10-Q 1 form_10-q.htm FORM 10-Q QUARTERLY REPORT FOR 12-31-2016

UNITED STATES

SECURITY AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

 

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2016

 

or

 

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File Number: 333-170315

 

 

AngioSoma Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

 

27-3480481

(State or other jurisdiction of Incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

2500 Wilcrest Drive, 3rd Floor
Houston, TX

 

77042

(Address of principal executive offices)

 

(Zip code)

 

Registrant’s telephone number, including area code: 832-781-8521

 

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 Web site, 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

[_]

Accelerated filer

[_]

 

Non-accelerated filer

[_]

Smaller reporting company

[X]

 

(Do not check is smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes [_] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of April 7, 2017, 37,284,267 shares of common stock are issued and outstanding.




TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION

4

 

 

Item 1. Financial Statements

4

 

 

Consolidated Balance Sheet as of December 31, 2016 and September 30, 2016 (Unaudited)

4

 

 

Consolidated Statement of Operations for the Three Months Ended December 31, 2016 (Unaudited)

5

 

 

Consolidated Statement of Comprehensive Income for the Three Months Ended December 31, 2016 (Unaudited)

6

 

 

Consolidated Statement of Changes in Stockholders’ Equity for the Three Months Ended December 31, 2016 (Unaudited)

7

 

 

Consolidated Statement of Cash Flows for the Three Months Ended December 31, 2016 (Unaudited)

8

 

 

Notes to the Unaudited Consolidated Financial Statements

9

 

 

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

14

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

15

 

 

Item 4. Controls and Procedures

15

 

 

PART II — OTHER INFORMATION

15

 

 

Item 1. Legal Proceedings

15

 

 

Item 1A. Risk Factors

15

 

 

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

15

 

 

Item 3. Defaults upon Senior Securities

16

 

 

Item 4. Mine Safety Disclosures

16

 

 

Item 5. Other Information

16

 

 

Item 6. Exhibits

16


- 2 -



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.


OTHER PERTINENT INFORMATION


When used in this report, the terms, “we,” the “Company,” “our,” and “us” refers to AngioSoma Inc., a Nevada corporation.


- 3 -



PART I — FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


ANGIOSOMA INC.

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 2016 and SEPTEMBER 30, 2016

(UNAUDITED)


 

 

December 31, 2016

 

September 30, 2016

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

393

 

$

5,845

 

Prepaid expenses

 

 

750

 

 

750

 

Total current assets

 

 

1,143

 

 

6,595

 

 

 

 

 

 

 

 

 

Available for sale securities, at market value

 

 

13,585

 

 

10,674

 

Intellectual property, net of impairment of $2,990,535

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

14,728

 

$

17,269

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

134,854

 

$

164,760

 

Accounts payable to related party

 

 

75,396

 

 

28,460

 

Advances payable

 

 

52,650

 

 

47,650

 

Convertible note payable in default

 

 

278,609

 

 

278,609

 

Current portion of convertible notes payable, net of discount of $67,053 and $109,760, respectively

 

 

128,473

 

 

149,814

 

Current portion of accrued interest payable

 

 

83,380

 

 

62,786

 

Total current liabilities

 

 

753,362

 

 

732,079

 

 

 

 

 

 

 

 

 

Convertible notes payable, net of discount of $368,091 and $371,687, respectively

 

 

29,123

 

 

25,527

 

Accrued interest payable

 

 

42,553

 

 

33,958

 

Note payable

 

 

68,793

 

 

68,793

 

TOTAL LIABILITIES

 

 

893,831

 

 

860,357

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Common stock, $0.001 par value; 480,000,000 shares authorized; 37,284,067 shares and 33,520,667 shares issued and outstanding at December 31, 2016 and September 30, 2016, respectively

 

 

37,284

 

 

33,521

 

Preferred stock, $0.001 par value; 20,000,000 shares authorized:

 

 

 

 

 

 

 

Series A Preferred Stock, 5,000,000 shares issued and outstanding at December 31, 2016 and September 30, 2016

 

 

2,990,535

 

 

2,990,535

 

