UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

  Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One) 

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

 

For the quarterly period ended November 30, 2015

 

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

 

For the transition period from __________ to __________

 

COMMISSION FILE NUMBER 333-136663

 

THE RADIANT CREATIONS GROUP, INC. 

(Exact name of registrant as specified in its charter)

 

NEVADA		45-2753483
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Harbour Financial Center 2401 PGA Boulevard, Suite 280-B Palm Beach Gardens, FL 33410		33410
(Address of principal executive offices)		(Zip code)

 

(561) 420-0380

(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. Yes [X] No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [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 ]
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock and preferred stock , as of the latest practicable date: As of January 15, 2015, the Issuer had 21,334,537 shares of common stock outstanding and 3,000,000 share of Series A Super Voting Control preferred stock and 20,000,000 shares of Series B preferred stock issued and outstanding.

 

 

 

THE RADIANT CREATIONS GROUP, INC.
NOVEMBER 30, 2015
	PART I – FINANCIAL INFORMATION	Page
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of November 30, 2015 (Unaudited) and February 28, 2015	3
	Condensed Consolidated Statements of Operations for the three and nine months ended November 30, 2015 and 2014 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended November 30, 2015 and 2014 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis and Plan of Operation	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	20
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mining Safety Disclosure	22
Item 5.	Other Information	22
Item 6.	Exhibits	22
	Signatures	23

 

ITEM 1. FINANCIAL INFORMATION

THE RADIANT CREATIONS GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
			November 30,				February 28,
			2015				2015
			(Unaudited)
ASSETS
Cash		$	60,156			$	15,293
Holdback receivable			90,478				75,447
Prepaid expenses and other assets			15,150				15,150
Due from related party			4,700				—
Inventory			70,871				39,752
Total current assets			241,355				145,642
Property and equipment, net of depreciation			7,435				8,935
Patent pending			13,935				—
Total assets		$	262,725			$	154,577
LIABILITIES AND DEFICIT
Current Liabilities:
Accounts payable and accrued liabilities		$	23,468			$	13,100
Accrued interest			218,247				171,908
Deferred compensation			117,000				—
Notes payable - related party			—				124,237
Convertible notes payable			370,000				596,515
Notes payable			116,000				135,000
Derivative liabilities			—				130,103
Total current liabilities			844,715				1,170,863
Long Term Liabilities:
Convertible notes payable, net of discount			676,484				192,237
Notes payable			190,000				40,000
Total long-term liabilities			866,484				232,237
Total liabilities			1,711,199				1,403,100
COMMITMENTS AND CONTINGENCIES
Deficit
Series A Preferred at $0.00001 par value, 3,000,000 shares authorized, 3,000,000 and 1,000,000 shares issued and outstanding, respectively			30				10
Series B Preferred at $0.00001 par value, 100,000,000 shares authorized, 20,000,000 shares issued and outstanding			200				200
Common stock at $0.00001 par value: 900,000,000 shares authorized, 20,186,578 and 56,013 shares issued and outstanding, respectively			202				1
Additional paid in capital			15,117,240				7,812,709
Accumulated deficit			(16,812,093	)			(9,093,629	)
Total Radiant stockholder’s deficit			(1,694,421	)			(1,280,709	)
Non-controlling interest in subsidiary			245,947				32,186
Total Deficit			(1,448,474	)			(1,248,523	)
TOTAL LIABILITIES AND DEFICIT		$	262,725			$	154,577
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

