NOTES TO UNAUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2020 and 2019
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Bioethics, Ltd. (“the Company”) was organized under the laws of the State of Nevada on July 26, 1990. The Company was organized to provide a vehicle for participating in potentially profitable business ventures which may become available through the personal contacts, and at the complete discretion, of the Company’s officers and directors. The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors.
The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows for the nine months ended September 30, 2020 and 2019 have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2019 audited financial statements. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full year.
NOTE 2 - RELATED PARTY TRANSACTIONS
Management Compensation - During the nine months ended September 30, 2020 and 2019, the Company did not pay any compensation to its officers and directors.
Beginning August 2017, the Company entered into an oral agreement to pay the Company’s President $500 per month as payment for use of his personal residence as the Company’s office and mailing address. The Company has recorded rent expense of $4,500 during each of the nine months ended September 30, 2020 and 2019, which is included in the general and administrative expenses on the statements of operations. The amount payable at December 31, 2019 was $1,500. During the nine months ended September 30, 2020, the Company paid $6,000, resulting in $-0- payable at September 30, 2020.
On March 8, 2018 the Company entered into a promissory note with a newly-affiliated party in the amount of $43,250. The note is payable on demand and carries interest at 10% per annum. Interest expense for the nine months ended September 30, 2020 and 2019 was $2,597 and $2,588, respectively, resulting in accrued interest of $8,882 and $6,285 at September 30, 2020 and December 31, 2019, respectively. Principal balance on the note at September 30, 2020 and December 31, 2019 was $43,250.
On December 12, 2017, the Company entered into a promissory note with its President in the amount of $107,000. On various dates in 2018 and 2019, the officer advanced the Company an additional $16,670, and the Company made payments of $14,686, resulting in the total note principal balance of $108,984 at December 31, 2019. During the nine months ended September 30, 2020, the Company received an additional $23,900 and paid a total of $6,000 of the principal balance resulting in the total note principal balance of $126,884 at September 30, 2020. The cumulative note balance is uncollateralized, due on demand, and carries interest at 12% per annum. Interest expense on the note for the nine months ended September 30, 2020 and 2019 was $10,707 and $9,431, respectively, of which the Company repaid $10,000 during the nine months ended September 30, 2020, resulting in accrued interest totaling $6,711 and $6,004 at September 30, 2020 and December 31, 2019, respectively.
NOTE 3 - NOTES PAYABLE
On June 14, 2016, the Company issued a promissory note in the principal amount of $35,000 to an unaffiliated lender. The Note is due on demand at any time after its original maturity date of June 14, 2017, and carries an interest rate of 8% per annum. Interest expense for the nine months ended September 30, 2020 and 2019 totaled $2,102 and $2,094, respectively, resulting in accrued interest at September 30, 2020 and December 31, 2019 of $12,036 and $9,934, respectively. Principal balance due on the note at September 30, 2020 and December 31, 2019 was $35,000.
9
BIOETHICS, LTD.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2020 and 2019
On August 15, 2018, the Company issued a promissory note in the principal amount of $10,000 to an unaffiliated lender. The Note was due on November 15, 2018 and is now due on demand and carries an interest rate of 12% per annum. Interest expense for the nine months ended September 30, 2020 and 2019 totaled $901 and $898, respectively, resulting in accrued interest at September 30, 2020 and December 31, 2019 of $1,805 and $904, respectively. Principal balance on the note at September 30, 2020 and December 31, 2019 was $10,000.
On November 15, 2018, the Company issued a promissory note in the principal amount of $20,000 to an unaffiliated lender. The Note was due on February 15, 2019 and is now due on demand and carries an interest rate of 12% per annum. Interest expense for the nine months ended September 30, 2020 and 2019 totaled $1,802 and $1,795, respectively, resulting in accrued interest at September 30, 2020 and December 31, 2019 of $3,610 and $1,808, respectively. Principal balance on the note at September 30, 2020 and December 31, 2019 was $20,000.