Series B Preferred Stock, $0.001 par value; 12,500 shares issued and outstanding at December 31, 2016

 

 

13

 

 

 

Series E Preferred Stock, $0.001 par value; 1,000,000 shares issued and outstanding at December 31, 2016 and September 30, 2016

 

 

1,000

 

 

1,000

 

Additional paid-in capital

 

 

(91,427

)

 

(366,139

)

Accumulated other comprehensive income

 

 

2,911

 

 

 

Accumulated deficit

 

 

(3,819,419

)

 

(3,502,005

)

Total stockholders’ deficit

 

 

(879,103

)

 

(843,088

)

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

$

14,728

 

$

17,269

 


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


- 4 -



ANGIOSOMA INC.

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2016

(UNAUDITED)


REVENUE

$

 

 

 

 

 

OPERATING EXPENSES

 

 

 

General and administrative expenses

 

236,838

 

Total operating expenses

 

236,838

 

 

 

 

 

LOSS FROM OPERATIONS

$

(236,838

)

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

Interest expense

 

(80,576

)

 

 

 

 

NET LOSS

$

(317,414

)

 

 

 

 

NET LOSS PER COMMON SHARE – Basic and diluted

$

(0.01

)

 

 

 

 

COMMON SHARES OUTSTANDING – Basic and diluted

 

36,241,378

 


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


- 5 -



ANGIOSOMA INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED DECEMBER 31, 2016

(UNAUDITED)


NET LOSS

$

(317,414

)

 

 

 

 

Change in fair value of available-for-sale securities

 

2,911

 

 

 

 

 

Comprehensive loss

$

(314,503

)


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


- 6 -



ANGIOSOMA INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED DECEMBER 31, 2016

(UNAUDITED)


 

 

Common Stock

 

Series A
Preferred Stock

 

Series B
Preferred Stock

 

Series E
Preferred Stock

 

Additional
Paid In

 

Accumulated
Other
Comprehensive

 

Accumulated

 

Total
Equity

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Income

 

Deficit

 

(Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE,
September 30, 2016

 

33,520,667

 

$

33,521

 

5,000,000

 

$

2,990,535

 

 

$

 

1,000,000

 

$

1,000

 

$

(366,139

)

$

 

$

(3,502,005

)

$

(843,088

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(317,414

)

 

(317,414

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,911

 

 

 

 

2,911

 

Common stock issued for conversion of convertible note payable

 

3,763,400

 

 

3,763

 

 

 

 

 

 

 

 

 

 

 

62,355

 

 

 

 

 

 

66,118

 

Series B Preferred Stock issued for cash

 

 

 

 

 

 

 

12,500

 

 

13

 

 

 

 

 

12,487

 

 

 

 

 

 

12,500

 

Stock options issued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

199,870

 

 

 

 

 

 

199,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE,
December 31, 2016

 

37,284,067

 

$

37,284

 

5,000,000

 

$

2,990,535

 

12,500

 

 

13

 

1,000,000

 

$

1,000

 

$

(91,247

)

$

2,911

 

$

(3,819,419

)

$

(879,103

)


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


- 7 -



ANGIOSOMA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2016

(UNAUDITED)


CASH FLOW FROM OPERATING ACTIVITIES:

 

 

 

 

Net loss

 

$

(317,414

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Stock compensation

 

 

199,870

 

Amortization of discount on convertible note payable

 

 

46,302

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts payable and accrued liabilities

 

 

17,030

 

Accrued interest payable

 

 

31,260

 

NET CASH USED IN OPERATING ACTIVITIES

 

 

(22,952

)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from advances

 

 

5,000

 

Proceeds from sale of Series B Preferred Stock

 

 

12,500

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

17,500

 

 

 

 

 

 

NET DECREASE IN CASH

 

 

(5,452

)

 

 

 

 

 

CASH, at the beginning of the period

 

 

5,845

 

 

 

 

 

 

CASH, at the end of the period

 

$

393

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

Cash paid during the period for:

 

 

 

 

Interest

 

$

 

Taxes

 

$

 

 

 

 

 

 

Noncash investing and financing transaction:

 

 

 

 

Conversion of convertible notes payable into common stock

 

$

66,118

 

Change in fair value of available-for-sale securities

 

$

2,911

 


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


- 8 -



ANGIOSOMA INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016


Note 1. General Organization and Business


AngioSoma Inc., a Nevada corporation, is a clinical stage biotechnology company focused on improving the effectiveness of current standard-of-care treatments, especially related to endovascular interventions in the treatment of peripheral artery disease (PAD).