THE RADIANT CREATIONS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

		For the Three Months Ended				For the Three Months Ended				For the Nine Months Ended				For the Nine Months Ended
		November 30, 2015				November 30, 2014				November 30, 2015				November 30, 2014
REVENUE, NET		$	143,027			$	69,082			$	192,004			$	477,538
COST OF REVENUE			(1,091	)			103,608				16,811				139,810
GROSS PROFIT (LOSS)			144,118				(34,526	)			175,193				337,728
Operating Expenses:
General and administrative expenses			568,615				434,522				1,784,464,				3,489,474
Depreciation			600				450				1,500				1,350
Inventory write-off			—				—				—				3,676
Total operating expenses			569,215				434,972				1,785,964				3,494,500
Operating loss			(425,097	)			(469,498	)			(1,610,771	)			(3,156,772	)
Other Income (Expense):
Interest expense			(38,107	)			(163,620	)			(536,986	)			(410,864	)
Bad debt recovery			—				—				—				195,534
Loss on purchase of intellectual property from related party			—				(726,000	)			(17,800	)			(726,000	)
Loss on modification of convertible debt			—				—				(5,506,688	)			—
Gain/(Loss) on derivative liabilities			—				(50,684	)			(187,208	)			229,359
Total other income/(expense), net			(38,107	)			(940,304	)			(6,248,682	)			(711,971	)
NET LOSS		$	(463,204	)		$	(1,409,802	)		$	(7,859,454	)		$	(3,868,743	)
LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST IN SUBSIDIARY		$	81,324			$	—			$	140,990			$	—
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS		$	(381,880	)		$	(1,409,802	)		$	(7,718,464	)		$	(3,868,743	)
NET LOSS PER COMMON SHARE  - Basic and Diluted*		$	(1.78	)		$	(43.03	)		$	(16.41	)		$	(96.25	)
Weighted Common Shares Outstanding
- Basic and Diluted*			214,341				32,764				470,432				40,194

*The Company’s financial statements have been retroactively adjusted to reflect a 1:1,250 reverse split of our common stock made effective September 25, 2015.

 

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

 

  

 

THE RADIANT CREATIONS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

		For the Nine				For the Nine
		Months Ended				Months Ended
		November 30, 2015				November 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss		$	(7,859,454	)		$	(3,868,743	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation Expense			1,500				1,350
(Gain)/Loss on derivative liabilities			187,208				(229,359	)
Default interest paid with convertible debt issuance							10,000
Loss on modification of convertible debt			5,506,688
Amortization of debt discounts			450,005				309,055
Stock based compensation			652,861				2,862,313
Loss on purchase of intellectual property from related party			17,800				726,000
Write off of inventory			—				3,676
Changes in operating assets and liabilities:
Inventory			(31,119	)			(9,130	)
Prepaid expenses			—				(35,909	)
Reserves			(15,031	)			—
Deferred compensation			117,000				—
Accounts receivable			—				(9,055	)
Accounts payable and accrued interest			56,707				66,640
NET CASH USED IN OPERATING ACTIVITIES			(915,835	)			(173,162	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets			—				(1,767	)
Payment of patent costs			(13,935	)			—
NET CASH FLOWS USED IN INVESTING ACTIVITIES			(13,935	)			(1,767	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on related party notes			(123,067	)			(120,753	)
Payments on related notes payable			(19,000	)			—
Proceeds from (Payments on) related party convertible debt			(70,000	)			64,307
Proceeds from short term notes and convertible notes			152,600				84,997
Proceeds from issuance of common stock			130,140				—
Sale of common stock of subsidiary			903,960				30,000
NET CASH PROVIDED BY FINANCING ACTIVITIES:			974,633				58,551
NET CHANGE IN CASH			44,863				(116,378	)
Cash at Beginning of Period			15,293				120,875
Cash at End of Period		$	60,156			$	4,497
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest		$	40,190			$	—
Cash paid for taxes		$	—			$	—
NON-CASH FINANCING AND INVESTMENT ACTIVITIES:
Conversion of convertible debt to common shares		$	166,670			$	135,633
Reclass of derivative to additional paid in capital		$	167,816			$	—
Debt extinguished for common stock		$	303,000			$	—
Exchange of common stock for preferred stock		$	—			$	476,000
Payment of prepaid marketing fees with note payable		$	—			$	240,000

 

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

 

 

THE RADIANT CREATIONS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

 

NOTE 1 – Organization and Significant Accounting Policies

 

Nature of Business

 

On June 20, 2013, following a change of control and subsequent acquisition of an exclusive license agreement, for the use of certain assets and processes related to innovative technologies in skin protection and enhancement, which consist of various proprietary products including an anti-aging and revitalizing skin cream generally sold under the "Radiant Creations" label, the Company changed its principal business to the development and marketing of unique and proprietary scientific technologies and cosmetic and over-the-counter personal enhancement products and devices. The Company currently sells its products exclusively over the internet to customers located globally.

