess fair value at an initial measurement of $35,506 being recognized as a loss on derivative fair value measurement.
On December 27, 2018, the Company issued a $105,000 convertible promissory note to an unrelated party that matures on December 27, 2019. Refer to Noteholder 9 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes is subject to a variable conversion rate.
The aggregate fair value of the derivative at the issuance date of the note was $98,091 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $38,365 which was up to the face value of the convertible note with the excess fair value at an initial measurement of $59,725 being recognized as a loss on derivative fair value measurement.
On January 14, 2019, the Company issued a $131,250 convertible promissory note to an unrelated party that matures on February 5, 2020. Refer to Noteholder 8 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.
The aggregate fair value of the derivative at the issuance date of the note was $144,752 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $14,423 which was up to the face value of the convertible note with the excess fair value at an initial measurement of $130,329 being recognized as a loss on derivative fair value measurement
On February 4, 2019, the Company issued a $265,000 convertible promissory note to an unrelated party that matures on February 4, 2020. Refer to Noteholder 8 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.
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The aggregate fair value of the derivative at the issuance date of the note was $322,521 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $322,521 on derivative fair value measurement.
On February 5, 2019, the Company issued a $131,250 convertible promissory note to an unrelated party that matures on February 11, 2020. Refer to Noteholder 9 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.
The aggregate fair value of the derivative at the issuance date of the note was $228,916 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $228,916 on derivative fair value measurement.
On July 1, 2019, the Company issued a $825,930 convertible promissory note to an unrelated party that matures on September 30, 2019. Refer to Noteholder 3 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.
The aggregate fair value of the derivative at the issuance date of the note was $1,807,875 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $1,807,875 on derivative fair value measurement.
On August 8, 2019, the Company issued a $33,092 convertible promissory note to an unrelated party that matures on August 8, 2020. Refer to Noteholder 6 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.
The aggregate fair value of the derivative at the issuance date of the note was $34,341 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $34,341 on derivative fair value measurement.
On August 8, 2019, the Company issued a $33,092 convertible promissory note to an unrelated party that matures on August 8, 2020. Refer to Noteholder 7 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.
The aggregate fair value of the derivative at the issuance date of the note was $34,341 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $34,341 on derivative fair value measurement.
On August 29, 2019, the Company issued a $170,000 convertible promissory note to an unrelated party that matures on May 29, 2020. Refer to Noteholder 14 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.
The aggregate fair value of the derivative at the issuance date of the note was $143,951 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $65,965 on derivative fair value measurement.
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On August 30, 2019, the Company issued a $110,000 convertible promissory note to an unrelated party that matures on May 30, 2020. Refer to Noteholder 14 under “Note 12 – Convertible Debentures” for more information. The Company analyzed the conversion feature of the agreement for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate.
The aggregate fair value of the derivative at the issuance date of the note was $109,936 which was recorded as a derivative liability on the balance sheet. The Company recognized a loss of $79,183 on derivative fair value measurement.
At March 31, 2020, the Company marked-to-market the fair value of the derivative liabilities related to conversion features and determined an aggregate fair value of $2,319,894 and recorded a $112,707 gain from change in fair value for the six months ended March 31, 2020. The fair value of the embedded derivatives was determined using a Black-Scholes option pricing model based on the following assumptions: (1) expected volatility of 160%, (2) risk-free interest rate of 0.17%, (3) exercise prices of $0.014 - $0.018, and (4) expected lives of 0.16 – 0.73 of a year.
On October 2, 2018, the Company issued a total of $220,000 convertible debenture to an unrelated party that matures on January 1, 2019. The Company issued a total of 100,000 warrants to purchase additional shares of common stock of the Company in connection with the convertible debenture. The Company analyzed the issued warrants for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the warrants should be classified as a derivative because the Company is unable to ascertain there will be adequate unissued authorized shares of common stock to fulfill its obligations should the warrants be exercised. In accordance with AC 815, the Company has recorded a derivative liability related to the warrants.
