Company Quick10K Filing
Quick10K
Frelii
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-11 Officers, Other Events
8-K 2019-05-29 Regulation FD, Exhibits
8-K 2019-04-29 Enter Agreement
8-K 2019-04-12 Other Events
8-K 2019-03-20 Enter Agreement
8-K 2019-02-14 Officers
8-K 2018-12-28
8-K 2018-12-12 Officers
8-K 2018-07-31 Enter Agreement, M&A, Sale of Shares, Exhibits
8-K 2018-07-20 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-07-13 Officers
8-K 2018-03-27 Officers
8-K 2018-03-09 Amend Bylaw, Shareholder Vote, Other Events, Exhibits
8-K 2018-01-18 Enter Agreement, M&A, Sale of Shares, Officers, Shell Status, Exhibits
KORS Michael Kors 10,037
SYNT Syntel 3,176
SONC Sonic 1,248
LQMT Liquidmetal Technologies 91
NGTF NightFood 23
ICTV ICTV Brands 6
DTH Delta Tucker Holdings 0
KML Kinder Morgan Canada 0
SBP SB Partners 0
CCPTV Cole Credit Property Trust V 0
FRLI 2019-06-30
Part I
Item 1. Financial Statements
Note 1 - Description of Business
Note 2 &Mdash; Basis of Presentation of Unaudited Condensed Financial Information
Note 3 - Going Concern Uncertainty
Note 4 - Promissory Note Receivable From Related Party
Note 5 - Software
Note 6 - Settlement Amount Due To Former Related Party
Note 7 - Common Stock and Preferred Stock Transactions
Note 8 - Commitments and Contingencies
Note 9 - Subsequent Events
Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii- Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ex31-1.htm
EX-32.1 ex32-1.htm

Frelii Earnings 2019-06-30

FRLI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarter ended June 30, 2019

 

[  ] 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. 333-107179 & 000-51210

 

FRÉLII, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   980380519

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

2701 North Thanksgiving Way, Suite 100

Lehi, UT 84043

(Address of principal executive offices, including Zip Code)

 

(833) 437-3544

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] 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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [  ] Yes [X] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [  ] Yes [X] No

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class   Outstanding as of August 9, 2019
Class B Common stock, $0.001 par value   42,780,901
Class A Common stock, $0.001 par value   -0-

 

 

 

 
 

 

FRéLLI, INC.

 

TABLE OF CONTENTS

 

PART I    
     
Item 1. Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 20
     
PART II    
     
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Default upon Senior Securities 21
Item 4. Mine Safety Disclosures 21
Item 5. Other Information 21
Item 6. Exhibits 21
SIGNATURES 22

 

2
 

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

FRÉLII, INC.

CONSOLIDATED BALANCE SHEETS

(Expressed in US dollars)

 

   June 30, 2019   December 31, 2018 
   (unaudited)     
ASSETS          
Current assets          
Cash and cash equivalents  $74,864   $58,558 
Common stock subscription receivable   25,000    130,500 
Inventory   50,243    22,524 
Prepaid expenses   -    8,426 
Note receivable   23,630    23,630 
Interest receivable   1,536    1,060 
Total current assets   175,273    244,698 
Software, less accumulated amortization of $105,342 and $44,404 respectively   1,629,033    189,971 
Total assets  $1,804,306   $434,669 
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)          
Current liabilities          
Accounts payable and accrued liabilities  $44,868   $55,057 
Accrued salaries and related expenses   25,404    23,573 
Deferred Revenue   39,583    - 
Settlement amount due to former related party   126,654    126,654 
Total liabilities   236,509    205,284 
Shareholders’ equity (deficit)          
Preferred Stock, $0.001 par value; 20,000,000 shares authorized:          
Series A Preferred Stock, $0.001 par value; 0 (December 31, 2018 - 0) shares issued and outstanding   -    - 
Common Stock, $0.001 par value; 2,000,000,000 shares authorized:          
           
Class B Common Stock, $0.001 par value; 41,356,440 (December 31, 2018 – 39,074,107) shares issued and outstanding   41,356    39,074 
Additional paid in capital   11,987,184    8,865,966 
Accumulated deficit   (10,460,743)   (8,675,655)
Total shareholders’ equity (deficit)   1,567,797    229,385 
Total liabilities and shareholders’ equity (deficit)  $1,804,306   $434,669 

 

See accompanying notes to the consolidated financial statements

 

3
 

 

FRÉLII, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in US dollars)

 

   Three Months   Three Months   Six Months   Six Months 
  

Ended

  

Ended

  

Ended

  

Ended

 
   June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
                 
Revenue  $22,604   $3,291   $39,547   $3,741 
Cost of goods sold   4,175    -    9,341    - 
Gross profit (loss)   18,429    3,291    30,206    3,741 
Operating expenses                    
Compensation and consulting fees (including stock-based compensation of $843,000, $1,750,000, $843,000 and $2,351,562 respectively   1,306,821    1,903,709    1,528,054    2,631,269 
Settlement with former related party   -    133,320    -    133,320 
Marketing and advertising   10,950    118,496    37,144    143,096 
Professional fees   20,322    14,625    59,473    51,481 
Amortization of software   49,219    11,719    60,938    20,966 
Other   68,089    45,305    128,366    73,875 
                     
Total Operating Expenses   1,455,401    2,227,174    1,813,975    3,054,077 
(Loss) from operations   (1,436,972)   (2,223,883)   (1,783,769)   (3,050,266)
Other Income (expense)                    
Interest income   251    578    489    3,261 
Interest expense   (883)   -    (1,808)   - 
Total other income (expense) - net   (632)   578    (1,319)   3,261 
                     
Income (loss) before income taxes   (1,437,604)   (2,223,305)   (1,785,088)   (3,047,005)
Income tax expense   -    -    -    - 
Net Loss  $(1,437,604)  $(2,223,305)  $(1,785,088)  $(3,047,005)
Basic and Diluted (Loss) Per Share                    
   $(0.04)  $(0.06)  $(0.04)  $(0.09)
Weighted average number of Common Shares Outstanding                    
Basic and Diluted   40,475,980    36,264,954    39,822,984    32,273,538 

 

See accompanying notes to the consolidated financial statements

 

4
 

 

FRÉLII, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Expressed in US dollars)

 

   Series A
Preferred Stock
   Class B
Common Stock
             
   Number of
       Number of
       Additional         
   Shares       Shares       Paid In   Accumulated     
   Issued   Amount   Issued   Amount   Capital   Deficit   Total 
                             
