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 September 30, 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

o

Smaller reporting company

x

(Do not check if a smaller reporting company)

Emerging growth company

o

 

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 November 9, 2018 there were 11,772,113 shares of common stock, $0.00001 par value per share, outstanding.

 

 
 
 
 

 

APPLIED BIOSCIENCES CORP.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2018

 

INDEX

 

Index

 

Page

 

 

 

Part I. Financial Information

 

 

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2018 (Unaudited) and March 31, 2018.

 

4

 

 

 

Condensed Unaudited Consolidated Statements of Operations for the three and six months ended September 30, 2018 and September 30, 2017.

 

5

 

 

 

Condensed Unaudited Consolidated Statements of Stockholders’ Equity for the six months ended September 30, 2018.

 

6

 

 

 

Condensed Unaudited Consolidated Statement of Cash Flows for the six months ended September 30, 2018 and September 30, 2017.

 

7

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited).

 

8

 

 

Item 2.

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

 

14

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

18

 

 

Item 4.

Controls and Procedures.

 

18

 

 

 

Part II. Other Information

 

 

 

Item 1.

Legal Proceedings.

 

19

 

 

Item 1A.

Risk Factors.

 

19

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

19

 

 

Item 3.

Defaults Upon Senior Securities.

 

19

 

 

Item 4.

Mine Safety Disclosures.

 

19

 

 

Item 5.

Other Information.

 

19

 

 

Item 6.

Exhibits.

 

20

 

 

 

Signatures

 

21

 

 

 
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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.

 

 
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PART I—FINANCIAL INFORMATION

 

Item 1. Financial statements.

 

APPLIED BIOSCIENCES CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS 

 

 

 

September 30, 2018

 

 

March 31, 2018

 

ASSETS

 

(unaudited)

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$ 6,924

 

 

$ 60,934

 

Accounts receivable, net of allowance of nil and $2,227 at September 30, 2018 (unaudited) and March 31, 2018, respectively

 

 

11,065

 

 

 

12,386

 

Inventory

 

 

51,672

 

 

 

29,074

 

Prepaids and other current assets

 

 

54,455

 

 

 

124,455

 

Total Current Assets

 

 

124,116

 

 

 

226,849

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

3,855

 

 

 

4,441

 

Equity investments

 

 

873,300

 

 

 

468,537

 

Other asset

 

 

5,500

 

 

 

5,500

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 1,006,771

 

 

$ 705,327

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$ 39,749

 

 

$ 21,846

 

Convertible note payable, net of debt discount of $85,890 at September 30, 2018

 

 

78,610

 

 

 

-

 

Accrued expenses

 

 

238,029

 

 

 

14,039

 

Total Current Liabilities

 

 

356,388

 

 

 

35,885

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

Preferred stock; $0.00001 par value; 5,000,000 shares authorized; none

 

 

 

 

 

 

 

 

issued and outstanding at September 30, 2018 (unaudited) and March 31, 2018

 

 

-

 

 

 

-

 

Common stock; $0.00001 par value; 200,000,000 shares

 

 

 

 

 

 

 

 

authorized; 10,677,110 and 10,499,610 issued and outstanding at

 

 

 

 

 

 

 

 

September 30, 2018 (unaudited) and March 31, 2018, respectively

 

 

107

 

 

 

105

 

Additional paid in capital

 

 

3,538,900

 

 

 

3,054,297

 

Common stock to be issued, 212,000 and 263,000 shares at

 

 

 

 

 

 

 

 

September 30, 2018 (unaudited) and March 31, 2018, respectively

 

 

537,852

 

 

 

526,000

 

Accumulated deficit

 

 

(3,407,857 )

 

 

(2,901,933 )

Total Applied BioSciences Corp. Stockholders’ Equity

 

 

669,002

 

 

 

678,469

 

Non-controlling interest

 

 

(18,619 )

 

 

(9,027 )

Total Stockholders’ Equity

 

 

650,383

 

 

 

669,442

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$ 1,006,771

 

 

$ 705,327

 

 

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

 

 
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APPLIED BIOSCIENCES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Three Months

 

 

Three Months

 

 

Six Months

 

 

Six Months

 

 

 

Ended

 

 

Ended

 

 

Ended

 

 

Ended

 

 

 

September 30, 2018

 

 

September 30, 2017

 