 

Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

 

Non-controlling Interest in Consolidated Financial Statements

 

Accounting guidance on non-controlling interests in consolidated financial statements requires that a non-controlling interest in the equity of a subsidiary be accounted for and reported as equity and provides revised guidance on the treatment of net income and losses attributable to the non-controlling interest and changes in ownership interests in a subsidiary. The revised guidance requires additional disclosures that identify and distinguish between the interests of the controlling and non-controlling owners.

 

Use of Estimates 

 

The preparation of financial statements in conformity with U.S. 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. The Company’s significant estimates include the valuation of stock-based compensation and derivative liabilities, estimates for future charge-backs, and allowance for slow moving or obsolete inventory.

 

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. As of November 30, 2015 and February 28, 2015, the Company had no cash equivalents.

 

Inventory

 

Inventory consists of finished goods and is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels and future sales forecasts.

 

Property and Equipment

 

Property and equipment are stated at cost, net of depreciation provided by use of a straight-line method over the estimated useful lives of the assets, of five years. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable.

 

Basic and diluted net loss per share

 

Basic loss per share is computed using the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the dilutive effects of common stock equivalents on an “as if converted” basis. As of November 30, 2015, the number of potentially dilutive shares consisted of 25,200,848 shares underlying convertible debt as well as options to acquire 30,440 shares. As of November 30, 2014, the number of potentially dilutive shares consisted of 220,767 shares underlying convertible debt. For the nine months ended November 30, 2015 and 2014, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

 

Related parties

 

The Company follows subtopic ASC 850, Related Party Disclosure, for the identification of related parties and disclosure of related party transactions.

 

Revenue Recognition

 

The Company follows guidance under ASC 605, Revenue Recognition, in determining when to report income from operations. The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery and acceptance has occurred, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Revenue recognized by the Company normally occurs upon shipment of our product to the customer.

 

Cost of Revenue

 

Amounts recorded as cost of revenue relate to direct expenses incurred in order to fulfill orders of our products. Such costs are recorded as incurred. Our cost of revenue consists primarily of the cost of product; payment processing fees; and the cost of product samples.

 

Cash flows reporting

 

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net loss to reconcile it to net cash flows from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net loss that do not affect operating cash receipts and payments.

 

 

Share-based Expense

 

ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

 

Share-based expense for the nine month period ended November 30, 2015 and 2014 was $652,861 and $2,862,313, respectively.

 

Income Taxes

 

The Company utilizes the asset and liability method to measure and record deferred income tax assets and liabilities. Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

The Company follows the provisions of Accounting for Uncertainty in Income Taxes, which clarified the accounting for uncertainties in tax positions and required that the Company recognizes in its financial statements the impact of an uncertain tax position, if that position has more likely than not chance of not being sustained on audit, based on technical merits of that position.

 

The Company is subject to the United States federal and state income tax examinations by the tax authorities for the 2014, 2013, and 2012 tax years.

 

Recently issued accounting pronouncements

 

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

 

In August 2014, FASB issued Accounting Standards Update (ASU) No. 2014-15 Preparation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements—Liquidation Basis of Accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU however, for the current period, management does not believe that it has met conditions which would subject these financial statements to additional disclosure.

 

In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation — Stock Compensation. As a result, the target is not reflected in the estimation of the award’s grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after 15 December 2015 and interim periods within those annual periods. Early adoption is permitted. Management has reviewed the ASU and believes that they currently account for these awards in a manner consistent with the new guidance; therefore there is no anticipation of any effect to the financial statements.

 

 

NOTE 2 – Going Concern

 

The accompanying financial statements have been prepared on the basis of accounting principles applicable to a “going concern”, which assume that the Company will continue in operation for at least one year and will be able to realize its assets and discharge its liabilities in the normal course of operations.

 

Several conditions and events cast substantial doubt about the Company’s ability to continue as a going concern. The Company has a working capital deficit of $603,360 as of November 30, 2015 and has incurred net losses since inception. The Company’s future capital requirements will depend on numerous factors including, but not limited to, executing its marketing and business plans and the pursuit of business opportunities. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

 

These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 3 – Non-controlling Interest

 

NIT Enterprises, Inc. was incorporated in the state of Delaware on May 12, 2014 and is doing business in the State of Florida. The Company is under common control with the management of Radiant Creations Group and was formed to permit Radiant Creations Group to “spin-off” the Nucleotide technology it holds. As of November 30, 2015, the Company holds 58.51% of NIT and 41.49% is held by a non-controlling interest.

