Form 10-Q OMNIA WELLNESS INC. For: Sep 30
Tweet
Share
E-mail
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from ____ to _____
Commission
file number:
(Name of Registrant in Its Charter)
State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate
by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act).
| Large accelerated filer ☐ | Accelerated filer ☐ | ||
| Smaller
reporting company |
Emerging
growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of common stock at November 28, 2022
OMNIA WELLNESS INC.
Index
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (Unaudited) - USD ($)
| 6 Months ended Sept 30, 2022 | Year Ended March 31, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Other receivable | ||||||||
| Due from related parties | ||||||||
| Inventory | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Fixed assets, net | ||||||||
| Intangible assets, net | ||||||||
| ROU assets, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Deposit liability | ||||||||
| Accrued interest | ||||||||
| Lease liability | ||||||||
| Warranty liability | ||||||||
| Royalty liability | ||||||||
| Nonconvertible notes, related party | ||||||||
| Nonconvertible notes | ||||||||
| Convertible notes, related party | ||||||||
| Convertible notes | ||||||||
| Senior secured notes | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Advances due to related party | ||||||||
| Lease liability | ||||||||
| Senior secured notes | ||||||||
| Nonconvertible notes, related party | ||||||||
| Nonconvertible notes | ||||||||
| Convertible notes | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit: | ||||||||
| Stock Payable | ||||||||
| Stock Reserve | ||||||||
| Preferred stock; shares authorized; shares issued or outstanding | ||||||||
| Common stock; $ par value, shares authorized; and issued and outstanding, respectively | ||||||||
| Common Stock Subscribed $ par value subscribed common shares, and -- shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Stock Purchase Agreement Receivable | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
| 3 |
Statements of Operations (Unaudited) - USD ($)
| 6 Months Ended | 6 Months Ended | 3 Months Ended | 3 Months Ended | |||||||||||||
September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| Revenue | ||||||||||||||||
| Sales, net | $ | $ | $ | $ | ||||||||||||
| Total revenue | ||||||||||||||||
| Cost of goods sold | ||||||||||||||||
| Cost of goods sold | ||||||||||||||||
| Total cost of goods sold | ||||||||||||||||
| Gross Profit | ( | ) | ||||||||||||||
| Operating expenses: | ||||||||||||||||
| Warranty expense | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Bad Debt Expense | ||||||||||||||||
| Legal and professional fees | ||||||||||||||||
| Payroll expense | ||||||||||||||||
| Selling and marketing expense | ||||||||||||||||
| Selling and marketing expense, related party | ||||||||||||||||
| Consulting | ||||||||||||||||
| Consulting, related party | ||||||||||||||||
| Royalty expense | ( | ) | ||||||||||||||
| License royalties | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Other (income) expense: | ||||||||||||||||
| Gain on PPP loan forgiven | ( | ) | ( | ) | ||||||||||||
| Loss on debt settlement | ||||||||||||||||
| Interest expense and finance costs | ||||||||||||||||
| Total other (income) expense | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss per common share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common | ||||||||||||||||
| shares outstanding-basic and diluted | 231,507,112 | 224,213,846 | 231,509,068 | 224,213,846 | ||||||||||||
| 4 |
Statements of Changes in Stockholders’ Deficit (Unaudited) - USD ($)
| Common Stock Shares | Common Stock Par Value | Common Stock Subscribed | Preferred Stock Shares | Preferred Stock Value | Stock Payable | Stock Reserve | Stock Purchase Agreement Receivable | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||
| Additional paid in capital | - | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||
| Additional paid in capital | - | |||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Reclass stock payable to Stock Reserve | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Reclass par value of shares and shares outstanding | ( | ) | ( | ) | - | |||||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature on convertible notes | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||
| Beneficial conversion feature on convertible notes | - | |||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||
| 5 |
Statements of Cash Flows (Unaudited) - USD ($)
For the Six Months Ended | For the Six Months Ended | |||||||
September 30, 2022 | September 30, 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | $ | |||||||
| BCF on convertible notes | $ | |||||||
| Loss on debt settlement | $ | |||||||
| Stock based compensation | $ | |||||||
| Amortization of ROU asset | $ | |||||||
| Amortization of warrants | $ | |||||||
| Discount on notes | $ | |||||||
| Royalty on sales | $ | |||||||
| Finance costs related to note payable | $ | |||||||
| Finance costs paid in stock | $ | |||||||
| Gain on PPP loan forgiven | $ | ( | ) | |||||
| Rent payments on lease liability | $ | ( | ) | |||||
| Bad debt expense | $ | |||||||
| Change in: | ||||||||
| Accounts receivables, net | $ | ( | ) | |||||
| Due from related parties | $ | |||||||
| Inventory | $ | ( | ) | |||||
| Deposits | $ | ( | ) | |||||
| Advance payments on purchase of inventory, related party | $ | |||||||
| Accounts payable and accrued liabilities | $ | |||||||
| Interest payable | $ | |||||||
| Net cash used - operating activities | $ | ( | ) | ( | ) | |||
| Cash flows from investing activities: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Payments on license agreement, related party | ||||||||
| Net cash used – investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Subscriptions receivable | ||||||||
| Proceeds from advances | ||||||||
| Proceeds from loans payable | ||||||||
| Payments on loans payable | ||||||||
| Payments on advances | ( | ) | ||||||
| decrease in Stock subscription payable | ( | ) | ||||||
| Increase in Stock Reserve | ||||||||
| Change in shareholders’ equity, net | ||||||||
| Change in common stock | ( | ) | ||||||
| Net cash provided - financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash - beginning of year | ||||||||
| Cash - end of year | $ | $ | ||||||
| 6 |
Omnia Wellness Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2022 and 2021
(unaudited)
Note 1 Nature of Operations
Omnia
Wellness Inc. (the “Company”) was incorporated as a Nevada corporation on
On
March 5, 2020, the Company filed Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada to,
among other things, (i) increase the Company’s authorized shares of common stock from to , (ii) create and
authorize shares of “blank check” preferred stock, and (iii) effect a
On
April 17, 2020, the Company entered into a Share Exchange and Reorganization Agreement (the “Exchange Agreement”) with Omnia
Wellness Corporation (formerly known as Bed Therapies Inc.), a Texas corporation (“Omnia Corp.”), and the beneficial stockholders
of Omnia Corp. to acquire
| 7 |
As of immediately prior to the closing of the Acquisition, the Company entered into an Assignment and Assumption Agreement with RZI Consulting LLC (the “Assignment Agreement”), pursuant to which RZI Consulting LLC assumed substantially all of the Company’s remaining assets and liabilities through the closing of the Acquisition. Accordingly, as of the closing of the Acquisition, the Company had no assets or liabilities (other than relating to general and administrative expenses).