The derivative for the warrants is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the warrants was $57,014 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $53,333 which was up to the face value of the convertible debentures with the excess fair value at an initial measurement of $3,681 being recognized as a loss on derivative fair value measurement.
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As discussed in “Note 12 – Convertible Debentures”, the Company issued a total of $374,000 of convertible debentures to unrelated parties that mature on dates ranging from October 17, 2020 to October 23, 2020. The Company issued a total of 187,000 warrants to purchase additional shares of common stock of the Company in connection with the convertible debentures. The Company analyzed the issued warrants for derivative accounting consideration and determined that the warrants should be classified as a derivative. The aggregate fair value of the derivative at the issuance date of the warrants was $73,383 which was recorded as a derivative liability on the balance sheet, for which the Company recorded an equivalent debt discount to the convertible debentures.
At March 31, 2020, the Company marked-to-market the fair value of the derivative liabilities related to warrants and determined an aggregate fair value of $44 and recorded a $181,772 gain from change in fair value for the six months ended March 31, 2020. The fair value of the derivatives was determined using a Black-Scholes option pricing model based on the following assumptions: (1) expected volatility of 160%, (2) risk-free interest rate of 0.17%, (3) exercise prices of $0.60 to $0.80, and (4) expected lives of 0.55 – 0.56 years.
The following table summarizes the change in derivative liabilities included in the balance sheet at March 31, 2020:
| Fair Value of Embedded Derivative Liabilities: | ||||
| Balance, September 30, 2019 | $ | 2,545,735 | ||
| Change in fair market value | (225,797 | ) | ||
| Balance, March 31, 2020 | $ | 2,319,938 | ||
The following table summarizes the gain (loss) on derivative liability included in the income statement for the three months ended March 31, 2020 and 2019, respectively.
| Six Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Day one loss due to derivatives on convertible debt | $ | (68,682 | ) | (780,678 | ) | |||
| Change in fair value of derivatives | 294,479 | 224,021 | ||||||
| Total derivative gain (loss) | $ | 225,797 | (556,647 | ) | ||||
NOTE 14 – STOCK OPTIONS AND WARRANTS
The following tables summarize all stock option and warrant activity for the three months ended March 31, 2020:
| Shares | Weighted- Average Exercise Price Per Share | |||||||
| Outstanding, September 30, 2019 | 5,484,970 | 0.742 | ||||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Forfeited | - | - | ||||||
| Expired | - | - | ||||||
| Outstanding, March 31, 2020 | 5,484,970 | 0.742 | ||||||
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The following table discloses information regarding outstanding and exercisable options and warrants at March 31, 2020:
| Outstanding | Exercisable | |||||||||||||||||||||
| Exercise Prices | Number of Option Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | Number of Option Shares | Weighted Average Exercise Price | |||||||||||||||||
| $ | 0.225 | 200,000 | $ | 0.225 | 4.46 | 200,000 | $ | 0.225 | ||||||||||||||
| $ | 0.400 | 110,000 | $ | 0.400 | 1.62 | 110,000 | $ | 0.400 | ||||||||||||||
| $ | 0.420 | 330,000 | $ | 0.420 | 4.05 | 330,000 | $ | 0.420 | ||||||||||||||
| $ | 0.500 | 165,000 | $ | 0.500 | 1.70 | 162,500 | $ | 0.500 | ||||||||||||||
| $ | 0.600 | 627,220 | $ | 0.600 | 0.11 | 627,220 | $ | 0.600 | ||||||||||||||
| $ | 0.650 | 145,000 | $ | 0.650 | 2.82 | 36,250 | $ | 0.650 | ||||||||||||||
| $ | 0.800 | 3,482,750 | $ | 0.800 | 1.43 | 3,095,250 | $ | 0.800 | ||||||||||||||
| $ | 0.850 | 100,000 | $ | 0.850 | 3.29 | - | $ | 0.850 | ||||||||||||||
| $ | 1.050 | 25,000 | $ | 1.050 | 3.79 | - | $ | 1.050 | ||||||||||||||
| $ | 1.260 | 220,000 | $ | 1.260 | 2.50 | 110,000 | $ | 1.260 | ||||||||||||||
| $ | 1.300 | 10,000 | $ | 1.300 | 1.80 | 7,500 | $ | 1.300 | ||||||||||||||
| $ | 1.386 | 60,000 | $ | 1.386 | 2.50 | 30,000 | $ | 1.386 | ||||||||||||||
| $ | 1.666 | 10,000 | $ | 1.666 | 2.59 | 5,000 | $ | 1.666 | ||||||||||||||
| Total | 5,484,970 | $ | 0.742 | 1.95 | 4,713,720 | $ | 0.718 | |||||||||||||||
Compensation related to stock-based compensation was $126,581 and $169,922, respectively, for the three months ended March 31, 2020 and 2019.