 

NOTE 4 – Notes Payable

 

Notes payable

 

The Company has two notes with outstanding balances as of November 30, 2015 of $75,000 and $5,000 which are subject to annual interest of 15% and matured on November 29, 2014 and January 31, 2015, respectively.

 

In April 2015, the Company issued a note payable in the amount of $150,000 for cash. The note matures in 24 months and accrues interest at an annual rate of 12%. The holder of the note also received 12,000 shares of common stock with a fair value of $33,000 based on the trading price of the shares on the date of issuance. The Company allocated $27,049 of the proceeds from the note to the common stock, which was recorded as a discount against the debt to be amortized through maturity. As of November 30, 2015, the note is carried at $127,036, net of unamortized discount of $22,964.

 

In October 2014, the Company issued a demand note in the amount of $50,000 for cash. The note is due on demand and accrues interest at an annual rate of 12%. As of November 30, 2015, the principle balance on the note was $36,000.

 

In July 2014, the Company issued a note payable in the amount of $40,000 for cash. The note matures in 36 months and accrues interest at an annual rate of 10%, payable quarterly. As of November 30, 2015, the principle balance remaining on the note is $40,000.

 

Notes payable - related parties

 

In July 2014, the Company issued a note payable in the aggregate amount of $250,000 for the purchase of intellectual property from a commonly owned entity. Because of the common ownership, the intellectual property was not marked to fair value and the Company recognized a loss for the amount of the notes, which is included in loss on acquisition of intellectual property from a commonly controlled entity on the condensed consolidated statements of operations. The note was non-interest bearing, matured in 24 months from issuance, and required principal payments of at least $25,000 every 180 days. During the nine months ended November 30, 2015, the remaining balance of $116,337 was paid in full.

 

In September 2014, the Company issued a note in the amount of $7,900 for cash. The note was payable in two years from issuance, and accrued interest, payable monthly, at an annual rate of 10%. During the nine months ended November 30, 2015, the remaining balance of $7,900 was paid in full.

 

NOTE 5 – Convertible Notes Payable

 

 

Note Date	Maturity Date	Face Amount	Eligible for Conversion	Conversion Date	Amounts Converted / Cash Paid*	Balance Outstanding
05/21/2013	09/20/2016	$900,448	06/15/2013	N/A 09/19/2013 11/20/2013	$31,000* $100,000 $70,000	$869,448 $769,448 $699,448
06/27/2013	$100,000 due 12/12/2014 (in default) $270,000 no due date	$370,000	06/27/2013	-	-	$370,000
11/19/2013	08/21/2014	$78,500       $10,000 Default	05/19/2014	06/13/2014 07/01/2014 07/11/2014 07/21/2014     11/19/2014 12/01/2014 12/12/2014 12/16/2014 01/23/2015	$12,000 $12,000 $15,000 $19,500     $7,235 $5,635 $6,395 $5,780 $4,955	$66,500 $54,500 $39,500 $20,000 $30,000   $22,765 $17,130 $10,735 $4,955 $ -0-
12/17/2013	09/21/2014	$32,500 $16,250 Default	06/15/2014	-     02/02/2015 02/05/2015 03/06/2015 03/09/2015 03/16/2015 03/23/2015 03/24/2015 03/31/2015 03/31/2015	-     $4,430 $6,030 $3,515 $3,515 $3,515 $3,760 $9,560 $2,675 $11,750	$32,500 $48,750   $44,320 $38,290 $34,775 $31,260 $27,445 $23,985 $14,425 $11,750 $-0-
01/27/2014	10/29/2014	$32,500 $16,250 Default	07/26/2014	-     04/07/2015 04/08/2015 04/15/2015 04/22/2015 04/29/2015 05/01/2015	-     $7,495 $10,685 $10,500 $11,540 $8,000 $530	$32,500 $48,750   $41,225 $30,570 $20,070 $8,530 $530 $-0-

 

