0001477932-19-000451.txt : 20190213 0001477932-19-000451.hdr.sgml : 20190213 20190213160153 ACCESSION NUMBER: 0001477932-19-000451 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 38 CONFORMED PERIOD OF REPORT: 20181231 FILED AS OF DATE: 20190213 DATE AS OF CHANGE: 20190213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Applied BioSciences Corp. CENTRAL INDEX KEY: 0001607549 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 811699502 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55523 FILM NUMBER: 19596994 BUSINESS ADDRESS: STREET 1: 9701 WILSHIRE BLVD. STREET 2: SUITE 1000 CITY: BEVERLY HILLS STATE: CA ZIP: 90212 BUSINESS PHONE: (310) 356-7374 MAIL ADDRESS: STREET 1: 9701 WILSHIRE BLVD. STREET 2: SUITE 1000 CITY: BEVERLY HILLS STATE: CA ZIP: 90212 FORMER COMPANY: FORMER CONFORMED NAME: Stony Hill Corp. DATE OF NAME CHANGE: 20161109 FORMER COMPANY: FORMER CONFORMED NAME: First Fixtures, Inc. DATE OF NAME CHANGE: 20140507 10-Q 1 appb_10q.htm FORM 10-Q appb_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2018

 

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to ____

 

Commission File No. 000-55523

 

APPLIED BIOSCIENCES CORP.

(Exact name of registrant as specified in its charter)

 

Nevada

None

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

9701 Wilshire Blvd., Suite 1000

Beverly Hills, California 90212

(Address of principal executive offices) (Zip Code)

 

(310) 356-7374

(Registrant’s telephone number, including area code)

 

____________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the issuer (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 ¨ No x

 

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. (check one):

 

Large accelerated filer

o

Accelerated filer

o

Non-accelerated filer

x

Smaller reporting company

x

Emerging growth company

x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act): Yes ¨ No x

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of February 8, 2019 there were 13,342,113 shares of common stock, $0.00001 par value per share, outstanding.

 

 
 
 
 

 

APPLIED BIOSCIENCES CORP.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED DECEMBER 31, 2018

 

INDEX

 

Index

 

Page

 

 

 

Part I. Financial Information

 

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

4

 

 

 

Condensed Consolidated Balance Sheets as of December 31, 2018 (Unaudited) and March 31, 2018.

 

4

 

 

 

Condensed Unaudited Consolidated Statements of Operations for the three and nine months ended December 31, 2018 and December 31, 2017.

 

5

 

 

 

Condensed Unaudited Consolidated Statements of Stockholders’ Equity for the nine months ended December 31, 2018.

 

6

 

 

 

Condensed Unaudited Consolidated Statement of Cash Flows for the nine months ended December 31, 2018 and December 31, 2017.

 

8

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited).

 

9

 

 

Item 2.

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

 

15

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

19

 

 

Item 4.

Controls and Procedures.

 

19

 

 

 

Part II. Other Information

 

 

Item 1.

Legal Proceedings.

 

20

 

 

Item 1A.

Risk Factors.

 

20

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

20

 

 

Item 3.

Defaults Upon Senior Securities.

 

20

 

 

Item 4.

Mine Safety Disclosures.

 

20

 

 

Item 5.

Other Information.

 

20

 

 

Item 6.

Exhibits.

 

21

 

 

 

Signatures

 

23

 

 

 
2
 
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q of Applied Biosciences Corp., a Nevada corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the possibility that we will not receive sufficient customers to grow our business, the Company’s need for and ability to obtain additional financing, other factors over which we have little or no control; and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).

 

Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

 

 
3
 
Table of Contents

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial statements.

 

APPLIED BIOSCIENCES CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,
2018

 

 

March 31,
2018

 

ASSETS

 

(unaudited)

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$ 241,571

 

 

$ 60,934

 

Accounts receivable, net of allowance of nil and $887 at December 31, 2018 (unaudited) and March 31, 2018, respectively

 

 

17,822

 

 

 

12,386

 

Inventory

 

 

70,105

 

 

 

29,074

 

Prepaids and other current assets

 

 

46,756

 

 

 

124,455

 

Total Current Assets

 

 

376,254

 

 

 

226,849

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

3,563

 

 

 

4,441

 

Equity investments

 

 

873,300

 

 

 

468,537

 

Deposit on the acquisition of Trace Analytics, Inc.

 

 

550,000

 

 

 

-

 

Other asset

 

 

5,500

 

 

 

5,500

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 1,808,617

 

 

$ 705,327

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$ 33,131

 

 

$ 21,846

 

Accrued expenses

 

 

150,246

 

 

 

14,039

 

Total Current Liabilities

 

 

183,377

 

 

 

35,885

 

Stockholders' Equity

 

 

 

 

 

 

 

 

Preferred stock; $0.00001 par value; 5,000,000 shares authorized; none issued and outstanding at December 31, 2018 (unaudited) and March 31, 2018

 

 

-

 

 

 

-

 

Common stock; $0.00001 par value; 200,000,000 shares authorized; 11,597,110 and 10,499,610 issued and outstanding at December 31, 2018 (unaudited) and March 31, 2018, respectively

 

 

116

 

 

 

105

 

Additional paid in capital

 

 

4,960,791

 

 

 

3,054,297

 

Common stock to be issued, 1,656,500 and 263,000 shares at December 31, 2018 (unaudited) and March 31, 2018, respectively

 

 

1,982,352

 

 

 

526,000

 

Accumulated deficit

 

 

(5,299,634 )

 

 

(2,901,933 )

Total Applied BioSciences Corp. Stockholders' Equity

 

 

1,643,625

 

 

 

678,469

 

Non-controlling deficit

 

 

(18,385 )

 

 

(9,027 )

Total Stockholders' Equity

 

 

1,625,240

 

 

 

669,442

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$ 1,808,617

 

 

$ 705,327

 

 

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

 

 
4
 
Table of Contents

 

APPLIED BIOSCIENCES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Three Months

 

 

Three Months

 

 

Nine Months

 

 

Nine Months

 

 

 

Ended

 

 

Ended

 

 

Ended

 

 

Ended

 

 

 

December 31,
2018

 

 

December 31,
2017

 

 

December 31,
2018

 

 

December 31,
2017

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRODUCT REVENUE, NET

 

$ 413,109

 

 

$ 62,977

 

 

$ 472,509

 

 

$ 179,534

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE, PRODUCT

 

 

379,582

 

 

 

50,370

 

 

 

439,740

 

 

 

140,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS MARGIN

 

 

33,527

 

 

 

12,607

 

 

 

32,769

 

 

 

38,828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing (including stock based compensation of nil, $47,111, $210,000 and $47,111, respectively)

 

 

100,730

 

 

 

165,315

 

 

 

556,167

 

 

 

229,674

 

General and administrative (including stock based compensation of $1,133,534, $13,889, $1,271,959 and $26,389, respectively)

 

 

1,317,469

 

 

 

133,977

 

 

 

1,712,667

 

 

 

358,193

 

Depreciation and Amortization

 

 

292

 

 

 

56,172

 

 

 

877

 

 

 

168,428

 

TOTAL OPERATING EXPENSES

 

 

1,418,491

 

 

 

355,464

 

 

 

2,269,711

 

 

 

756,295

 

OPERATING LOSS

 

 

(1,384,964 )

 

 

(342,857 )

 

 

(2,236,942 )

 

 

(717,467 )

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrecognized gain on equity investments

 

 

-

 

 

 

-

 

 

 

404,763

 

 

 

-

 

Interest Expense

 

 

(506,579 )

 

 

-

 

 

 

(574,880 )

 

 

-

 

Total other income, net

 

 

(506,579 )

 

 

-

 

 

 

(170,117 )

 

 

-

 

NET LOSS

 

 

(1,891,543 )

 

 

(342,857 )

 

 

(2,407,059 )

 

 

(717,467 )

Less: Net loss (income) attributable to non controlling interest

 

 

(234 )

 

 

7,131

 

 

 

9,358

 

 

 

5,997

 

NET LOSS ATTRIBUTABLE TO APPLIED BIOSCIENCES CORP.

 

$ (1,891,777 )

 

$ (335,726 )

 

$ (2,397,701 )

 

$ (711,470 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS PER COMMON SHARE

 

$ (0.16 )

 

$ (0.02 )

 

$ (0.22 )

 

$ (0.05 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

11,797,297

 

 

 

15,595,100

 

 

 

11,150,168

 

 

 

15,458,775

 

 

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

 

 
5
 
Table of Contents

  

APPLIED BIOSCIENCES CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED DECEMBER 31, 2018 (UNAUDITED)

 

 

 

Common Stock $0.00001 Par

 

 

Common
Stock
to be

 

 

Additional

Paid In

 

 

Non-
Controlling

 

 

Accumulated

 

 

Stockholders'

 

 

 

Number

 

 

Amount

 

 

Issued

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018

 

 

10,499,610

 

 

$ 105

 

 

$ 526,000

 

 

$ 3,054,297

 

 

$ (9,027 )

 

$ (2,901,933 )

 

$ 669,442

 

Issuance of common stock previously committed but not issued

 

 

50,000

 

 

 

1

 

 

 

(100,000 )

 

 

99,999

 

 

 

 

 

 

 

 

 

 

 

-

 

Issuance of common stock for cash

 

 

 

 

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75,000

 

Fair value of shares issued to consultant for services

 

 

90,000

 

 

 

1

 

 

 

45,926

 

 

 

179,999

 

 

 

 

 

 

 

 

 

 

 

225,926

 

Fair value of shares issued to advisory board member

 

 

25,000

 

 

 

-

 

 

 

 

 

 

 

51,000

 

 

 

 

 

 

 

 

 

 

 

51,000

 

Beneficial conversion feature associated with issuance of convertible notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,705

 

 

 

 

 

 

 

 

 

 

 

28,705

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,256 )

 

 

(395,501 )

 

 

(401,757 )

Balance, June 30, 2018 (unaudited)

 

 

10,664,610

 

 

 

107

 

 

 

546,926

 

 

 

3,414,000

 

 

 

(15,283 )

 

 

(3,297,434 )

 

 

648,316

 

Issuance of common stock for cash

 

 

12,500

 

 

 

 

 

 

 

(25,000 )

 

 

25,000

 

 

 

 

 

 

 

 

 

 

 

-

 

Fair value of shares issued to consultant for services

 

 

 

 

 

 

 

 

 

 

15,926

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

15,926

 

Beneficial conversion feature associated with issuance of convertible notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

99,900

 

 

 

 

 

 

 

 

 

 

 

99,900

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,336 )

 

 

(110,423 )

 

 

(113,759 )

Balance, September 30, 2018 (unaudited)

 

 

10,677,110

 

 

 

107

 

 

 

537,852

 

 

 

3,538,900

 