Following the Acquisition, the Company, through its wholly owned subsidiary Omnia Corp., now develops and markets products for wellness and physical therapy markets, using patented dry-hydro therapy equipment that the Company plans to offer and sell in medical and fitness markets.
On
April 6, 2021,
The Company’s principal executive office is located at 999 18th St., Suite 3000, Denver, CO 80202, and its telephone number is 303-325-3738. The Company’s website address is www.omniawellness.com.
In March 2020 the World Health Organization declared COVID-19 a pandemic. The Company is still assessing the impact COVID-19 may have on its business, but there can be no assurance that this analysis will enable the Company to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally. The extent to which the COVID-19 pandemic and global efforts to contain its spread will impact the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic.
Note 2 Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
Basis of Presentation - The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Principles of Consolidation - The consolidated financial statements include accounts of the Company’s wholly-owned subsidiary Omnia Wellness Corp., and Omnia Wellness Corp.’s wholly-owned subsidiary SolaJet™ Financing Company, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Financial Information - The accompanying Consolidated Balance Sheet as of September 30, 2022 and 2021, the Consolidated Statements of Income for the three and six months ended September 30, 2022 and 2021, the Consolidated Statements of Changes in Stockholders Equity for the six months ended September 30, 2022 and 2021, and the Consolidated Statements of Cash Flows for the six month ended September 30, 2022 and 2021 are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). In our opinion, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of September 30, 2022 and 2021, our results of operations for the three and six months ended September 30, 2022 and 2021, and our cash flows for the six months ended September 30, 2022 and 2021. The results of operations for the three and six months ended September 30, 2022 and 2021 are not necessarily indicative of the results to be expected for the year ending March 31, 2023.
These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 filed with the SEC on October 17, 2022.
Prior period balance related to inventories has been reclassified to conform to the current year presentation.
Accounting Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and the accompanying notes. Such estimates and assumptions impact, among others, the following: the allowance for doubtful accounts, determination of impairment on investments and determination of recoverability of deferred tax assets. Actual results could differ from those estimates.
Risks and Uncertainties - The Company’s operations may be subject to significant risk and uncertainties including financial, operational, regulatory, and other risks associated with a start-up company, including the potential risk of business failure. See Note 3 regarding going concern matters.
| 8 |
Cash - In the consolidated statement of cash flows, cash includes cash in hand and other short-term highly liquid investments with original maturities of three months or less. The Company places its cash on deposit with financial institutions it believes to be of high quality.
Accounts
Receivable – Accounts receivable balances are established for amounts owed to the Company from its customers from the sale
of products and services. The Company closely monitors the collectability of outstanding accounts receivable and provide an allowance
for doubtful accounts based on estimated collections of outstanding amounts. The Company evaluated the accounts receivable and determined
no collection loss reserve was necessary. There were $
Related Party Transactions - The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include (a) affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Advance
Payments on Purchases of Inventory, related party - Advance payments on purchases of inventory consists of hydro-therapy beds
and related equipment that are held by DryRx, a company owned and controlled by the Chairman’s brother, under a Contract Services
Agreement until ownership is transferred, which is when a sale or use of the bed and equipment occurs, and beds are placed in service.
The value of the advance payments is stated at the lower of cost or market, determined using the first in, first-out method. Inventory
held by third parties in use, which is inventory installed at a third-party location and ownership is maintained by the Company, is re-classified
to fixed assets and depreciated over its useful life using the straight-line method of depreciation. All inventory held as advance payments
on purchases of inventory are available either for sale or for use to be installed at third-party locations and not transferred until
a transaction has occurred. The balance of advance payments on purchases of inventory was $
Fixed
Assets - Fixed assets are carried at cost less accumulated depreciation and amortization. Depreciation is computed using the
straight-line method over the estimated useful lives. The fixed assets include equipment placed in use at certain locations The accumulated
depreciation was calculated to be $
Intangible
Asset - Patents with a finite useful life that are acquired through the license agreement are carried at cost less accumulated
amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives.
The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any impairment
changes being accounted for on an annual basis. The expected life of the current patent recorded is expected to be
Leases - Operating lease right of use (“ROU”) assets represent the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in operating expenses in the consolidated statements of operations.
License Payable, related party – License payable is the remaining balance due for the initial intangible asset cost. License payable is classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
| 9 |
Warranty
Liability – For sales to customers, the Company provides a warranty on the beds sold which includes, a three-year warranty
on parts, a five-year warranty on the frame, three year warranty on parts, and a one year warranty on any labor. Warranty liability is
accrued and is estimated at
Beneficial Conversion Features – The Company accounts for convertible notes payable in accordance with ASC 470-20. A beneficial conversion feature is a non-detachable conversion feature that is “in the money” at the commitment date, which requires recognition of interest expense for underlying debt instruments and a deemed dividend for underlying equity instruments. A conversion option is in the money if the effective conversion price is lower than the commitment date fair value of a share into which it is convertible. As of September 30, 2022 and 2021, the Company did not have any conversion options that were in the money.