AngioSoma Nevada is developing its lead product, a drug candidate called Liprostin TM  for the treatment of peripheral artery disease, or PAD, which has completed FDA Phase I and three Phase II clinical trials. We are in discussions with several contract research organizations for completion of our FDA protocol for Phase III and submission of our new drug application for marketing in the US and its territories.


The Company incorporated on April 29, 2016. The Company’s year-end is September 30.


On June 3, 2016, we entered into a business combination whereby a wholly-owned subsidiary of the Company, AngioSoma Research, Inc., a Texas corporation, (“AngioSoma Texas”) merged with AngioSoma Research, Inc., a Nevada corporation, (“AngioSoma Nevada”) with AngioSoma Research Texas surviving as our wholly-owned subsidiary (the “Merger”) . In connection with the Merger, the Company issued to the holders of outstanding common stock of AngioSoma Nevada 20 million shares of the Company’s common stock (“Common Stock”) and, as a result, immediately following the completion of the Merger, the former equity holders of AngioSoma Nevada owned approximately 66% of the Common Stock and the stockholders of First Titan Corp. immediately prior to the Merger owned approximately 34% of the Common Stock, in each case, on a fully-diluted basis (subject to certain exceptions and adjustments).  Also in connection with the Merger, the pre-Merger director and officer of the Company tendered his resignation and the pre-Merger director and officer of AngioSoma Nevada was appointed as the new director and officer of the Company, and our corporate headquarters was moved from Las Vegas, Nevada to Montgomery, Texas. In connection with completion of the Merger, the Company changed its corporate name from First Titan Corp. to AngioSoma, Inc. and its common stock continues to trade on the OTC Markets Group, OTCQB tier under the new trading symbol “SOAN”.


Note 2. Going Concern


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the three months ended December 31, 2016, the Company had a net loss of $317,414 and negative cash flow from operating activities of $22,952. As of December 31, 2016, the Company had negative working capital of $738,634. Management does not anticipate having positive cash flow from operations in the near future.


These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.


The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.


Management has plans to address the Company’s financial situation as follows:


In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.


- 9 -



In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company, which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.


Note 3. Summary of Significant Accounting Policies


Interim Financial Statements


The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. The results of operations for the three months ended December 31, 2016 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2017.


Consolidated Financial Statements


The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, AngioSoma Research, LLC, First Titan Energy, LLC and First Titan Technical, LLC from the date of their formations or acquisition. Significant intercompany transactions have been eliminated in consolidation.


Use of Estimates


The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.


Financial Instruments


The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period between the origination of these instruments and their expected realization.


FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures (ASC 820) defines fair value 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. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:


Level 1 -

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

 

Level 2 -

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

 

Level 3 -

Inputs that are both significant to the fair value measurement and unobservable.


- 10 -



Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, and accrued expenses. The fair value of the Company’s notes payable is estimated based on current rates that would be available for debt of similar terms that is not significantly different from its stated value.


The following table presents assets that were measured and recognized at fair value as of December 31, 2016 and the period then ended on a recurring and nonrecurring basis:


December 31, 2016


Description

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Gain (Loss)

 

Available for sale securities

 

$

13,585

 

$

 

$

 

$

13,585

 

$

2,911

 

Totals

 

$

13,585

 

$

 

$

 

$

13,585

 

$

2,911

 


The following table presents assets that were measured and recognized at fair value as of September 30, 2016 and the period then ended on a recurring and nonrecurring basis:


Description

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Available for sale securities

 

$

10,674

 

$

 

$

 

$

10,674

 

Totals

 

$

10,674

 

$

 

$

 

$

10,674

 


Commitments and Contingencies


The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. There are no known commitments or contingencies as of December 31, 2016.


Recently Issued Accounting Pronouncements


We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.


