NUTRALIFE BIOSCIENCES, INC - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2021

Or

For the transition period from ______ to ______

Commission file number 000-55144

Registrant’s telephone number, including area code 888-509-8901

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Act:

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [  ] Yes [X] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 Act.) Yes [  ] No [X]

The number of shares outstanding of the registrant’s common stock as of July 16, 2021, was 163,396,982 shares.

DOCUMENTS INCORPORATED BY REFERENCE — NONE

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information contained in this quarterly report on Form 10-Q contains “forward-looking statements.” These forward-looking statements are contained principally in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events, including, but not limited to: our future financial performance; the continuation of historical trends; the sufficiency of our resources in funding our operations; our intention to engage in mergers and acquisitions; and our liquidity and capital needs. Our forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. These risks, uncertainties and other factors include but are not limited to: the risks of limited management, labor and financial resources; our ability to establish and maintain adequate internal controls; our ability to develop and maintain a market in our securities; and our ability obtain financing, if and when needed, on terms that are acceptable. Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

As used in this quarterly report on Form 10-Q, “we,” “our,” “us” and the “Company” refer to NutraLife BioSciences, Inc., a Florida corporation, and its subsidiaries unless the context requires otherwise.

Item 1. Financial Statements.

NUTRALIFE BIOSCIENCES, INC., F/K/A NUTRAFUELS, INC.

Condensed Consolidated Balance Sheets

The accompanying notes are an integral part of these condensed consolidated financial statements.

NUTRALIFE BIOSCIENCES, INC., F/K/A NUTRAFUELS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

NUTRALIFE BIOSCIENCES, INC., F/K/A NUTRAFUELS, INC.

Consolidated Statements of Changes in Stockholders’ Equity

NUTRALIFE BIOSCIENCES, INC., F/K/A NUTRAFUELS, INC.

Consolidated Condensed Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

NUTRALIFE BIOSCIENCES, INC. F/K/A NUTRAFUELS, INC

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 - NATURE OF OPERATIONS AND CONSOLIDATION

NutraLife BioSciences, Inc. F/K/A NutraFuels, Inc. (“We” or the “Company”) is the producer and distributor of nutritional supplements that uses micro molecular formulae and a utilization of an oral spray to provide faster and more efficient absorption. Our products are sold to private label distributers who sell the products we manufacture under their own brand name as well as under our own brand name.

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America (“U.S.”) as promulgated by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and with the rules and regulations of the U.S Securities and Exchange Commission (“SEC”). In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation. Interim results are not necessarily indicative of results for a full year. Therefore, the interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, from which the accompanying condensed consolidated balance sheet dated December 31, 2020 was derived.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Precision Analytic Testing, LLC, NutraDerma Technologies, Inc., PhytoChem Technologies, Inc., and TransDermalRX, Inc. We operate as one reportable segment. All intercompany transactions and balances have been eliminated in consolidation.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on its estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and clarify the implementation guidance. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”, which amended the effective date of the various topics. As the Company is a smaller reporting company, the provisions of ASU 2016-13 and the related amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 (quarter ending March 31, 2023 for the Company). Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company will evaluate the impact of ASU 2016-13 on the Company’s consolidated financial statements in a future period closer to the date of adoption.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for this quarter ended, March 31, 2021. The adoption of this standard does not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which simplifies and clarifies certain calculation and presentation matters related to convertible equity and debt instruments. Specifically, ASU-2020-06 removes requirements to separately account for conversion features as a derivative under ASC Topic 815 and removing the requirement to account for beneficial conversion features on such instruments. Accounting Standards Update 2020-06 also provides clearer guidance surrounding disclosure of such instruments and provides specific guidance for how such instruments are to be incorporated in the calculation of Diluted EPS. The guidance under ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company adopted this standard using a modified retrospective approach effective January 1, 2021. The adoption of this standard does not have a material impact on the Company’s consolidated financial statements and related disclosures.

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying consolidated financial statements.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Cash

The Company maintains its cash in bank deposit accounts, which may, at times, may exceed federally insured limits. The Company did not have cash balances in excess of FDIC insured limits at March 31, 2021 and December 31, 2020.

