Glucose Health, Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation Some of the statements in this report are "forward-looking statements." These forward-looking statements involve certain known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. The words "believe," "expect," "anticipate," "intend," "plan," and similar expressions identify forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. We undertake no obligation to update and revise any forward-looking statements or to publicly announce the result of any revisions to any of the forward-looking statements in this report to reflect any future or developments. However, the Private Securities Litigation Reform Act of 1995 is not available to us as a penny stock issuer and thus we may not rely on the statutory safe harbor from liability for forward-looking statements. Further, Section 27A(b)(2)(D) of the Securities Act and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that the safe harbor for forward looking statements does not apply to statements made in connection with any offering. Critical Accounting Policies and Estimates . Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the year ended December 31, 2015 together with notes thereto as previously filed with our Annual Report on Form 10-K on April 14, 2016. In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in our Quarterly Report on Form 10-Q for the period ended June 30, 2016. Cash and Cash Equivalents The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents. There were no cash equivalents as of June 30, 2016 and December 31, 2015. The Company maintains cash balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. 3 Table of Contents Recoverability of Long-Lived Assets The Company reviews their long-lived assets on a periodic basis, namely intellectual property, whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment will be based primarily on the Company's ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fixed assets to be disposed of by sale will be carried at the lower of the then current carrying value or fair value less estimated costs to sell. The Company evaluates the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit's carrying amount, including goodwill. The fair value of the reporting unit is estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies' data. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of reporting unit goodwill to its carrying amount. In calculating the implied fair value of reporting unit goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities, is the implied fair value of goodwill. We make critical assumptions and estimates in completing impairment assessments of goodwill and other intangible assets. Our cash flow projections look several years into the future and include assumptions on variables such as future sales and operating margin growth rates, economic conditions, market competition, inflation and discount rates. A 10% decrease in the estimated discounted cash flows for the reporting units tested would result in impairment that is not material to our results of operations. A 1.0 percentage point increase in the discount rate used would also result in impairment that is not material to our results of operations. We amortize the cost of other intangible assets over their estimated useful lives, which range up to ten years, unless such lives are deemed indefinite. Intangible assets with indefinite lives are tested in the third quarter of each fiscal year for impairment, or more often if indicators warrant. Fair Value of Financial Instruments The carrying amount reported in the balance sheets for cash, accounts payable, accrued expenses, and short-term notes payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The Company does not utilize derivative instruments. Beneficial Conversion Features ASC 470-20 applies to convertible securities with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation in either stock or cash. ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as the difference between the conversion price and the fair market value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible. This amount is recorded as a debt discount and amortized over the life of the debt. ASC 470-20 further limits this amount to the proceeds allocated to the convertible instrument. 4 Table of Contents Revenue Recognition The Company utilizes the following criteria with respect to the recognition of revenue: 1) Persuasive evidence of an arrangement exists; 2) delivery has occurred or services have been rendered; 3) the seller's price to the buyer is fixed or determinable, and 4) collectability is reasonably assured. Share Based Compensation The Company accounts for share-based compensation in accordance with the fair value recognition provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") No. 718 and No. 505. For employees, directors and non-employees, the fair value of the stock compensation is based upon the measurement date as determined at either (a) the date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn the equity instruments is complete. The Company has not issued any stock options or warrants. Inventory Inventory is stated at the lower of cost (FIFO: first-in, first-out) or market, and includes raw materials and finished goods. The cost of finished goods includes