On December 31, 2018, the Company issued a promissory note in the principal amount of $30,000 to an unaffiliated lender. The Note was due on December 31, 2019 and is now due on demand and carries an interest rate of 12% per annum. Interest expense for the nine months ended September 30, 2020 and 2019 totaled $2,702 and $2,692, respectively, resulting in accrued interest at September 30, 2020 and December 31, 2019 of $5,415 and $2,712, respectively. Principal balance on the note at September 30, 2020 and December 31, 2019 was $30,000.
On January 23, 2019, the Company issued a promissory note in the principal amount of $50,000 to an unaffiliated lender. The Note was due on January 23, 2020 and is now due on demand and carries an interest rate of 12% per annum. Interest expense for the nine months ended September 30, 2020 and 2019 totaled $4,504 and $4,110, respectively, resulting in accrued interest at September 30, 2020 and December 31, 2019 of $9,025 and $4,521, respectively. Principal balance on the note at September 30, 2020 and December 31, 2019 was $50,000.
On May 1, 2020, the Company issued a promissory note in the principal amount of $5,000 to an unaffiliated lender. The Note is due on May 1, 2021 and carries an interest rate of 12% per annum. Interest expense for the nine months ended September 30, 2020 totaled $240, resulting in accrued interest at September 30, 2020 of $240. Principal balance on the note at September 30, 2020 was $5,000.
NOTE 4 – CONVERTIBLE NOTE PAYABLE
On December 18, 2019, the Company issued a convertible promissory note in the original principal amount of $10,000 to a lender. The Note was due on June 18, 2020 and is now due on demand and carries an interest rate of 8% per annum. The Note is due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a conversion rate of $2.00 per share. The Company recognized a beneficial conversion feature and recorded a debt discount in the amount of $4,000, which is being amortized over the life of the promissory note. At September 30, 2020 and December 31, 2019, the unamortized debt discount was $-0- and $3,716, respectively, and the net convertible note balance was $10,000 and $6,284, respectively. The amortization of debt discount was $3,716 during the nine months ended September 30, 2020. Interest expense for the nine months ended September 30, 2020 totaled $901, resulting in accrued interest at September 30, 2020 and December 31, 2019 of $944 and $43, respectively. Principal balance on the note at September 30, 2020 was $10,000.
On June 9, 2020, the Company issued a convertible promissory note in the original principal amount of $10,000 to a lender. The Note is due on June 9, 2021 and carries an interest rate of 10% per annum. The Note is due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a conversion rate of $2.50 per share. The Company recognized a beneficial conversion feature and recorded a debt discount in the amount of $6,200, which is being amortized over the life of the promissory note. At September 30, 2020, the unamortized debt discount was $4,281 and the net convertible note balance was $5,719. The amortization of debt discount was $1,919 during the nine months ended September 30, 2020. Interest expense for the nine months ended September 30, 2020 totaled $248, resulting in accrued interest at September 30, 2020 of $248. Principal balance on the note at September 30, 2020 was $10,000.
On August 3, 2020, the Company issued a convertible promissory note in the original principal amount of $15,000 to a lender. The Note is due on August 3, 2021 and carries an interest rate of 8% per annum. The Note is due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-
10
BIOETHICS, LTD.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2020 and 2019
assessable shares of common stock of the Company at a conversion rate of $7.00 per share. The Company did not recognize a beneficial conversion feature or debt discount as the conversion price was higher than the market price at the time of issuance of the note. Interest expense for the nine months ended September 30, 2020 totaled $191, resulting in accrued interest at September 30, 2020 of $191. Principal balance on the note at September 30, 2020 was $15,000.
NOTE 5 – EQUITY TRANSACTIONS
On December 2, 2019, the Company amended its articles of incorporation with the state of Nevada increasing the number of authorized common stock of the Company to 250,000,000 shares. There were no equity transactions during the nine months ended September 30, 2020 or 2019, resulting in 1,132,450 shares of common stock issued and outstanding at September 30, 2020 and December 31, 2019.