 

September 30, 2018

 

 

September 30, 2017

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

PRODUCT REVENUE, NET

 

$ 48,966

 

 

$ 61,279

 

 

$ 59,400

 

 

$ 116,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE, PRODUCT

 

 

42,400

 

 

 

52,443

 

 

 

60,158

 

 

 

90,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS MARGIN (LOSS)

 

 

6,566

 

 

 

8,836

 

 

 

(758 )

 

 

26,222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

111,393

 

 

 

45,496

 

 

 

455,437

 

 

 

65,061

 

General and administrative

 

 

188,052

 

 

 

84,619

 

 

 

395,198

 

 

 

223,516

 

Depreciation and Amortization

 

 

292

 

 

 

56,128

 

 

 

585

 

 

 

112,256

 

TOTAL OPERATING EXPENSES

 

 

299,737

 

 

 

186,243

 

 

 

851,220

 

 

 

400,833

 

OPERATING LOSS

 

 

(293,171 )

 

 

(177,407 )

 

 

(851,978 )

 

 

(374,611 )

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on equity investments

 

 

245,834

 

 

 

-

 

 

 

404,763

 

 

 

-

 

Interest Expense

 

 

(66,422 )

 

 

-

 

 

 

(68,301 )

 

 

-

 

Total other income, net

 

 

179,412

 

 

 

-

 

 

 

336,462

 

 

 

-

 

NET LOSS

 

 

(113,759 )

 

 

(177,407 )

 

 

(515,516 )

 

 

(374,611 )

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

 

 

3,336

 

 

 

57

 

 

 

9,592

 

 

 

(1,139 )

NET LOSS ATTRIBUTABLE TO APPLIED BIOSCIENCES CORP.

 

$ (110,423 )

 

$ (177,350 )

 

$ (505,924 )

 

$ (375,750 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS PER COMMON SHARE

 

$ (0.01 )

 

$ (0.01 )

 

$ (0.05 )

 

$ (0.02 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

10,677,110

 

 

 

15,320,154

 

 

 

10,617,332

 

 

 

15,268,914

 

 

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

 

 
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APPLIED BIOSCIENCES CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 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

 

 

12,500

 

 

 

 

 

 

 

50,000

 

 

 

25,000

 

 

 

 

 

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of shares issued to consultant for services

 

 

90,000

 

 

 

1

 

 

 

61,852

 

 

 

179,999

 

 

 

 

 

 

 

 

 

 

 

241,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of shares issued to advisory board member

 

 

25,000

 

 

 

-

 

 

 

 

 

 

 

51,000

 

 

 

 

 

 

 

 

 

 

 

51,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beneficial conversion feature associated with a convertible note

 

 

 

 

 

 

 

 

 

 

 

 

 

 

128,605

 

 

 

 

 

 

 

 

 

 

 

128,605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,592 )

 

 

(505,924 )

 

 

(515,516 )

Balance, September 30, 2018 (unaudited)

 

 

10,677,110

 

 

$ 107

 

 

$ 537,852

 

 

$ 3,538,900

 

 

$ (18,619 )

 

$ (3,407,857 )

 

$ 650,383

 

 

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

 

 
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APPLIED BIOSCIENCES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Six Months

 

 

Six Months

 

 

 

Ended

 

 

Ended

 

 

 

September 30, 2018

 

 

September 30, 2017

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

(unaudited)

 

 

(unaudited)

 

Net loss

 

$ (515,516 )

 

$ (374,611 )

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

 

 

 

 

 

 

 

 

Unrealized gain on equity investments

 

 

(404,763 )

 

 

 

 

Amortization of debt discount

 

 

42,715

 

 

 

-

 

Fair value of shares issued to consultants

 

 

255,352

 

 

 

50,000

 

Depreciation

 

 

586

 

 

 

-

 

Amortization of intangible

 

 

-

 

 

 

112,256

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,321

 

 

 

(3,392 )

Inventory

 

 

(22,598 )

 

 

(7,648 )

Prepaid and other current assets

 

 

107,500

 

 

 

1,382

 

Accounts payable and accrued expenses

 

 

241,893

 

 

 

11,805

 

Net cash used in operating activities

 

 

(293,510 )

 

 

(210,208 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Acquisition of equity investment

 

 

-

 

 

 

(50,000 )