the cost of packaging supplies, direct and indirect labor and other indirect manufacturing costs. As of June 30, 2016, the Company had inventory of $8,310 comprised of the Glucose Health Ò Natural Blood Sugar Maintenance Blueberry Tea Mix (45 Servings) product and no inventory of Glucose Health Ò Daily Blood Sugar Maintenance Blueberry Tea Mix (60 Servings) as of June 30, 2016. All Glucose Health Ò products are affixed with a production lot number and "Best Before" date of 24 months following production. The Company currently sees no trends that would render its current inventory obsolete prior to its "Best Before" date. Overview Glucose Health, Inc. was incorporated under the laws of the State of Nevada on March 27, 2007. Our principal executive office is located at 609 SW 8th Street, Suite 600, Bentonville, AR 72712 and our telephone number is 479-802-3827. Our corporate website is www.glucosehealthinc.com and our product website is www.glucosehealth.com. Our CUSIP number is 379894108 and trading symbol is GLUC. We are a manufacturer of diabetes nutritional products and our business focus is serving the consumer market segment of persons concerned with pre-diabetes and Type-2 diabetes. As discussed in greater detail below, our principal product is Glucose Health Ò Daily Blood Sugar Maintenance. We acquired this product in fourth quarter of 2014 and we are in the early stages of manufacturing, marketing and distributing this product. We have a history of losses. 5 Table of Contents Corporate Information We were incorporated under the laws of State of Nevada on March 27, 2007, as Bio-Solutions Corp. On October 17, 2012, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock, pursuant to written consents in lieu of a meeting, approved an amendment to our Articles of Incorporation to increase our authorized capital (the "amendment"). The amendment was filed with the Nevada Secretary of State on October 17, 2012, increasing our authorized capital from 90,000,000 shares of common stock, to 200,000,000 shares of common stock, with a par value of $0.001. On January 10, 2014, the Company's Board of Directors unanimously voted to reverse split the Company's common stock on the basis of one share of the Company's common stock for each 10 shares outstanding while maintaining the authorized capital structure of the Company at 200,000,000 shares. The Board resolution set the date of record for shareholder approval for January 14, 2014. As of January 29, 2014, the Company obtained written consent in lieu of a meeting of the shareholders to authorize a reverse split of the Company's common stock. Shareholders owning a total of 100,992,469 shares of the Company's common stock voted in favor of the reverse split. There were a total of 199,611,900 shares of common stock issued and outstanding as of January 14, 2014 (the date of record). The number of shares of common stock voting in favor of the reverse split was sufficient for approval. On February 4, 2014, the Company filed a Certificate of Change with the State of Nevada effecting a 1-for-10 reverse split pursuant to which every ten shares of the Company's common stock were combined and converted into one share of the Company's common stock (with all fractional shares resulting there from being rounded up to the next whole share) with the total number of shares of the Company's authorized common stock remaining at 200,000,000 shares. The effective date of the above corporate action was February 26, 2014. On October 30, 2014, the board of directors of the Company voted to reverse split the Company's common stock on the basis of one share of the Company's common stock for each 50 shares outstanding while maintaining the authorized capital structure of the Company at 200,000,000 shares; to authorize 1,000 shares of preferred stock with "blank check" rights; and to change the Company's name from Bio-Solutions Corp. to Glucose Health, Inc. (the "corporate action"). The board resolution set the date of record for shareholder approval of the corporate action for October 31, 2014 and the effective date of the corporate action for November 19, 2014. As of October 31, 2014, the Company obtained written consent in lieu of a meeting of shareholders to authorize the corporate action. Shareholders owning a total of 30,596,154 shares of the Company's common stock voted in favor of the corporate action. There were a total of 60,132,271 shares of common stock issued and outstanding as of October 31, 2014 (the date of record). The number of shares of common stock voting in favor of the corporate action was sufficient for approval. On November 5, 2014, the Company filed a Certificate of Amendment to its Articles of Incorporation, with the Nevada Secretary of State effecting, as of November 19, 2014, the 1-for-50 reverse split pursuant to which every fifty shares of the Company's common stock were combined and converted into one share of the Company's common stock (with all fractional shares being rounded up to the next whole share) with the total number of shares of the Company's authorized common stock remaining at 200,000,000 shares; effecting the authorization of 1,000 shares of preferred stock with "blank check" rights; and effecting the change of the Company's name from Bio-Solutions Corp. to Glucose Health, Inc. On November 20, 2015, the board of