Effective November 2, 2020, the Company effectuated a 1 share for 10 shares reverse stock split which reduced the issued and outstanding shares of common stock from 11,000,000 shares to 1,132,450 shares. The accompanying financial statements have been retroactively adjusted to reflect this reverse stock split.
NOTE 6 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has incurred losses since its inception totaling $949,576 and has no on-going operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans, additional sales of its common stock, or through a possible business combination. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. In addition, the COVID-19 pandemic could have an impact on our ability to obtain financing to fund the operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 7 - LOSS PER SHARE
The computation of basic loss per share is based on the weighted average number of shares outstanding during each period.
The following data show the amounts used in computing loss per share for the nine months ended:
|
|
|
September 30, 2020
|
|
September 30,
2019
|
|
|
|
|
|
|
|
Net loss (numerator)
|
$
|
(88,423)
|
$
|
(64,112)
|
|
Weighted average shares outstanding (denominator)
|
|
1,132,450
|
|
1,132,450
|
|
Basic and fully diluted net loss per share amount
|
$
|
(0.08)
|
$
|
(0.06)
|
The following data show the amounts used in computing loss per share for the three months ended:
|
|
|
September 30, 2020
|
|
September 30,
2019
|
|
|
|
|
|
|
|
Net loss (numerator)
|
$
|
(24,052)
|
$
|
(19,878)
|
|
Weighted average shares outstanding (denominator)
|
|
1,132,450
|
|
1,132,450
|
|
Basic and fully diluted net loss per share amount
|
$
|
(0.02)
|
$
|
(0.02)
|
The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus the common stock equivalents as detailed in the following chart. For the nine months ended September 30, 2020 and 2019, the inclusion of these shares on the statements of operations would have resulted in a weighted average shares fully diluted number that was anti-dilutive, and as such they are excluded.
11
BIOETHICS, LTD.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2020 and 2019
The following data show the fully diluted shares for the nine months ended September 30, 2020 and 2019:
|
|
|
September 30,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
1,132,450
|
|
1,132,450
|
|
Convertible debt
|
|
11,143
|
|
-0-
|
|
Total
|
|
1,143,593
|
|
1,132,450
|
The following data show the fully diluted shares for the three months ended September 30, 2020 and 2019:
|
|
|
September 30,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
1,132,450
|
|
1,132,450
|
|
Convertible debt
|
|
11,143
|
|
-0-
|
|
Total
|
|
1,143,593
|
|
1,132,450
|
NOTE 8 – SUBSEQUENT EVENTS
Effective November 2, 2020, the Company effectuated a 1 share for 10 shares reverse stock split which reduced the issued and outstanding shares of common stock from 11,000,000 shares to 1,132,450 shares. The accompanying financial statements have been retroactively adjusted to reflect this reverse stock split.
12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion in conjunction with our financial statements, which are included elsewhere in this report. The following information contains forward-looking statements. (See “Forward-Looking Statements” below and “Risk Factors” in our 2019 Form 10K.)
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements reflect the Company’s views with respect to future events based upon information available to it at this time. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from these statements. These uncertainties and other factors include but are not limited to the risk factors described in our Form 10-K for the year ended December 31, 2019 under the caption “Item 1A. Risk Factors.” The words “anticipates,” “believes,” “estimates,” “expects,” “plans,” “projects,” “targets,” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, changes in assumptions, future events or otherwise.
General
The Company is a shell company that conducts no active business operations and is seeking business opportunities for acquisition or participation by the Company.
The Report of Independent Registered Public Accounting Firm on the Company’s December 31, 2019 audited financial statements addresses an uncertainty about the Company’s ability to continue as a going concern, indicating that the Company has incurred losses since its inception and has no on-going operations. The report further indicates that these factors raise substantial doubt about the Company’s ability to continue as a going concern. At September 30, 2020, the Company had a working capital deficit of $448,260 and an accumulated deficit since inception of $949,576. The Company incurred net losses of $88,423 and $64,112 for the nine months ended September 30, 2020 and 2019, respectively. The Company has not entered into any agreements or arrangements for the provision of additional debt or equity financing and there can be no assurance that it will be able to obtain the additional debt or equity capital required to continue its operations.