 

 

(18,619 )

 

 

(3,407,857 )

 

 

650,383

 

Fair value of shares issued to consultants for services

 

 

295,000

 

 

 

3

 

 

 

-

 

 

 

356,447

 

 

 

 

 

 

 

 

 

 

 

356,450

 

Fair value of shares issued to Company Officers and board member

 

 

625,000

 

 

 

6

 

 

 

 

 

 

 

756,244

 

 

 

 

 

 

 

 

 

 

 

756,250

 

Beneficial conversion feature associated with a convertible note

 

 

 

 

 

 

 

 

 

 

 

 

 

 

309,200

 

 

 

 

 

 

 

 

 

 

 

309,200

 

Conversion of convertible debt

 

 

 

 

 

 

 

 

 

 

1,444,500

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

1,444,500

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

234

 

 

 

(1,891,777 )

 

 

(1,891,543 )

Balance, December 31, 2018 (unaudited)

 

 

11,597,110

 

 

$ 116

 

 

$ 1,982,352

 

 

$ 4,960,791

 

 

$ (18,385 )

 

$ (5,299,634 )

 

$ 1,625,240

 

 

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

 

 
6
 
Table of Contents

 

APPLIED BIOSCIENCES CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED DECEMBER 31, 2017 (UNAUDITED)

 

 

 

Common Stock $0.00001 Par

 

 

Common Stock

to be

 

 

Additional

Paid In

 

 

Non-
Controlling

 

 

Accumulated

 

 

Stockholders'

 

 

 

Number

 

 

Amount

 

 

Issued

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2017

 

 

15,247,600

 

 

$ 152

 

 

$ 426,000

 

 

$ 1,742,472

 

 

$ 1,736

 

 

$ (525,832 )

 

$ 1,644,528

 

Common stock to be issued in conjunction with consulting agreement

 

 

 

 

 

 

 

 

 

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50,000

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,196

 

 

 

(198,400 )

 

 

(197,204 )

Balance, June 30, 2017 (unaudited)

 

 

15,247,600

 

 

 

152

 

 

 

476,000

 

 

 

1,742,472

 

 

 

2,932

 

 

 

(724,232 )

 

 

1,497,324

 

Issuance of common stock for cash

 

 

347,500

 

 

 

2

 

 

 

 

 

 

 

694,998

 

 

 

 

 

 

 

 

 

 

 

695,000

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(57 )

 

 

(177,350 )

 

 

(177,407 )

Balance, September 30, 2017 (unaudited)

 

 

15,595,100

 

 

 

154

 

 

 

476,000

 

 

 

2,437,470

 

 

 

2,875

 

 

 

(901,582 )

 

 

2,014,917

 

Common stock to be issued in conjunction with consulting agreement

 

 

 

 

 

 

 

 

 

 

62,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62,333

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,136 )

 

 

(335,720 )

 

 

(342,856 )

Balance, December 31, 2017 (unaudited)

 

 

15,595,100

 

 

$ 154

 

 

$ 538,333

 

 

$ 2,437,470

 

 

$ (4,261 )

 

$ (1,237,302 )

 

$ 1,734,394

 

 

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

 

 
7
 
Table of Contents

  

APPLIED BIOSCIENCES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Nine Months

 

 

Nine Months

 

 

 

Ended

 

 

Ended

 

 

 

December 31,
2018

 

 

December 31,
2017

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

Net loss

 

$ (2,407,059 )

 

$ (717,467 )

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

 

 

 

 

 

 

 

 

Unrecognized gain on equity investments

 

 

(404,763 )

 

 

-

 

Amortization of debt discount

 

 

437,805

 

 

 

-

 

Fair value of shares issued to consultants

 

 

649,302

 

 

 

112,333

 

Fair value of shares issued to officers and board member

 

 

756,250

 

 

 

-

 

Depreciation

 

 

878

 

 

 

44

 

Amortization of intangible

 

 

-

 

 

 

168,384

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(5,436 )

 

 

992

 

Inventory

 

 

(41,031 )

 

 

(12,305 )

Prepaid and other current assets

 

 

77,699

 

 

 

12,630

 

Other asset

 

 

-

 

 

 

(5,500 )

Accounts payable and accrued expenses

 

 

147,492

 

 

 

20,188

 

Net cash used in operating activities

 

 

(788,863 )

 

 

(420,701 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Deposit on acquisition

 

 

(550,000 )

 

 

-

Acquisition of equity investments

 

 

-

 

 

 

(68,537

)

Purchase of property and equipment

 

 

-

 

 

 

(1,568 )

Net cash used in investing activities

 

 

(550,000 )

 

 

(70,105 )

 

 

 

 

 

 

 

 

 

CASH FLOW FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from issuance of convertible notes

 

 

1,444,500

 

 

 

-

 

Proceeds from issuance of common stock

 

 

75,000

 

 

 

695,000

 

Net cash provided by financing activities

 

 

1,519,500

 

 

 

695,000

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH

 

 

180,637

 

 

 

204,194

 

 

 

 

 

 

 

 

 

 

CASH, BEGINNING OF PERIOD

 

 

60,934

 

 

 

212,637

 

 

 

 

 

 

 

 

 

 

CASH, END OF PERIOD

 

$ 241,571

 

 

$ 416,831

 

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Fair value of common stock issued upon conversion of convertible notes

 

$ 1,444,500

 

 

$ -

 

Fair value of beneficial conversion feature related to issuance of convertible notes

 

$ 437,805

 

 

$ -

 

 

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

 

 
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NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

Description of the Company

 

Applied BioSciences Corp. (formerly First Fixtures, Inc. and Stony Hill Corp. or the “Company”) was incorporated in the State of Nevada on February 21, 2014 and established a fiscal year end of March 31. Effective October 24, 2016 the Company changed its name from First Fixtures Inc. to Stony Hill Corp and on March 6, 2018, the Company changed its name from Stony Hill Corp. to Applied BioSciences Corp. The Company is focused on multiple areas of the hemp and CBD industry. Specifically, the Company is focused on select investments, branding, real estate, and partnership opportunities in the recreational, health and wellness, nutraceutical, and media industries.

 

Basis of presentation – Unaudited Financial Statements

 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2019, or for any other interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended March 31, 2018, which are included in the Company’s Report on Form 10-K for such year filed on June 28, 2018.

 

Going concern

 

These condensed statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As reflected in the condensed consolidated financial statements, the Company incurred a net loss of $2,407,059 and used $788,863 of cash in operating activities during the nine months ended December 31, 2018. Further, the Company’s independent auditor in their audit report for fiscal year ended March 31, 2018 expressed substantial doubt about the Company’s ability to continue as a going concern. These and other factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital and to ultimately achieve sustainable revenues and income from operations. During the nine months ended December 31, 2018, the Company sold 37,500 shares of its common stock to accredited investors at a price of $2.00 per share for total proceeds of $75,000 and issued convertible notes for total proceeds of $1,444,500 both in private placements to accredited investors. However, the Company will need and is currently working on obtaining additional funds to operate its business through and beyond the date of this Form 10-Q filing. There is no assurance that such funds will be available or at terms acceptable to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions and covenants on its operations, in the case of debt financing or cause substantial dilution for its stockholders in the case of convertible debt and equity financing.

 

 
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Applied Products LLC, VitaCBD LLC, an 80% owned entity, both Washington limited liability companies and SHL Management LLC, a Nevada limited liability company. Intercompany transactions and balances have been eliminated in consolidation. Management evaluates its investments on an individual basis for purposes of determining whether or not consolidation is appropriate.

 

Use of Estimates and Assumptions

 

Preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Among other things, management estimates include the collectability of its accounts receivable, recoverability of inventory, assumptions made in determining impairment of investments and intangible assets, accruals for potential liabilities, and realization of deferred tax assets. These estimates generally involve complex issues and require judgments, involve analysis of historical information and the prediction of future trends, and are subject to change from period to period. Actual amounts could differ significantly from these estimates.

 

Revenue Recognition

 

The Company adopted the guidance of ASC 606 on April 1, 2018, Revenue from Contracts with Customers (Topic 606), (ASC 606). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. 

 

Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer.

 

The implementation of ASC 606 had no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.

 

Advertising

 

The Company expenses advertising costs as incurred. Advertising expense for the three and nine months ended December 31, 2018 amounted to $100,730 and $556,167, respectively, and $165,315 and $229,674 for the three and nine months ended December 31, 2017 and are included in "Sales and Marketing expenses" in the Condensed Consolidated Statements of Operations.

 

 
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Earnings (Loss) per Share

 

The basic earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Shares of common stock to be issued are included in weighted average shares calculation from the date of grant. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items.

 

Investments

 

Through March 31, 2018, the Company used either the equity method or the cost method of accounting. The Company used the equity method for unconsolidated equity investments in which the Company was considered to have significant influence over the operations of the investee. The Company used the cost method for all other investments. Under the cost method, there is no change to the cost basis unless there is an other-than-temporary decline in value or dividends are received. If the decline is determined to be other-than-temporary, the Company writes down the cost basis of the investment to a new cost basis that represents realizable value.

 

On April 1, 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 primarily affects equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Among other things, this new guidance requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. As such, the Company measures its equity investments at their fair value at end of each reporting period.

 

Investments accounted for under the equity method or cost method of accounting above are included in the caption "Equity investments" on the Condensed Consolidated Balance Sheets.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases. This update will require the recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its financial statements and related disclosures.

 

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The ASU also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently assessing the effect that the ASU will have on our financial position, results of operations, and disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

 

 
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NOTE 3 – INVESTMENT

 

Equity investments relate to purchases of stock in certain entities with ownership percentages of less than 5%. As of March 31, 2018, these investments were recorded at their cost basis. On April 1, 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, and as such, these investments were recorded at their market value as of December 31, 2018. The investments consist of the following:

 

 

 

December 31,
2018

 

 

March 31,
2018

 

(A) Cannabi-Tech Ltd. (Gemma)

 

$ 68,537

 

 

$ 68,237

 

(B) Hightimes Holdings Corp.

 

 

654,763

 

 

 

250,000

 

(C) Precision Cultivation Systems, LLC

 

 

50,000

 

 

 

50,000

 

(D) Bailey Venture Partners XII LLC (JUUL)

 

 

100,000

 

 

 

100,000

 

 

 

$ 873,300

 

 

$ 468,537

 

  

(A) In November 2016, the Company purchased 29,571 shares of Preferred A stock of Cannabi-Tech Ltd. (“Cannabi”), at a price of $1.69086 per share for total investment of $50,000. In October 2017, the Company purchased 7,309 shares of Preferred A-1 stock of Cannabi at a price of $2.536 per share for total investment of $18,537. As of March 31, 2018, total investment amounted to $68,537, which accounts for less than 5% in Cannabi. Cannabi is a private company incorporated in the State of Israel that provides lab-grade medical cannabis quality control testing systems used to test the quality of medical marijuana flowers. The fair value of the investment at December 31, 2018 approximated its cost basis.