directors voted to designate Series A Special Preferred Shares consisting of 1,000 shares of preferred stock with special voting rights whereby the holder(s) may exercise their right to vote on all shareholder matters representing the number of votes equal to all shares of common stock then issued and outstanding, plus an additional ten thousand (10,000) shares. Additionally, the board of directors voted to extend an existing 12 month consulting contract with the Company's CEO, Murray Fleming, for an additional 12 months, through October 1, 2016, without further compensation, in exchange for the issuance to Mr. Fleming, of the 1,000 Series A Special Preferred Shares. A Certificate of Designation for the Series A Special Preferred Shares was filed with the Nevada Secretary of State and effective on December 1, 2014. Our Business From inception through September 25, 2011, we were a manufacturer of Nutra-Animal, a pre-mix anti-oxidant for chicken integrators containing wheat middlings, vitamin E, calcium carbonate, silicone dioxyde, shrimp flour, sodium selenite and fish oil. We were also a distributor of GreenEx TM , a biological larvicide produced from a strain of Bacillus thuringiensis subspecies israelensis (Bti), a naturally occurring bacterium that produces a crystalline protein toxin (cystal) toxic for mosquitoes, vectors of malaria. We were not successful in these business endeavors. 6 Table of Contents On September 26, 2011, we acquired the "Type2 Defense" product together with all intellectual property associated therewith. Upon the acquisition of Type2 Defense we discontinued our former operations as a manufacturer of Nutri-Animal and distributor of GreenEx TM . Since we discontinued our former operations, we wrote off any inventories attributable to our former operations. Type2 Defense is a dietary supplement made from natural ingredients and formulated to support healthy glucose levels and targeted to consumers concerned about Type-2 and pre-diabetes. The first production run of the Company's Type2 Defense product was completed in June 2013 with the manufacture of 1764 cases. On July 8, 2013, the Company announced the product was available for on-line sales on Amazon.com. On July 9, 2013, the Company announced the product was available for on-line sales via the www.Type2Defense.com website. Subsequently, the Company encountered significant management, operational and financial challenges resulting in poor product sales and inadequate inventory control. As a consequence, the Company generated only nominal revenues in the fiscal year ended December 31, 2013 and the Company elected to declare the $200,000 intellectual property for Type2 Defense, recorded as other intangible assets, as impaired at December 31, 2013. On April 8, 2014, the Company appointed James Hodge chairman of the Company's board of directors. On April 8, 2014, in a special meeting of the board of directors, the board voted in favor of amending the Company's bylaws to decrease the number of members of the board of directors from three to one. The previous board members agreed to resign from the board and accept other duties for the Company. On April 21, 2014, the Company appointed Thomas Metzger Ph.D., Chief Executive Officer and Chief Financial Officer. In addition, Peggy Knight was appointed Chief Marketing Officer. On July 22, 2014, Thomas Metzger Ph.D., Chief Executive Officer and Chief Financial Officer, resigned from the Company. James Hodge, chairman of the board of directors was appointed interim Chief Executive Officer and Chief Financial Officer. Our Current Business On October 1, 2014, Murray Fleming was appointed the Company's Chief Executive Officer for the 12-month period ending October 1, 2015. Additionally, on October 1, 2014, the Company entered into an Intellectual Property Purchase Agreement to purchase the "Glucose Health Natural Blood Sugar Maintenance" product from a company of which Mr. Fleming is the beneficial owner. Following this purchase, the Company undertook a series of steps to achieve a final product offering that would be considered efficacious as well as pleasant tasting by our target consumer market, being persons concerned with pre-diabetes and Type-2 diabetes, and would offer a value proposition relative to our competition in order to be considered for stocking by national and regional pharmacy retailers. To assist in achieving our final product objectives, we retained a former head of beverage product development at Nestle. We retained an attorney specializing in compliance with Food and Drug Administration (FDA) regulations, necessary, in part, to allow our product to be stocked by national pharmacy retailers. We also undertook a number of actions to establish and build our Glucose Health Ò brand. The Company conducted a design competition related to its packaging artwork and product logo and retained an experienced product packaging graphic artist to assist with all digital and print representations of the product. The Company filed for and received trademark protection for Glucose Health Ò with the United States Trademark and Patent Office (USPTO). While our primary sales and marketing focus is achieving sales to consumers through national and regional pharmacies, secondarily, we intend to also market the product directly to customers via our dedicated product website and through other online marketplaces. 