Six Months Ended June 30, 2019                                   
                                    
Balance, January 1, 2019   -   $-    39,074,107   $39,074   $8,865,966   $(8,675,655)  $229,385 
Sales of common stock and warrants   -    -    230,000    230    344,770    -    345,000 
Net loss   -    -    -    -    -    (347,484)   (347,484)
Balance, March 31, 2019   -    -    39,304,107    39,304    9,210,736    (9,023,139)   226,901 
Issuance of common stock in connection with acquisition of software   -    -    1,200,000    1,200    1,498,800    -    1,500,000 
Issuance of common stock for services   -    -    550,000    550    824,450    -    825,000 
Sale of common stock and warrants   -    -    302,333    302    453,198    -    453,500 
Net loss   -    -    -    -    -    (1,437,604)   (1,437,604)
Balance June 30, 2019   -   $-    41,356,440   $41,356   $11,987,184   $(10,460,743)  $1,567,797 
                                    
Six Months Ended June 30, 2018                                   
                                    
Balance, January 1, 2018   100   $-    10,441,107   $10,441   $3,430,239   $(3,125,977)  $314,703 
Cancellation of shares   (100)   -    (1,830,000)   (1,830)   1,830    -    - 
Issuance of common stock   -    -    7,500,000    7,500    226,875    -    234,375 
Issuance of common stock for services   -    -    19,250,000    19,250    582,312    -    601,562 
Sale of common stock   -    -    150,000    150    187,350    -    187,500 
Net loss   -    -    -    -    -    (823,700)   (823,700)
Balance, March 31, 2018   -    -    35,511,107    35,511    4,428,606    (3,949,677)   514,440 
Issuance of common stock for services   -    -    1,400,000    1,400    1,748,600    -    1,750,000 
Net Loss   -    -    -    -    -    (2,223,305)   (2,223,305)
Balance, June 30, 2018   -   $-    36,911,107   $36,911   $6,177,206   $(6,172,982)  $41,135 

 

See accompanying notes to the consolidated financial statements

 

5
 

 

FRÉLII, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in US dollars)

 

   Six Months   Six Months 
   Ended    Ended  
   June 30, 2019   June 30, 2018 
   (Unaudited)   (Unaudited) 
Cash Flows From Operating Activities          
Net (loss)  $(1,785,088)  $(3,047,005)
Adjustments to reconcile net income (loss) to net cash used by operating activities:          
Stock based compensation   843,000    2,351,562 
Amortization of software   60,938    20,966 
Changes in operating assets and liabilities:          
Accounts Receivable   -    (3,291)
Inventory   (27,719)   - 
Prepaid Expenses   8,426    - 
Interest receivable   (476)   13,888 
Accounts payable and accrued liabilities   (10,189)   29,537 
Accrued salaries and related expenses   1,831    - 
Deferred Revenue   39,583    - 
Settlement amount due to former related party   -    126,654 
Net cash used in operating activities   (869,694)   (507,689)
Cash Flows From Investing Activities:          
Collections of note receivable   -    316,516 
Net cash provided by investing activities   -    316,516 
Cash flows from financing activities:          
Sale of Class B common stock   755,500    187,500 
Collection of common stock subscription receivable   130,500    - 
Advances from former related parties   -    54,156 
Net cash provided by financing activities   886,000    241,656 
Increase in cash and and cash equivalents   16,306    50,483 
Cash and cash equivalents, beginning of period   58,558    - 
Cash and cash equivalents, end of period  $74,864   $50,483 
Supplemental disclosures of cash flow information:          
Cash payments for:          
Interest paid  $925   $13,888 
Income taxes paid  $-   $- 
Non-cash investing and financing activities:          
Stock issued for software  $1,500,000   $234,375 
Issuance of Common Stock in exchange for common stock subscription receivable  $25,000   $- 
Issuance of Common Stock in exchange for satisfaction of accounts payable  $18,000   $- 
Issuance of Common Stock to various employees and consultants for services rendered  $825,000   $2,351,562 

 

See accompanying notes to the consolidated financial statements

 

6
 

 

FRéLII, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Expressed in US dollars)

(Unaudited)

 

NOTE 1 – Description of Business

 

The Company incorporated in the State of Nevada on September 5, 2002, under the name “Bayview Corporation.” On April 7, 2005, the Company changed its name to Xpention Genetics, Inc. concurrent with a change in its business to researching and developing cancer treatment drugs. On September 17, 2008, the Company changed its name to Cancer Detection Corporation. On August 13, 2009, the Company again changed its name to Tremont Fair, Inc. From July 2009 until May 2011, the Company operated as a real estate services firm, seeking to capitalize on the real estate opportunities resulting from the dislocation in the credit markets, and by extension, the multifamily housing market, by acquiring, rehabilitating, stabilizing and selling distressed multifamily properties in the southern United States, predominantly in Texas. On May 26, 2011, the Company changed its name to Vican Resources, Inc., and changed its business model when it sold the real estate services division and acquired all of the outstanding shares of Vican Trading, Inc., a Montreal-based purchaser and seller of metals, ores, and other commodities (hereafter, “Vican Trading”). Upon the acquisition of Vican Trading, there was an implied option for either party to rescind the original acquisition. During 2011, that rescission option was exercised and on December 20, 2011, the Company again changed its business when it unwound the acquisition of Vican Trading and acquired all of the assets of Med Ex Direct, Inc., a Florida-based provider of management services in respect of the distribution of diabetic supplies, principally to Hispanic patients (hereafter, “Med Ex Florida”). On March 22, 2012, the Company again changed its business to become an oil & gas exploration, development, and distribution company, unwound the purchase of the assets of Med Ex Florida, and acquired an interest in two oil & gas wells located in Jefferson County, Mississippi.

 

In April 2017, the Company underwent a change of control whereby our current Chief Executive Officer Ian Jenkins acquired a controlling interest in the Company’s capital stock and was appointed our sole officer and director. On April 11, 2017, the Company executed a Share Exchange Agreement with Unprescribed, LLC, later amended to include Cornerstone Medical Center LLC, whereby the Company, among other terms, agreed to exchange shares with the ownership units of those two entities for 25,000,000 shares of the Company’s Common Stock. The Share Exchange Agreement, as amended, terminated by its own terms on December 31, 2017. Following the termination of the Share Exchange Agreement, the Company modified its business plan to acquire certain intellectual property assets and to engage a new management team to effectuate the new business plan.

 

Effective March 9, 2018, the Company changed its name to Frélii, Inc. From March 2018 to December 2018, the Company operated a web-based subscription service providing personalized nutrition and wellness plans. The current business plan uses Artificial Intelligence & whole genome analysis to increase patient outcomes and lower direct costs.