Inventories

Inventories are stated at lower of cost or net realizable value utilizing the weighted average method of valuation and consist of raw materials and finished goods. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to cost of sales results when the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews the Company’s inventories for such declines in value. Inventory consists of the following:

Allowance for Doubtful Accounts

We establish the existence of bad debts through a review of several factors including historical collection experience, current aging status of the customer accounts, and financial condition of our customers. The allowance for doubtful accounts is $0 as of March 31, 2021 and December 31, 2020.

Property and Equipment

All property and equipment are recorded at cost and depreciated over their estimated useful lives, generally three, seven and twelve years, using the straight-line method. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred. Leasehold improvements are amortized over their estimated useful lives or the remaining term of the lease, whichever is shorter.

Impairment of Long-Lived Assets

A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived assets exceeds its fair value.

Impairment charges would be included with costs and expenses in the Company’s condensed consolidated statements of operations and would result in reduced carrying amounts of the related assets on the Company’s condensed consolidated balance sheets. No adjustments were made to long-lived assets during the three month periods ended March 31, 2021, and 2020.

Revenue Recognition

The Company accounts for revenue under the guidance of FASB ASC 606, “Revenue from Contracts from Customers” (“ASC 606”).

ASC 606 prescribes a five-step model that focuses on transfer of control and entitlement to payment when determining the amount of revenue to be recognized. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company generates revenues from the sale of products. The product is invoiced, and the revenue is recognized upon shipment or once transfer of risk has passed to the customer, which is the point at which the Company has satisfied its performance obligation.

Payments received in advance from customers are recorded as customer deposits until earned, at which time revenue is recognized.

We recognize certain revenues under bill and hold arrangements with certain customers when the Company has fulfilled all of its performance obligations, the units are segregated for the specific customer only, and the goods are ready for physical transfer to the customer in accordance with their defined contract delivery schedule. For any requested bill and hold arrangement, we make an evaluation as to whether the bill and hold arrangement qualifies for revenue recognition. The customer must initiate the request for the bill and hold arrangement. The customer must make a fixed commitment to purchase the items. The risk of ownership is passed to the customer, and payment terms are not modified.

The Company’s revenues accounted for under ASC 606 do not require significant estimates or judgements based on the nature of the Company’s revenue. The Company’s contracts do not include multiple performance obligations or variable consideration. All of the Company’s sales resulted from contracts with customers for the three months ended March 31, 2021 and 2020.

Income Taxes

The Company recorded no income tax expense for the three months ended March 31, 2021 and 2020 because the estimated annual effective tax rate was zero. As of March 31, 2021, the Company continues to provide a valuation allowance against its net deferred tax assets since the Company believes it is more than likely than not that its deferred tax assets will not be realized.

Net Loss Per Share

Basic loss per share excludes dilution and is computed by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the Company. Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the period and dilutive potential shares outstanding unless consideration of such dilutive potential shares would result in anti-dilution. The following equity and debt securities were excluded from the computation of net loss per share.

Related Party Transactions

All transactions with related parties are in the normal course of operations and are measured at the exchange amount.

Leases

The Company accounts for leases under FASB ASU 2016-02, “Leases” (ASC 842) and other associated standards, which defines a lease as any contract that conveys the right to use a specific asset for a period of time in exchange for consideration. ASC 842 requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance sheet and the disclosure of key information about certain leasing arrangements. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases (formerly called capital leases). The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of-use asset is recorded in operating expenses and an implied interest component is recorded in interest expense.

Leases are classified as a finance lease if any of the following criteria are met:

For any leases that do not meet the criteria identified above for finance leases, the Company treats such leases as operating leases. As of March 31, 2021, the Company has two finance leases and three operating leases.

Under the current guidance, both finance and operating leases are reflected on the balance sheet as lease or “right-of -use” assets and lease liabilities. There are some exceptions, which the Company has elected in its accounting policies. For leases with terms of twelve months or less, or below the Company’s general capitalization policy threshold, the Company elects an accounting policy to not recognize lease assets and lease liabilities for all asset classes. The Company recognizes lease expense for such leases generally on a straight-line basis over the lease term.

The Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain to be exercised. Certain leases contain non-lease components, such as common area maintenance, which are generally accounted for separately. In general, the Company will assess if non-lease components are fixed and determinable, or variable, when determining if the component should be included in the lease liability. For purposes of calculating the present value of the lease obligations, the Company utilizes the implicit interest rate within the lease agreement when known and/or determinable, and otherwise utilizes its incremental borrowing rate at the time of the lease agreement. The related right-of-use asset is initially measured at cost, which primarily comprises of the initial amount of the lease liability.

Lease expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Lease expense for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.

Intangible Asset

Intangible asset represents the value assigned to intellectual property and is amortized based on the economic benefit expected to be realized.

NOTE 3 - LIQUIDITY AND GOING CONCERN CONSIDERATIONS

Our condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We sustained a net loss of $2,501,086 for the three months ended March 31, 2021, and have an accumulated deficit of approximately $44,200,000 at March 31, 2021. We had cash used in operating activities of approximately $356,000 for the three months ended March 31, 2021. These conditions raise substantial doubt about our ability to continue as a going concern.

In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in China, and began to spread around the world in early 2020. In reaction to decreased supply of and increased demand for sanitizer products, the Company shifted its manufacturing to produce sanitizer products. The Company’s other business operations have been impacted negatively by COVID-19 due to government restrictions and the overall adverse effect on the global economy. The Company expects COVID-19 to continue to negatively impact its operating results and its ability to obtain financing.

The Company is currently in the process of raising capital to complete and finalize the build-out of its facility in Deerfield Beach for the purpose of consolidating its operations. The structure of the capital raise is currently in development. The Company is continuing its path to profitability through increased business development, marketing and sales of the Company’s multiple lines of topical, ingestible and skincare health and wellness products. The Company is also focused on completing an efficacy clinical study on its patented mosquito bug patch with plans upon a successful conclusion to launch globally in the very near future, adding to the Company’s suite of wellness products.

Failure to successfully continue to grow operational revenues could harm our profitability and adversely affect our financial condition and results of operations. We face all of the risks inherent in a new business, including the need for significant additional capital, management’s potential underestimation of initial and ongoing costs, and potential delays and other problems in connection with establishing sales channels.

We are continuing our plan to further grow and expand operations and seek sources of capital to pay our contractual obligations as they come due. Management believes that its current operating strategy will provide the opportunity for us to continue as a going concern as long as we are able to obtain additional financing; however, there is no assurance this will occur. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

NOTE 4 – PROPERTY AND EQUIPMENT, NET

A summary of property and equipment at March 31, 2021 and December 31,2020 is as follows:

Depreciation expense for the three months ended March 31, 2021 and 2020 totaled $13,929 and $15,793, respectively.

NOTE 5 – INTANGIBLE ASSET, NET

In February 2019, the Company acquired certain intellectual property consisting of patent rights. The aggregate purchase price paid in connection with the patent purchase was $714,640, consisting of $130,000 cash, and 3,300,000 shares of the Company’s common stock valued at $0.177 per share or an aggregate of $584,640. Of the 3,300,000 shares, 1,800,000 shares were provided at closing and 1,500,000 were to be provided one year thereafter. These shares have not been issued and the Company is in negotiations with the seller to extend the issuance of the shares. As such, the Company recognized a liability for stock to be issued of $265,500 at both March 31, 2021, and December 31, 2020. The acquired patent is amortized over its remaining estimated useful life of approximately 11 years. Amortization for the three months ended March 31, 2021 and 2020 totaled $16,242 and $16,242, respectively. Total accumulated amortization for March 31, 2021 and December 31, 2020 was $140,764 and $124,522, respectively. The estimated annual amortization expense for the next five years and thereafter is as follows:

There is no impairment recorded for the three months ended March 31, 2021.