07/08/2014	04/09/2015	$21,150 $10,575 Default	01/04/2015	-     05/07/2015 05/14/2015 05/19/2015 05/26/2015 06/15/2015 06/17/2015 06/25/2015 06/26/2015 06/29/2015 07/01/2015 07/06/2015 07/09/2015 07/14/2015	-     $4,320 $3,165 $2,400 $1,820 2,655 2,655 2,655 2,510 2,235 2,235 2,235 2,095 745	$21,150 $31,725   $27,405 $24,240 $21,840 $20,020 $17,365 $14,710 $12,055 $9,545 $7,310 $5,075 $2,840 $745 $-0-
09/03/2014	06/05/2015	$32,500 $16,250 Default	03/03/2015     08/05/2015	-     N/A	-     $48,750*	$32,500 $48,750   $-0-
09/10/2014	09/10/2016	$35,000	09/10/2014	03/27/2015 03/31/2015 04/07/2015 04/15/2015 04/22/2015 05/01/2015 05/07/2015 05/15/2015	- $3,320 $3,802 $4,373 $5,013 $6,630 $4,608 $5,232 $2,023	$35,000 $31,680 $21,878 $23,506 $18,493 $11,863 $7,255 $2,023 $-0-
01/12/2015	10/14/2015	$16,000 $8,000 Default   Note paid off at discount	07/11/2015	-     N/A N/A	-     $21,250* $ 2,750	$16,000 $24,000   $2,750 $-0-
Totals		$1,595,923	-	-	Converted $ 425,475 Cash paid $ 101,000*	$1,069,448

 

Convertible notes payable

 

During 2011, 2012 and 2013, the Company obtained loans totaling $720,000. These loans were unsecured and bore interest at 10%. In 2013, the loans (including accrued interest of $140,448) in the amount of $900,448 were converted to a Convertible Note Payable due to Southwest Financial bearing interest at 10% per annum. Following cash payments of $31,000 and conversions to common stock of $170,000 later in fiscal 2013, the Company owed $699,448. The notes were initially convertible at the option of the Holder at fixed rate of $93.75 per share and matured on September 20, 2015. In September 2014, the conversion rate was amended to a fixed rate of $3.75 per share. The Company recorded additional expense of $3,845,935 as a result of the reduction in conversion price which is recorded as a loss on modification of convertible debt. The Company paid no principal cash payments on these notes during the nine months ended November 30, 2015. The principle balance of the note was $699,448 as of November 30, 2015.

 

As of February 28, 2015, the Company owed convertible notes totaling $370,000 to third parties including accrued interest of another $4,041. Interest is 10% annually and is to be paid currently. The notes may be converted at the option of the Holder at a fixed rate of $93.75 per share. In February 2014, the notes were amended to modify the conversion rate to $3.75 per share. In August 2015, the conversion rate was further reduced to $0.05 per share. The Company recorded additional expense of $1,660,753 as a result of the reduction in conversion price which is recorded as a loss on modification of convertible debt. The principle balance of the notes as of November 30, 2015 was $370,000 in the aggregate and the notes are due on demand.

 

On December 17, 2013, the Company signed a convertible note agreement with a third party in which the party loaned $32,500 subject to annual interest of 8%. The note matured on September 21, 2014 and was convertible into the Company’s common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On December 1, 2014, default interest in the amount of $16,250 was added to the principle balance of the note. During the nine months ended November 30, 2015, the lender converted $38,290 in principle in exchange for 31,801 shares of common stock and the note was paid in full.

 

On January 27, 2014, the Company signed a convertible note agreement with a third party in which the party loaned $32,500 subject to annual interest of 8%. The note matured on October 29, 2014 and was convertible into the Company’s common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On July 26, 2014, a derivative liability of $23,228 was recorded as a debt discount and amortized over the term of the note. During the twelve months ended February 28, 2015, default interest of $16,250 was added to the principle balance of the note. During the nine months ended November 30, 2015, the lender converted $51,350 in principle in exchange for 43,421 shares of common stock and the note was paid in full.

 

On July 8, 2014, the Company signed a convertible note agreement with a third party in which the party loaned $21,150 subject to annual interest of 8%. The note matures on April 9, 2015 and was convertible into the Company’s common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. During the twelve months ended February 28, 2015, default interest of $10,575 was added to the principle balance of the note. During the nine months ended November 30, 2015, the lender converted $31,725 in principle in exchange for 134,751 shares of common stock and the note was paid in full.