 

On May 9, 2019, the Company formed a subsidiary named Frelii Canada Inc.

 

The Company’s core business strategy is utilizing its proprietary DNA profiling artificial intelligence (AI) to meet the growing demands of targeted market segments. Specifically, to provide precision medicine recommendations including medical cannabis use analysis, consumer wellness, nutraceutical analysis, and in due course pharmaceuticals. This will be delivered through telehealth, managed care facilities and hospital systems.

 

7
 

 

NOTE 2 — BASIS OF PRESENTATION OF UNAUDITED CONDENSED FINANCIAL INFORMATION

 

The unaudited condensed financial statements of the Company for the three and six month periods ended June 30, 2019 and 2018 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2018 was derived from the audited financial statements included in the Company’s financial statements as of and for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”). These financial statements should be read in conjunction with that report.

 

Recently Issued Accounting Pronouncements

 

Between May 2014 and December 2016, the FASB issued several ASU’s on Revenue from Contracts with Customers (Topic 606). The core principle is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. A five-step process has been defined to achieve this core principle, and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under former U.S. GAAP. The standards are effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standards in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting the standards recognized at the date of adoption (which includes additional footnote disclosures). The adoption of these new standards has not had a material impact on the Company’s financial statements.

 

Certain other accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material

 

NOTE 3 - GOING CONCERN UNCERTAINTY

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has sustained net losses which have resulted in an accumulated deficit at June 30, 2019, and negative cash flows from operations, all of which raise substantial doubt regarding the Company’s ability to continue as a going concern.

 

The Company believes these conditions have resulted from the inherent risks associated with small companies. Such risks include, but are not limited to, the ability to (i) generate revenues and sales of its products and services at levels sufficient to cover its costs and provide a return for investors, (ii) attract additional capital in order to finance growth, (iii) further develop and successfully market commercial products and services, and (iv) successfully compete with other comparable companies having financial, production and marketing resources significantly greater than those of the Company.

 

We expect to be dependent on additional debt and equity financing to develop our new business but we cannot assure you that any such financings will be available or will otherwise be made on terms acceptable to us, or that our present shareholders might suffer substantial dilution as a result.

 

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

These financial statements have been prepared on the basis that the Company will continue as a going concern, which presumes that it will be able to realize its assets and discharge its liabilities in the normal course of business as they come due. These financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

 

NOTE 4 – PROMISSORY NOTE RECEIVABLE FROM RELATED PARTY

 

On April 11, 2017, pursuant to a Security Agreement dated April 11, 2017, the Company paid $495,000 to Cornerstone Medical Center LLC (“Cornerstone”). In exchange, the Company received a $500,000 Secured Promissory Note from Cornerstone (the “Promissory Note”), dated April 11, 2017. The Promissory Note bears interest at 4% per annum, or 18% in the event of a default under the Promissory Note. The principal and interest was due on December 31, 2017. The Promissory Note is secured by all the assets of Cornerstone.

 

8
 

 

Cornerstone is owned by Gregory Mongeon, who served as a former officer and director of the Company from January 17, 2018 to May 15, 2018.

 

NOTE 5 – SOFTWARE

 

At June 30, 2019 and December 31, 2018, software, net, consisted of:

 

   June 30, 2019   December 31, 2018 
Software and intellectual property acquired from Christopher Dean pursuant to Tech Assignment Agreement on January 18, 2018 in exchange for 7,500,000 shares of Class B Common Stock (see Note 7).  $234,375   $234,375 
Software and intellectual property acquired from IrisMind LLC pursuant to Technology Assignment Agreement on May 15, 2019 in exchange for 1,200,000 shares of Class B Common Stock (see Note 7).   1,500,000    - 
Total   1,734,375    234,475 
Less accumulated amortization   (105,342)   (44,404)
Net  $1,629,053   $189,971 

 

The acquired software is being amortized using the straight-line method over their estimated economic life of 5 years. Expected future amortization expense for the acquired software as of June 30, 2019 follows:

 

Year ending
December 31,
  Amount 
     
2019  $173,437 
2020   346,875 
2021   346,875 
2022   346,875 
2023   302,471 
2024   112,500 
      
Total  $1,629,033 

 

NOTE 6 – SETTLEMENT AMOUNT DUE TO FORMER RELATED PARTY

 

On June 1, 2018, the Company and Gregory Mongeon (see Note 4 above) executed a Separation and Release Agreement. The agreement provides for the Company to make 20 monthly cash payments of $6,666 each to Mr. Mongeon from June 5, 2018 to January 5, 2020 (total $133,320). The agreement also provides for limits on future sales of 7,500,000 shares of Class B Common Stock owned by Mr. Mongeon. At June 30, 2019, the remaining amount due Mr. Mongeon pursuant to the Separation and Release Agreement was $126,654. The Company failed to make the required monthly payments from July 2018 to June 2019.

 

9
 

 

NOTE 7 - COMMON STOCK AND PREFERRED STOCK TRANSACTIONS

 

On January 18, 2018, the Company entered into a technology assignment agreement (the “Tech Assignment Agreement”) whereby the Company acquired certain intellectual property consisting of advanced computer programming software, source code, proprietary designs, plans, processes, test procedures, and other technical data and information (the “Technology”) from Christopher Dean in exchange for 7,500,000 shares of Class B Common Stock of the Company. Christopher Dean was the Chief Technology Officer and a director of the Company from January 17, 2018 to March 27, 2018.

 

The $234,375 estimated fair value of the 7,500,000 shares of Class B Common Stock was capitalized as software. As the trading market of the Company’s Class B Common Stock was inactive, the fair value of the Class B Common Stock was based on the $0.03125 per share price derived from the $250,000 purchase price of the Exchange Note, which was converted to 8,000,000 shares of Class B Common Stock on December 14, 2017.

 

On January 19, 2018, the Company entered into employment agreements with Ian Jenkins (Chief Executive Officer and Chief Financial Officer), Christopher Dean (former Chief Technology Officer), Dr. Gregory Mongeon (former Chief Medical Officer), Seth Jones (Chief Marketing Officer), and Julia Kline (former Chief Operating Officer). The agreements all have a term of five years and provide for annual base salaries totaling, in the aggregate, $400,000. All of the agreements may be terminated by the Company at any time without cause by providing written notice to the respective employee for which termination is effective 30 days therefrom. On January 31, 2018, pursuant to the employment agreements, the Company issued a total of 17,450,000 shares of Class B Common Stock of the Company to these five officers.