Note 15 – Subsequent Events
Common Stock Issuances
The Company made the following issuances of common stock subsequent to March 31, 2020:
| ● | 10,500,000 common shares for the conversion of $100,000 of principal on convertible debentures. |
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On April 13, 2020, the Company entered into a convertible note payable with an unrelated party for $66,000 which included $6,000 originator issuer discount resulting in net cash proceeds to the Company of $60,000. The convertible note payable carries interest at a rate of 12% per annum, is due on November 30, 2020 and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 35% discount from the lowest trading price of the Company’s common stock in the preceding 15 trading days.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On May 9, 2019, Stephanie Head, a former part-time lab administrator for EVIO Labs Eugene, LLC, filed a wrongful termination lawsuit with the US District Court - District of Oregon, Eugene Division, Case No. 6:19-CV-00681, against EVIO Labs Eugene, LLC, EVIO, Inc., and Lori Glauser. In December 2018, EVIO Labs Eugene, LLC terminated Stephanie Head because she was not available to work full-time. In February 2019, Ms. Head filed a complaint to the Oregon Bureau of Labor & Industries (“BOLI”) with allegations that she was discriminated against and unlawfully terminated. In October 2019 BOLI found substantial evidence of unlawful employment on the basis of protected whistle-blowing, but found no substantial evidence of Ms. Head’s seven other allegations of unlawful employment practice. In April 2019, BOLI notified EVIO Labs Eugene, LLC that BOLI elected not to pursue the charges further and closed the file. On January 28, 2020, the case was settled for $35,000, $25,000 payable in cash, and $10,000 in EVIO Common Stock.
On February 6, 2020, MC CRE Investments, LLC landlord for the Palm Desert location, filed a Breach of Lease Agreement with the Superior Court of the State of California, County of Riverside. EVIO Labs Palm Desert has vacated the space and turned it back over to the landlord. The Company has expensed past due rents and late fees and these items are included in the liabilities in the balance sheet.
On or about March 5, 2020, Paul Tomaso, and Jonah Barber beneficiaries for MRX Labs, LLC, filed a Breach of Promissory Note in the original principal amount of $750,000, plus late fees and penalties, with the Circuit Court of the State in Oregon, in Multnomah County against Greenhaus Analytical Labs, LLC. The Company has expensed penalties and late fees and these items are included in the liabilities in the balance sheet.
On or about April 30, 2020, Michele Malaret and Gordon Griswold filed, filed a Breach of Contract in the original principal amount of $500,000, with the Superior Court of California, County of Humboldt. The Company currently recognizes the full liability on its balance sheet. There is no interest due associated with the note.
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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained herein involve risks and uncertainties, including statements as to:
| ● | our future operating results; | |
| ● | our business prospects; | |
| ● | our contractual arrangements and relationships with third parties; | |
| ● | the dependence of our future success on the general economy; | |
| ● | our possible financings; and | |
| ● | the adequacy of our cash resources and working capital. |
These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives, or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of this report. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We operate as a Colorado corporation and through our subsidiaries which provide analytical testing and advisory services to the emerging legalized cannabis industry.