Net cash used in investing activities

 

 

-

 

 

 

(50,000 )

 

 

 

 

 

 

 

 

 

CASH FLOW FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Issuance of convertible note

 

 

164,500

 

 

 

-

 

Issuance of common stock for cash

 

 

75,000

 

 

 

195,055

 

Net cash provided by financing activities

 

 

239,500

 

 

 

195,055

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH

 

 

(54,010 )

 

 

(65,153 )

 

 

 

 

 

 

 

 

 

CASH, BEGINNING OF PERIOD

 

 

60,934

 

 

 

212,637

 

 

 

 

 

 

 

 

 

 

CASH, END OF PERIOD

 

$ 6,924

 

 

$ 147,484

 

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Fair value of shares issued to consultants recorded as prepaid

 

$ 37,500

 

 

$ -

 

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

 

$ 128,605

 

 

$ -

 

Increase in cash held in trust account from sale of common stock

 

$ -

 

 

$ 499,945

 

 

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

 

 
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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(unaudited)

 

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 $515,516 and used $293,510 of cash in operating activities during the six months ended September 30, 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 six months ended September 30, 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 three separate convertible notes for a total amount of $164,500 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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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(unaudited)

 

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.

 

Reclassification of Certain Prior Year Information 

 

The Company has reclassified prior year sales and marketing expenses of $45,496 and $65,061 for the three and six months ended September 30, 2017, respectively, that were previously included in general and administrative expenses in the condensed consolidated statements of operations to conform to the current year presentation. The reclassification of sales and marketing expenses had no impact on net loss or cash flows.

 

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 six months ended September 30, 2018 amounted to $111,392 and $455,437, respectively, and $45,496 and $65,061 for the three and six months ended September 30, 2017 and are included in “Sales and Marketing expenses” in the Condensed Consolidated Statements of Operations.

 

 
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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(unaudited)

 

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 during the period. 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 as 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.

 

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.

 

NOTE 3 – INVESTMENTS

 

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 September 30, 2018. The investments consist of the following:

 

 
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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(unaudited)

 

 

 

September 30, 2018

 

 

March 31, 2018

 

(A)    Cannabi-Tech Ltd.

 

$ 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 September 30, 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, 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 unrealized gain from the change in market value of $404,763 during the six months ended September 30, 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 September 30, 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 September 30, 2018 approximated its cost basis.

 

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.

 

NOTE 4 – CONVERTIBLE NOTE

 

During the six months ended September 30, 2018, the Company issued three separate Convertible Promissory Notes (“Notes”) having a total available principal amount of $250,000 to the same holder of which the Company borrowed $164,500 as of September 30, 2018. All outstanding principal together with interest on this Note is due and payable on December 31, 2018 and accrue interest at 8% per month. The note holder, at its sole discretion and election, may 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. As the conversion price of $1.00 reflected a price discount below the fair market value of the Company’s common stock as of the date of the receipt of proceeds, there was deemed a beneficial conversion feature associated with these Notes. As such, the Company recorded $128,605 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 is being amortized over the term of the Notes of which $42,715 was amortized and reflected as interest expense for the six months ended September 30, 2018. As of September 30, 2018, the unamortized debt discount was $85,890. As of September 30, 2018, the balance of the $164,500 note, net of the unamortized discount of $85,890 was $78,610.

 

 
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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(unaudited)

 

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 six months ended September 30, 2018.

 

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 have not been issued as of March 31, 2018 and have been included in “Common stock to be issued” in the accompanying condensed consolidated statement of stockholders’ equity. During the six months ended September 30, 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 six months ended September 30, 2018, the Company sold 37,500 shares of common stock, of which 25,000 shares had not been issued as of September 30, 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 six months ended September 30, 2018, the Company appointed another 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 for Services

 

During the six months ended September 30, 2018, the Company granted an aggregate of 99,500 shares of its common stock to three (3) consultants as payment for services rendered to the Company and recorded expense of $241,852 based on the fair value of the Company’s common stock at grant dates. Of the 99,500 shares granted, 62,000 shares valued at $61,852 had not been issued as of September 30, 2018, and were reflected in “Common stock to be issued” in the condensed consolidated statement of stockholders’ equity during the period then ended.