NOTE 6 – INVESTMENT

On November 2, 2020 in connection with a manufacturing, distribution and sales agreement with a third party distributor (the “Distributor”), the Company issued 12.5 million of its common shares for 250 shares of non-trading convertible preferred stock of the Distributor. Each convertible preferred share is convertible into 1,000 shares of the Distributor’s common stock. The Distributor’s common shares are currently traded in the over the counter market. On the first business day following the 180-day anniversary of closing, if the share price of the Distributor is less than $4.00, the Distributor will provide the Company its common stock valued at $1 million, less 250,000 common shares, for no additional consideration. On the one-year anniversary of closing, if the share price of the Distributor is less than $4.00, the Distributor will provide the Company its common stock valued at $1 million, less 250,000 shares, less the number of shares provided on the 181st day anniversary, for no additional consideration.

The Company determined to initially value the convertible preferred stock investment using the Black-Scholes option pricing model using the following inputs: stock price: $4.00, exercise price: $4.00, expected term: one year, and risk free rate 0.13%.

The Company made this investment to realize strategic benefits for its business, rather than to generate income or capital gains. Because the Company owns less than 20% on an as converted basis of the Distributor, and cannot exercise significant influence over operating and financial policies of the Distributor, the Company accounts for the investment under ASC 321, “Equity Securities” (“ASC 321”). Under ASC 321, for each reporting period, the Company completes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired.

The investment balance as of March 31, 2021 and December 31, 2020 is $383,326. There is no impairment recorded for the three months ended March 31, 2021.

NOTE 7 – ACCRUED EXPENSES

A summary of accrued expenses is as follows:

NOTE 8 – NOTES PAYABLE

Notes Payable

In January 2021, the Company entered into a Note Exchange Agreement whereby a note holder of the Company agreed to exchange their current note that was in default, for a new promissory note and a warrant to acquire 1,200,000 shares of common stock. The warrant is exercisable at $0.08 per share and expires three years from the date of the new promissory note.

During the quarter ended March 31, 2021, the Company received proceeds aggregating $215,000 in connection with multiple short-term promissory notes with due dates ranging from January to March 2022. The notes bear interest at 10% for the terms of the notes. An aggregate of 8,600,000 warrants were issued to the noteholders as additional consideration. The warrants are exercisable at $0.08 per share and expire three years from the date of each respective note.

The warrants to purchase common stock issued to the noteholders were treated as debt discounts. The gross proceeds of the notes were allocated to debt and warrants issued on a relative far value basis.

The warrants’ relative fair value was calculated using the Black-Scholes Merton valuation model with the following inputs: an expected and contractual life of three years, an assumed volatility of 191.0%, zero dividend rate, and a risk free rate ranging from 0.18% - 0.34%.

The debt discounts associated with the warrants are amortized through the maturity date of the notes, on a straight-line basis which approximates the effective interest method due to the short-term nature of the notes. Amortization of the debt discount is reported as finance costs in the Statement of Operations.

The Company allocated $199,100 of the gross proceeds of the warrants on a relative fair value basis, which has been recorded as a debt discount.

Convertible Note Payable to Shareholder

In June 2019, the Company entered into an Investment Agreement that included a secured convertible 5.75% promissory note payable for $1,000,000 with a shareholder. The note is subject to a security agreement whereby the first four Ennea Processors the Company has committed to commercialize and monetize will be secured as collateral for the note as well as current and future assets of the Company and its subsidiaries. The payment terms of the note were interest only payments from July 7, 2019 through December 7, 2019 and commencing January 7, 2020, the Company was to make equal monthly installment payments that include principal and interest through the Maturity Date of December 7, 2020.

Included in the Investment Agreement is a royalty agreement whereby the investor received 500,000 shares of the Company’s common stock and will be entitled to a royalty of 8.5% from the revenue generated from the “collateral processors” while the principal is outstanding and 5% thereafter on the first two collateral processors for a period of 10 years.

In addition to the collateral, the note is secured by a Pledge Agreement from a related-party that included a mortgage lien on certain real property as additional collateral.

The collateral processors are not yet in service. Therefore, revenue generated from them and the related royalties due cannot be estimated at this time and will be expensed as incurred in the future.

The Company is currently in default of this note, however, the parties are in negotiation to reach settlement terms.