7 Table of Contents Glucose Health Ò is a dietary supplement formulated from nine natural ingredients shown in certain clinical research such as that published by the National Institutes of Health (see www.glucosehealth.com/clinical-trials), to have a beneficial impact upon blood glucose, insulin, triglyceride and cholesterol levels. The Centers for Disease Control and Prevention (CDC) publishes a National Diabetes Statistics Report annually. The 2014 Report estimates 2 of 5 presently healthy Americans will develop Type-2 diabetes in their lifetime. We believe the CDC Report and other similar research points to a large and growing market of consumers concerned with pre-diabetes or Type-2 diabetes including many of whom are likely seeking natural products like Glucose Health Ò to proactively maintain good health. On November 20, 2014, the existing 12 month consulting contract with the Company's CEO, Murray Fleming, was extended an additional 12 months ending October 2016, without further compensation, in exchange for the issuance to Mr. Fleming, of 1,000 Series A Special Preferred Shares. On December 31, 2014, the Company elected to write-off its inventory of Type2 Defense product to -0- and cease all manufacturing and sales activities related to the product. On January 5, 2015, the Company signed a contract manufacturing agreement for testing, compounding, supply and order fulfillment for the Glucose Health Ò product and additionally a purchasing agreement to distribute the product in a limited number of Northwest Arkansas pharmacies. On January 7, 2015, the Company completed its implementation of Current Good Manufacturing Practices (CGMP). The Dietary Supplement (DS) CGMP rule in 21 CFR part 111 of the FDA's regulations requires companies which manufacture, package, label, or hold a dietary supplement to establish and follow current good manufacturing practice to ensure the quality of the dietary supplement and to ensure that the dietary supplement is packaged and labeled as specified in the master manufacturing record. On January 26, 2015, the Company filed an initial application for trademark protection related to its line of dietary products, with the United States Trademark and Patent Office (USPTO). On January 29, 2015, the Company appointed of Chandrasekhar Mallangi, Ph.D., as an advisor. Dr. Mallangi earned a Ph.D. in Food Science from Oregon State University and is an advisor to multinational companies in the development of nutritional products. Dr. Mallangi is the credited inventor and co-inventor for patents in the area of food nutrition, awarded by the USPTO to subsidiaries of Nestle, SA of Vevey, Switzerland. On February 10, 2015, Murray Fleming, the Company's Chief Executive Officer was appointed the Company's Chief Financial Officer. Mr. Fleming replaces James Hodge the Company's interim Chief Financial Officer. Mr. Hodge continued as the Company's Chairman of the Board of Directors. On February 24, 2015, the Company completed FDA facility registration, a compliance procedure for manufacturers of dietary and nutritional supplements. On May 26, 2015, the Company completed the first production run of the product and pursuant to the January 5, 2015 purchasing agreement, the product began to be offered for retail sale through a limited number of Northwest Arkansas pharmacies as well as on the Company's product website www.glucosehealth.com. On July 7, 2015, the Company received notification from the United States Patent and Trademark Office (USPTO) that its application for trademark of "Glucose Health" was accepted to the Supplemental Register (Reg. 4,770,720) with first use recognized by the USPTO as of February 1, 2015. On January 6, 2016, the Company executed a General Merchandise Supplier Agreement ("Agreement") with Wal-mart Stores, Inc. 8 Table of Contents On January 27, 2016 the Company notified OTC Markets, Inc. of its intention to not renew its OTCQB service. The Company filed Form 8-A12G in fiscal 2015 registering a class of securities under the 1934 Securities Exchange Act. Accordingly, the Company does not make use of the OTC Markets Disclosure and News Service and instead files its periodic and annual reports and audited financial statements with the Securities and Exchange Commission. On February 4, 2016, the Company's Chief Executive Officer and Chief Financial Officer, Murray Fleming, was appointed to the Board of Directors of Glucose Health, Inc. ("Company"). On February 5, 2016, James Hodge resigned from the Board of Directors. On March 8, 2016, the Company received a series of material purchase orders from the Customer pursuant to a General Merchandise Supplier Agreement ("Agreement") with Wal-mart Stores, Inc., executed January 6, 2016. At June 30, 2016, the Company's Glucose Health Ò Daily Blood Sugar Maintenance Blueberry Tea Mix (60-Day Supply) diabetes nutritional product, is stocked in the "Diabetes Supplies" section of many Walmart pharmacies in all 50 states. Results of Operations For the three months ended June 30, 2016 as compared to the three months ended June 30, 2015 Revenues We generated $295,809 revenues for the three months ended June 30, 2016 compared to nominal revenues for the three months ended June 30, 2015. The Company's focus for the remainder of 2016 will be to increase