 

The $545,312 estimated fair value of the 17,450,000 shares of Class B Common Stock using the $0.03125 per share price described in the second preceding paragraph was expensed as compensation in the three months ended March 31, 2018.

 

On January 21, 2018 and January 26, 2018, the Company’s Chief Executive Officer returned 100 shares of Series A Preferred Stock and 1,830,000 shares of Class B Common Stock to the Company’s treasury that were cancelled by the Company.

 

On January 31, 2018, the Company issued a total of 1,800,000 shares of Class B Common Stock of the Company to 6 service providers (including 800,000 shares issued to two relatives of the Company’s Chief Executive Officer and 600,000 shares to two independent directors of the Company) for services rendered.

 

The $56,250 estimated fair value of the 1,800,000 shares of Class B Common Stock (using the $0.03125 per share as described in the fifth preceding paragraph) was expensed as compensation in the three months ended March 31, 2018.

 

On March 23, 2018, the Company sold 150,000 shares of Class B Common Stock to an investor at a price of $1.25 per share for $187,500 cash proceeds.

 

On May 8, 2018, the Company issued 600,000 shares of Class B Common Stock of the Company to Dr. Hans Jenkins in connection with an employment agreement signed between Dr. Jenkins and the Company on the same date. The $750,000 estimated fair value of the 600,000 shares of Class B Common Stock (based on the $1.25 per share price of the March 23, 2018 sale of 150,000 shares of Class B Common Stock) was expensed as compensation in the three months ended June 30, 2018.

 

On May 15, 2018, the Company issued a total of 800,000 shares of Class B Common Stock of the Company to 6 employees and consultants for services rendered pursuant to the Company’s 2018 Incentive Stock Option Plan. The $1,000,000 estimated fair value of the 800,000 shares of Class B Common Stock (based on the $1.25 per shares price of the March 23, 2018 sale of 150,000 of Class B Common Stock) was expensed as compensation in the three months ended June 30, 2018.

 

On July 6, 2018, the Company issued a total of 600,000 shares of Class B Stock to its two outside directors (300,000 shares each) for services rendered. The $750,000 estimated fair value of the 600,000 shares of Class B Common Stock (based on the $1.25 per share price of the March 23, 2018 sale of 150,000 shares of Class B Common Stock) was expensed as compensation in the three months ended September 30, 2018.

 

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On July 6, 2018, the Company settled an outstanding debt of $91,220 for professional fees incurred and operating expenses paid on the behalf of the Company owed to Kline Law Group, P.C. and its principal Scott Kline. Mr. Kline and Kline Law Group agreed to waive all outstanding amounts due as of July 6, 2018, in exchange for 1,000,000 Class B Common Stock shares. The $1,158,780 excess the $1,250,000 estimated fair value of the 1,000,000 shares of Class B Common Stock (using the $1.25 per share prices described in the preceding paragraph) over the $91,220 debt settled was expensed as loss on settlement of debt in the three months ended September 30, 2018.

 

On July 20, 2018, the company sold 100,000 shares of Class B Common Stock (and a three-year warrant to purchase up to 100,000 shares of Class B Common Stock at $1.50 per share) to an investor at a price of $1.25 per share for $125,000 cash proceeds.

 

On July 31, 2018, the Company entered into an Asset Purchase Agreement with Kingdom Life Sciences, LLC, a Utah limited liability company (“KLS”), and its equity holders whereby the Company agreed to purchase certain inventory and related intellectual property of KLS in exchange for assumption of a liability of KLS in the amount of $19,133 and 20,000 Class B Common Stock shares of the Company. KLS is controlled by Ian Jenkins, Company Chief Executive Officer, and Gregory Mongeon and Christopher Dean, former officers and directors of the Company. Pursuant to ASC 805-50 relating to transactions between entities under common control, the inventory was recorded at KLS’s historical carrying amount of $32,055 and the increase in stockholders’ equity was recorded at $12,922 (the $32,055 inventory acquired less the $19,133 liability assumed).

 

From August 17, 2018 to August 31, 2018, the Company sold a total of 130,000 shares of Class B Common Stock (and three year warrants to purchase up to a total of 200,000 shares of Class B Common Stock at $1.50 per share) at prices of $1.00 and $1.25 per share to four investors for total cash proceeds of $140,000.

 

On August 31, 2018, the Company issued a total of 110,000 shares of Class B Common Stock to two consultants for services rendered. The $137,500 estimated fair value of the 110,000 shares of Class B Common Stock (using the $1.25 per share price described in the preceding paragraph) was expensed as compensation in the three months ended September 30, 2018.

 

On October 9, 2018, the Company sold 116,000 shares of Class B Common Stock (and a three-year warrant to purchase up to a total of 116,000 shares of Class B Common Stock at $1.50 per share) at $1.25 per share to an investor for $145,000 cash proceeds.

 

On December 29, 2018, the Company sold 87,000 shares of Class B Common Stock to an investor of a price of $1.50 per share for $130,500 cash proceeds (which was collected January 9, 2019).

 

From February 19, 2019 to March 6, 2019, the Company sold 230,000 shares of Class B Common Stock at $1.50 per share to 8 shareholders for $345,000 cash proceeds.

 

Effective May 15, 2019, the Company executed a Technology Assignment Agreement with IrisMind, LLC (“IrisMind”), an entity owned and controlled by Jayson Uffens, the Company’s Chief Technology Officer and a Board member. Pursuant to the Technology Agreement, the Company acquired an exclusive license to use certain intellectual property (including a software product named the “Rapport Platform” from IrisMind in exchange for the issuance of 1,200,000 shares of the Company Class B Common Stock (with a fair value of $1,500,000 based on the valuation date of May 15, 2019)

 

From April 26 to May 10, 2019 the Company sold 302,333 shares of Class B Common Stock at $1.50 per share to 10 investors for $410,500 cash proceeds, $18,000 for settlement of services provided, and common stock subscription receivable of $25,000.

 

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On May 8, 2019, the Company issued 200,000 Class B shares to Leslie Norris, 200,000 Class B shares to Sandeep Uppal and 150,000 Class B shares to Yvan Aubin for services. The $825,000 fair value of the 550,000 shares of Class B Common Stock on May 8, 2019 was charged to compensation expense in the three months ended June 30, 2019.

 

At June 30, 2019, there are warrants outstanding to purchase a total of 416,000 shares of Class B Common Stock at $1.50 per share.