Derivatives – The Company accounts for derivative instruments in accordance with ASC815 and ASC470, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedging relationships and the types of relationships designated are based on the exposures hedged. At September 30, 2022 and 2021, the Company did not have any derivative instruments that were designated as hedges.
Revenue – Revenue Recognition Standard, ASC 606 is used by the Company to recognize revenue. ASC 606 standards were jointly issued by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). The five conditions of ASC 606 applied to revenue are: 1. Identify the contract with the customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to separate performance obligations; and 5. Recognize revenue as each performance obligation is satisfied.
The Company derives its revenues primarily from the usage fees and sales of hydrotherapy massage beds and installation services. Revenues from sales are recognized when the products are sold and delivered to its customers and the usage fees are earned based on subscription or actual usage. Sales Taxes and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue.
Income Taxes – The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25
addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely
than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carrybacks and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
| 10 |
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Fair Value of Financial Instruments - From inception, the Company adopted ASC 820, Fair Value Measurements and Disclosures, which provides a framework for measuring fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
| ● | Level 1: Quoted prices for identical assets and liabilities in active markets; | |
| ● | Level 2: Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and | |
| ● | Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
The carrying amounts of financial instruments including cash, accounts payable, warranty liability and notes payable approximated fair value based on Level 1 measurement as of September 30, and 2021 due to the relatively short maturity of the respective instruments.
Recently Issued Accounting Pronouncements -
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2021, including interim periods within those years, and must be adopted under a modified retrospective method approach. Entities may adopt ASU 2016-13 earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those years. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company’s financial statements and disclosures.
Implementation of this ASU had no material impact on the consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. Implementation of this ASU had no material impact on the consolidated financial statements.
As of September 30, 2022, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.
| 11 |
Note 3 Going Concern
The Company adopted Accounting Standards Update No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the financial statements, the Company had an accumulated deficit at September 30, 2022 and 2020, a net loss and net cash used in operating activities for the reporting periods then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company is commencing operations to generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of private offering. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 4 Related Parties
The
Company outsources its manufacturing pursuant to a Contract Services Agreement with DryRX, LLC dated as of January 1, 2020, which replaced
and superseded the Contract Services Agreement with DryRX, LLC dated as of July 22, 2018, which expired in accordance with its terms.
The Contract Services Agreement, among other things, provides that DryRX shall provide manufacturing and support services on behalf of
the Company, and shall be responsible for the manufacturing oversight and production operations of the Company’s products. In return,
the Company is obligated to pay to DryRX a fee equal to
Note 5 Fixed Assets
The carrying basis and accumulated depreciation of fixed assets at September 30, 2022 and 2021 is as follows:
| Useful Lives | September 30, 2022 | September 30, 2021 | ||||||||
| Equipment in use | $ | $ | ||||||||
| Vehicles and Trailers | ||||||||||
| Patent Costs | ||||||||||
| Building improvements | ||||||||||
| Less depreciation and amortization | ||||||||||
| Total fixed assets, net | $ | |||||||||
The
Company recorded depreciation and amortization expense of $
| 12 |
Note 6 License Agreement, Related Party
On
April 30, 2019, the Company entered worldwide exclusive license with Drywave Technologies, Inc. (“Drywave”), a Company owned
by Steve Howe. On the terms and conditions of the agreement, the Company received intellectual property rights to manufacture, use, and
offer for sale all the products related to the patents and trademarks for dry hydrotherapy therapy technologies. The license fee to acquire
the technology was $
| (a) | $ | |
| (b) | $ | |
| (c) | $ |
The
Company made all the required payments as of March 31, 2021.
filing.
The
company recorded the original license fee as an intangible asset as of April 30, 2019 and is amortizing the asset over the expected useful
life of the asset of
Note 7 Lease Liability
On
January 1, 2022, we adopted ASC Topic 842 – Leases. Under this new guidance, lessees are required to recognize assets and liabilities
on the balance sheet for the rights and obligations created by all leases. As of September 30, 2022 and 2021 the company recorded its
ROU lease liabilities of $
Lessee accounting
We
determine if an arrangement is or contains a lease at inception.
Under the guidance of ASC 842, operating leases are included in right-of-use assets, current lease liabilities, and noncurrent lease liabilities on our balance sheets. ROU assets and lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at transition date in determining the present value of future payments. The ROU asset includes any lease payments made but excludes lease incentives and initial direct costs incurred, if any. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
Lease extensions
Many leases have options to either extend or terminate the lease. In determining the lease term, we considered all available contract extensions that are reasonably certain of occurring.
Operating leases
The
Company has three operating leases, each with different terms.
| 13 |
The following table summarizes balance sheet data related to leases at September 30, 2022 and September 30, 2021:
September 30, 2022 | September 30, 2021 | |||||||
| Assets | ||||||||
| Operating lease right of use assets #1 | $ | $ | ||||||
| Operating lease right of use assets #2 | ||||||||
| Operating lease right of use assets #3 | ||||||||
| Less accumulated depreciation | ( | ) | ||||||
| Total operating lease right of use assets | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease liability, current | ||||||||
| Operating lease liability, noncurrent | ||||||||
| Total lease liabilities | ||||||||
Operating
lease liability is presented net of lease payments. The Company is required to make monthly payments for each lease. During the fiscal
year ended September 30, 2022, the Company paid $
Note 8 Notes Payable
The following are the various notes payable of the Company:
Covid-19 PPP Loan
During
the year ended March 31, 2021, the Company entered into loans under the Paycheck Protection Program (“PPP”) sponsored by
the U.S. Small Business Administration (SBA) providing for proceeds of $
Senior Secured Notes
In
June 2021, the Company entered into a Senior Secured Note with Auctus Fund for $
On
July 14, 2021, the principal amount of the note was increased by $
Also
pursuant to the agreement, in connection with the issuance of the note, the Company issued two common stock purchase warrants (separately,
the “First Warrant” and the “Second Warrant” and together, the “Warrants”) to Auctus, each allowing
Auctus to purchase an aggregate of shares of the Company’s common stock. The Second Warrant is subject to cancellation
pursuant to the terms of the Auctus Note and may not be exercised until the Trigger Date (as defined in the Second Warrant). The Warrants
each have an exercise price of $
| 14 |
The
total fair value of the warrants was estimated on the issue date at $
| June 24, 2022 | ||||
| Market price of common stock on date of issuance | $ | |||
| Risk-free interest rate | % | |||
| Expected dividend yield | ||||
| Expected term (in years) | ||||
| Expected volatility | % | |||
On or about November 22, 2021, the Company triggered an event of default under the Auctus Note and related documents which entitled Auctus, among other things, to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the Auctus Note. On February 17, 2022, Auctus and the Company executed a Waiver Letter which waived such defaults effective as of November 22, 2021.