 

On September 3, 2014, the Company signed a convertible note agreement with a third party in which the party loaned $32,500 subject to annual interest of 8%. The note matures on June 5, 2015 and was convertible into the Company’s common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. During the twelve months ended February 28, 2015, default interest of $16,250 was added to the principle balance of the note. During the nine months ended November 30, 2015, the lender converted $1,740 in principle in exchange for 15,467 shares of common stock. In the same period, the Company paid $48,750 in cash and the note was paid in full.

 

On September 9, 2014, the Company executed a $35,000 Convertible Promissory Note bearing interest on the unpaid balance at the rate of 12% on the original principal amount. The principle amount due on the note shall be prorated based upon the consideration actually received by the Company, plus an approximate 10% original issue discount that is prorated based upon the consideration actually received as well as any other interest or fees. Under the terms of the note, the Company is not required to repay any unfunded portion of the note. The Maturity Date is two years from the Effective Date of each payment and is the date upon which the principal sum of this Note, as well as any unpaid interest and other fees, shall be due and payable. The conversion price was the lesser of $56.25 or 60% of the lowest trade price in the 25 trading days previous to the conversion. During the nine months ended November 30, 2015, the lender converted $43,565 in principle in exchange for 57,504 shares of common stock and the note was paid in full.

 

On January 12, 2015, the Company signed a convertible note agreement with a third party in which the party loaned $16,000 subject to annual interest of 8%. The note matured on October 14, 2015 and was convertible into the Company’s common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On July 11, 2015, the note became convertible and the embedded conversion option required derivative accounting to the variable conversion rate. During the twelve months ended February 28, 2015, default interest of $8,000 was added to the principle balance of the note. During the nine months ended November 30, 2015, the Company satisfied the remaining principle of $24,000 in the form of cash payment of $21,250 and the balance of $2,750 was recorded against the discount on the note for early payment.

 

Amortization expense on the debt discounts for the nine months ended November 30, 2015 amounted to $450,005 and notes are carried at $1,570,731, net of unamortized discounts of $22,964.

 

NOTE 6– Derivative Liabilities

 

The Company records the fair value of the conversion features of the convertible notes disclosed in Note 4 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivative liability was calculated using a multi-nominal lattice model. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statements of operations. During the nine months ended November 30, 2015, the Company recorded a loss on the change in fair value of derivative liability of $187,208.

 

The following table summarizes the changes in derivative liabilities during the nine months ended November 30, 2015:

 

Balance as of February 28, 2015	$                   130,103
Fair value of embedded conversion derivative liability at issuance	50,558
Reclassification of derivatives upon conversion or redemption of convertible debt	(222,317)
Unrealized derivative losses included in other expense	187,208
Ending balance as of November 30, 2015	$                          -0-

 

The Company determined that the instruments embedded in the convertible note should be classified as liabilities and recorded at fair value due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The fair value of the instruments was determined using a multinomial lattice model based on the following assumptions:

 

-

The projected volatility curve for each valuation period was based on the historical volatility of the Company and ranged from 191% to 198%.

 

-

An event of default would occur 5% of the time, increasing 1.00% per month to a maximum of 10%,

 

-

The monthly trading volume would average $175,000 to $136,000 and would increase at 1% per month. The variable conversion price of 58% of ask-bid or close prices over 10 trading days have effective discount rates of 42.42%,

 

-

The variable conversion price of the lesser of: (i) $0.045, or (ii) 60% of the lowest trade price over 25 trading days would have effective discount rates of 47.92% to 47.64%

 

-

The Note Holders would automatically convert fixed and variable conversion prices (with full ratchet resets) the notes at the stock price for the convertible Note if the registration was effective and the Company was not in default, and conversion price reset events are assumed every 3 months.

 

NOTE 7 – Equity

 

During the nine months ended November 30, 2015, amortization expense recognizing the fair value of vested stock options was $349,861. Expected future expense related to the expected vesting of options is $109,987.