 

 
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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(unaudited)

 

NOTE 7 – SUBSEQUENT EVENTS

 

Common Stock Purchase Agreement

 

On October 15, 2018, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Triton Funds, LP, a Delaware limited partnership (the “Purchaser”), pursuant to which the Purchaser has the right to right to purchase up to $1,000,000 of shares of common stock (the “Shares”) of the Company at a purchase price equal to 75% of the lowest closing price of the common stock of the Company on the over-the-counter markets for the five business days prior to a purchase. The Purchaser, however, will not have the right to purchase more than $300,000 of common stock of the Company within a period of every 30 business days. The Company has the right to terminate the Purchase Agreement at any time, and the Purchase Agreement shall terminate automatically on June 30, 2019, unless earlier terminated. The Purchase Agreement also contains customary representations, warranties, and covenants by, among, and for the benefit of the parties.

 

On October 15, 2018, the Company entered into a non-binding letter agreement, pursuant to which the Company intends to issue 25,000 shares of common stock to the Purchaser, pursuant to a Share Donation Agreement to be entered into by and between the Company and the Purchaser at a future, unspecified date. The Company anticipates making the issuance of 25,000 shares on a date before December 31, 2018.

 

The Company’s offering of the Shares to the Purchaser is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Act (in that the Shares were offered by us in a transaction not involving any public offering) and pursuant to Rule 506 of Regulation D, promulgated thereunder.

 

 
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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 six months ended September 30, 2018 as compared to our three and six months ended September 30, 2017 were as follows:

 

Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017

 

 

 

Three Months

 

 

Three Months

 

 

 

 

 

 

 

Ended

 

 

Ended

 

 

 

 

Percentage

 

 

 

September 30,

2018

 

 

September 30,

2017

 

 

$ Change

Inc (Dec)

 

 

Change

Inc (Dec)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRODUCT REVENUE, NET

 

$ 48,966

 

 

$ 61,279

 

 

$ (12,313 )

 

 

(20 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE, PRODUCT

 

 

42,400

 

 

 

52,443

 

 

 

(10,043 )

 

 

(19 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS (LOSS) MARGIN

 

 

6,566

 

 

 

8,836

 

 

 

(2,270 )

 

 

(26 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

111,393

 

 

 

45,496

 

 

 

65,897

 

 

 

145 %

General and administrative

 

 

188,052

 

 

 

84,619

 

 

 

103,433

 

 

 

122 %

Depreciation and Amortization

 

 

292

 

 

 

56,128

 

 

 

(55,836 )

 

 

(99 )%

TOTAL OPERATING EXPENSES

 

 

299,737

 

 

 

186,243

 

 

 

113,494

 

 

 

61 %

OPERATING LOSS

 

 

(293,171 )

 

 

(177,407 )

 

 

115,764

 

 

 

65 %

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on equity investments

 

 

245,834

 

 

 

-

 

 

 

245,834

 

 

 

-

 

Interest Expense

 

 

(66,422 )

 

 

-

 

 

 

(66,422 )

 

 

-

 

Total other income, net

 

 

179,412

 

 

 

-

 

 

 

179,412

 

 

 

-

 

NET LOSS

 

 

(113,759 )

 

 

(177,407 )

 

 

(63,648 )

 

 

(36 )%

Less: Net loss attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

non controlling interest

 

 

3,336

 

 

 

57

 

 

 

3,279

 

 

 

5753 %

NET LOSS ATTRIBUTABLE TO APPLIED BIOSCIENCES CORP.

 

$ (110,423 )

 

$ (177,350 )

 

$ (66,927 )

 

 

(38 )%

 

Revenues: Revenue from products relate to shipments of cannabidiol (“CBD”) brand products. During the three months ended September 30, 2018, we earned revenue from our CBD product lines of $48,966 as compared to $61,279 for the three months ended September 30, 2017. The decrease of $12,313 relates to our efforts to replace then 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.

 

Cost of Goods Sold: Cost of goods sold consists of purchases of CBD product inventory for sale. During the three months ended September 30, 2018, we incurred $42,400 of costs primarily related to product purchases and labeling of new products as compared to $52,443 for the three months ended September 30, 2017. The decrease of $10,043 reflects our refocus and launch of new products during our current fiscal year.

 

Gross Margin: Gross margin comprised from our sale of products and was $6,566 for the three months ended September 30, 2018 as compared to $8,836 for the three months ended September 30, 2017. The decrease of $2,270 reflects our refocus and launch of new CBD products during our current fiscal year.