Our active subsidiaries as of March 31, 2020, are as follows:
| Trade Name (dba) | Company Name | State of Incorporation | Ownership % | Acquisition Month | ||||||||
| EVIO Labs Medford | Smith Scientific Industries, LLC | Oregon | 80 | % | June 2016 | |||||||
| EVIO Labs Portland | Greenhaus Analytical Labs | Oregon | 100 | % | October 2016 | |||||||
| EVIO Labs MA | Viridis Analytics | Massachusetts | 100 | % | August 2017 | |||||||
| EVIO Labs Berkeley | C3 Labs, LLC | California | 90 | % | January 2018 | |||||||
| Keystone Labs | Keystone Labs, Inc. | Ontario, Canada | 50 | % | May 2018 | |||||||
In addition to the wholly-owned subsidiaries, the Company has entered into license agreements with independent testing laboratories in Florida and Colorado. Under the terms of the agreements, the independent laboratories are granted non-transferable and non-exclusive rights to use the Company’s trademarks and trade name.
Going Concern
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have an established source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
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The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
In the coming year, the Company’s foreseeable cash requirements will relate to the continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.
Historically, it has mostly relied upon private offerings and internally generated funds such as shareholder loans and advances to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future public or private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.
Critical Accounting Policies and Estimates.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.
Three Months Ended March 31, 2020, compared to Three Months Ended March 31, 2019
COVID-19
On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most US states and many countries have issued policies intended to stop or slow the further spread of the disease.
COVID-19 and the US’s response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations.
Revenues
For the three months ended March 31, 2020, we generated revenues of $867,814 compared to $735,179 for the three months ended March 31, 2019, an increase of $132,635 or approximately 18%. The increase was due primarily to increased testing sales in Oregon and California.
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Gross Profit
For the three months ended March 31, 2020, the gross loss was $(152,632) compared to a gross loss of $(421,863) for the three months ended March 31, 2019 an increase of $269,231. The reduced losses was primarily attributed to increased sales in Oregon and decreased operating costs across all labs.
Operating Expenses
For the three months ended March 31, 2020, total operating expenses were $1,446,465 compared to $1,262,778 for the three months ended March 31, 2019, an increase of $183,697. The increase is primarily attributed to increase in sales, general and administrative expenses.
Other (Expense)
For the three months ended March 31, 2020, other expense, net was $1,383,589, compared to other expense, net of $2,135,116 for the three months ended March 31, 2019. The decrease in other income, net of $751,527 was primarily attributable to a decrease in the change in the fair market value of derivative liabilities of $1,215,039, offset by increased cost of debt discount amortization.
Net Loss
Net loss during the three months ended March 31, 2020, was $2,982,686, compared to a net loss of $3,820,370 during the three months ended March 31, 2019. The reduction of $837,684 in net loss is the result of an increase in gross margin and a reduction in other expenses, net.
Liquidity and Capital Resources
During the six months ended March 2020, the Company used $698,030 in cash from operating activities compared to cash used in operating activities of $1,078,049 for the six months ended March 31, 2019. The improvement of $535,401 is primarily attributable to a reduction in operating losses in 2019.
During the six months ended March 31, 2020, the Company used $44,674 in investing activities compared to $580,075 used in investing activities during the same period ended March 31, 2019. The reduction of $535,401 is attributable to a decrease in the purchase of fixed assets
During the six months ended March 31, 2020, net cash from financing activities was $648,477 compared to $1,631,419 during the same six month period ended March 31, 2019. The decrease in the 2019 period is primarily attributable a decrease in proceeds from the issuance of common stock, convertible debentures, and convertible notes, while the company increased its repayments of capital leases and loans.
Dividends
The Company has never declared dividends.
Critical Accounting Policies and Estimates.