Subsequent events


The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.


Note 4. Advances


As of December 31, 2016, the Company had non-interest bearing advances payable to third parties of $52,650. These advances are payable on demand.


- 11 -



Note 5. Convertible Notes Payable


Convertible notes payable consisted of the following at December 31, 2016 and September 30, 2016:


 

 

December 31, 2016

 

September 30, 2016

 

Convertible note dated September 30, 2013 in the original principal amount of $528,434, matured September 30, 2015, bearing interest at 10% per year, convertible into common stock at a rate of $0.04 per share, in default

 

$

2,324

 

$

2,324

 

Convertible note dated June 30, 2014 payable in the original principal amount of $276,825, matured June 30, 2016, bearing interest at 10% per year, convertible into common stock at a rate of $0.03 per share, in default

 

 

276,285

 

 

276,285

 

Convertible note dated December 31, 2014 in the original principal amount of $118,620, maturing December 31, 2016, bearing interest at 10% per year, convertible into common stock at a rate of $0.01 per share

 

 

80,263

 

 

104,310

 

Convertible note dated March 31, 2015 in the original principal amount of $49,190, maturing March 31, 2017, bearing interest at 10% per year, convertible into common stock at a rate of $0.005 per share

 

 

49,190

 

 

49,190

 

Convertible note dated June 30, 2015 in the original principal amount of $66,074, maturing June 30, 2017, bearing interest at 10% per year, convertible into common stock at a rate of $0.53 per share

 

 

66,074

 

 

66,074

 

Convertible note dated September 30, 2015 in the original principal amount of $235,313, maturing September 30, 2018, bearing interest at 10% per year, convertible into common stock a rate of $0.75 per share

 

 

235,313

 

 

235,313

 

Convertible note dated December 31, 2015 in the original principal amount of $90,040, maturing December 31, 2018, bearing interest at 10% per year, convertible into common stock at a rate of $0.08 per share

 

 

90,040

 

 

90,040

 

Convertible note dated March 24, 2016 in the original principal amount of $40,000, maturing March 24, 2017, bearing interest at 5% per year, convertible into common stock at the lower of a 48% discount to the lowest trading price of the last 20 days before conversion and $0.00005 per share

 

 

 

 

40,000

 

Convertible note dated March 31, 2016 in the original principal amount of $71,861, maturing March 31, 2019, bearing interest at 10% per year, convertible into common stock at a rate of a 60% discount to the market price on the date of conversion

 

 

71,861

 

 

71,861

 

Total convertible notes payable

 

$

871,350

 

$

935,397

 

 

 

 

 

 

 

 

 

Less: current portion of convertible notes payable

 

 

(474,135

)

 

(538,183

)

Less: discount on noncurrent convertible notes payable

 

 

(368,092

)

 

(371,687

)

Long-term convertible notes payable, net of discount

 

$

29,123

 

$

25,527

 

 

 

 

 

 

 

 

 

Current portion of convertible notes payable

 

 

474,135

 

 

538,183

 

Discount on current convertible notes payable

 

 

(67,053

)

 

(109,760

)

Short-term convertible notes payable, net of discount

 

$

407,082

 

$

428,423

 


All principal along with accrued interest is payable on the maturity date. The notes are convertible into common stock at the option of the holder. The holder of the notes cannot convert the notes into shares of common stock if that conversion would result in the holder owning more than 4.9% of the outstanding stock of the Company.


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Conversions to Common Stock


During three months ended December 31, 2016, the holders of the Convertible Note Payable dated December 31, 2014 elected to convert principal and accrued interest of $25,000 into 2,500,000 shares of common stock. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.


During three months ended December 31, 2016, the holders of the Convertible Note Payable dated March 24, 2016 elected to fully convert principal and accrued interest of $41,118 into 1,263,400 shares of common stock. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.


Note 6. Related Party Transactions


The Company rents office space from David Summers, a significant shareholder of the Company, for $400 per month under a month to month lease. As of December 31, 2016, rent and other expense reimbursements in the amount of $3,450 was unpaid.