sales of its Glucose Health Ò diabetes nutritional beverage products. Operating Expenses For the three months ended June 30, 2016, we had total operating expenses of $15,313, as compared to total operating expenses of $42,588 for the three months ended June 30, 2015. The decrease of $27,275 or 64%, in operating expenses between the periods is primarily due to the Company renegotiating and/or terminating consulting contracts, which resulted in lower operating expenses. Net Loss For the three months ended June 30, 2016, after interest expense of $93,402, we had a net loss of $87,370 or $0.03 per share. In comparison, for the three months ended June 30, 2015, after interest expense of $28,215, we had a net loss of $50,018 or $0.03 per share. We expect to continue to incur net losses for the foreseeable future. 9 Table of Contents For the six months ended June 30, 2016 as compared to the six months ended June 30, 2015 Revenues We generated $295,929 of revenue for the six months ended June 30, 2016 compared to nominal revenues for the six months ended June 30, 2015. The Company's focus for the 2016 will be to increases sales of its Glucose Health Ò diabetes nutritional beverage products. Operating Expenses For the six months ended June 30, 2016, we had total operating expenses of $27,648, as compared to total operating expenses of $107,331 for the six months ended June 30, 2015. The decrease of $79,683 in operating expenses between the periods is primarily due to the Company renegotiating and eliminating consulting agreements. We expect we will continue to incur significant legal and accounting expenses related to being a public company. Net Loss For the six months ended June 30, 2016, after interest expense of $119,301, we had a net loss of $125,544 or $0.05 per share. In comparison, for the six months ended June 30, 2015, after interest expense of $83,493, we had a net loss of $170,014 or $0.10 per share. We expect to continue to incur net losses for the foreseeable future. Liquidity and Capital Resources As of June 30, 2016 our current assets totaled $206,809 consisting primarily of $27,773 of cash, $168,346 of accounts receivable and $8,310 of inventory. Our current liabilities were $423,804 as of June 30, 2016, which was represented by accounts payable and accrued expenses of $195,895, short-term loans of $36,000, and convertible notes payable of $191,909. We had no other liabilities and no long-term commitments or contingencies as of June 30, 2016. On January 7, 2015, the Company issued a $4,315 convertible note to a corporation owned by the Company's CEO. The loan bears interest at 5% and has a maturity date of July 7, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.04 per share. On January 8, 2015, the Company issued an $8,750 convertible note to a corporation. The loan bears interest at 5% and has a maturity date of July 8, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.04 per share. On January 8, 2015, the Company issued an $8,750 convertible note to a corporation owned by the Company's CEO. The loan bears interest at 5% and has a maturity date of July 8, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.04 per share. 10 Table of Contents On February 2, 2015, the Company issued a $12,500 convertible note to a corporation. The loan bears interest at 5% and has a maturity date of August 2, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.031 per share. On February 2, 2015, the Company issued a $12,500 convertible note to a corporation owned by the Company's CEO. The loan bears interest at 5% and has a maturity date of August 2, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.031 per share. On March 2, 2015, the Company issued a $10,000 convertible note to a corporation. The loan bears interest at 5% and has a maturity date of September 2, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.025 per share. On March 2, 2015, the Company issued a $10,000 convertible note to a corporation owned by the Company's CEO. The loan bears interest at 5% and has a maturity date of September 2, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.025 per share. On April 1, 2015, the Company issued a $5,000 convertible note to a corporation. The loan bears interest at 5% and has a maturity date of October 1, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.020 per share. On April 1, 2015, the Company issued a $5,000 convertible note to a corporation owned by the Company's CEO. The loan bears interest at 5% and has a maturity date of October 1, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.020 per share. On May 1, 2015, the Company issued a $5,000 convertible note to a corporation. The loan bears interest at 5% and has a maturity date of November 1, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.025 per share. On May 1, 2015, the Company issued a $5,000 convertible note to a corporation owned by the Company's CEO. The loan bears interest at 5% and has a maturity date of November 1, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.025 per share. On June 1, 2015, the Company issued a $4,000 convertible note to a corporation. The loan bears interest at 5% and has a maturity date of December 1, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.025 per share. On June 1, 2015, the Company issued a $4,000 convertible note to a corporation owned by the Company's CEO. The loan bears interest at 5% and has a maturity date of December 1, 2015. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.025 per share. On January 15, 2016, the Company issued a $3,000 convertible note to a corporation. The loan bears interest at 5% and has a maturity date of December 31, 2016. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.025 per share. 11 Table of Contents On January 15, 2016, the Company issued a $10,500 convertible note to a corporation owned by the Company's CEO. The loan bears interest at 5% and has a maturity date of December 31, 2016. In addition, at any time, the holder may convert the note into shares of the Company's common stock at an exercise price of $0.025 per share. On March 11, 2016, the Company issued a $35,000 note to a corporation owned by the Company's CEO. The loan bears interest at 24% per annum and has a maturity date of July 11, 2016. On May 1, 2016, the Company issued a $35,000 note to a corporation owned by the Company's CEO. The loan bears interest at 24% and has a maturity date of September 1, 2016. On May 18, 2016, the Company issued a $30,000 note to a corporation. The loan bears interest at 24% per annum and has a maturity date of July 18, 2016. During the period ended June 30, 2016, the Company combined the principal balances on multiple notes from the two note holders into two single note agreements, one for $169,065 and the second for $112,157. These transactions were accounted for as a modification of debt, as the interest rate and conversion shares did not change from the original note agreements, therefore, no gain or loss was recognized. Our Plan of Operation for the Next Twelve Months. Our principal business strategy for the next twelve months will be to implement marketing and sales initiatives and earn significant revenues from our Glucose Health Ò diabetes nutritional beverage product. Our sales initiatives will be focused upon securing repeat purchase orders from national and regional pharmacy retailers. Our marketing initiatives will be primarily focused on supporting Glucose Health Ò such sales through our national and regional partners. We intend to begin advertising in and sponsoring, various television, radio, print, digital and social media platforms, which align with the interest of persons in our target consumer market segment, in diabetes nutritional beverage products such as Glucose Health Ò . Secondarily to our primary marketing and sales initiatives above, we also intend to grow our online sales of Glucose Health Ò product through sales from our product website and sales through other online marketplaces. We also intend to enhance our Glucose Health Ò diabetes nutritional beverage product offerings by improving our proprietary formula with respect to taste and efficacy; to introduce new flavors; and to introduce additional packaging options. At June 30, 2016, we had nominal cash, which will not be sufficient to satisfy our working capital requirements for the next twelve months. We cannot forecast with any degree of certainty our anticipated revenues or cash flow. Our forecasts and operations will involve risks and uncertainties, which we are unable to predict and actual results could fail. We will require additional capital to continue operations. If we cannot secure additional capital or generate significant revenues, we may cease operations in which case you will lose your investment. We intend to continue to source capital from the two private equity companies currently providing financing to us on a monthly basis. We cannot guarantee that such additional funding will be available on favorable terms, if at all. If adequate funds are not available, then our ability to continue or expand our operations may be significantly hindered. If adequate funds are not available, our officer, directors and principal shareholders may contribute capital to the Company in the form of debt financing or equity contributions. However, our officer, directors and principal shareholders are not committed to contribute funds to pay for our expenses. Even assuming that we secure adequate financing, there can be no assurance that we will be profitable at any time in the future. Further, the legal and accounting costs of being a public company will continue to impact our liquidity and we will need to obtain funds to pay those expenses. Other than the anticipated increases in legal and accounting costs due to the reporting requirements of being a reporting company, we are not aware of any other known trends, events or uncertainties, which may affect our future liquidity. Our auditors have questioned our ability to continue operations as a "going concern." While we expect to obtain significant revenues from future product sales, in the absence of significant sales and profits, we will seek to raise funds to meet our working capital needs principally through the additional sales of our securities. However, we cannot guarantee that we will be able to obtain sufficient additional funds when needed, or that such funds, even if available, will be obtainable on terms satisfactory to us. As a result, our auditors believe that substantial doubt exists about our ability to continue operations. 12 Table of Contents Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosure About Market Risk Not applicable