The note is secured by an Affidavit of Confession of Judgment and ranks senior over all existing and future indebtedness of the Borrower.
Nonconvertible Notes – Related Party
As
of September 30, 2022, the Company has issued $
| Interest Rate | Issuance Date | Maturity | September 30, 2022 | |||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| 15 |
Nonconvertible Notes
As
of September 30, 2022, the Company has issued $
| Interest Rate | Default Rate | Issuance Date | Maturity | September 30, 2022 | ||||||||||
| % | N/A | $ | ||||||||||||
| % | % | $ | ||||||||||||
| % | % | $ | ||||||||||||
| % | Additional | % | $ | |||||||||||
| % | Additional | % | $ | |||||||||||
| % | N/A | $ | ||||||||||||
| % | Additional | % | $ | |||||||||||
| % | Additional | % | $ | |||||||||||
| % | % | $ | ||||||||||||
| % | Additional | % | $ | |||||||||||
| % | Additional | % | $ | |||||||||||
| % | Additional | % | $ | |||||||||||
| % | Additional | % | $ | |||||||||||
| % | N/A | % | $ | |||||||||||
| % | N/A | % | $ | |||||||||||
| % | N/A | % | $ | |||||||||||
| N/A% | N/A | % | $ | |||||||||||
| $ | ||||||||||||||
Convertible Notes – Related Party
The
Company has issued $
Convertible Notes
As
of September 30, 2022, the Company has issued $
| Interest Rate | Conversion Rate | Issuance Date | Maturity | September 30, 2022 | ||||||||||||
| % | $ | $ | ||||||||||||||
| % | $ | $ | ||||||||||||||
| % | $ | $ | ||||||||||||||
| % | $ | $ | ||||||||||||||
| % | $ | $ | ||||||||||||||
| % | $ | $ | ||||||||||||||
| % | $ | $ | ||||||||||||||
| % | $ | $ | ||||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | $ | ||||||||||||||
| % | $ | $ | ||||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| % | $ | * | $ | |||||||||||||
| adjustment | $ | |||||||||||||||
| $ | ||||||||||||||||
| * |
The
Company evaluates these notes at commencement for beneficial conversion features and derivatives. As of September 30, 2022, the Company
recorded a beneficial conversion feature on the convertible notes of $
| 16 |
Note 9 Shareholders’ Equity
Common Stock - The Company is authorized to issue shares of common stock, par value $ per share. All shares of the Company’s common stock have equal rights and privileges with respect to voting, liquidation, and dividend rights. Each share of common stock entitles the holder thereof to:
| a. | One non-cumulative vote for each share held of record on all matters submitted to a vote of the stockholders; | |
| b. | To participate equally and to receive all such dividends as may be declared by the Board of Directors out of funds legally available; therefore, and | |
| c. | To participate pro rata in any distribution of assets available for distribution upon liquidation. |
Stockholders have no pre-emptive rights to acquire additional shares of common stock or any other securities. Common shares are not subject to redemption and carry no subscription or conversion rights.
Preferred Stock - On April 6, 2021, the Company increased its authorized shares of “blank check” preferred stock from 0 to shares, which may be issued from time to time in one or more series and/or classes. No shares of preferred stock have been issued or are outstanding as of September 30, 2022.
The Company has not declared or paid any dividends or returned any capital to common stock shareholders as of September 30, 2022, and 2021.
Note 10 Income Taxes
Income Tax Expense
For
the fiscal year ended September 30, 2022, the reconciliation between the income tax benefit computed by applying the statutory U.S. federal
income tax rate to the pre-tax loss before income taxes, and total income tax expense recognized in the financial statements is the change
in the valuation allowance. For the fiscal year ended September 30, 2020, and 2021, the Company did
NOL Carryforwards and Other Matters
The Company files income tax returns in the U.S. federal jurisdiction and the state of Colorado. The Company’s federal and state tax years for the 2018 fiscal year and forward are subject to examination by taxing authorities.
The
Company did
Note 11 Commitments and Contingencies
Off-Balance Sheet Arrangements - The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Leases
- The Company leases approximately
The
Company leases a warehouse facility of approximately
| 17 |
The
Company has terminated the lease of approximately
Licenses-
The Company entered into a Master Facility License Agreement in which space is currently leased at two fitness facilities to operate
equipment in use. The licenses have an initial term of 90 days and then are on a month-to-month basis. The rent is a fixed fee times
the number of beds that ware installed in the space. After six months, the rental fee also includes
Legal Matters - From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. During the periods ended September 30, 2022 and 2021, there are no proceedings in which the Company or any of its directors, officers or affiliates, or any registered or beneficial shareholders, is an adverse party or has a material interest adverse to its interest.