 

NOTE 8 – COMMITMENTS AND CONTINGENCIES

 

Effective April 12, 2019, the Company entered into a Master License and Services Agreement (the “MLSA”) with Optivida Health. The MLSA provides for the Company’s grant to Optivida of a non-exclusive non-transferable license to use the Company’s DNA Kit and associated proprietary technology required to produce an “individual-specific” set of recommendations for customers’ health and wellness. The MLSA also provides for Optivida’s payment of an annual licensing agreement fee to the Company, which has been paid as of the date of issuance of the accompanying financial statements. The MLSA also provides for the Company to retain a percentage of revenue from customers referred to our website by Optivida and to receive a percentage of the profits on products designed by the Company and marketed by Optivida. The initial term of the MLSA is three years.

 

On April 15, 2019, the Company entered into a Collaboration Agreement with Orn Health Inc. (“Orn”), a company controlled by Dr. Hans Jenkins, the Company’s Chief Medical Officer and a Board member. The Collaboration Agreement provides for the Company’s grant to Orn certain rights to act as the Company’s independent and non-exclusive sales representative and to directly sublicense products related to the Company’s software platforms on a non-exclusive basis. The Collaboration Agreement also provides that Gross Revenue generated by Orn and all Approved Operating Expenses incurred by Orn or the Company will be shared equally by the parties. The initial term of the Collaboration Agreement is 5 years.

 

NOTE 9 – SUBSEQUENT EVENTS

 

Effective July 1, 2019, Frelii Canada Inc. (the “Tenant”) entered into a Commercial Lease Agreement to rent certain premises in Ontario Canada. The lease provides for Base Rent of CAD 3,000 (approximately $2,300) per month for a term of one year expiring June 30, 2020. The lease also provides the Tenant the right to renew the lease for an additional term at a rent equal to the Base Rent increased by 3%. The lease also provides the Tenant the right to pay amounts due under the lease with shares of Frelii Common Stock using an exchange rate of 1.30 CAD:$1.00 and a price of $0.30 per share of Frelii Common Stock.

 

On July 11, 2019, the Company entered into a License Agreement (the “Agreement”) with GATC Canna Inc. (“GATC”) of Newport Beach, CA. The Agreement provides GATC an exclusive non-transferable license to use the Company’s GATC branded DNA Kit and the co-developed technology to produce an “individual-specific” set of Cannabis recommendations for customers’ health and wellness. The Agreement also provides the Company a reciprocal exclusive license of the co-developed authored work. The Agreement also provides GATC a non-exclusive right to DNA Sequencing, AI processing, Individual customized Health & Wellness Recommendations, Medical Test Recommendations, Whole Genome search and reference tool, and Psychotropic Analysis Test. The Agreement provides for GATC’s payment of an annual licensing agreement fee to the Company, which has not yet been paid as of the date of issuance of the accompanying financial statements. The Agreement also provides for the Company to retain a percentage of revenue from customers referred to a co-developed website. The Agreement terminates automatically on December 31, 2119.

 

Effective August 7, 2019, the Company issued a total of 1,424,461 shares of Class B common stock to:

 

   Shares   Agreed Value 
Ontario, Canada office space landlord for leasehold improvements ($16,154) and first year rent ($27,692)   146,154   $43,846 
Officers and directors for services and expenses   341,717    102,515 
Consultants pursuant to various consulting agreements   936,590    280,977 
Totals   1,424,461   $427,338 

 

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

 

Special Note Regarding Forward Looking Statements

 

This Quarterly Report on Form 10-Q, including the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words “believe”, “expect”, “anticipate”, “project”, “targets”, “optimistic”, “intend”, “aim”, “will” or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to our potential inability to raise additional capital; changes in domestic and foreign laws, regulations and taxes; uncertainties related to China’s legal system and economic, political and social events in China; Securities and Exchange Commission regulations which affect trading in the securities of “penny stocks”; changes in economic conditions, including a general economic downturn or a downturn in the securities markets; and any of the factors and risks mentioned in the “Risk Factors” sections of our Annual Report on Form 10-K for fiscal year ended December 31, 2016 and subsequent SEC filings. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.

 

Our History

 

The Company incorporated in Nevada September 5, 2002 as “Bayview Corporation.” Since 2002, the Company changed control and its name and business plan numerous times. In April 2017, our current Chief Executive Officer acquired a controlling interest in the Company, and in January 2018, the Company commenced its current operations, which consist of providing personalized health and nutrition plans based on genetics and our artificial intelligence-driven computer algorithm. On March 9, 2018, the Company changed its name to Frélii, Inc. and its ticker symbol to “FRLI” to coincide with its new business plan as disclosed on Form 8-K filed the same date.

 

On May 9, 2019, the Company formed a subsidiary named Frelii Canada Inc.

 

Overview of Our Business and Strategy

 

The Company’s core business strategy utilizes its proprietary DNA profiling artificial intelligence (AI) to meet the growing demands of targeted market segments. Specifically, to provide precision medicine recommendations including medical cannabis use analysis, consumer wellness, nutraceutical analysis, and in due course pharmaceuticals. This will be delivered through telehealth, managed care facilities and hospital systems.

 

Frelii continues to develop and grow its patented AI technology named “NAVII”, leveraging base code and large data sets gathered from public and private partnerships. Frelii’s predictive capacity with its precision medicine and health and wellness AI has increased from 84% to 98.5%. The flagship high-efficiency Genetic Sequencing and analysis using Frelii’s proprietary technology has increased to greater than 99% and 99.999% accuracy on whole genome and exome sequencing, respectively. Current competitive solutions analyze approximately 400 thousand data points, generating approximately 384 outcomes, such as diet suggestions or identification of potential health risks. The Frelii AI technology has dramatically increased the data points analyzed to over 3.2 billion, yielding more than 60 million outcomes.

 

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Due to this continued expansion of its AI and market segment specific UI, Frelii has been able to create negotiations with institutions and organizations in each target market segment that will allow the Company to maximize its business development, strategic growth and revenue for the foreseeable future. The Company’s unique technology is particularly attractive to these select segments because of the fundamentally different approach Frelii takes using AI to interpret DNA testing results. This will allow each roadmap market segment to have much greater insight and decision-making perspective than what is currently available, creating greater competitive advantage for each partner and alliance within their own respective markets.