Debt Discounts

Total amortization associated with all debt discounts was $64,331 and $461,027 for the three months ended March 31, 2021 and 2020, respectively.

Note Payable, SBA

On April 23, 2020, the Company received an aggregate of $254,700 related to its filing under the Paycheck Protection Program (“PPP”) and Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) from Trust Bank, N.A. (the “Lender”). The PPP loan of $244,700 was forgiven on March 12, 2021 and recognized as other income.

On February 26, 2021, the Company received an aggregate of $243,275 (“Second Draw”) related to its filing under the PPP and “CARES Act” from the Lender. The payment terms of the note were as follows:

The Lender is participating in the Paycheck Protection Program to help businesses impacted by the economic impact from COVID-19. Forgiveness of this loan is only available for principal that is used for the limited purposes that qualify for forgiveness under the SBA’s requirements; and that to obtain forgiveness, the Company must request it and must provide documentation in accordance with the SBA requirements and certify that the amounts the Company is requesting to be forgiven qualify under those requirements. The Company elected to treat the loan as debt under FASB ASC 470. As such, the Company will derecognize the liability when the loan is forgiven, and the Company is legally released from the loan.

Principal payments on the Second Draw are due as follows:

NOTE 9 - STOCKHOLDERS’ EQUITY

In January 2021, the Company issued 15,000,000 warrants to its Chief Executive Officer, President and sole Director as compensation. The warrants are exercisable at $0.1025 per share and expire three years from issuance.

In January 2021, the Company issued 7,500,000 warrants to its Vice President, Neil Catania, as compensation. The warrants are exercisable at $0.1025 per share and expire three years from issuance.

The warrants issued as compensation were valued at $2,029,990, calculated using the Black-Scholes Merton valuation model with the following inputs: an expected and contractual life of three years, an assumed volatility of 191.0%, zero dividend rate, and a risk free rate of 0.22%.

Preferred Stock

The Company’s board of directors is authorized to issue, at any time, without further stockholder approval, up to 10,000 shares of preferred stock. The board of directors has the authority to fix and determine the voting rights, rights of redemption and other rights and preferences of preferred stock.

Series A Preferred Stock (“Series A Preferred”)

On November 30, 2012, the board of directors of the Company created Series A Preferred. The Series A Preferred has the following rights and preferences:

On November 30, 2012, Edgar Ward, the Company’s President, CEO, and director, was granted 1,000 shares of Series A Preferred for $1,000. At the option of Mr. Ward, the Series A Preferred shares are redeemable for $1,000.

As of March 31, 2021 and December 31, 2020, 1,000 shares of Series A Preferred are outstanding.

Series B Convertible Preferred Stock (“Series B Preferred”)

On September 30, 2020, the Company designated 110 shares of Preferred Stock as Series B Convertible Preferred Stock. A Series B Holder has the right from time to time, and at any time following January 1, 2021, to convert each outstanding share of Series B stock into shares of common stock at a rate of 149,567 shares of common stock for each share of Series B Preferred. Each share of Series B Preferred shall have a number of votes equal to the number of conversion shares which would be issuable as of the date of such vote. The Series B Preferred does not have any liquidation preferences. The Series B Preferred will participate in any dividends, distributions or payments to the holders of the common stock on an as-converted basis. The Series B Preferred is subject to an ownership limitation, pursuant to which no holder of Series B Preferred will be entitled to convert such investor’s shares of Series B Preferred Stock into shares of common stock if such conversion would result in ownership of more than 4.99% of the outstanding shares of common stock of the Company. Once issued, certain shares of the Series B Preferred are redeemable at the election of the Company at any time prior to the Permitted Conversion Date pursuant to separate written agreements that will be effectuated between holders of the Series B Preferred and the Company.

In March, 2021, the Company issued 10 shares of Series B Preferred to three consultants as part of their compensation agreements. The consultant compensation was valued at $164,524 using the trading price of the equivalent common stock on the date of issuance.

As of March 31, 2021 and December 31, 2020, 30 and 20 shares, respectively, of Series B Preferred are outstanding.