 

(B) In January 2017, the Company entered in to an agreement to purchase 59,524 shares of Class A common stock at a price of $4.20 per share for total investment of $250,000, which accounts for less than 5% investment in Hightimes Holdings Corp. (“Hightimes”). Hightimes owns Hight Times Magazine and hosts festivals, events and competitions including the High Times Cannabis Cup and multiple e-commerce properties, including HighTimes.com, CannabisCup.com and 420.com. As of September 30, 2018 and December 31, 2018, the Company was able to obtain observable evidence that the investment had a market value of $11.00 per share, or an aggregate value of $654,763. As such, the Company recorded an unrecognized gain from the change in market value of $404,763 during the nine months ended December 31, 2018.

 

(C) In June 2017, the Company entered in a Subscription Agreement to purchase 0.5% interest in Precision Cultivation Systems, LLC (“Precision”), a Delaware limited liability company, for a purchase price of $50,000. Precision is developing a growth system that capitalizes on a patent-pending cultivation method that utilizes proprietary irrigation and root zone conditioning. As part of the Subscription Agreement, $42,500 of the investment is subject to repayment on a pro-rata basis with other investors who have entered into similar Subscription Agreements. Amounts subject to repayment are solely at the discretion of Precision. The fair value of the investment at December 31, 2018 approximated its cost basis.

 

(D) In January 2018, the Company paid $100,000 for the purchase of a Membership Interest in Bailey Venture Partners XII LLC (“Bailey”) representing less than 5% interest in Bailey. Along with other funds received from third-party investors, Bailey plans to invest funds received in various strategic investments. The Company recorded this investment at cost and will recognize dividends, if any, when received, and will recognize gains or loss upon either selling the securities or recognize a loss prior to selling the securities if there is evidence that the fair market value of the investment has declined to below the recorded historical cost. The fair value of the investment at December 31, 2018 approximated its cost basis.

  

In February 2019, the Company received a distribution of approximately $186,000 from Bailey’s investment in JUUL Labs, Inc.  

 

As the Company does not participate in the management of these companies nor has the ability to exercise significant influence over these companies, the Company recorded these investments at cost, and as of April 1, 2018, will adjust the cost basis to market at the end of each reporting period. Dividends, if any, will be recognized when received.

 

During the three months ended December 31, 2018, the Company paid $550,000 as a deposit towards the acquisition purchase price of Trace Analytics, Inc. (see Note 7), which was reflected as deposit on the acquisition in the accompanying condensed consolidated balance sheet as of the period then ended.

 

 
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NOTE 4 – CONVERTIBLE NOTE

 

During the nine months ended December 31, 2018, the Company issued separate Convertible Promissory Notes (“Notes”) having a total principal amount of $1,444,500 to certain accredited holders. All outstanding principal together with interest on these Notes was due and payable on December 31, 2018 and accrued interest ranging from 1% to 8% per month, and 8% per annum. The note holders, at their sole discretion and election, were allowed to convert any part or all of the then outstanding principal and/or interest on these Notes into shares of common stock of the Company at a fixed price per share of $1.00. On December 31, 2018, all holders of the Notes converted the principal portion of their Notes to 1,444,500 shares of the Company’s common stock. The shares had not been issued as of December 31, 2018 and were reflected in “Common stock to be issued” in the condensed consolidated statement of stockholders’ equity during the period then ended.

 

A portion of the Notes with principal amount aggregating $1,019,500 were issued when the market price of the Company’s common stock was in excess of the $1.00 per share conversion price creating beneficial conversion feature associated with these Notes with an aggregate amount of $437,805 upon issuance dates. As such, the Company recorded $437,805 in additional paid-in capital and debt discount representing the intrinsic value of the beneficial conversion feature at the date of the borrowing against the Notes. The value of the beneficial conversion feature was fully amortized upon conversion of all of the outstanding Notes and reflected as interest expense for the nine months ended December 31, 2018.

  

NOTE 5 – RELATED PARTY TRANSACTIONS

 

In view of the Company’s limited operations and resources, none of the Company’s directors and/or officers received any compensation from the Company during the nine months ended December 31, 2018 and 2017.

 

NOTE 6 – EQUITY

 

Common Stock to be Issued

 

On February 23, 2017, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with mCig, Inc., a Nevada corporation (“mCig”) consisting of the issuance of an aggregate of 350,000 shares of common stock. Of the 350,000 shares of common stock consideration, 150,000 shares or $426,000 were not issued as of March 31, 2018 and were included in “Common stock to be issued” in the accompanying condensed consolidated statement of stockholders’ equity. During the nine months ended December 31, 2018, the Company issued 50,000 shares of common stock valued at $100,000 which was previously reflected as “Common stock to be issued” in the condensed consolidated statement of stockholders’ equity.

 

During the nine months ended December 31, 2018, the Company sold 37,500 shares of common stock, of which 25,000 shares had not been issued as of December 31, 2018 and is reflected in “Common stock to be issued” in the condensed consolidated statement of stockholders’ equity. The shares were sold at a price of $2.00 per share for total proceeds of $75,000 pursuant to a private placement Subscription Agreement with accredited investors. The Subscription Agreement offered up to one million shares of the Company’s common stock at a price per share of $2.00 per share. The Company made this offering solely to accredited investors, as defined under Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended.

 

Establishment of Advisory Board and Adoption of Charter

 

On April 28, 2017, the Company established an advisory board (the “Advisory Board”) and approved and adopted a charter (the “Advisory Board Charter”) to govern the Advisory Board. The Advisory Board shall be comprised of one or more directors (“Advisors”), and up to nine independent, non-Board, non-employee members, all of whom shall be appointed and subject to removal by the Board of Directors at any time.

 

During the nine months ended December 31, 2018, the Company appointed an advisor to the Advisory Board, which entitled him to an annual consulting fee 25,000 shares of the Company’s stock for a term of 6 months, with total fair value of $51,000.

 

 
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Shares issued to consultants for services

 

During the nine months ended December 31, 2018, the Company granted an aggregate of 414,815 shares of its common stock to seven (7) consultants as payment for services rendered to the Company and recorded expense of $598,302 based on the fair value of the Company’s common stock at grant dates. Of the 414,815 shares granted, 29,815 shares valued at $61,852 had not been issued as of December 31, 2018 and were reflected in “Common stock to be issued” in the condensed consolidated statement of stockholders’ equity during the period then ended.  

 

Shares issued to officers and directors for compensation

 

During the nine months ended December 31, 2018, the Company granted an aggregate of 625,000 shares of its common stock to one (1) board member and (2) officers of the Company as payment for services rendered to the Company and recorded expense of $756,250 based on the fair value of the Company’s common stock at grant dates. 

 

NOTE 7 – SUBSEQUENT EVENTS

 

Acquisition

 

On January 1, 2019, the Company entered into a Common Stock Purchase Agreement and closed on a purchase of 520,410 shares of common stock of Trace Analytics, Inc., a Washington corporation (“Trace Analytics”), at a purchase price of $2.40 per share, for an aggregate purchase price of $1,250,000, of which $750,000 was payable in cash and $500,000 of which will be paid in shares of common stock of the Company. During the three months ended December, 31, 2018, the Company paid $550,000 towards the acquisition purchase price of Trace Analytics, and which was reflected as deposit on the acquisition of Trace Analytics in the accompanying condensed consolidated balance sheet as of the period then ended. Immediately following the purchase, the Company holds 51% of the issued and outstanding shares of common stock of Trace Analytics. The Company is in the process of analizing the accounting effects of this transaction and historical financial statements of the acquired company and pro forma effects of the acquisition will be provided in a Form 8K/A to be subsequently filed.

 

 On February 6, 2019, the Company issued an aggregate of 250,000 shares of common stock of the Company as payment for the shares of common stock payable to Trace Analytics. 125,000 of such shares were issued directly to Jason Zitzer, and 125,000 of such shares were issued directly to Gordon Fargas, both of whom are affiliates of Trace Analytics.

  

Trace Analytics is a cannabis testing laboratory and service company located in Spokane, Washington. Some of the services provided by Trace Analytics are:

 

 

· 502 compulsory testing for all types of cannabis products;

 

· Industrial hemp CBD product testing;

 

· Extensive terpene, residual solvents, and cannabinoid profiles;

 

· Aflatoxin/Mycotoxin screening;

 

· Experienced grow consultation, evaluation and related services; and

 

· Edibles work up, process evaluation and dose distribution guidance.

  

In connection with the Common Stock Purchase Agreement, the Company also entered into a Stockholders’ Agreement (the “Stockholders’ Agreement”), dated January 1, 2019, with Trace Analytics, Jason Zitzer, and Gordon Fargas. Mr. Zitzer and Mr. Fargas are affiliates of Trace Analytics and the only other stockholders of Trace Analytics, in addition to the Company. The Stockholders’ Agreement contains certain transfer restrictions and a right of first refusal which provides that if any party to the Stockholder’s Agreement proposes to transfer its Trace Analytics shares, Trace Analytics shall for a period of 30 days, have a first right of refusal to purchase such shares, followed by a first right of refusal for the remaining shareholders.

 

In connection with the Common Stock Purchase Agreement, the Company also entered into a Voting Agreement (the “Voting Agreement”), dated January 1, 2019, with Trace Analytics, Jason Zitzer, and Gordon Fargas. The Voting Agreement provides that the parties of the Voting Agreement shall vote their shares of common stock of Trace Analytics to appoint the three of the five members of the board of directors of Trace Analytics as designated by the Company, one member of the board of directors as designated by Mr. Ziter, and one member of the board of directors as designated by Mr. Fargas

 

Distribution

 

In February 2019, the Company received a distribution of approximately $186,000 from Bailey's investment in JUUL Labs, Inc.