 

Sales and Marketing: Sales and marketing expenses mainly comprised of advertising, public relations, events, and website marketing costs. Sales and marketing expenses increased $65,897 to $111,393 for the three months ended September 30, 2018 as compared to $45,496 for the three months ended September 30, 2017. The majority of the increase related to public relation services, website marketing development and increased advertising and promotion costs.

 

 
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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 $103,433 to $188,052 for the three months ended September 30, 2018 as compared to $84,619 for the three months ended September 30, 2017. The majority 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 September 30, 2018 as compared to $56,128 for the three months ended September 30, 2017. The decrease relates to amortization during our three months ended September 30, 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 September 30, 2018.

 

Unrealized Gain on Equity Investments: During the three months ended September 30, 2018, we were able to obtain observable evidence that an investment we own had increased by $4.13 per share for an aggregate value of $654,763, which was $245,834 higher than the fair value of this investment in the previous quarter. As such, we recorded an unrealized gain from the change in market value of $245,834 during the three months ended September 30, 2018.

 

Interest Expense: During the three months ended September 30, 2018, we recorded $66,422 of interest costs related to convertible notes that we entered into during our current fiscal year.

 

Six Months Ended September 30, 2018 Compared to Six Months Ended September 30, 2017

 

 

 

Six Months

 

 

Six Months

 

 

 

 

 

 

 

Ended

 

 

Ended

 

 

 

 

Percentage

 

 

 

September 30,

2018

 

 

September 30,

2017

 

 

$ Change

Inc (Dec)

 

 

Change

Inc (Dec)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRODUCT REVENUE, NET

 

$ 59,400

 

 

$ 116,611

 

 

$ (57,211 )

 

 

(49 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE, PRODUCT

 

 

60,158

 

 

 

90,389

 

 

 

(30,231 )

 

 

(33 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS (LOSS) MARGIN

 

 

(758 )

 

 

26,222

 

 

 

(26,980 )

 

 

(103 )%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

455,437

 

 

 

65,061

 

 

 

390,376

 

 

 

600 %

General and administrative

 

 

395,198

 

 

 

223,516

 

 

 

171,682

 

 

 

77 %

Depreciation and Amortization

 

 

585

 

 

 

112,256

 

 

 

(111,671 )

 

 

(99 )%

TOTAL OPERATING EXPENSES

 

 

851,220

 

 

 

400,833

 

 

 

450,387

 

 

 

112 %

OPERATING LOSS

 

 

(851,978 )

 

 

(374,611 )

 

 

477,367

 

 

 

127 %

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on equity investments

 

 

404,763

 

 

 

-

 

 

 

404,763

 

 

 

-

 

Interest Expense

 

 

(68,301 )

 

 

-

 

 

 

(68,301 )

 

 

-

 

Total other income, net

 

 

336,462

 

 

 

-

 

 

 

336,462

 

 

 

-

 

NET LOSS

 

 

(515,516 )

 

 

(374,611 )

 

 

140,905

 

 

 

38 %

Less: Net loss attributable to non controlling interest

 

 

9,592

 

 

 

(1,139 )

 

 

10,731

 

 

 

942 %

NET LOSS ATTRIBUTABLE TO APPLIED BIOSCIENCES CORP.

 

$ (505,924 )

 

$ (375,750 )

 

$ 130,174

 

 

 

35 %

 

Revenues: During the six months ended September 30, 2018, we earned revenue from our CBD product lines of $59,400 as compared to $116,611 for the six months ended September 30, 2017. The decrease of $57,211 relates to our efforts to replace then 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.

 

 
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Cost of Goods Sold: During the six months ended September 30, 2018, we incurred $60,158 of costs primarily related to product purchases and labeling of new products as compared to $90,389 for the six months ended September 30, 2017. The decrease of $30,231 reflects our refocus and launch of new products during our current fiscal year.

 

Gross (Loss) Margin: Gross (loss) margin comprised from our sale of products and was a gross loss of $758 for the six months ended September 30, 2018 as compared to a gross margin of $26,222 for the six months ended September 30, 2017. The decrease of $26,980 reflects our refocus and launch of new CBD products during our current fiscal year.