Subsequent Issuances

In April 2021, the Company issued 2,000,000 warrants to its Production Manager as compensation. The warrants have an exercise price of $0.1025 and expire 3 years after issuance.

In April through June 2021, the Company issued 3,662,500 shares of common stock and 14,650,000 warrants in exchange for $1,193,000. The warrants have an exercise price of $0.08 per share and expire 2 years after issuance.

In June 2021, the Company entered into two Note Exchange Agreements whereby previous note holders of the Company agreed to exchange their current notes that were in default, for new promissory notes, shares of common stock totaling 1,997,312, and warrants to acquire an aggregate of 7,989,250 shares of common stock. The warrants are exercisable at $0.08 per share and expire two years from the dates of the new promissory notes.

NOTE 10 – LEASES

In conjunction with the new guidance for leases, as defined by the FASB with ASU 2016-02, “Leases (Topic 842),” the Company has described the existing leases as operating as further described below:

The Company leases their office and warehouse facilities located in in Coconut Creek, Florida under a non-cancelable operating lease agreement that expires in February 2022.

In June 2017, the Company entered into a lease for an additional facility located in Deerfield Beach, Florida under a non-cancelable operating lease. The term of the lease is for 86 months beginning on January 1, 2018 and calls for yearly 3% increases to base rent, with monthly payments that commenced in March 2018.

In July and September of 2019, the Company’s wholly owned subsidiary, Phytochem, entered into two separate lease agreements for office and warehouse space located in Onalaska, Wisconsin, that commenced on August 1 and October 1, respectively. Each lease is for six-month terms with four (4) renewal options to extend for six additional months. The Company expects to occupy one of the spaces for the full term of the lease totaling 30 months. The Company terminated its lease on the other facility in May 2020, without penalty. The remaining lease calls for an annual 3% increase to base rent.

In addition to rent, the Company pays certain insurance, maintenance, and other costs related to its leased spaces.

As of December 31, 2020, in the consolidated balance sheet, the Company has right-of-use assets of $661,141 and a lease liability of $711,593, of which $214,000 was reported as a current liability.

In the March 31, 2021 condensed consolidated balance sheet, the Company has right-of-use assets of approximately $612,000 and a lease liability of $662,000, of which $212,000 is reported as a current liability.

The weighted average remaining lease term is 43 months and weighted average discount rate used is 10%.

The following table presents a reconciliation of the undiscounted future minimum lease payments remaining under the operating lease reported as operating lease liability on the condensed consolidated balance sheet as of March 31, 2021:

Supplemental cash flow information related to leases is as follows, for the three months ended March 31,

Lease expense for the operating leases was approximately $100,800 and $63,000 for the quarters ended March 31, 2021 and 2020, respectively.

Finance Leases:

The Company has acquired certain equipment under agreements that are classified as finance leases. The cost of the equipment under finance leases is included in the balance sheet as property and equipment. The finance lease equipment was approximately $110,000 as of March 31, 2021 and December 31, 2020, with related accumulated depreciation of $9,909 and $8,950, respectively.

Minimum lease payments required by these finance leases are as follows:

Undiscounted future minimum lease payments:

NOTE 11 - COMMITMENTS AND CONTINGENCIES

The Company is subject to asserted claims and liabilities that arise in the ordinary course of business. The Company maintains insurance policies to mitigate potential losses from these actions. In the opinion of management, the amount of the ultimate liability with respect to those actions will not materially affect the Company’s financial position or results of operations.

As of March 31, 2021, the Company is not aware of any asserted claims.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the results of operations and financial condition of the Company for the quarters ended March 31, 2021 and 2020, should be read in conjunction with the other sections of this Quarterly Report, including the Financial Statements and notes thereto of the Company included in this Quarterly Report. The various sections of this discussion contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties as well as other matters over which we have no control. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

Overview

NutraLife BioSciences, Inc. F/K/A NutraFuels, Inc, a Florida corporation (“us”, “we” or “our”) was formed as a limited liability company in the state of Florida on April 1, 2010, to engage in the development and distribution of nutritional and dietary oral spray products. On December 3, 2012, we converted from a Limited Liability Company to a Florida Corporation.