Note 12 Subsequent Events
None noted
| 18 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statements
The following discussion should be read in conjunction with our unaudited financial statements and related notes included in Item 1, “Financial Statements,” of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended March 31, 2022. Certain information contained in this MD&A includes “forward-looking statements.” Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition and results of operations, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our existing and proposed business, including many assumptions regarding future events. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including those risks described in detail in the section entitled “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “will,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology.
In light of these risks and uncertainties, and especially given the nature of our existing and proposed business, there can be no assurance that the forward-looking statements contained in this section and elsewhere in this Quarterly Report on Form 10-Q will in fact occur. Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
Business
We develop and market products for wellness and physical therapy markets, using patented dry-hydro therapy equipment and other related modalities that we plan to offer and market in wellness, fitness and medical markets.
Our mission is to redefine the wellness industry by introducing affordable, “on demand” wellness memberships through a network of retail locations, which we refer to as BodyStop® Centers, which feature patented, touchless SOLAJET™ endokinetic therapy, a technology that we believe exceeds the capability and effect of hands-on massage. We seek to become the leading provider of therapeutic wellness treatments and the most recognized brand in the wellness category through the rapid and focused expansion of BodyStop® Relaxation Centers in key markets throughout the U.S. and Europe. The goal is not only to capture a significant share of the existing market but also to expand the wellness market as a whole by attracting a large segment of potential customers who are averse to human touch.
We plan to introduce a disruptive business model into the traditional wellness massage and spa industry by delivering the important benefits of our endokinetic therapies in a more affordable and convenient way. We have created a unique and expandable business model that we believe breaks through the main barriers of wellness treatments which include cost, scheduling, and quality/consistency.
Central to our business plan is the creation of the BodyStop® Relaxation Centers, which are premium, spa-like locations that can be located, and an appointment booked, by customers or “members” using a smartphone app or the web – massage on demand. We expect that each typical BodyStop® Relaxation Center will have six to ten patented dry-hydrotherapy SOLAJET™ systems, two Aquavive® contrast therapy units, one SolaSauna, a SolaPro percussive treatment tower, one full body cryo-therapy chamber, one HyperCryo® spot therapy unit, one SolaDerm® LED therapy system and an assisted TheraStretch® zone where customers can choose and receive private, deeply relaxing, consistent and therapeutic treatments with the multiple modalities available. We believe that the customized wellness experience provided at a BodyStop® is unequaled in our goal to provide the client the ability to “Feel Better Fast” at our one stop locations.
Our retail membership model is currently based upon a price from $5 to $10 per fifteen minute session on the modality of the customer’s choice. Due to our technology, we expect to operate the BodyStop® Relaxation Centers with a minimal amount of staffing, as well as potentially franchise BodyStop® Relaxation Centers to third parties to enhance the rate of growth. Based on projected usage rates determined by us after multiple years of product development and market testing, we estimate that a single BodyStop® center servicing up to 800 members, may generate approximately $1,000,000 in annual revenue with a target gross margin of approximately 60%.
| 19 |
Research and Development
To develop our proprietary technology and prepare our product for commercialization, Omnia Corp. and its founder and affiliates have spent multiple years designing and placing over 500 units in high volume usage commercial settings. This product verification program was important to validate the product’s reliability, performance, consumer features and production capacity. The Company is continuing to develop additional products to offer in the wellness market and will incur research and development expenses on an ongoing basis.
Products and Services
The SolaJet® Dry-Hydrotherapy System, is an exhilarating new wave in health and wellness. Inside, a powerful traveling water jet performs a relaxing full body Endo-Kinetic™ treatment but is also able to isolate to any part of the body at the touch of a button. Throughout this TOUCH-LESS self- administered session, the client remains clothed and dry.
The AquaVive, is the world’s first hyper-thermic massaging system that uses the penetrating power of water to both relax muscles with therapeutic heat or to quell inflammation with cooling to 40 degrees F. The AquaVive also provides gentle stretching and side to side movement.
The SolaPro, provides deep and rapid vibration which provides many individuals fast and advanced relief from aches and pains and helps promote faster recovery. Sola-Pro creates a targeted therapeutic effect. In the case of the SolaPro™, our “smooth- force” penetrating power can deliver gentle strength massage or powerful deep penetrating action.
SolaDerm, aids in the reduction of inflammation using cold therapy works by reducing blood flow to a particular area, which can significantly reduce swelling that causes pain, especially around a joint or a tendon. It can temporarily reduce nerve activity, which can also relieve pain. Compression assists in a similar manner through the restriction of blood flow and the reduction of swelling and fluid build-up.
HyperCryo Spot Cryotherapy, uses extremely cold temperatures in order to induce healing processes. Cryotherapy has been used to stimulate the body’s own natural ability to recover, repair, and rebuild. Using extremely cold temperatures over a short time has an effect much easier to administer than traditional ice packs used for cold therapy or treatment. Spot cryo targets a local area vs the whole body.
Full Body Cryotherapy, refers to the process of stimulating the body’s natural healing and recovery systems by applying extremely cold temperatures to the entire body. Eliminating pain, reducing inflammation, and improving the blood flow are just a few of its many possible positive benefits.
SolaSauna, is the only true full spectrum infrared saunas available offering advanced near, mid and far infrared technologies. Our robust True Wave™ Full Spectrum heating system provides all wavelengths 100% of the time to optimize your sauna session.
EarthCord. “Grounding” or natural diffusion refers to the health benefits of direct contact with the earth’s negative electrical field. As static electricity build up is discharged through direct skin contact, grounding to the earth may help rebalance electrons in the body to naturally optimize its electrical system, thus helping the user to relax and reduce inflammation.
BodyVibe. Whole body vibration can help reduce pain and stiffness by improving local circulation and even reverse the effects of limited mobility naturally. We believe that whole body vibration therapy is a great treatment prior to stretching or exercise, with gentle motion or aggressive vibration set to the user’s preference.