 

Attention will still be given to the company’s consumer offerings; however, the consistently expanding and growing capabilities make Frelii’s offerings significant to expanded markets in the following ways:

 

Precision Medicine and Health Prediction

 

Because Frelii conducts whole-genome sequencing, its technology can be leveraged to advance precision medicine when used for disease treatment and prevention by taking into consideration an individual patient’s complete genome with more than 60 million outcomes. Medical professionals and researchers will be able to more accurately predict and provide treatment strategies. This includes:

 

Precision Medicine for Medical Cannabis Use. In states where medical cannabis is legal and in Canada, the application of NAVII can be used to help medical professionals determine the best or most appropriate plant genetics and dose to use with patients based on the patient’s genetic information. The Frelii technology has the potential to optimize and improve how patients are treated with medical cannabis. Making it safer and more effective.
Precision Medicine and the Frelii DNA Wallet: Our web platform will provide doctors a more comprehensive pharmacogenetics search and reference tool with both dose and time safety protocols. This reduces the risk to both the patient and doctor while improving the patient outcomes and quality of care. This tool also provides doctors and patients an individualized health analysis that identifies their most significant health priorities and generates preventative action plans based on the Frelii Whole Genome Discovery tool. Once the patient has enrolled in the DNA wallet experience they will be able to deliver their whole genome results to a doctor who will then have the ability to import useful information and begin using precision medicine. This gives any doctor they choose, the ability to recommend further testing and diagnostic tools more accurately by using predictive analytics and established health baselines.
  Consumer Wellness: Our personalized wellness programs feature nutrition and fitness plans, supplement recommendations, downloadable menus, recipes, and shopping lists, and virtual personal training. Subscribers will have the opportunity to enhance their personalized wellness plans by uploading their 23andMe or Ancestry.com raw genetic data, or by ordering lab diagnostic kits for more comprehensive health testing and analysis. Customers can also order premium nutritional and vitamin supplements from our channel partners via our online health marketplace. We plan to generate revenues through user subscriptions, lab diagnostic kit purchases, sales of compounding pharmacy products, and nutritional supplements. Frelii plans to offer corporate wellness organizations the opportunity to enhance their personalized wellness plans by ordering lab diagnostic kits for more comprehensive blood testing and analysis.

 

Distribution will be focused on various Medical Systems. The Company’s technology and its application to diagnostic, health risk identification and precision medicine could improve health care and lower costs of health providers. Health providers will use the Company’s technology to identify risks before symptoms or complaints arise, when such health issues could be addressed more efficiently and potentially more cost-effectively. This will include Managed Care Facilities and Hospital Networks delivered face to face or within telemedicine.

 

In connection with the foregoing:

 

(1) We signed a Memorandum of Understanding (MOU) in March 2019 with, Mercator Biologic, Inc. of Centerville, Utah; True DNA Story, LLC of Centerville, Utah, and Verdant Inc of Toronto, Ontario, Canada. The purpose of the MOUs are to build a cooperative ventures capable of leveraging the strengths of each company to enhance and further the science of genetics, markets and potential clients’ quality of life. It also includes mutual cooperation in expanding and improving on the established product portfolios and future plans. The parties in the MOU also have agreed that there is an opportunity to participate in a pilot research initiative which is of mutual interest and may present an opportunity for each entity to validate its technology and provide a means to significantly advance each other’s commercial capabilities. If enacted, this initiative will be finalized in a statement of work that will define the phases of the initiative and the roles of each participant. The MOU with Verdant Inc, has since expired.

 

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(2) Effective April 12, 2019, the company entered into a Master License and Services Agreement (the “MLSA”) with Optivida Health. The MLSA provides for the Company’s grant to Optivida of a non-exclusive non-transferable license to use the Company’s DNA Kit and associated proprietary technology required to produce an “individual-specific” set of recommendations for customers’ health and wellness. The MLSA also provides for Optivida’s payment of an annual licensing agreement fee to the Company, which has been paid as of the date of issuance of the accompanying financial statements. The MLSA also provides for the Company to retain a percentage of revenue from customers referred to our website by Optivida and to receive a percentage of the profits on products designed by the Company and marketed by Optivida. The initial term of the MLSA is three years.

 

(3) On April 15, 2019, the Company entered into a Collaboration Agreement with Orn Health Inc. (“Orn”), a company controlled by Dr. Hans Jenkins, the Company’s Chief Medical Officer and a Board member. The Collaboration Agreement provides for the Company’s grant to Orn certain rights to act as the Company’s independent and non-exclusive sales representative and to directly sublicense products related to the Company’s software platforms on a non-exclusive basis. The Collaboration Agreement also provides that Gross Revenue generated by Orn and all Approved Operating Expenses incurred by Orn or the Company will be shared equally by the parties. The initial term of the Collaboration Agreement is 5 years.

 

(4) On May 9, 2019, the Company incorporated a Canadian subsidiary, Frelii Canada Inc. with offices to be located in Mississauga, Ontario.

 

(5) On July 11, 2019, the Company entered into a License Agreement (the “Agreement”) with GATC Canna Inc. (“GATC”) of Newport Beach, CA. The Agreement provides GATC an exclusive non-transferable license to use the Company’s GATC branded DNA Kit and the co-developed technology to produce an “individual-specific” set of Cannabis recommendations for customers’ health and wellness. The Agreement also provides the a reciprocal exclusive license of the co-developed authored work. The Agreement also provides GATC a non-exclusive right to DNA Sequencing, AI processing, Individual customized Health & Wellness Recommendations, Medical Test Recommendations, Whole Genome search and reference tool, and Psychotropic Analysis Test. The Agreement provides for GATC’s payment of an annual licensing agreement fee to the Company, which has not yet been paid as of the date of issuance of the accompanying financial statements. The Agreement also provides for the Company to retain a percentage of revenue from customers referred to a co-developed website. The Agreement terminates automatically on December 31, 2199.

 

We are currently doing business under the name “Frélii.” Effective March 9, 2018, the Company changed its name to “Frélii, Inc.” and its trading symbol to “FRLI.” Frelii (OTCQB: FRLI) trades on the #OTCQB Venture Market for early stage and developing U.S. and international companies.

 

Our executive offices are located at 2701 North Thanksgiving Way, Suite 100, Lehi, UT 84043. You can also contact us by telephone at (833) 437-3544.

 

We are subject to the disclosure requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith, file reports, information statements and other information, including annual and quarterly reports on Form 10-K and 10-Q, respectively, with the Securities and Exchange Commission (the “SEC”). Reports and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, DC 20549. Copies of such material can also be obtained upon written request addressed to the SEC, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, the SEC maintains a web site on the Internet (http://www.sec.gov) that contains reports, information statements and other information regarding issuers that file electronically with the SEC through the Electronic Data Gathering, Analysis and Retrieval System.