 

The following table summarizes the Company’s stock options activity as of November 30, 2015:

 

					Options				Weighted Average Exercise Price				Aggregate Intrinsic Value				Exercisable				Weighted Average Remaining Life
	Balance, November 30, 2015					38,050,000			$	0.11			$	—				29,700,000			3.79

 

On August 24, 2015, the Board of Directors of the Company approved a reverse split of the Company’s commons stock at a ratio of one for one thousand two hundred and fifty (1,250) shares, (1-for-1,250). As of August 24, 2015, (prior to the Reverse Split), we had 439,445,822 shares of common stock outstanding and 460,554,178 common shares available for issuance. Upon effectiveness (September 25, 2015) of the Reverse Split, the Company remained authorized to issue 900,000,000 common shares and had 351,557 shares outstanding with the ability to issue 899,648,443 additional common shares. The Company’s financial statements for all periods presented have been retroactively adjusted to reflect the stock split made effective on September 25, 2015.

 

The table below illustrates the capitalization of our outstanding shares before and after the Reverse Split.

 

Capitalization		Prior to the Reverse Split		After the Reverse Split
Common stock (1)
Authorized		900,000,000		900,000,000
Issued and Outstanding		439,445,822		351,557
Available for Issuance		460,554,178		899,648,443
Series A Preferred stock (2,4)
Authorized		3,000,000		3,000,000
Issued and Outstanding		3,000,000		3,000,000
Available for Issuance		-		-
Series B Preferred stock (3,4)
Authorized		20,000,000		20,000,000
Issued and Outstanding		20,000,000		20,000,000
Available for Issuance		-		-

  

 

(1)

Each one (1) share of our Common Stock entitles the holder to one (1) vote per share on all matters submitted to a vote of our stockholders.

 

(2)

Each one (1) share of our Series A Preferred Stock entitles the holder to two hundred (200) votes per share on all matters submitted to a vote of our stockholders.

 

(3)

Each one (1) share of our Series B Preferred Stock entitles the holder to one (1) vote per share on all matters submitted to a vote of our stockholders.

 

(4)

As a result of the 3,000,000 Series A Preferred shares and 20,000,000 Series B Preferred shares held by Biodynamic Molecular Technologies, LLC, a commonly controlled entity, it holds an aggregate of 620,000,000 common shares or 59% of the votes, which entitle it to determine the outcome of all matters submitted to a vote of our stockholders.

 

During the nine months ended November 30, 2015, the Company issued 282,944 shares of common stock upon the conversion of debt, for an aggregate value of $166,670. (see Note 4)

 

During the nine months ended November 30, 2015, the Company issued 600 shares of common stock as compensation for services for an aggregate value of $158.

During the nine months ended November 30, 2015, the Company issued 12,000 shares of common stock to an investor on a note payable for a value of $27,049. (see Note 4)

 

During the nine months ended November 30, 2015, the Company issued 1,562,500 shares of common stock for cash for a value of $30,000.

 

During the nine months ended November 30, 2015, the Company converted $303,000 in accrued executive compensation to 3,030,000 shares of common stock of the Company.

 

During the nine months ended November 30, 2015, the Company received $100,000 from an investor in exchange for shares of common stock in the Company equal to 5% of the total outstanding shares of common stock as of January 31, 2016. As of November 30, 2015, 1,683,000 shares have been issued.

 

During the nine months ended November 30, 2015, the Company issued 13,559,521 shares of common stock to certain investors who previously purchased shares at prices materially above market value. The shares were recorded at par value, consistent with a stock split due to significance.

 

During the nine months ended November 30, 2015, the Company issued 2,000,000 shares of its Series A Preferred Stock to related parties as consideration for services rendered. The fair value of the shares of $17,800, based on the value of the control feature, was recorded as expense during the nine months ending November 30, 2015.

 

NIT Enterprises, Inc.

 

During the nine months ended November 30, 2015, NIT Enterprises issued 110,000 shares of common stock as compensation for services’ The shares were issued at par value

 

During the nine months ended November 30, 2015, NIT Enterprises issued 3,512,000 shares of common stock for cash consideration of $903,959.

 

During the nine months ended November 30, 2015, NIT Enterprises issued 3,552,000 preferred shares to investors according to the terms provided in NIT’s cash subscription agreement. The shares were issued at par value.

 

During the nine months ended November 30, 2015, NIT Enterprises issued 1,000,000 Series A, Super-Voting preferred shares to a founder. The shares were issued at par value.

 

During the nine months ended November 30, 2015, NIT Enterprises issued 26,000,000 Series B, Founder preferred shares to its founders The shares were issued at par value.