BodyStretch. Many people go through daily activity with stiff muscles resulting from sedentary lifestyles or overworked and stressed muscle. Stretching can help reestablish a more normalized muscle tone, relieving stiffness and soreness.
| 20 |
Plan of Operations
Relaxation Centers
The Company’s business model is to create a national chain of BodyStop® “Relaxation Centers”. Earlier Company focus groups have shown that individuals introduced to the proposed BodyStop® Relaxation Center concept had a high interest in the services offered. The Company also had similar results selling SOLAJET™ memberships in commercial settings with a compelling conversion rate for users to purchase a monthly massage membership. The Company believes this is a strong indication that retention or membership sales will be high once consumers experience a SOLAJET™ massage in a relaxing and stress-free environment. The Company’s first two BodyStop® locations are currently planned at the LA Fitness on Alicia Parkway in Mission Viejo, California and at the LA Fitness in Fountain Valley, California, with an expected opening date of December, 2022.
For the BodyStop® Relaxation Centers, the Company continues to develop product branding and marketing using professional marketing agencies and intends to hire consultants to develop various store layouts and associated marketing concepts. The locations are intended to represent a “human oasis” or an affordable “recharge station” for our stressed-out world. The Company intends to work closely with franchise consultants during the testing and modeling of the centers to make certain any future franchise offering, if any, has the best opportunity to be successful.
After our Relaxation Centers have been in service for a reasonable test period, management plans to evaluate each location’s results and determine the proper course of action for the identification and installation of future locations. If results from the test market demonstrate that the concept is profitable and scalable, we intend to open approximately 50 to 100 Company-owned Relaxation Centers in the U.S. within the following 12 - 24 months, subject to the availability of funds. Following this, we expect to expand first into Europe. Our target is to have 1,000 Relaxation Centers in the U.S. and additional locations in Europe, within 6-8 years after the initial launch. We believe that there will be opportunities to expand the business into other areas worldwide, if and when we have the resources available.
Along with the retail and commercial elements of the business plan, we expect to launch a medical rental program targeting physical therapists and chiropractors, which we believe removes the cost factor that would otherwise prevent practitioners from purchasing our products - a major barrier of entry.
History
On April 17, 2020, we entered into the Exchange Agreement with Omnia Corp. and the beneficial stockholders of Omnia Corp. to acquire 100% of the issued and outstanding shares of capital stock of Omnia Corp. The transactions contemplated by the Exchange Agreement were consummated on January 5, 2021 and, pursuant to the terms of the Exchange Agreement, among other things, all outstanding Omnia Corp. Shares were exchanged for shares of our common stock, par value $0.001 per share, based on the exchange ratio of one share of our common stock for every one Omnia Corp. Share. Accordingly, we acquired 100% of Omnia Corp. in exchange for the issuance of 10,000,000 shares of our common stock and Omnia Corp. became our wholly-owned subsidiary. As of the Closing, Mr. Amer Samad, formerly our sole director and executive officer, agreed to cancel 52,656,888 (pre-stock split) shares of our common stock owned beneficially and of record by him as part of the conditions to Closing, which were cancelled immediately after the Closing. We also issued an aggregate of 1,269,665 shares of common stock on January 5, 2021 as a result of the conversion in accordance with their terms of outstanding convertible promissory notes in the aggregate principal amount of approximately $539,000.
As of immediately prior to the closing of the Acquisition, we entered into an Assignment and Assumption Agreement with RZI Consulting LLC (the “Assignment Agreement”), pursuant to which RZI Consulting LLC assumed substantially all of our remaining assets and liabilities through the closing of the Acquisition. Accordingly, as of the closing of the Acquisition, we had no assets or liabilities (other than relating to general and administrative expenses).
| 21 |
Significant Accounting Policies and Estimates
The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations.
Results of Operations
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long-term operating requirements and to support our present growth needs. We expect to raise additional capital through, among other things, the sale of equity or debt securities, which we are actively pursuing in Europe now and expect to close a number of convertible debt notes before the end of 2022. Additionally, the Company is in discussions, under a confidential letter of intent, with an US investment bank to underwrite an offering of equity securities in Q1 of 2023.
Fiscal Quarter Ended September 30, 2022 Compared to Fiscal Quarter Ended September 30, 2021
Revenues
Total revenue was $28,446 for the fiscal quarter ended September 30, 2022, compared to $57,809 for the fiscal quarter ended September 30, 2021. The decreased revenue during the 2022 period is due to a delay in the opening of the new BodyStop locations for LA Fitness, originally scheduled for August 2022 and the decision to relocate the BodyStop location on Long Island prior to opening in July 2022
Cost of Goods Sold
Total cost of goods sold was $77,534 for the fiscal quarter ended September 30, 2022, compared to $8,477 for the fiscal quarter ended September 30, 2021. The increase in cost of goods sold during the 2022 period is due to a payout for 8 beds purchased from Velocity.
Operating Expenses
Total operating expenses was $408,889 for the fiscal quarter ended September 30, 2022, compared to $823,770 for the fiscal quarter ended September 30, 2021. There was a decrease due to less spending within R&D Expense. During thet fiscal quarter of June 30, 2021 there was a reclass entry to move R&D as an intangible asset to expense creating an increase of $335,000. As of September 30, 2022 there is an increase in payroll expense due hiring on a full time controller, consulting expense due to efforts associated with raising more funding, and general and administrative expenses offset by a decrease in advertising expense, legal and professional fees, Royalty expense
Interest Expenses
Interest expense was $176,640 for the fiscal quarter ended September 30, 2022, compared to $918,807 for the fiscal quarter ended September 30, 2021. The decrease in interest expense from 2021 is due to the Beneficial Conversion Feature booked in September 30, 2021 vs the amount booked in September 30, 2022. he Company issued convertible notes during the period in the amount of $50,000, that convert into shares at a lower cost than the cost that was offered to the current market (the Beneficial Conversion Feature). The convertible notes convert within 12 months at an average of $.20/ share and were issued when the market for the shares ranged from $.17 to $.36/share. The Company is recognizing the cost for the price difference in those shares, which represents the share’s intrinsic value and is considered an additional cost of financing and is recorded as an interest expense for the period of $22,841. During the fiscal quarter ended September 30, 2021 the Beneficial Conversion Feature was calculated on all outstanding convertible notes in the amount of $1,090,000 to calculate the Beneficial Conversion Feature in the amount of $771,576. Finance lease costs are split, where amortization of the ROU asset is recorded in operating expenses and an implied interest component is recorded in interest expense. The ROU interest expense for the period is $3,766.