Our Critical Accounting Policies can be found in Note 1. ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES to our consolidated financial statements.
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Our Website.
Our website can be found at www.eviolabs.com.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, as a smaller reporting company, as defined by Rule 229.10(f)(1), is not required to provide the information required by this Item.
ITEM 4 – CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our principal executive and principal financial officers have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.
Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report for the reasons disclosed in our annual report on Form 10-K.
This quarterly report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to Rule 308(b) of Regulation S-K, which permits the Company to provide only management’s report in this Quarterly Report.
(b) Changes in Internal Control over Financial Reporting
There were no changes in Internal Controls over financial reporting during the three months ended March 31, 2020. Upon hiring additional financial staff, EVIO will prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions, and prepare, review, and submit SEC filings in a timely manner.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On
May 9, 2019, Stephanie Head, a former part-time lab administrator for EVIO Labs Eugene, LLC, filed a wrongful termination lawsuit
with the US District Court - District of Oregon, Eugene Division, Case No. 6:19-CV-00681, against EVIO Labs Eugene, LLC, EVIO,
Inc., and Lori Glauser. In December 2018, EVIO Labs Eugene, LLC terminated Stephanie Head because she was not available to work
full-time. In February 2019, Ms. Head filed complaint to Oregon Bureau of Labor & Industries (“BOLI”) with allegations
that she was discriminated against and unlawfully terminated. In October, 2019 BOLI found substantial evidence of unlawful employment
on the basis of protected whistle-blowing, but found no substantial evidence of Ms. Head’s seven other allegations of unlawful
employment practice. In April 2019, BOLI notified EVIO Labs Eugene, LLC that BOLI elected not to pursue the charges further and
closed the file. On January 28, 2020, the case was settled for $35,000, $25,000 payable in cash, and $10,000 in EVIO Common Stock.
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On February 6, 2020, MC CRE Investments, LLC landlord for the Palm Desert location, filed a Breach of Lease Agreement with the Superior Court of the State of California, County of Riverside. EVIO Labs Palm Desert has vacated the space and turned it back over to the landlord. The Company has expensed past due rents and late fees and these items are included in the liabilities in the balance sheet.
On or about March 5, 2020, Paul Tomaso, and Jonah Barber beneficiaries for MRX Labs, LLC, filed a Breach of Promissory Note in the original principal amount of $750,000, plus late fees and penalties, with the Circuit Court of the State in Oregon, in Multnomah County against Greenhaus Analytical Labs, LLC. The Company has expensed penalties and late fees and these items are included in the liabilities in the balance sheet.
On or about April 30, 2020, Michele Malaret and Gordon Griswold filed, filed a Breach of Contract in the original principal amount of $500,000, with the Superior Court of California, County of Humboldt. The Company currently recognizes the full liability on its balance sheet. There is no interest due associated with the note.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
The above statement notwithstanding, shareholders and prospective investors should be aware that certain risks exist with respect to the Company and its business, including those risk factors contained in our most recent Registration Statements on Form S-1 and Form 10, as amended. These risks include, among others: limited assets, lack of significant revenues, and only losses since inception, industry risks, dependence on third party manufacturers/suppliers and the need for additional capital. The Company’s management is aware of these risks and has established the minimum controls and procedures to ensure adequate risk assessment and execution to reduce loss exposure.
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
There was no other information during the quarter ended March 31, 2020, which was not previously disclosed in our filings during that period.
| 31.1 | Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002 | |
| 31.2 | Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002 | |
| 32.1 | Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002 | |
| 32.2 | Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002 | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on September 9, 2020.
| EVIO, INC. | ||
| By: | /s/ William Waldrop | |
| William Waldrop | ||
| Chief Executive Officer, Interim Chief Financial Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on September 9, 2020.
| By: | /s/ William Waldrop | |
| William Waldrop | ||
| Director & Principal Executive Officer | ||
| By: | /s/ Lori Glauser | |
| Lori Glauser | ||
| Director |
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