 

 
14
 
Table of Contents

 

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

 

This section of this Form 10-Q includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

 

Results of Operations

 

Our revenue, operating expenses, and net loss from operations for our three and nine months ended December 31, 2018 as compared to our three and nine months ended December 31, 2017 were as follows:

 

Three Months Ended December 31, 2018 Compared to Three Months Ended December 31, 2017

 

 

 

Three Months

Ended

December 31,
2018

 

 

Three Months

Ended

December 31,
2017

 

 

$ Change

Inc (Dec)

 

 

Percentage

Change

Inc (Dec)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRODUCT REVENUE, NET

 

$ 413,109

 

 

$ 62,977

 

 

$ 350,132

 

 

 

556 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE, PRODUCT

 

 

379,582

 

 

 

50,370

 

 

 

329,212

 

 

 

654 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS MARGIN

 

 

33,527

 

 

 

12,607

 

 

 

20,920

 

 

 

166 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

100,730

 

 

 

165,315

 

 

 

(64,585 )

 

 

(39 )%

General and administrative

 

 

1,317,469

 

 

 

133,977

 

 

 

1,183,492

 

 

 

883 %

Depreciation and Amortization

 

 

292

 

 

 

56,172

 

 

 

(55,880 )

 

 

(99 )%

TOTAL OPERATING EXPENSES

 

 

1,418,491

 

 

 

355,464

 

 

 

1,063,027

 

 

 

299 %

OPERATING LOSS

 

 

(1,384,964 )

 

 

(342,857 )

 

 

1,042,107

 

 

 

304 %

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

(506,579 )

 

 

-

 

 

 

(506,579 )

 

 

-

 

Total other income, net

 

 

(506,579 )

 

 

-

 

 

 

(506,579 )

 

 

-

 

NET LOSS

 

 

(1,891,543 )

 

 

(342,857 )

 

 

1,548,686

 

 

 

452 %

Less: Net loss attributable to non controlling interest

 

 

(234 )

 

 

7,131

 

 

 

(7,365 )

 

 

(103 )%

NET LOSS ATTRIBUTABLE TO APPLIED BIOSCIENCES CORP.

 

$ (1,891,777 )

 

$ (335,726 )

 

$ 1,556,051

 

 

 

463 %

 

Revenues: Revenue from products relate to shipments of cannabidiol (“CBD”) brand products. During the three months ended December 31, 2018, we earned revenue from our CBD product lines of $413,109 as compared to $62,977 for the three months ended December 31, 2017. The factors that contributed to the $350,132 increase in revenue were the $14,132 increase related to higher sales of our new Remedi CBD, HerbalPet, TherPet and CanaGel CBD products, which we launched during our current fiscal year, and the $336,000 increase related to our wholesale of industrial Hemp.

 

Cost of Goods Sold: Cost of goods sold consists of purchases of CBD product inventory for sale. During the three months ended December 31, 2018, we incurred $379,582 of costs related to product purchases as compared to $50,370 for the three months ended December 31, 2017. The increase of $329,212 reflects the product cost of our launch of new products during our current fiscal year and $300,000 purchase of industrial Hemp for wholesale.

 

Gross Margin: Gross margin comprised from our sale of products and was $33,527 or 8% of sales for the three months ended December 31, 2018 as compared to $12,607 or 20% of sales for the three months ended December 31, 2017. The increase of $20,920 reflects our increase in sales. The lower gross margin percentage mainly relates to 10.7% margin obtained from our wholesale of industrial Hemp.

 

 
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Sales and Marketing: Sales and marketing expenses mainly comprised of advertising, public relations, events, and website marketing costs. Sales and marketing expenses decreased $64,585 to $100,730 for the three months ended December 31, 2018 as compared to $165,315 for the three months ended December 31, 2017. The majority of the decrease related to lower public relation services, website marketing development and advertising and promotion costs.

 

General and Administrative: General and administrative expenses mainly comprised of professional fees, travel expenses, meals and entertainment and other office support costs. General and administrative expenses increased $1,183,492 to $1,317,469 for the three months ended December 31, 2018 as compared to $133,977 for the three months ended December 31, 2017. The majority of the increase related to non-cash issuance of our common stock to certain officers, advisory members and board members and consultants in exchange for services which totaled $1,133,534 for the three months ended December 31, 2018. The remaining amount of the increase related to higher professional and advisory fees and other supportive general and administrative expenses.

 

Depreciation and Amortization: Depreciation expense was $292 for the three months ended December 31, 2018 as compared to $56,172 for the three months ended December 31, 2017. The decrease relates to amortization during our three months ended December 31, 2017 related to a brand that we acquired in February 2017, which was fully expensed during our fiscal year ended March 31, 2018. We did not own any similar intangibles that required amortization during the three months ended December 31, 2018.

 

Interest Expense: During the three months ended December 31, 2018, we recorded $111,489 of interest costs related to convertible notes that we entered into during our current fiscal year along with amortization of $395,090 of debt discount recorded in conjunction with the convertible notes.

 

Nine months Ended December 31, 2018 Compared to Nine months Ended December 31, 2017

 

 

 

Nine Months

Ended

December 31,
2018

 

 

Nine Months

Ended

December 31,
2017

 

 

$ Change

Inc (Dec)

 

 

Percentage

Change

Inc (Dec)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRODUCT REVENUE, NET

 

$ 472,509

 

 

$ 179,534

 

 

$ 292,975

 

 

 

163 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE, PRODUCT

 

 

439,740

 

 

 

140,706

 

 

 

299,034

 

 

 

213 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS MARGIN

 

 

32,769

 

 

 

38,828

 

 

 

(6,059 )

 

 

(16 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

556,167

 

 

 

229,674

 

 

 

326,493

 

 

 

142 %

General and administrative

 

 

1,712,667

 

 

 

358,193

 

 

 

1,354,474

 

 

 

378 %

Depreciation and Amortization

 

 

877

 

 

 

168,428

 

 

 

(167,551 )

 

 

(99 )%

TOTAL OPERATING EXPENSES

 

 

2,269,711

 

 

 

756,295

 

 

 

1,513,416

 

 

 

200 %

OPERATING LOSS

 

 

(2,236,942 )

 

 

(717,467 )

 

 

1,519,475

 

 

 

212 %

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrecognized gain on equity investments

 

 

404,763

 

 

 

-

 

 

 

404,763

 

 

 

-

 

Interest Expense

 

 

(574,880 )

 

 

-

 

 

 

(574,880 )

 

 

-

 

Total other income, net

 

 

(170,117 )

 

 

-

 

 

 

(170,117 )

 

 

-

 

NET LOSS

 

 

(2,407,059 )

 

 

(717,467 )

 

 

1,689,592

 

 

 

235 %

Less: Net loss attributable to non controlling interest

 

 

9,358

 

 

 

5,997

 

 

 

3,361

 

 

 

56 %

NET LOSS ATTRIBUTABLE TO APPLIED BIOSCIENCES CORP.

 

$ (2,397,701 )

 

$ (711,470 )

 

$ 1,686,231

 

 

 

237 %

 

Revenues: During the nine months ended December 31, 2018, we earned revenue from our CBD product lines of $472,509 as compared to $179,534 for the nine months ended December 31, 2017. The increase of $292,975 relates primarily to our wholesale of industrial Hemp for $336,000 offset by a decrease in our sale of CBD products primarily driven by our efforts to replace previously existing CBD products and change our product lines and branding to our new Remedi CBD, HerbalPet, TherPet and CanaGel CBD products. This required our change in marketing, branding, labeling and warehousing which ultimately caused sales to temporarily slow until we relaunched our new CBD products during our current fiscal year.

 

 
16
 
Table of Contents

  

Cost of Goods Sold: During the nine months ended December 31, 2018, we incurred $439,740 of costs primarily related to purchase of industrial Hemp for wholesale and product purchases and labeling of new products as compared to $140,706 for the nine months ended December 31, 2017.

 

Gross Margin: Gross margin comprised from our sale of products and was $32,769 or 7% of sales for the three months ended December 31, 2018 as compared to $38,828 or 22% of sales for the three months ended December 31, 2017. The decrease of $6,059 reflects our refocus and launch of new CBD products during our current fiscal year. The lower gross margin percentage mainly relates to 10.7% margin obtained from our wholesale of industrial Hemp.

 

Sales and Marketing: Sales and marketing expenses increased $326,493 to $556,167 for the nine months ended December 31, 2018 as compared to $229,674 for the nine months ended December 31, 2017. The majority of the increase related to stock compensation of $210,000 along with public relation services, website marketing development and increased advertising and promotion costs.

 

General and Administrative: General and administrative expenses increased $1,354,474 to $1,712,667 for the nine months ended December 31, 2018 as compared to $358,193 for the nine months ended December 31, 2017. The majority of the increase related to higher professional fees and general and administrative expenses. The majority of the increase related to non-cash issuance of our common stock to certain officers, advisory members and board members and consultants in exchange for services which totaled $1,271,959 for the six months ended December 31, 2018. The remaining amount of the increase related to higher professional and advisory fees and other supportive general and administrative expenses.

 

Depreciation and Amortization: Depreciation expense was $877 for the nine months ended December 31, 2018 as compared to $168,428 for the nine months ended December 31, 2017. The decrease relates to amortization during our nine months ended December 31, 2017 related to a brand that we acquired in February 2017, which was fully expensed during our fiscal year ended March 31, 2018. We did not own any similar intangibles that required amortization during the nine months ended December 31, 2018.

 

Unrecognized Gain on Equity Investments: During the nine months ended December 31, 2018, we were able to obtain observable evidence that an investment we own had increased by $6.80 per share for an aggregate value of $654,763, which was $404,763 higher than our original purchase price for this investment. As such, we recorded an unrecognized gain from the change in market value of $404,763 during the nine months ended December 31, 2018.

 

Interest Expense: During the nine months ended December 31, 2018, we recorded $137,075 of interest costs related to a convertible notes that we entered into during our current fiscal year along with amortization of $437,805 of debt discount recorded in conjunction with the convertible notes..

 

Liquidity and Capital Resources

 

Cash Flows

 

A summary of our cash flows for the nine months ended December 31, 2018 is as follows:

 

Net cash used in operating activities was $788,863 for the nine months ended December 31, 2018 as compared to $420,701 for the nine months ended December 31, 2017. The increase in use of cash in operations mainly related to higher general and administrative and sales and marketing expenses from our operations.

 

Net cash used in investing activities during the nine months ended December 31, 2018 was the $550,000 deposit on the purchase price related to the acquisition of Trace Analytics, Inc., which was completed in January 2019 as compared to $70,105 during the nine months ended December 31, 2017, which mainly comprised of a $68,537 equity investment we made during that period.

 

Net cash provided by financing activities for the nine months ended December 31, 2018 was $1,519,500 as compared to $695,000 for the nine months ended December 31, 2017. The amounts received during our nine months ended December 31, 2018 related to $75,000 from proceeds from the sale of shares of our common stock and $1,444,500 received from our issuance of convertible notes. The amounts received during our nine months ended December 31, 2017 related to our issuance of our common stock for cash.

 

 
17
 
Table of Contents

  

Going Concern

 

As reflected in the condensed consolidated financial statements contained elsewhere is this Form 10-Q, as of December 31, 2018 we had cash on hand and had an accumulated deficit of $241,571 and $5,299,634, respectively, and during the nine months ended December 31, 2018, we utilized cash for operations and incurred a net loss of $788,863 and $2,407,059, respectively. Our uses of cash have been primarily for strategic investments we made and operations and marketing efforts to promote and develop our CBD products and our company. Our principal sources of liquidity have been cash provided by financing, primarily through the sale of equity securities and issuance of convertible notes, along with revenues from our principal business activities. Further, we have used cash for various strategic investments for which we typically receive returns when such investments are sold and when or if dividends are declared.