| 22 |
Net Income (Loss)
The net loss for the fiscal quarter ended September 30, 2022 was $(634,617), compared to a net loss for the fiscal quarter ended September 30, 2021 of $(1,546,286). The net loss of $(634,617) as of the fiscal quarter ended September 30, 2022 resulted in a loss per share of (0.00) compared to a net loss of $(1,546,286) as of September 30, 2021, resulting in a loss per share of (0.01).
Six Months Ended September 30, 2021 Compared to Six Months Ended September 30, 2020
Revenues
Total revenue was $162,092 for the six months ended September 30, 2022, compared to $94,931 for the six months ended September 30, 2021. The increase in revenue during the 2022 period is due to obtaining customers in the process of opening many stores and purchasing our beds for use.
Cost of Goods Sold
Total cost of goods sold was $98,500 for the six months ended September 30, 2022, compared to $15,010 for the six months ended September 30, 2021. The increase in cost of goods sold during the 2022 period was mainly due to the payout to a vendor for 8 beds that were sold to customers. During the six months ended September 30,2021 the company was in the middle of launching the subscription based revenue program which does not focus on the sales of product and has a minimal impact on cost of goods sold.
Operating Expenses
Total operating expenses was $867,570 for the six months ended September 30, 2022, compared to $1,414,474 for the six months ended September 30, 2021. There was a decrease due to less spending within R&D Expense. During thet fiscal quarter of June 30, 2021 there was a reclass entry to move R&D as an intangible asset to expense creating an increase of $732,000 as of September 30, 2021. For the six months ended September 30, 2022 there is an increase in payroll expense due to hiring a full time controller and general and administrative expenses.
Interest Expenses
Interest expense was $410,164 for the six months ended September 30, 2022, compared to $1,045,638 for the six months ended September 30, 2021. The decrease in interest expense from 2021 is due to the Beneficial Conversion Feature booked in September 30, 2021 vs the amount booked in September 30, 2022. The Company issued convertible notes during the six months ended in the amount of $208,750, that convert into shares at a lower cost than the cost that was offered to the current market (the Beneficial Conversion Feature). The convertible notes convert within 12 months at an average of $.20/ share and were issued when the market for the shares ranged from $.17 to $.36/share. The Company is recognizing the cost for the price difference in those shares, which represents the share’s intrinsic value and is considered an additional cost of financing and is recorded as an interest expense for the six months ended of $100,402. During the six months ended September 30, 2021 the Beneficial Conversion Feature was calculated on all outstanding convertible notes in the amount of $1,090,000 to calculate the Beneficial Conversion Feature in the amount of $771,576. Also, finance lease costs are split, where amortization of the ROU asset is recorded in operating expenses and an implied interest component is recorded in interest expense. The ROU interest expense for the six months ended is $8,080.
| 23 |
Net Income (Loss)
The net loss for the six months ended September 30, 2022 was $(1,214,142), compared to net loss for the six months ended September 30, 2021 of $(1,936,318). The net loss of $(1,214,142) as of the six months ended September 30, 2022 resulted in a loss per share of (0.01), compared to a net loss of $(1,936,318) as of September 30, 2021, resulting in a loss per share of (0.01).
Liquidity and Capital Resources
We have historically funded operations through the issuance of loans, evidenced by convertible and non-convertible promissory notes. Since inception, we have raised an aggregate of $9,993,908 through the sale of such promissory notes, of which approximately $6,096,955 principal amount remains outstanding and either is currently due and continuing to accrue default interest, or will be due in 2023
Based on our current burn rate, we need to raise additional capital in the short term to fund operations, including the opening of Relaxation Centers, and meet expected future liquidity requirements, as well as to repay our remaining existing total indebtedness of approximately $8,431,356, if not converted to equity, or we will be required to curtail or terminate some or all of our installations or our operations. We are continuously in discussions to raise additional capital, which may include or be a combination of convertible or term loans and equity which, if successful, will enable us to continue operations based on our current burn rate, for the next 12 months; however, we cannot give any assurance at this time that we will successfully raise all or some of such capital or any other capital. In addition, the COVID-19 pandemic recovery and the unprecedented capital market turmoil tied to geopolitical events and rising inflation has presented unprecedented challenges to businesses and the investing landscape around the world, including our business. We are actively pursuing financing in Europe through select investors who have liquidity and have business interests in our model and strategy and expect to close a number of convertible debt notes before the end of 2022. Additionally, the Company is in discussions, under a confidential letter of intent, with an US investment bank to underwrite an offering of equity securities in Q1 of 2023. Although we are having positive reception now, there can be no assurance that management’s plans will be successful. We may not be able to finalize the proposed financing arrangements on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our product lines or our operations. Furthermore, at this time, we do not have an established source of funds sufficient to cover operating costs after January, 2023. Funds raised, if any, are anticipated to fund not just repayment of existing obligations, but our ongoing operations including validating the business model for Relaxation Centers, hiring additional personnel, and expanding the revenue share model with additional facilities.
Currently, we do not have available funds to repay currently due liabilities or note indebtedness that is expected to become due in 2023, and are exploring refinancing, extending the maturity date and/or converting some or all of such indebtedness into equity.