On July 29, 2020, the Company entered into a non-binding Term Sheet with XCR Diagnostics, Inc. (“XCR”), subject to a number of conditions, to acquire 100% of the ownership of XCR. On July 31, 2020, the Company filed a Form 8-K further describing the proposed transaction. The Company and XCR have not yet negotiated a definitive agreement for the proposed acquisition.
The Three and Nine Months ended September 30, 2020 compared to September 30, 2019
The Company did not conduct any operations during the nine-month periods ended September 30, 2020 or 2019. At September 30, 2020, the Company had cash and total current assets in the amount of $1,069, compared to $8,761 at December 31, 2019. At September 30, 2020, the Company had total current liabilities of $449,329, compared to $375,012 at December 31, 2019. The Company had a working capital deficit of $448,260 at September 30, 2020 compared to $366,251 at December 31, 2019.
The Company did not generate revenues during the nine-month periods ending September 30, 2020 or 2019. The Company incurred general and administrative expenses of $12,922 during the three months ended September 30, 2020, compared to $12,009 during the three months ended September 30, 2019. The Company incurred general and administrative expenses of $55,894 during the nine months ended September 30, 2020, compared to $40,504 during the nine months ended September 30, 2019. Such expenses consist primarily of legal and accounting fees as well as taxes and annual fees required to maintain the Company’s corporate status.
The Company incurred other expenses of $11,130 during the three months ended September 30, 2020 compared to $7,869 during the three months ended September 30, 2019. The Company incurred other expenses of $32,529 during the nine months ended September 30, 2020 compared to $23,608 during the nine months ended September
13
30, 2019. Total other income and expenses consist of interest expense related to the notes payable due from the Company. Increase in interest expense is due to the increase in debt issued by the Company during the three and nine months ended September 30, 2020 over the same periods ended September 30, 2019.
The Company incurred a net loss of $24,052 during the three months ended September 30, 2020, compared to a net loss of $19,878 during the three months ended September 30, 2019. The Company incurred a net loss of $88,423 during the nine months ended September 30, 2020, compared to a net loss of $64,112 during the nine months ended September 30, 2019. The increase in net loss in 2020 as compared to 2019 was due to the increased professional fees related to the Company maintaining its status and filings with the Securities and Exchange Commission and an increase in interest expense on the recently-issued debt.
The Company has never had substantial ongoing operations. As a result, since its inception on July 26, 1990, the Company had accumulated a deficit of $949,576 as of September 30, 2020.
Liquidity and Capital Resources
Net cash used by operating activities was $55,592 and $52,754 during the nine months ended September 30, 2020 and 2019, respectively.
Net cash provided by investing activities was $-0- during both the nine months ended September 30, 2020 and 2019.
Net cash provided by financing activities was $47,900 and $35,314 during the nine months ended September 30, 2020 and 2019, respectively.
Since the Company does not generate any revenues from operations, it is dependent on sales of securities, loans, or contributions from its stockholders in order to pay its operating costs. In addition, in the event the Company locates a suitable candidate for potential acquisition, the Company will require additional funds to pay the costs of negotiating and completing the acquisition of such candidate. The Company has not entered into any agreement or arrangement for the provision of any additional funding and no assurances can be given that such funding will be available to the Company on terms acceptable to it or at all.
The Company cannot presently foresee the cash requirements of any business opportunity which may ultimately be acquired by the Company. However, since it is likely that any business it acquires will be involved in active business operations, the Company anticipates that an acquisition will result in increased cash requirements as well as increases in the number of employees of the Company.
Off-Balance Sheet Arrangements
The Company has not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.
Critical Accounting Policies
Due to the lack of current operations and limited business activities, the Company does not have any accounting policies that it believes are critical to facilitate an investor’s understanding of the Company’s financial and operating status.