Alex Blankenship is paid $5,000 per month under her employment agreement with the Company. As of December 31, 2016, the Company owed Ms. Blankenship $40,315 for unpaid compensation.


As of December 31, 2016, the Company owed Sydney Jim, our former CEO, $31,730 for accrued but unpaid compensation.


Note 7. Stockholders’ Equity


Preferred Stock issued for cash


During the three months ended December 31, 2016, the Company issued 12,500 shares of Series B Preferred Stock to a third party and received cash proceeds of $12,500.


Common stock issued for conversion of convertible note payable


During three months ended December 31, 2016, the Company issued 3,763,400 shares of common stock upon the conversion of accrued interest of $66,118. No gain or loss was recognized on the transaction because it was transacted within the terms of the convertible note payable.


Note 8. Subsequent Events


The Company has reviewed subsequent events through the filing of this report and has noted none that require disclosure.


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Overview


AngioSoma is a clinical stage biotechnology company focused on improving the effectiveness of current standard-of-care treatments, especially related to endovascular interventions in the treatment of peripheral artery disease (PAD).


AngioSoma is developing its lead product, a drug candidate called Liprostin TM  for the treatment of peripheral artery disease, or PAD, which has completed FDA Phase I and three Phase II clinical trials. We are in discussions with several contract research organizations for completion of our FDA protocol for Phase III and submission of our new drug application for marketing in the US and its territories.


Critical Accounting Policies


We prepare our consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the condensed consolidated financial statements are prepared. We regularly review our accounting policies, and how they are applied and disclosed in our condensed consolidated financial statements.


While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.


Results of Operations


General and administrative expense.  We recognized general and administrative expense of $236,838 for the three months ended December 31, 2016 primarily related to accrued compensation and stock-based compensation.


Interest expense.  We recognized interest expense of $80,576 for the three months ended December 31, 2016 primarily related to amortization of discounts on convertible notes payable.


Net loss.  We recognized a net loss of $317,414 for the three months ended December 31, 2016 as a result of general and administrative expense and interest expense discussed above.


Liquidity and Capital Resources


At December 31, 2016, we had cash on hand of $393. The Company has negative working capital of $738,638. Net cash used in operating activities for the three months ended December 31, 2016 was $22,952. Cash on hand is adequate to fund our operations for less than one month. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to the Company. We have no material commitments for capital expenditures as of December 31, 2016.


Additional Financing


Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.


Off Balance Sheet Arrangements


We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.


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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not applicable to a smaller reporting company.


ITEM 4. CONTROLS AND PROCEDURES


Management’s Report on Internal Control over Financial Reporting


We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2016. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2016, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.


 

1.

As of December 31, 2016, we did not maintain effective controls over the control environment. Specifically, we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

 

 

 

 

2.

As of December 31, 2016, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.


Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.


Change in Internal Controls Over Financial Reporting


There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.



PART II — OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.


ITEM 1A. RISK FACTORS


Not applicable to a smaller reporting company.


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


None.


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ITEM 3. DEFAULTS UPON SENIOR SECURITIES


The Company has not defaulted upon senior securities.


ITEM 4. MINE SAFETY DISCLOSURES


This item is not applicable to smaller reporting companies.


ITEM 5. OTHER INFORMATION


None.


ITEM 6. EXHIBITS


3.1

Articles of Incorporation (1)

3.2

Bylaws (2)

14.1

Code of Ethics (3)

31.1

Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer. (4)

32.1

Section 1350 Certification of principal executive officer and principal financial accounting officer. (4)

101*

XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q. (4)(5)

__________

(1)

Incorporated by reference to our Definitive Proxy Statement on Schedule 14A filed on April 8, 2015.

(2)

Incorporated by reference to our Form 10-K/A Amendment No. 1 for the year ended September 30, 2015 filed on January 22, 2016.

(3)

Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on November 3, 2010.

(4)

Filed or furnished herewith.

(5)

In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”



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.


 

AngioSoma Inc.

 

 

Date: April 10, 2017

BY: /s/ Alex Blankenship

 

Alex Blankenship

 

Chief Executive Officer, President, Secretary, Treasurer, Principal Executive Officer, Principal Finance and Accounting Officer and Sole Director


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