There can be no assurance that necessary debt or equity financing will be available, or will be available on terms acceptable to us, in which case we may be unable to meet our obligations or fully implement our business plan, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Additionally, we will need additional funds to respond to business opportunities including potential acquisitions of complementary technologies, protect our intellectual property, develop new lines of business, and enhance our operating infrastructure. While we may need to seek additional funding for any such purposes, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock.
As a result of the COVID-19 pandemic, rising inflation and geopolitical events, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. Any of these actions could materially harm our business, results of operations and future prospects.
| 24 |
Cash Flows
The following table provides a summary of the net cash flow activity for each of the periods set forth below:
| Six months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash used in operating activities | $ | (170,344 | ) | $ | (1,536,678 | ) | ||
| Cash provided by investing activities | (34,300 | ) | (146,750 | ) | ||||
| Cash provided by financing activities | 202,750 | 1,721,993 | ||||||
| Change in cash | $ | (1,894 | ) | $ | 38,565 | |||
Cash used in operating activities for the six months ended September 30, 2022 was $(170,344). Cash used in operating activities for the six months ended September 30, 2021 was $(1,536,678). The decrease in cash used in our operating activities is associated to a large increase in accounts payable and accrued liabilities as we are working on obtaining capital for our operations.. As of September 30, 2022 operating cash flows included interest on beneficial conversion feature, amortization of the ROU Asset, and Royalty expense for DryRX and Drywave. .. Additionally, in 2021 we received funding for a total of $588,891, pursuant to the federal Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security (CARES) Act, of which $440,266 was forgiven within the 6 months ending September 30, 2021.
Cash provided by investing activities for the six months ended September 30, 2022 was $(34,300), compared to $(146,750) for the six months ended September 30, 2021, which consisted of acquiring fixed assets.
Cash provided by financing activities for the six months ended September 30, 2022 was $202,750, compared to $1,721,993 for the six months ended September 30, 2021, which consisted of payments of advances, and proceeds from issuance of notes and advances
Going Concern
The independent auditors’ report accompanying our March 31, 2021, financial statements contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared “assuming that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.
Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. We have incurred continuous losses from operations, have an accumulated deficit of $(12,226,184) and had a working capital deficit of $(7,707,873) at September 30, 2022, and have reported negative cash flows from operations since inception. In addition, we do not currently have the cash resources to meet our operating commitments for the next twelve months. Our ability to continue as a going concern must be considered in light of the problems, expenses, and complications frequently encountered by entrance into established markets and the competitive nature in which we operate.
Our ability to continue as a going concern is dependent on our ability to generate sufficient cash from operations to meet our cash needs and/or to raise funds to finance ongoing operations and repay debt. There can be no assurance, however, that we will be successful in our efforts to raise additional debt or equity capital and/or that our cash generated by any of our future operations will be adequate to meet our needs. These factors, among others, indicate that we may be unable to continue as a going concern for a reasonable period of time.
| 25 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). As required by Rule 13a-15(b) under the Exchange Act, management of the Company, under the direction of our principal executive officer and principal financial officer, reviewed and performed an evaluation of the effectiveness of design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2022. Based on that review and evaluation, our principal executive officer and principal financial officer concluded that as of September 30, 2022, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and were not effective to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
Although we have begun to rectify these weaknesses by the hiring of an additional accounting personnel in August 2021, and intend to implement an independent board of directors and a full-time Chief Financial Officer once we have additional resources to do so, our remediation of these deficiencies is still ongoing.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with the evaluation we conducted of the effectiveness of our internal control over financial reporting as of September 30, 2022, that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 26 |
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not required for a Smaller Reporting Company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the quarter ended September 30, 2022, we issued an aggregate of 0 shares of our common stock to consultants as consideration for services. The securities were issued in private transactions in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act, as transactions not involving any public offering.
During the quarter ended September 30, 2022, we issued 0 shares of our common stock upon conversion of outstanding indebtedness held by a holder of our indebtedness. Such shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as no general solicitation or advertising was used in the offer and sale of such securities.
During the quarter ended September 30, 2022, we issued 0 shares of our common stock upon conversion of outstanding indebtedness held by a holder of our indebtedness. Such shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as no general solicitation or advertising was used in the offer and sale of such securities.
Item 3. Defaults Upon Senior Securities.
The Company is past due on payments due Auctus in 2022. The Company is in discussions with Auctus to bring the Senior Securities current under the terms of the note.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
The exhibits listed below are hereby furnished to the SEC as part of this report
| 31.1 | Certification of Steve R. Howe, Executive Chairman |
| 31.2 | Certification of Andrew E. Trumbach, Chief Financial Officer |
| 32.1 | Certification of Steve Howe, Executive Chairman, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2 | Certification of Andrew E. Trumbach, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.1 | Inline XBRL Instance - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema. |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation. |
| 101.DEF | Inline XBRL Taxonomy Extension Definition. |
| 101.LAB | Inline XBRL Taxonomy Extension Labels. |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| 27 |
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, this 28th day of November 2022.
| OMNIA WELLNESS INC. | ||
| By: | /s/ Steve R. Howe | |
| Name: | Steve R. Howe | |
| Title: | Executive Chairman | |
| (principal executive officer) | ||
| By: | /s/ Andrew E. Trumbach | |
| Name: | Andrew E. Trumbach | |
| Title: | Chief Financial Officer | |
| (principal financial and accounting officer) | ||
| 28 |
ATTACHMENTS / EXHIBITS
INLINE XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- OneShield Announces Partnership with One Inc to Enhance Digital Payment Solution Offering
- 3D Printing Medical Devices Market Set to Grow to USD 10.67 Billion by 2031 Owing to Growing Demand for Personalized Medical Solutions
- WHEELHOUSE SECURES MINORITY INVESTMENT FROM ALIGNMENT GROWTH TO SCALE THE NEXT GENERATION ENTERTAINMENT COMPANY
Create E-mail Alert Related Categories
SEC FilingsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