 

As of the date of this Form 10-Q, our cash resources are insufficient to meet our current operating expense requirements and planned business objectives without additional financing. Our ability to continue as a going concern is dependent on our ability to raise additional capital and to ultimately achieve sustainable revenues and income from our operations. During the nine months ended December 31, 2018, we raised $75,000 through the receipt of Subscription Agreements (“Subscription”) where we sold 37,500 shares of our common stock to accredited investors at a price of $2.00 per share. We also received during the nine months ended December 31, 2018 $1,444,500 from the issuance of convertible notes to accredited investors. However, we anticipate that significant additional expenditures will be necessary to expand and bring to market our products and investments before sufficient and consistent positive operating cash flows will be achieved. As such, we will need additional funds to operate our business through and beyond the date of this Form 10-Q filing. There can be no assurance that such funds will be available or at terms acceptable to us. Even if we are able to obtain additional financing, it may contain undue restrictions and covenants on our operations, in the case of debt financing or cause substantial dilution for our stockholders in the case of convertible debt and equity financing.

 

These and other factors raise substantial doubt about our ability to continue as a going concern. Further, our independent auditors in their audit report for our fiscal year ended March 31, 2018 expressed substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

 

Summary of Significant Accounting Policies

 

Use of Estimates

 

Preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Among other things, our estimates include the collectability of our accounts receivable, recoverability of inventory, assumptions made in determining impairment of investments and intangible assets, accruals for potential liabilities, and realization of deferred tax assets. These estimates generally involve complex issues and require judgments, involve analysis of historical information and the prediction of future trends, and are subject to change from period to period. Actual amounts could differ significantly from these estimates.

 

Investments

 

We used either the equity method or the cost method of accounting. We use the equity method for unconsolidated equity investments in which we are considered to have significant influence over the operations of the investee. We use the cost method for all other investments. Under the cost method, there is no change to the cost basis unless there is an other-than-temporary decline in value or dividends are received. If the decline is determined to be other-than-temporary, we write down the cost basis of the investment to a new cost basis that represents realizable value.

 

 
18
 
Table of Contents

  

On April 1, 2018 we adopted ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 primarily affects equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Among other things, this new guidance requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. As such, we measure our equity investments at their fair value at end of each reporting period.

 

Investments accounted for under the equity method or cost method of accounting above are included in the caption "Equity investments" in our Condensed Consolidated Balance Sheets.

 

Recent Accounting Pronouncements

 

See our discussion of recent accounting policies in Footnote 2 to the condensed consolidated financial statements contained elsewhere in this Form 10-Q.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

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

 

Item 4. Controls and Procedures.

 

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 Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period 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 our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

 

In connection with this quarterly report, as required by Rule 15d-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's principal executive officer and principal financial officer. Based upon that evaluation, our company's principal executive officer and principal financial officer concluded that as of December 31, 2018, our disclosure controls and procedures were not effective.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the nine months ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. 

 

 
19
 
Table of Contents

  

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Currently we are not subject to any pending litigation or legal proceeding.

 

Item 1A. Risk Factors.

 

As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act we are not required to provide the information required under this item.

 

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

 

Not applicable

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

None.

 

Item 5. Other Information.

 

None.

 

 
20
 
Table of Contents

 

Item 6. Exhibits.

 

(a) Exhibits required by Item 601 of Regulation SK.

 

Number

Description

 

2.1

Share Exchange Agreement, dated November 4, 2016, by and among the Applied Biosciences Corp., Stony Hill Ventures Corp., a Nevada corporation, and the holders of common stock of Stony Hill Ventures Corp. (3)

 

3.1.1

Articles of Incorporation (1)

 

3.1.2

 

Certificate of Amendment (3)

 

3.1.3

 

Certificate of Change (3)

 

3.1.4

Certificate of Amendment (4)

 

3.2

 

Bylaws (2)

 

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2

 

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS *

 

XBRL Instance Document

 

101.SCH *

 

XBRL Taxonomy Extension Schema Document

 

101.CAL *

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

101.DEF *

 

XBRL Taxonomy Extension Definition Linkbase Document

 

101.LAB *

 

XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE *

 

XBRL Taxonomy Extension Presentation Linkbase Document

____________ 

(1)

Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-197443), filed with the Securities and Exchange Commission on July 16, 2014.

(2)

Incorporated by reference to the Registrant's Registration Statement on Form S-1/A (File No. 333-197443), filed with the Securities and Exchange Commission on October 16, 2014.

 

(3)

Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-52223), filed with the Securities and Exchange Commission on November 10, 2016.

 

(4)

Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-52223) filed with the Securities Exchange Commission on March 5, 2018

 

*

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 
 
21
 
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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.

 

 

APPLIED BIOSCIENCES CORP.

 

(Name of Registrant)

 

Date: February 13, 2019

By:

/s/ Chris Bridges

Name:

Chris Bridges

Title:

President (principal executive officer)

 

Date: February 13, 2019

By:

/s/ John James Southard

Name:

John James Southard

Title:

Secretary and Treasurer
(principal accounting officer and financial officer)

 

 

 
22

 

EX-31.1 2 appb_ex311.htm CERTIFICATION appb_ex311.htm

EXHIBIT 31.1

 

SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF APPLIED BIOSCIENCES CORP.

 

I, Chris Bridges, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of Applied Biosciences Corp.;

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: February 13, 2019

By:

/s/ Chris Bridges

 

Chris Bridges

 

President (principal executive officer)

 

EX-31.2 3 appb_ex312.htm CERTIFICATION appb_ex312.htm

EXHIBIT 31.2

 

SECTION 302 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF APPLIED BIOSCIENCES CORP.

 

I, John James Southard, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of Applied Biosciences Corp.;

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: February 13, 2019

By:

/s/ John James Southard

 

John James Southard

 

Secretary (principal accounting officer and principal financial officer)

 

EX-32.1 4 appb_ex321.htm CERTIFICATION appb_ex321.htm

EXHIBIT 32.1

 

SECTION 906 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF APPLIED BIOSCIENCES CORP.

 

In connection with the accompanying Quarterly Report on Form 10-Q of Applied Biosciences Corp. for the nine months ended December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Chris Bridges, President of Applied Biosciences Corp., does hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Applied Biosciences Corp.

 

 

Date: February 13, 2019

By:

/s/ Chris Bridges

 

 

Chris Bridges

 

 

President

 

(principal executive officer)

 

EX-32.2 5 appb_ex322.htm CERTIFICATION appb_ex322.htm

EXHIBIT 32.2

 

SECTION 906 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF APPLIED BIOSCIENCES CORP.

 

In connection with the accompanying Quarterly Report on Form 10-Q of Applied Biosciences Corp. for the nine months ended December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, John James Southard, Secretary of Applied Biosciences Corp., does hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Applied Biosciences Corp.

 

 

Date: February 13, 2019

By:

/s/ John James Southard

 

 

John James Southard

 

 

Secretary and Treasurer

 

(principal accounting officer and principal financial officer)

 