We manufacture and distribute oral spray nutritional and dietary products. Our distribution strategy includes selling to private label customers retailers, distributors, and consumers through retail outlets.

Three Months Ended March 31, 2021 and 2020

We had sales of $136,373 and $192,048 for the three months ended March 31, 2021 and 2020, respectively, or 29% decrease from the first quarter of 2020.

Cost of sales was $96,868 compared to $267,463 for the three months ended March 31, 2021 and 2020, respectively, or 63.8% decrease. This decrease is directly related to the decrease in sales and production volume resulting from the shutdowns and business disruptions from the pandemic. The Company also significantly increased its production labor force.

Gross margin (loss) was $39,505 and $(75,415) for the three months ended March 31, 2021 and 2020, respectively. This is the result of the disruptions in operations resulting from the pandemic.

General and administrative expenses were $441,967 compared to $351,880 for the three months ended March 31, 2021 and 2020, respectively, an increase of 25.6%. This increase is primarily due to the disruptions in the Company’s operations from the pandemic.

Stock based compensation was $2,194,514 and $47,023 for the three months ended March 31, 2021 and 2020, respectively, an increase of $2,147,491.

Our finance costs were $119,928 compared to $515,494 for the three months ended March 31, 2021 and 2020, respectively, a decrease of approximately $395,500. This decrease is the result of the timing of the recognition of the expense related to the discount on convertible debt.

We incurred a net loss of ($2,501,086) compared to ($1,019,832) for the three months ended March 31, 2021 and 2020, respectively.

Liquidity and Capital Resources

Historically, the Company’s primary cash needs have been related to working capital items, which the Company has largely funded through our revenues, working capital, cash on hand, proceeds from lending and proceeds from the issuance of stock.

As of March 31, 2021, the Company had a cash balance of $98,188.

Failure to successfully continue to grow operational revenues could harm our profitability and adversely affect our financial condition and results of operations. We face all of the risks inherent in a new business, including the need for significant additional capital, management’s potential underestimation of initial and ongoing costs, and potential delays and other problems in connection with establishing sales channels.

We are continuing our plan to further grow and expand operations and seek sources of capital to pay our contractual obligations as they come due. Management believes that its current operating strategy will provide the opportunity for us to continue as a going concern as long as we are able to obtain additional financing; however, there is no assurance this will occur. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Cash Flow Activities

As of March 31, 2021, the Company had a cash balance of $98,188.

Operating Activities

Cash used in operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities, such as those included in working capital.

For the first three months of 2021, the Company’s operating activities used cash of $356,006, compared to the first quarter of 2020 which used cash of $430,497. For details of the operating cash flows refer to the condensed consolidated statements of cash flows in Part I – Financial Information.

Financing Activities

During the three months ended March 31, 2021, we received proceeds of $243,275 from the second SBA loan and $215,000 from the issuance of debt net of $4,823 for the payment of finance leases.

Critical Accounting Policies and Estimates

For detailed information regarding our critical accounting policies and estimates, see our financial statements and notes thereto included in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to our critical accounting policies and estimates from those disclosed in our most recent Annual Report on Form 10-K.

Recent Accounting Pronouncements

(See “Recently Issued Accounting Pronouncements” in Note 2 of Notes to the Condensed Consolidated Financial Statements.)

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide the information called for by this Item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021. Based upon this evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of March 31, 2021.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. 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. Litigations applicable to the Company are discussed as follows.