 

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Our Management Team

 

The Company’s Board of Directors is comprised of experienced professionals in multiple areas of importance to the Company’s business strategy:

 

  Alternative Health Care – Our Chief Executive Officer and Chairman Ian Jenkins has over 10 years of experience as a senior executive in the health and supplement industry, and an extensive background in physiology, technology startups, and supplement product research and development; Our director James Spallino has over 35 years of experience in the integrative medical and dental industry as both an entrepreneur and consultant;
     
  Medical – Our director and Chief Medical Officer Dr. Hans Jenkins is a board-certified physician specializing in preventive health education, medical screenings, and lifestyle modifications to obtain optimal health;
     
  Digital Marketing – Our Chief Marketing Officer Seth Jones is a marketing strategist and digital media expert, produced and distributed digital content that generated more than 4.5 million subscribers and over 915 million views on YouTube and over 3.2 million subscribers and over a billion views on Facebook for an extreme sports and adventure video production company;
     
  International Trade – Our director Tarek Mango has been involved in international trade and business development for over 20 years, and has successfully consulted for, built, and introduced U.S. health care-related brands into Middle Eastern, Asian, and European markets;
     
 

Digital Technology – Our director and Chief Technology Officer Jayson Uffens is a senior technology architect with over two decades of executive experience at high-growth technology firms like GrubHub, Northrop Grumman, and GoDaddy.

 

 

Administration – Our Chief Administrative Officer, Sandeep Uppal, MBA has decades of experience as CFO for various insurance companies, and is has extensive experience in strategic planning, mergers and acquisitions, contract negotiations, and business development

 

  Finance – Our Executive Vice-President of Finance, Yvan Aubin, CPA, CA (Canada) has over 20 years of senior finance experience spanning the Oil & Gas and Insurance industries. He has extensive experience in mergers & acquisitions, lending activities, risk management, and treasury.

 

The Company’s Scientific Advisory Committee is comprised of experienced medical professionals:

 

  Dr. Anthony R. Torres, is an independent researcher studying immune genes in autism and helping companies solve their biochemical problems in industry. Dr Torres holds several patents for novel inventions in the genetics field. Dr Torres attended University of Utah Medical School and Yale for his Residency. He is a senior scientist at the center for persons with disabilities. Dr Torres has extensive publications in genetic research.
     
 

Dr. Susan Morelli, is a board Certified Geneticist and Neonatologist in Provo, Utah. Dr Morelli received her BA from Harvard, her medical degree from University of Connecticut School of Medicine and has been in practice for more than 20 years. She is a member of the American Academy of Pediatrics, American Board of Pediatrics, and the American Society of Human Genetics, American Board of Medical Genetics and Genomics . She is Board Certified as AM BD MEDICAL GENETICS CLINICAL GENETICS (MD/DO). Dr Morelli is a published lead author in several medical studies.

     
  Shannon Jenkins, D.O. is a practicing medical doctor with over two decades of research experience and teaching. He has published innovative research articles in respected journals from Universities such as UCLA, the University of Arizona and the University of Utah. He specializes in developmental biology and translational research. He has won many research awards such as the UCLA STAR Outstanding Achievement Research Scholar Award, the Human and Molecular Development Research Award and the Human Research Development Award. He is also an outstanding teacher and humanitarian having received awards such as the Frist Humanitarian Award and the Pediatric Resident Teaching Award. He graduated Summa Cum Laude from Medical School and is a member of the Sigma Sigma Phi Medical Honor Society. Additionally, he is board certified in Perinatal and Neonatal Medicine and completed a fellowship at UCLA Medical Center in Developmental Biology and Neonatology.
     
  Shayne Morris, is a PhD biochemist and genetic researcher. His early work laid the foundation for many novel cancer interventions using genetic testing such as the flagship research he conducted for Huntsman Cancer Institute. As chairman and founder of the genetics and cell biology research center, Nutri-Biome Research, he has advanced the body of research is in human epigenetic response to preventive and precision intervention. Dr. Morris’ research is chronicled in a series of Research Reports, Patents and published works available to health professionals.

 

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Our Marketing Plans/Launch Schedule

 

We have planned a comprehensive digital marketing campaign that includes Facebook and Twitter ads, a media affiliate program, and other social media digital advertising.

 

Our Future Development Plans

 

In addition to the new licensing model described above, the Company is currently developing, either alone or in cooperation with development partners, and will distribute a series of innovative and proprietary functional food and alternative healthcare/supplement/health and beauty products. We believe that several of these products have the potential of being highly disruptive to existing product offering currently in the market, or wholly revolutionary. We believe that these products are the natural and organic extension of our plan to provide a full suite of personalized health assessments and action plans to our customers.

 

We signed a Memorandum of Understanding (MOU) in March 2019 with; Mercator Biologic, Inc. of Centerville, Utah; True DNA Story, LLC of Centerville, Utah, and Verdant Inc of Toronto, Ontario, Canada. The purpose of these MOUs are to build a cooperative venture capable of leveraging the strengths of each company to enhance and further the science of genetics, markets and potential clients’ quality of life. It also includes mutual cooperation in expanding and improving on the established product portfolios and future plans. The parties in the MOU also have agreed that there is an opportunity to participate in a pilot research initiative which is of mutual interest and may present an opportunity for each entity to validate its technology and provide a means to significantly advance each other’s commercial capabilities. If enacted, this initiative will be finalized in a statement of work that will define the phases of the initiative and the roles of each participant. The MOU with Verdant Inc, has since expired.

 

Effective April 12, 2019, the company entered into a Master License and Services Agreement (the “MLSA”) with Optivida Health. The MLSA provides for the Company’s grant to Optivida of a non-exclusive non-transferable license to use the Company’s DNA Kit and associated proprietary technology required to produce an “individual-specific” set of recommendations for customers’ health and wellness. The MLSA also provides for Optivida’s payment of an annual licensing agreement fee to the Company, which has been paid as of the date of issuance of the accompanying financial statements. The MLSA also provides for the Company to retain a percentage of revenue from customers referred to our website by Optivida and to receive a percentage of the profits on products designed by the Company and marketed by Optivida. The initial term of the MLSA is three years.

 

On April 15, 2019, the Company entered into a Collaboration Agreement with Orn Health Inc. (“Orn”), a company controlled by Dr. Hans Jenkins, the Company’s Chief Medical Officer and a Board member. The Collaboration Agreement provides for the Company’s grant to Orn certain rights to act as the Company’s independent and non-exclusive sales representative and to directly sublicense products related to the Company’s software platforms on a non-exclusive basis. The Collaboration Agreement also provides that Gross Revenue generated by Orn and all Approved Operating Expenses incurred by Orn or the Company will be shared equally by the parties. The initial term of the Collaboration Agreement is 5 years.