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Dec. 31, 2018
Feb. 08, 2019
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Entity Central Index Key 0001607549  
Document Type 10-Q  
Document Period End Date Dec. 31, 2018  
Amendment Flag false  
Current Fiscal Year End Date --03-31  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Non-accelerated Filer  
Entity Common Stock, Shares Outstanding   13,342,113
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2019  
Entity Emerging Growth Company true  
Entity Small Business true  
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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
Dec. 31, 2018
Mar. 31, 2018
Current Assets    
Cash $ 241,571 $ 60,934
Accounts receivable, net of allowance of nil and $887 at December 31, 2018 (unaudited) and March 31, 2018, respectively 17,822 12,386
Inventory 70,105 29,074
Prepaids and other current assets 46,756 124,455
Total Current Assets 376,254 226,849
Property and equipment, net 3,563 4,441
Equity investments 873,300 468,537
Deposit on the acquisition of Trace Analytics, Inc. 550,000
Other asset 5,500 5,500
TOTAL ASSETS 1,808,617 705,327
Current Liabilities    
Accounts payable 33,131 21,846
Accrued expenses 150,246 14,039
Total Current Liabilities 183,377 35,885
Stockholders' Equity    
Preferred stock; $0.00001 par value; 5,000,000 shares authorized; none issued and outstanding at December 31, 2018 (unaudited) and March 31, 2018
Common stock; $0.00001 par value; 200,000,000 shares authorized; 11,597,110 and 10,499,610 issued and outstanding at December 31, 2018 (unaudited) and March 31, 2018, respectively 116 105
Additional paid in capital 4,960,791 3,054,297
Common stock to be issued, 1,656,500 and 263,000 shares at December 31, 2018 (unaudited) and March 31, 2018, respectively 1,982,352 526,000
Accumulated deficit (5,299,634) (2,901,933)
Total Applied BioSciences Corp. Stockholders' Equity 1,643,625 678,469
Non-controlling interest (18,385) (9,027)
Total Stockholders' Equity 1,625,240 669,442
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,808,617 $ 705,327
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Dec. 31, 2018
Mar. 31, 2018
Current Assets    
Accounts receivable, net of allowance $ 887
Stockholders' Equity    
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, authorized 5,000,000 5,000,000
Preferred stock, issued 0 0
Preferred stock, outstanding 0 0
Common stock, par value $ 0.00001 $ 0.00001
Common stock, authorized 200,000,000 200,000,000
Common stock, issued 11,597,110 10,499,610
Common stock, outstanding 11,597,110 10,499,610
Common stock shares to be issued 1,656,500 263,000
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Condensed Consolidated Statements Of Operations        
PRODUCT REVENUE, NET $ 413,109 $ 62,977 $ 472,509 $ 179,534
COST OF REVENUE, PRODUCT 379,582 50,370 439,740 140,706
GROSS MARGIN 33,527 12,607 32,769 38,828
EXPENSES        
Sales and marketing (including stock based compensation of nil, $47,111, $210,000 and $47,111, respectively) 100,730 165,315 556,167 229,674
General and administrative (including stock based compensation of $1,133,534, $13,889, $1,271,959 and $26,389, respectively) 1,317,469 133,977 1,712,667 358,193
Depreciation and Amortization 292 56,172 877 168,428
TOTAL OPERATING EXPENSES 1,418,491 355,464 2,269,711 756,295
OPERATING LOSS (1,384,964) (342,857) (2,236,942) (717,467)
Other Income (Expense)        
Unrealized gain on equity investments 404,763
Interest Expense (506,579) (574,880)
Total other income, net (506,579) (170,117)
NET LOSS (1,891,543) (342,856) (2,407,059) (717,467)
Less: Net loss (income) attributable to non controlling interest (234) 7,131 9,358 5,997
NET LOSS ATTRIBUTABLE TO APPLIED BIOSCIENCES CORP. $ (1,891,777) $ (335,726) $ (2,397,701) $ (711,470)
LOSS PER COMMON SHARE $ (0.16) $ (0.02) $ (0.22) $ (0.05)
WEIGHTED AVERAGE SHARES OUTSTANDING        
Basic and diluted 11,797,297 15,595,100 11,150,168 15,458,775
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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (Unaudited) - USD ($)
Common Stock $0.00001 Par
Common Stock to be Issued
Additional Paid-In Capital
Non-Controlling Interest
Accumulated Deficit
Total
Beginning Balance, Shares at Mar. 31, 2017 15,247,600          
Beginning Balance, Amount at Mar. 31, 2017 $ 152 $ 426,000 $ 1,742,472 $ 1,736 $ (525,832) $ 1,644,528
Common stock to be issued in conjunction with consulting agreement 50,000 50,000
Net income (loss) 1,196 (198,400) (197,204)
Ending Balance, Shares at Jun. 30, 2017 15,247,600          
Ending Balance, Amount at Jun. 30, 2017 $ 152 476,000 1,742,472 2,932 (724,232) 1,497,324
Beginning Balance, Shares at Mar. 31, 2017 15,247,600          
Beginning Balance, Amount at Mar. 31, 2017 $ 152 426,000 1,742,472 1,736 (525,832) 1,644,528
Net income (loss)           (717,467)
Ending Balance, Shares at Dec. 31, 2017 15,595,100          
Ending Balance, Amount at Dec. 31, 2017 $ 154 538,333 2,437,470 (4,261) (1,237,302) 1,734,394
Beginning Balance, Shares at Jun. 30, 2017 15,247,600          
Beginning Balance, Amount at Jun. 30, 2017 $ 152 476,000 1,742,472 2,932 (724,232) 1,497,324
Issuance of common stock for cash, Shares 347,500          
Issuance of common stock for cash, Amount $ 2 694,998 695,000
Net income (loss) (57) (177,350) (177,407)
Ending Balance, Shares at Sep. 30, 2017 15,595,100          
Ending Balance, Amount at Sep. 30, 2017 $ 154 476,000 2,437,470 2,875 (901,582) 2,014,917
Common stock to be issued in conjunction with consulting agreement 62,333 62,333
Net income (loss) (7,136) (335,720) (342,856)
Ending Balance, Shares at Dec. 31, 2017 15,595,100          
Ending Balance, Amount at Dec. 31, 2017 $ 154 538,333 2,437,470 (4,261) (1,237,302) 1,734,394
Beginning Balance, Shares at Mar. 31, 2018 10,499,610          
Beginning Balance, Amount at Mar. 31, 2018 $ 105 526,000 3,054,297 (9,027) (2,901,933) 669,442
Issuance of common stock for cash, Shares          
Issuance of common stock for cash, Amount 75,000 75,000
Issuance of common stock previously committed but not issued, Shares 50,000          
Issuance of common stock previously committed but not issued, Amount $ 1 (100,000) 99,999
Fair value of shares issued to consultant for services, Shares 90,000          
Fair value of shares issued to consultant for services, Amount $ 1 45,926 179,999 225,926
Fair value of shares issued to advisory board member, Shares 25,000          
Fair value of shares issued to advisory board member, Amount 51,000 51,000
Beneficial conversion feature associated with issuance of convertible notes 28,705 28,705
Net income (loss) (6,256) (395,501) (401,757)
Ending Balance, Shares at Jun. 30, 2018 10,664,610          
Ending Balance, Amount at Jun. 30, 2018 $ 107 546,926 3,414,000 (15,283) (3,297,434) 648,316
Beginning Balance, Shares at Mar. 31, 2018 10,499,610          
Beginning Balance, Amount at Mar. 31, 2018 $ 105 526,000 3,054,297 (9,027) (2,901,933) $ 669,442
Fair value of shares issued to Company Officers and board member, Shares           625,000
Fair value of shares issued to Company Officers and board member, Amount           $ 756,250
Net income (loss)           (2,407,059)
Ending Balance, Shares at Dec. 31, 2018 11,597,110          
Ending Balance, Amount at Dec. 31, 2018 $ 116 1,982,352 4,960,791 (18,385) (5,299,634) 1,625,240
Beginning Balance, Shares at Jun. 30, 2018 10,664,610          
Beginning Balance, Amount at Jun. 30, 2018 $ 107 546,926 3,414,000 (15,283) (3,297,434) 648,316
Issuance of common stock for cash, Shares 12,500          
Issuance of common stock for cash, Amount (25,000) 25,000
Fair value of shares issued to consultant for services, Shares          
Fair value of shares issued to consultant for services, Amount 15,926 15,926
Beneficial conversion feature associated with issuance of convertible notes 99,900 99,900
Net income (loss) (3,336) (110,423) (113,759)
Ending Balance, Shares at Sep. 30, 2018 10,677,110          
Ending Balance, Amount at Sep. 30, 2018 $ 107 537,852 3,538,900 (18,619) (3,407,857) 650,383
Fair value of shares issued to consultant for services, Shares 295,000          
Fair value of shares issued to consultant for services, Amount $ 3 356,447 356,450
Fair value of shares issued to Company Officers and board member, Shares 625,000          
Fair value of shares issued to Company Officers and board member, Amount $ 6 756,244 756,250
Beneficial conversion feature associated with a convertible note 309,200 309,200
Conversion of convertible debt 1,444,500 1,444,500
Net income (loss) 234 (1,891,777) (1,891,543)
Ending Balance, Shares at Dec. 31, 2018 11,597,110          
Ending Balance, Amount at Dec. 31, 2018 $ 116 $ 1,982,352 $ 4,960,791 $ (18,385) $ (5,299,634) $ 1,625,240
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
9 Months Ended
Dec. 31, 2018
Dec. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (2,407,059) $ (717,467)
Adjustment to reconcile net loss to net cash used in operating activities:    
Unrealized gain on equity investments (404,763)
Amortization of debt discount 437,805
Fair value of shares issued to consultants 649,302 112,333
Fair value of shares issued to officers and board member 756,250
Depreciation 878 44
Amortization of intangible 168,384
Changes in operating assets and liabilities    
Accounts receivable (5,436) 992
Inventory (41,031) (12,305)
Prepaid and other current assets 77,699 12,630
Other asset (5,500)
Accounts payable and accrued expenses 147,492 20,188
Net cash used in operating activities (788,863) (420,701)
CASH FLOWS FROM INVESTING ACTIVITIES    
Deposit on acquisition (550,000)
Acquisition of equity investments   (68,537)
Purchase of property and equipment (1,568)
Net cash used in investing activities (550,000) (70,105)
CASH FLOW FROM FINANCING ACTIVITIES    
Proceeds from issuance of convertible notes 1,444,500
Proceeds from issuance of common stock 75,000 695,000
Net cash provided by financing activities 1,519,500 695,000
NET CHANGE IN CASH 180,637 204,194
CASH, BEGINNING OF PERIOD 60,934 212,637
CASH, END OF PERIOD 241,571 416,831
NON-CASH INVESTING AND FINANCING ACTIVITIES    
Fair value of common stock issued upon conversion of convertible notes 1,444,500
Fair value of beneficial conversion feature related to issuance of convertible notes $ 437,805
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
9 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Description of the Company

 

Applied BioSciences Corp. (formerly First Fixtures, Inc. and Stony Hill Corp. or the “Company”) was incorporated in the State of Nevada on February 21, 2014 and established a fiscal year end of March 31. Effective October 24, 2016 the Company changed its name from First Fixtures Inc. to Stony Hill Corp and on March 6, 2018, the Company changed its name from Stony Hill Corp. to Applied BioSciences Corp. The Company is focused on multiple areas of the hemp and CBD industry. Specifically, the Company is focused on select investments, branding, real estate, and partnership opportunities in the recreational, health and wellness, nutraceutical, and media industries.

 

Basis of presentation – Unaudited Financial Statements

 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2019, or for any other interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended March 31, 2018, which are included in the Company’s Report on Form 10-K for such year filed on June 28, 2018.

 

Going concern

 

These condensed statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As reflected in the condensed consolidated financial statements, the Company incurred a net loss of $2,407,059 and used $788,863 of cash in operating activities during the nine months ended December 31, 2018. Further, the Company’s independent auditor in their audit report for fiscal year ended March 31, 2018 expressed substantial doubt about the Company’s ability to continue as a going concern. These and other factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital and to ultimately achieve sustainable revenues and income from operations. During the nine months ended December 31, 2018, the Company sold 37,500 shares of its common stock to accredited investors at a price of $2.00 per share for total proceeds of $75,000 and issued convertible notes for total proceeds of $1,444,500 both in private placements to accredited investors. However, the Company will need and is currently working on obtaining additional funds to operate its business through and beyond the date of this Form 10-Q filing. There is no assurance that such funds will be available or at terms acceptable to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions and covenants on its operations, in the case of debt financing or cause substantial dilution for its stockholders in the case of convertible debt and equity financing.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Applied Products LLC, VitaCBD LLC, an 80% owned entity, both Washington limited liability companies and SHL Management LLC, a Nevada limited liability company. Intercompany transactions and balances have been eliminated in consolidation. Management evaluates its investments on an individual basis for purposes of determining whether or not consolidation is appropriate.

 

Use of Estimates and Assumptions

 

Preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Among other things, management estimates include the collectability of its accounts receivable, recoverability of inventory, assumptions made in determining impairment of investments and intangible assets, accruals for potential liabilities, and realization of deferred tax assets. These estimates generally involve complex issues and require judgments, involve analysis of historical information and the prediction of future trends, and are subject to change from period to period. Actual amounts could differ significantly from these estimates.

 

Revenue Recognition

 

The Company adopted the guidance of ASC 606 on April 1, 2018, Revenue from Contracts with Customers (Topic 606), (ASC 606). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. 

 

Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer.

 

The implementation of ASC 606 had no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.

 

Advertising

 

The Company expenses advertising costs as incurred. Advertising expense for the three and nine months ended December 31, 2018 amounted to $100,730 and $556,167, respectively, and $165,315 and $229,674 for the three and nine months ended December 31, 2017 and are included in "Sales and Marketing expenses" in the Condensed Consolidated Statements of Operations.

  

Earnings (Loss) per Share

 

The basic earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Shares of common stock to be issued are included in weighted average shares calculation from the date of grant. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items.

 

Investments

 

Through March 31, 2018, the Company used either the equity method or the cost method of accounting. The Company used the equity method for unconsolidated equity investments in which the Company was considered to have significant influence over the operations of the investee. The Company used the cost method for all other investments. Under the cost method, there is no change to the cost basis unless there is an other-than-temporary decline in value or dividends are received. If the decline is determined to be other-than-temporary, the Company writes down the cost basis of the investment to a new cost basis that represents realizable value.