 

Sales and Marketing: Sales and marketing expenses increased $390,376 to $455,437 for the six months ended September 30, 2018 as compared to $65,061 for the six months ended September 30, 2017. The majority of the increase related to public relation services, website marketing development and increased advertising and promotion costs.

 

General and Administrative: General and administrative expenses increased $171,682 to $395,198 for the six months ended September 30, 2018 as compared to $223,516 for the six months ended September 30, 2017. The majority of the increase related to higher professional fees and general and administrative expenses.

 

Depreciation and Amortization: Depreciation expense was $585 for the six months ended September 30, 2018 as compared to $112,256 for the six months ended September 30, 2017. The decrease relates to amortization during our six months ended September 30, 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 six months ended September 30, 2018.

 

Unrealized Gain on Equity Investments: During the six months ended September 30, 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 unrealized gain from the change in market value of $404,763 during the six months ended September 30, 2018.

 

Interest Expense: During the six months ended September 30, 2018, we recorded $68,301 of interest costs related to a convertible notes that we entered into during the six months ended September 2018.

 

Liquidity and Capital Resources

 

Cash Flows

 

A summary of our cash flows for the six months ended September 30, 2018 is as follows:

 

Net cash used in operating activities was $293,510 for the six months ended September 30, 2018 as compared to $210,208 for the six months ended September 30, 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 was nil during the six months ended September 30, 2018 as compared to $50,000 during the six months ended September 30, 2017, which comprised of a $50,000 equity investment we made during that period.

 

Net cash provided by financing activities for the six months ended September 30, 2018 was $239,500 as compared to $195,055 for the six months ended September 30, 2017. The amounts received during our six months ended September 30, 2018 related to $75,000 from proceeds from the sale of shares of our common stock and $164,500 received from three convertible notes. The amounts received during our six months ended September 30, 2017 related to our issuance of our common stock for cash.

 

 
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Going Concern

 

As reflected in the condensed consolidated financial statements contained elsewhere is this Form 10-Q, as of September 30, 2018 we had cash on hand and had an accumulated deficit of $6,924 and $3,407,857, respectively, and during the six months ended September 30, 2018, we utilized cash for operations and incurred a net loss of $293,510 and $515,516, 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 six months ended September 30, 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 six months ended September 30, 2018 $164,500 from the issuance of convertible notes to an investor. 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.

 

To address our capital requirements, in October 2018 we entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Triton Funds, LP, a Delaware limited partnership (the “Purchaser”), pursuant to which the Purchaser has the right to purchase up to $1,000,000 of our shares of common stock (the “Shares”) at a purchase price equal to 75% of the lowest closing price of our common stock on the over-the-counter markets for the five business days prior to a purchase. The Purchaser, however, will not have the right to purchase more than $300,000 worth of our shares of common stock within a consecutive period of 30 business days. However, we anticipate that additional funds will be needed to continue operations, obtain profitability and to achieve our objectives. 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.

 

 
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Investments

 

Through March 31, 2018, 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.

 

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 September 30, 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 six months ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 
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PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Currently we are 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.

 

On June 6, 2018, the Company offered and sold one convertible promissory note (the “Note”) in the principal amount of $100,000. The note is due December 31, 2018, bears interest at 8% per month, and in convertible at any time, in the sole discretion of the holder of the Note, into shares of common stock of the Company at purchase price of $1.00 per share. The Company made the offering to an “accredited investor” in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506, promulgated thereunder.

 

On August 1, 2018, the Company offered and sold one convertible promissory note (the “Second Note”) in the principal amount of $100,000. The note is due December 31, 2018, bears interest at 8% per month, and in convertible at any time, in the sole discretion of the holder of the Second Note, into shares of common stock of the Company at purchase price of $1.00 per share. The Company made the offering to an “accredited investor” in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506, promulgated thereunder.

 

 
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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)

 

4.1

 

Convertible Promissory Note, dated June 6, 2018

 

4.2

 

Convertible Promissory Note, dated August 1, 2018

 

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 Executive Officer and 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.

 

 
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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: November 14, 2018

By:

/s/ Chris Bridges

Name:

Chris Bridges

Title:

President (principal executive officer)

 

Date: November 14, 2018

By:

/s/ John James Southard

Name:

John James Southard

Title:

Secretary and Treasurer (principal accounting officer and financial officer)

 

 

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