Hamilton v. the Company: Hamilton & Associates Law Group, P.A. v. Nutralife Biosciences, Inc. f/k/a Nutrafuels, Inc., Case No. 50-2020-CA-008435, was filed in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida on August 9, 2020. In the suit, Hamilton & Associates Law Group, P.A. sets forth purported claims for breach of contract, and in the alternative, account stated, open account, unjust enrichment, and quantum meruit. Plaintiff requests a judgment for damages in the principal sum of $150,004.85, plus an award of attorneys’ fees and costs pursuant to a legal services agreement dated January 7, 2019, as well as pre-judgment interest and post-judgment interest. The Hamilton matter filed directly against the Company initially included a claim against Edgar Ward, but the individual claim has been dropped. The prior engagement agreement between the Hamilton law firm and the Company (for 2018) was in the nature of a flat fee engagement, in which shares were provided in lieu of cash payments. The Company maintains that the change in the engagement of the law firm (from 2018 to 2019) in terms of the nature of payment was not disclosed or explained adequately, and the Company was unaware of any claim that sums remained unpaid, as all fees were understood to be paid as a result of the shares of stock provided. The claim was filed on August 9, 2020, and is not set for trial, and only documentary discovery has been conducted to date.

Native American Partners v. the Company: Native American Partners LLC, including NAVF Holdings and NAVF-Pharma, subsidiary companies, and Best Darn Brands, LLC, and its subsidiaries v. Nutralife Biosciences Inc., Case No. CACE-20-009352, was filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida. This action was filed on June 5, 2020, against both the Company and Edgar Ward. However, the claim against Mr. Ward was later dropped. The claim asserted that the Company failed to comply with the confidentiality imposed by a non-disclosure agreement signed by plaintiff and defendant. Plaintiff claims that defendant proceeded with the development of a hand sanitizer product that was first revealed to defendant by the plaintiff, however, defendant asserted that the product produced was different (gel vs. spray) and that defendant had contemplated developing the product (the Covid 19 pandemic was already underway) well in advance of the signing of the NDA. In the Amended Complaint filed on July 9, 2020, plaintiffs demanded injunctive relief and damages for conversion, fraudulent misrepresentation, fraud in the inducement, equitable accounting, unjust enrichment, quantum meruit, breach of contract, and negligent misrepresentation. We obtained a dismissal of this Amended Complaint on February 8, 2021, based on the arbitration provision included in the written contract at issue between the parties. At this time, the plaintiffs have not filed another court action that we are aware of. We are also not yet aware of any arbitration initiated by the plaintiff.

Ortiz v. the Company: Jose Ortiz v. Nutralife Biosciences, Inc. f/k/a Nutrafuels, Inc., Case No. CACE-29-017957, was filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, on October 28, 2020. In this matter, Mr. Ortiz is seeking a judgment for damages, attorneys’ fees, and other costs relating to defendant’s purported breach of an employment agreement dated March 18, 2015. We do not believe that this claim is valued at greater than $5,000. Ortiz’ claim was filed on October 28, 2020, asserting improper discharge from employment, and failure to pay wages and benefits, however, we believe (and have filed summary judgment asserting) that the claim was filed too late, in contravention of the applicable statute of limitations.

Item 1A. Risk Factors.

As a smaller reporting company, the Company is not required to provide information under this Item.

Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds.

During the quarter ended March 31, 2021, and to date, we offered and sold the securities below which were not registered under the Securities Act of 1933, as amended (the “Securities Act”). None of the issuances involved underwriters, underwriting discounts or commissions. We relied upon Sections 4(2) of the Securities Act, and Rule 506(b) of the Securities Act for the offer and sale of the securities.

We believed these exemptions were available because:

In March, 2021, the Company issued 10 shares of Series B Convertible Preferred Stock to three consultants as part of their compensation agreements. The consultant compensation was valued at $164,524 using the trading price of the equivalent common stock on the date of issuance.

In April 2021, the Company issued 2,000,000 warrants to its Production Manager as compensation. The warrants have an exercise price of $0.1025 and expire 3 years after issuance.

In April through June 2021, the Company issued 3,662,500 shares of common stock and 14,650,000 warrants in exchange for $1,193,000. The warrants have an exercise price of $0.08 per share and expire 2 years after issuance.

In June 2021, the Company entered into two Note Exchange Agreements whereby previous note holders of the Company agreed to exchange their current notes that were in default, for new promissory notes, shares of common stock totaling 1,997,312, and warrants to acquire an aggregate of 7,989,250 shares of common stock. The warrants are exercisable at $0.08 per share and expire two years from the dates of the new promissory notes.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The exhibits listed on the Exhibit Index below are provided as part of this report.

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.