 

On April 1, 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 primarily affects equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Among other things, this new guidance requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. As such, the Company measures its equity investments at their fair value at end of each reporting period.

 

Investments accounted for under the equity method or cost method of accounting above are included in the caption "Equity investments" on the Condensed Consolidated Balance Sheets.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases. This update will require the recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its financial statements and related disclosures.

 

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The ASU also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently assessing the effect that the ASU will have on our financial position, results of operations, and disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
INVESTMENT
9 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
NOTE 3 - INVESTMENT

Equity investments relate to purchases of stock in certain entities with ownership percentages of less than 5%. As of March 31, 2018, these investments were recorded at their cost basis. On April 1, 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, and as such, these investments were recorded at their market value as of December 31, 2018. The investments consist of the following:

 

    December 31,
2018
    March 31,
2018
 
(A) Cannabi-Tech Ltd. (Gemma)   $ 68,537     $ 68,237  
(B) Hightimes Holdings Corp.     654,763       250,000  
(C) Precision Cultivation Systems, LLC     50,000       50,000  
(D) Bailey Venture Partners XII LLC (JUUL)     100,000       100,000  
    $ 873,300     $ 468,537  

  

(A) In November 2016, the Company purchased 29,571 shares of Preferred A stock of Cannabi-Tech Ltd. (“Cannabi”), at a price of $1.69086 per share for total investment of $50,000. In October 2017, the Company purchased 7,309 shares of Preferred A-1 stock of Cannabi at a price of $2.536 per share for total investment of $18,537. As of March 31, 2018, total investment amounted to $68,537, which accounts for less than 5% in Cannabi. Cannabi is a private company incorporated in the State of Israel that provides lab-grade medical cannabis quality control testing systems used to test the quality of medical marijuana flowers. The fair value of the investment at December 31, 2018 approximated its cost basis.

 

(B) In January 2017, the Company entered in to an agreement to purchase 59,524 shares of Class A common stock at a price of $4.20 per share for total investment of $250,000, which accounts for less than 5% investment in Hightimes Holdings Corp. (“Hightimes”). Hightimes owns Hight Times Magazine and hosts festivals, events and competitions including the High Times Cannabis Cup and multiple e-commerce properties, including HighTimes.com, CannabisCup.com and 420.com. As of September 30, 2018 and December 31, 2018, the Company was able to obtain observable evidence that the investment had a market value of $11.00 per share, or an aggregate value of $654,763. As such, the Company recorded an unrecognized gain from the change in market value of $404,763 during the nine months ended December 31, 2018.

 

(C) In June 2017, the Company entered in a Subscription Agreement to purchase 0.5% interest in Precision Cultivation Systems, LLC (“Precision”), a Delaware limited liability company, for a purchase price of $50,000. Precision is developing a growth system that capitalizes on a patent-pending cultivation method that utilizes proprietary irrigation and root zone conditioning. As part of the Subscription Agreement, $42,500 of the investment is subject to repayment on a pro-rata basis with other investors who have entered into similar Subscription Agreements. Amounts subject to repayment are solely at the discretion of Precision. The fair value of the investment at December 31, 2018 approximated its cost basis.

 

(D) In January 2018, the Company paid $100,000 for the purchase of a Membership Interest in Bailey Venture Partners XII LLC (“Bailey”) representing less than 5% interest in Bailey. Along with other funds received from third-party investors, Bailey plans to invest funds received in various strategic investments. The Company recorded this investment at cost and will recognize dividends, if any, when received, and will recognize gains or loss upon either selling the securities or recognize a loss prior to selling the securities if there is evidence that the fair market value of the investment has declined to below the recorded historical cost. The fair value of the investment at December 31, 2018 approximated its cost basis.

  

In February 2019, the Company received a distribution of approximately $186,000 from Bailey’s investment in JUUL Labs, Inc.  

 

As the Company does not participate in the management of these companies nor has the ability to exercise significant influence over these companies, the Company recorded these investments at cost, and as of April 1, 2018, will adjust the cost basis to market at the end of each reporting period. Dividends, if any, will be recognized when received.

 

During the three months ended December 31, 2018, the Company paid $550,000 as a deposit towards the acquisition purchase price of Trace Analytics, Inc. (see Note 7), which was reflected as deposit on the acquisition in the accompanying condensed consolidated balance sheet as of the period then ended.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONVERTIBLE NOTE
9 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
NOTE 4 - CONVERTIBLE NOTE

During the nine months ended December 31, 2018, the Company issued separate Convertible Promissory Notes (“Notes”) having a total principal amount of $1,444,500 to certain accredited holders. All outstanding principal together with interest on these Notes was due and payable on December 31, 2018 and accrued interest ranging from 1% to 8% per month, and 8% per annum. The note holders, at their sole discretion and election, were allowed to convert any part or all of the then outstanding principal and/or interest on these Notes into shares of common stock of the Company at a fixed price per share of $1.00. On December 31, 2018, all holders of the Notes converted the principal portion of their Notes to 1,444,500 shares of the Company’s common stock. The shares had not been issued as of December 31, 2018 and were reflected in “Common stock to be issued” in the condensed consolidated statement of stockholders’ equity during the period then ended.

 

A portion of the Notes with principal amount aggregating $1,019,500 were issued when the market price of the Company’s common stock was in excess of the $1.00 per share conversion price creating beneficial conversion feature associated with these Notes with an aggregate amount of $437,805 upon issuance dates. As such, the Company recorded $437,805 in additional paid-in capital and debt discount representing the intrinsic value of the beneficial conversion feature at the date of the borrowing against the Notes. The value of the beneficial conversion feature was fully amortized upon conversion of all of the outstanding Notes and reflected as interest expense for the nine months ended December 31, 2018.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
RELATED PARTY TRANSACTIONS
9 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
NOTE 5 - RELATED PARTY TRANSACTIONS

In view of the Company’s limited operations and resources, none of the Company’s directors and/or officers received any compensation from the Company during the nine months ended December 31, 2018 and 2017.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
EQUITY
9 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
NOTE 6 - EQUITY

Common Stock to be Issued

 

On February 23, 2017, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with mCig, Inc., a Nevada corporation (“mCig”) consisting of the issuance of an aggregate of 350,000 shares of common stock. Of the 350,000 shares of common stock consideration, 150,000 shares or $426,000 were not issued as of March 31, 2018 and were included in “Common stock to be issued” in the accompanying condensed consolidated statement of stockholders’ equity. During the nine months ended December 31, 2018, the Company issued 50,000 shares of common stock valued at $100,000 which was previously reflected as “Common stock to be issued” in the condensed consolidated statement of stockholders’ equity.

 

During the nine months ended December 31, 2018, the Company sold 37,500 shares of common stock, of which 25,000 shares had not been issued as of December 31, 2018 and is reflected in “Common stock to be issued” in the condensed consolidated statement of stockholders’ equity. The shares were sold at a price of $2.00 per share for total proceeds of $75,000 pursuant to a private placement Subscription Agreement with accredited investors. The Subscription Agreement offered up to one million shares of the Company’s common stock at a price per share of $2.00 per share. The Company made this offering solely to accredited investors, as defined under Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended.

 

Establishment of Advisory Board and Adoption of Charter

 

On April 28, 2017, the Company established an advisory board (the “Advisory Board”) and approved and adopted a charter (the “Advisory Board Charter”) to govern the Advisory Board. The Advisory Board shall be comprised of one or more directors (“Advisors”), and up to nine independent, non-Board, non-employee members, all of whom shall be appointed and subject to removal by the Board of Directors at any time.

 

During the nine months ended December 31, 2018, the Company appointed an advisor to the Advisory Board, which entitled him to an annual consulting fee 25,000 shares of the Company’s stock for a term of 6 months, with total fair value of $51,000.

 

Shares issued to consultants for services

 

During the nine months ended December 31, 2018, the Company granted an aggregate of 414,815 shares of its common stock to seven (7) consultants as payment for services rendered to the Company and recorded expense of $598,302 based on the fair value of the Company’s common stock at grant dates. Of the 414,815 shares granted, 29,815 shares valued at $61,852 had not been issued as of December 31, 2018 and were reflected in “Common stock to be issued” in the condensed consolidated statement of stockholders’ equity during the period then ended.  

 

Shares issued to officers and directors for compensation

 

During the nine months ended December 31, 2018, the Company granted an aggregate of 625,000 shares of its common stock to one (1) board member and (2) officers of the Company as payment for services rendered to the Company and recorded expense of $756,250 based on the fair value of the Company’s common stock at grant dates. 

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
SUBSEQUENT EVENTS
9 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
NOTE 7 - SUBSEQUENT EVENTS

Acquisition

 

On January 1, 2019, the Company entered into a Common Stock Purchase Agreement and closed on a purchase of 520,410 shares of common stock of Trace Analytics, Inc., a Washington corporation (“Trace Analytics”), at a purchase price of $2.40 per share, for an aggregate purchase price of $1,250,000, of which $750,000 was payable in cash and $500,000 of which will be paid in shares of common stock of the Company. During the three months ended December, 31, 2018, the Company paid $550,000 towards the acquisition purchase price of Trace Analytics, and which was reflected as deposit on the acquisition of Trace Analytics in the accompanying condensed consolidated balance sheet as of the period then ended. Immediately following the purchase, the Company holds 51% of the issued and outstanding shares of common stock of Trace Analytics. The Company is in the process of analizing the accounting effects of this transaction and historical financial statements of the acquired company and pro forma effects of the acquisition will be provided in a Form 8K/A to be subsequently filed.

 

 On February 6, 2019, the Company issued an aggregate of 250,000 shares of common stock of the Company as payment for the shares of common stock payable to Trace Analytics. 125,000 of such shares were issued directly to Jason Zitzer, and 125,000 of such shares were issued directly to Gordon Fargas, both of whom are affiliates of Trace Analytics.

  

Trace Analytics is a cannabis testing laboratory and service company located in Spokane, Washington. Some of the services provided by Trace Analytics are:

 

  · 502 compulsory testing for all types of cannabis products;
  · Industrial hemp CBD product testing;
  · Extensive terpene, residual solvents, and cannabinoid profiles;
  · Aflatoxin/Mycotoxin screening;
  · Experienced grow consultation, evaluation and related services; and
  · Edibles work up, process evaluation and dose distribution guidance.