 

On May 9, 2019, the Company incorporated a Canadian subsidiary, Frelii Canada Inc. with offices to be located in Mississauga, Ontario.

 

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On July 11, 2019, the Company entered into a License Agreement (the “Agreement”) with GATC Canna Inc. (“GATC”) of Newport Beach, CA. The Agreement provides GATC an exclusive non-transferable license to use the Company’s GATC branded DNA Kit and the co-developed technology to produce an “individual-specific” set of Cannabis recommendations for customers’ health and wellness. The Agreement also provides the Company a reciprocal exclusive license of the co-developed authored work. The Agreement also provides GATC a non-exclusive right to DNA Sequencing, AI processing, Individual customized Health & Wellness Recommendations, Medical Test Recommendations, Whole Genome search and reference tool, and Psychotropic Analysis Test. The Agreement provides for GATC’s payment of an annual licensing agreement fee to the Company, which has not yet been paid as of the date of issuance of the accompanying financial statements. The Agreement also provides for the Company to retain a percentage of revenue from customers referred to a co-developed website. The Agreement terminates automatically on December 31, 2119.

 

Our Offices

 

Our executive offices are located at 2701 North Thanksgiving Way, Suite 100 Lehi, UT 84043. You can also contact our customer service department by telephone at (833) 4FRELII.

 

Liquidity and Capital Resources

 

Operations for the three months ended June 30, 2019 was primarily funded through sales of Class B common stock.

 

Subject to the launch of the pipeline of revenue streams, there is no certainty that we will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable us to meet our obligations as they come due and consequently continue as a going concern. The Company may require additional funds to further develop our expanded business plan. The Company may require additional financing this year to fund our operations and is examining possible sources of funding beyond the existing cash generated from operations. Sales of additional equity securities would result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required. In the event that the necessary additional financing is not obtained, the Company would reduce its discretionary overhead costs substantially, or otherwise curtail operations.

 

The Company expects the forgoing, or a combination thereof, to meet our anticipated cash requirements for the next 12 months; however, these conditions raise substantial doubt about our ability to continue as a going concern. The accompanying 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.

 

Results of operations for the three months ended June 30, 2019 and 2018.

 

Revenues. For the three months ended June 30, 2019 and 2018, revenues were $22,604 and $3,291 respectively.

 

Operating expenses. Operating expenses for the three months ended June 30, 2019 was $1,455,401 compared to $2,227,174 for the three months ended June 30, 2018. The decrease in operating expenses was mainly due to higher compensation expenses, including stock-based compensation expenses reported in the three months ended June 30, 2018.

 

Other Income (Expenses). Other expense-net for the three months ended June 30, 2019, was a loss of $632 compared with other income-net of $578 for the three months ended June 30, 2018, The other income and other expenses represent interest income and interest expense.

 

Net loss for the three months ended June 30, 2019 was $1,437,604 compared to a net loss of $2,223,305 for the three months ended June 30, 2018. The decrease in net loss was a result of the higher compensation expenses, including stock-based compensation expenses reported in the three months ended June 30, 2018.

 

Off-Balance Sheet Arrangements

 

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

 

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Personnel

 

Frélii has ten full-time employees, but utilizes other contract personnel to carry out our business. We utilize contract personnel on a continuous basis, primarily in connection with building our technology platform.

 

Critical Accounting Policies

 

Cash and Cash Equivalents

 

Cash Equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.

 

Estimates

 

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

 

Derivative financial instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

 

The Company reviews the terms of equity instruments and other financing arrangements, if any, to determine whether there are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants to employees and non-employees in connection with consulting or other services. These options or warrants may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity.

 

Advertising

 

The Company follows the policy of charging the costs of advertising to expense as incurred. Advertising expense is included in operating expenses in the statements of operations. Advertising and marketing expense for the three months ended June 30, 2019 and 2018 was $10,950 and $118,496, respectively

 

Basic and Diluted Net Income (Loss) Per Share

 

The Company follows ASC Topic 260 to account for the earnings per share. Basic earnings (loss) per common share (“EPS”) calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents (if dilutive) outstanding.

 

Income Taxes

 

The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not that such tax benefits will not be realized.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies

 

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ITEM 4. CONTROLS AND PROCEDURES

 

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports it files or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports it files or submitted under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Because of inherent limitations, disclosure controls and procedures, as well as internal control over financial reporting, may not prevent or detect all inaccurate statements or omissions.

 

Our management, with the supervision and participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of June 30, 2019, were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

Inherent Limitations Over Internal Controls

 

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”). Our internal control over financial reporting includes those policies and procedures that:

 

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

 

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of the our management and directors; and

 

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

 

Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate. 

 

Changes in Internal Control over Financial Reporting

 

There have been no significant changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2019 that have materially 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

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business.

 

ITEM 1A. RISK FACTORS

 

Not applicable to smaller reporting companies.

 

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

 

From April 26, 2019 to May 18, 2019, the company sold 302,333 shares of Class B Common Stock at $1.50 per share to 10 investors for $410,500 cash proceeds, settlement for services of $18,000 and a common stock subscription receivable of $25,000.

 

On May 18, 2019, the company issued 550,000 shares of Class B Common Stock valued at $1.50 per share to three service providers as compensation.

 

On May 15, 2019, the company issued 1,200,000 shares of Class B Common Stock valued at $1.25 per share to an entity controlled by a Frelii director for certain software assets.

 

Exemption from Registration Claimed

 

All of the sales by the Company of its unregistered securities were made by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”). All of the individuals and/or entities listed above that purchased the unregistered securities were all known to the Company and its management, through pre-existing business relationships. All purchasers were provided access to all material information, which they requested, and all information necessary to verify such information and were afforded access to management of the Company in connection with their purchases. All purchasers of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to the Company. All certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer of the certificates or agreements representing such securities, without such securities either being first registered or otherwise exempt from registration in any further resale or disposition.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None

 

Item 6. Exhibits.

 

The following exhibits are filed with or incorporated by reference in this report:

 

Item No.   Description
31.1*   Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Ian Jenkins.
32.1*   Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Ian Jenkins.

 

* filed herewith

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on August 13, 2019.

 

  FRÉLII, INC.
   

Dated: August 13, 2019

By:

/s/ Ian G. Jenkins

    Ian G. Jenkins
Chief Executive Officer, Chief Financial Officer
and Director

 

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