  

In connection with the Common Stock Purchase Agreement, the Company also entered into a Stockholders’ Agreement (the “Stockholders’ Agreement”), dated January 1, 2019, with Trace Analytics, Jason Zitzer, and Gordon Fargas. Mr. Zitzer and Mr. Fargas are affiliates of Trace Analytics and the only other stockholders of Trace Analytics, in addition to the Company. The Stockholders’ Agreement contains certain transfer restrictions and a right of first refusal which provides that if any party to the Stockholder’s Agreement proposes to transfer its Trace Analytics shares, Trace Analytics shall for a period of 30 days, have a first right of refusal to purchase such shares, followed by a first right of refusal for the remaining shareholders.

 

In connection with the Common Stock Purchase Agreement, the Company also entered into a Voting Agreement (the “Voting Agreement”), dated January 1, 2019, with Trace Analytics, Jason Zitzer, and Gordon Fargas. The Voting Agreement provides that the parties of the Voting Agreement shall vote their shares of common stock of Trace Analytics to appoint the three of the five members of the board of directors of Trace Analytics as designated by the Company, one member of the board of directors as designated by Mr. Ziter, and one member of the board of directors as designated by Mr. Fargas

 

Distribution

 

In February 2019, the Company received a distribution of approximately $186,000 from Bailey's investment in JUUL Labs, Inc.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Dec. 31, 2018
Summary Of Significant Accounting Policies  
Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Applied Products LLC, VitaCBD LLC, an 80% owned entity, both Washington limited liability companies and SHL Management LLC, a Nevada limited liability company. Intercompany transactions and balances have been eliminated in consolidation. Management evaluates its investments on an individual basis for purposes of determining whether or not consolidation is appropriate.

Use of Estimates and Assumptions

Preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Among other things, management estimates include the collectability of its accounts receivable, recoverability of inventory, assumptions made in determining impairment of investments and intangible assets, accruals for potential liabilities, and realization of deferred tax assets. These estimates generally involve complex issues and require judgments, involve analysis of historical information and the prediction of future trends, and are subject to change from period to period. Actual amounts could differ significantly from these estimates.

Revenue Recognition

The Company adopted the guidance of ASC 606 on April 1, 2018, Revenue from Contracts with Customers (Topic 606), (ASC 606). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. 

 

Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer.

 

The implementation of ASC 606 had no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.

Advertising

The Company expenses advertising costs as incurred. Advertising expense for the three and nine months ended December 31, 2018 amounted to $100,730 and $556,167, respectively, and $165,315 and $229,674 for the three and nine months ended December 31, 2017 and are included in "Sales and Marketing expenses" in the Condensed Consolidated Statements of Operations.

Earnings (Loss) per Share

The basic earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Shares of common stock to be issued are included in weighted average shares calculation from the date of grant. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items.

Investments

Through March 31, 2018, the Company used either the equity method or the cost method of accounting. The Company used the equity method for unconsolidated equity investments in which the Company was considered to have significant influence over the operations of the investee. The Company used the cost method for all other investments. Under the cost method, there is no change to the cost basis unless there is an other-than-temporary decline in value or dividends are received. If the decline is determined to be other-than-temporary, the Company writes down the cost basis of the investment to a new cost basis that represents realizable value.

 

On April 1, 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 primarily affects equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Among other things, this new guidance requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. As such, the Company measures its equity investments at their fair value at end of each reporting period.

 

Investments accounted for under the equity method or cost method of accounting above are included in the caption "Equity investments" on the Condensed Consolidated Balance Sheets.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. This update will require the recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its financial statements and related disclosures.

 

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The ASU also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently assessing the effect that the ASU will have on our financial position, results of operations, and disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
INVESTMENTS (Tables)
9 Months Ended
Dec. 31, 2018
Investments Tables Abstract  
Stock equity investments
    December 31,
2018
    March 31,
2018
 
(A) Cannabi-Tech Ltd. (Gemma)   $ 68,537     $ 68,237  
(B) Hightimes Holdings Corp.     654,763       250,000  
(C) Precision Cultivation Systems, LLC     50,000       50,000  
(D) Bailey Venture Partners XII LLC (JUUL)     100,000       100,000  
    $ 873,300     $ 468,537  
XML 27 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Dec. 31, 2018
Dec. 31, 2017
State of incorporation             Nevada  
Date of incorporation             Feb. 21, 2014  
Net loss $ (1,891,543) $ (113,759) $ (401,757) $ (342,856) $ (177,407) $ (197,204) $ (2,407,059) $ (717,467)
Net cash used in operating activities             (788,863) (420,701)
Issuance of common stock for cash             $ 75,000 695,000
Common stock, price per share $ 2.00           $ 2.00  
Issuance of convertible note             $ 1,444,500
Investor [Member]                
Issuance of common stock for cash, Share             37,500  
Issuance of common stock for cash             $ 75,000  
Common stock, price per share $ 2.00           $ 2.00  
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Advertising expense $ 100,730 $ 165,315 $ 556,167 $ 229,674
Applied Products LLC [Member] | VitaCBD LLC [Member]        
Owned Interest entity     80.00%  
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
INVESTMENTS (Details) - USD ($)
Dec. 31, 2018
Mar. 31, 2018
Equity investments $ 873,300 $ 468,537
Cannabi-Tech Ltd [Member]    
Equity investments 68,537 68,237
Hightimes Holdings Corp [Member]    
Equity investments 654,763 250,000
Precision Cultivation Systems, LLC [Member]    
Equity investments 50,000 50,000
Bailey Venture Partners XII LLC [Member]    
Equity investments $ 100,000 $ 100,000
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
INVESTMENTS (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 9 Months Ended
Mar. 31, 2018
Jan. 31, 2018
Oct. 31, 2017
Jun. 30, 2017
Jan. 31, 2017
Nov. 30, 2016
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Feb. 28, 2019
Equity investments $ 468,537           $ 873,300   $ 873,300    
Ownership percentages description                 ownership percentages of less than 5%    
Unrealized gain on equity investments             $ 404,763  
Deposit on acquisition                 (550,000)  
Series A preferred stock [Member]                      
Purchase of stock     7,309     29,571          
Stock price per share     $ 2.536     $ 1.69086          
Total investment     $ 18,537     $ 50,000          
Common stock A [Member]                      
Purchase of stock         59,524            
Stock price per share         $ 4.20            
Total investment         $ 250,000            
Ownership percentages description         accounts for less than 5% investment in High times Holdings Corp.            
Precision Cultivation Systems, LLC [Member]                      
Purchase of stock       50,000              
Interest rate       0.50%              
Repayment of investment, pro-rata basis       $ 42,500              
Bailey Venture Partners XII LLC [Member]                      
Purchase of stock   100,000                  
Ownership percentages description   representing less than 5% interest in Bailey.                  
Cannabi-Tech Ltd. [Member]                      
Equity investments $ 68,537                    
Ownership percentages description accounts for less than 5% in Cannabi.                    
Hightimes Holdings Corp [Member]                      
Equity investments $ 250,000           $ 654,763   $ 654,763    
Market value per share             $ 11.00   $ 11.00    
Subsequent Event [Member] | JUUL Labs, Inc [Member]                      
Cash distributions                     $ 186,000
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
CONVERTIBLE NOTE (Details Narrative) - USD ($)
9 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Issuance of convertible note $ 1,444,500
Amortization of debt discount 437,805
Fair value of beneficial conversion feature related to issuance of convertible notes 437,805
Convertible Promissory Notes [Member]    
Principal amount $ 1,444,500  
Convertible debt maturity date Dec. 31, 2018  
Interest rate 8.00%  
Interest rate description accrued interest ranging from 1% to 8% per month, and 8% per annum.  
Issuance of convertible note $ 1,019,500  
Fixed price per share $ 1.00  
Conversion price $ 1.00  
Conversion of convertible debt, Shares 1,444,500  
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
EQUITY (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Dec. 31, 2018
Jun. 30, 2018
Dec. 31, 2018
Dec. 31, 2017
Mar. 31, 2018
Feb. 23, 2017
Fair value of shares issued to advisory board member, Amount   $ 51,000        
Issuance of common stock for cash     $ 75,000 $ 695,000    
Sale of common stock, price per share $ 2.00   $ 2.00      
Common stock, per share $ 0.00001   $ 0.00001   $ 0.00001  
Fair value of shares issued to Company Officers and board member, Shares     625,000      
Fair value of shares issued to Company Officers and board member, Amount $ 756,250   $ 756,250      
Investor [Member]            
Issuance of common stock for cash, shares     37,500      
Issuance of common stock for cash     $ 75,000      
Sale of common stock, price per share $ 2.00   $ 2.00      
Common stock, per share $ 2.00   $ 2.00      
Common stock, shares unissued, shares 25,000   25,000      
Asset Purchase Agreement [Member]            
Issuance of common stock for cash, shares     50,000      
Issuance of common stock for cash     $ 100,000      
Advisory Board [Member]            
Fair value of shares issued to advisory board member, Shares     25,000      
Fair value of shares issued to advisory board member, Amount     $ 51,000      
Consulting agreement term     6 months      
mCig LLC [Member]            
Aggregate common stock shares issued           350,000
Common stock, shares unissued, shares           150,000
Common stock, shares unissued, value           $ 426,000
Seven Consultants [Member] | Consulting Agreement [Member]            
Common stock, shares unissued, shares 29,815   29,815      
Common stock, shares unissued, value $ 61,852   $ 61,852      
Common stock shares granted 414,815   414,815      
Expense related to shares granted $ 598,302   $ 598,302      
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
SUBSEQUENT EVENTS (Details Narrative) - USD ($)
9 Months Ended
Feb. 06, 2019
Jan. 01, 2019
Dec. 31, 2018
Dec. 31, 2017
Feb. 28, 2019
Issuance of common stock for cash     $ 75,000 $ 695,000  
Sale of common stock, price per share     $ 2.00    
Subsequent Event [Member]          
Common stock purchase agreement, description   <p style="margin: 0pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">On January 1, 2019, the Company entered into a Common Stock Purchase Agreement and closed on a purchase of 520,410 shares of common stock of Trace Analytics, Inc., a Washington corporation (“Trace Analytics”), at a purchase price of $2.40 per share, for an aggregate purchase price of $1,250,000, of which $750,000 was payable in cash and $500,000 of which will be paid in shares of common stock of the Company. During the three months ended December, 31, 2018, the Company paid $550,000 towards the acquisition purchase price of Trace Analytics, and which was reflected as deposit on the acquisition of Trace Analytics in the accompanying condensed consolidated balance sheet as of the period then ended.</font></p>      
Issuance of common stock for cash, shares   520,410      
Issuance of common stock for cash   $ 1,250,000      
Sale of common stock, price per share   $ 2.40      
Common stock issued for services, shares 250,000        
Subsequent Event [Member] | Jason Zitzer [Member]          
Common stock issued for services, shares 125,000        
Subsequent Event [Member] | Gordon Fargas [Member]          
Common stock issued for services, shares 125,000        
Subsequent Event [Member] | JUUL Labs, Inc [Member]          
Cash distributions         $ 186,000
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