 

 

NOTE 8 – Commitments and Contingencies

 

Acquisition and Assignment

 

On June 25, 2013, the Company purchased certain assets from The Renewable Corporation, a related party. The purchases included their license, certain assets and processes to innovative technologies in skin protection from the sun, industrial UV sources (such as welding), and reducing collateral damage from medical radiation treatment which consists of various patented skin products generally under the "Radiant Creations" label. 

 

The license purchased is with Dr. Yin-Xiong Li, MD, Ph.D. to his patent in Enhanced Broad-Spectrum UV Radiation Filters and Methods as disclosed and claimed in U.S. Patent No. US Patent # 6,117,846 - Nucleic acid filters and US Patent Application # 20080233626 - Enhanced broad-spectrum UV radiation filters and methods, and the following international filings European Application # 07811023.6, and Australian Application # 2007281485 and as trade secrets associate with the above listed intellectual property and trade secrets and potential patent applications for an anti-aging skin rejuvenation cream, an acne OTC treatment, a wrinkle reduction cream, BioSalt redistribution technology using supplements.  The License Agreement, as of June 25, 2013 has added an addendum to it allowing Renewable to transfer the license agreement to The Radiant Creations Group.

 

The various patented skin products acquired include all the patented technologies that strips out the four nucleotide code molecules from DNA strands and uses them in a system that can provide up to 99% protection from DNA damage, which is the cause of aging and skin cancer. A second technology is the delivery system to house the nucleotides, and also, a hydration agent that is time released to infuse uniform hydration into the skin for up to 10 hours.  The resulting products are a DNA based SPF-30 day cream; an anti-aging and rejuvenating night cream featuring the hydration system, Chinese herbs, and aloe; a medical radiation protection and healing cream for use by dermatologists in radiation therapy for skin cancer and a rejuvenating DNA protection cream for the tanning bed industry for DNA damage protection.

 ​

Other terms of the Agreement include:

 

Radiant shall pay all future intellectual property costs for the Licensed Patent, including all costs incident to the United States and foreign applications, patents and like protection, including all costs incurred for filing, prosecution, issuance and maintenance fees as well as any costs incurred in filling continuations, continuations-in-part, divisional s or related applications and any improvements, re-examination or reissue proceedings.  

Radiant agrees to appoint Li to the Radiant Advisory Board with compensation for such appointment to be commensurate with other members when remuneration is commended.  

​Radiant agrees to offer Li an Executive position for any subsidiary corporation responsible for operating the above Licensed Products for which the subsidiary becomes profitable.  As part of the position, salary and executive benefit compensation will be offered, terms to be negotiated at time of offer. 

 ​

Radiant shall pay Li a royalty of twenty-two percent (22%) of the Net Profit of the Licensed Product (“the Royalty”) made during the term of this Agreement.

 

​The Royalty owed to Li shall be calculated on a quarterly calendar basis (“Royalty Period”) and shall be payable no later than thirty (30) days after the termination of the preceding full Royalty Period i.e., commencing on the first (1st) day of January, April, July and October, except that the first and last Royalty Periods may be "short," depending on the effective date of this Agreement.

 ​

For each Royalty Period, Radiant shall provide Li with a written royalty statement in a form acceptable to Li.  Such royalty statement shall be certified as accurate by a duly authorized officer of Radiant.  Such statements shall be furnished to Li regardless of whether any Licensed Products were sold during the Royalty Period or whether any actual Royalty was owed.

 

Dilutive Stock Issuances

 

Pursuant to its sale of common stock in August 2015, the Company is obligated to issue a number of shares equal to 5% of the total shares outstanding as of January 31, 2016. (see note 7)

 

Litigation

 

The Company may become involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, excepts as discussed herein, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity. As of November 30, 2015, the Company is not involved in any material legal matters.

 

 

NOTE 9 – Related Party Transactions

 

During the nine months ended November 30, 2015, the Company enlisted a related party, Renewable Bioscience Holdings, Inc., to act as a bookkeeping and vending agent for the Company’s majority owned subsidiary, NIT Enterprises, Inc. For the nine months ended November 30, 2015, the Company’s agent disbursed $348,063 in expenses on behalf of the Company which primarily consisted of staff and executive compensation, investor relations expenses, and reimbursements of travel costs.

 

During the nine months ended November 30, 2015, the Company issued a non-interest bearing demand note receivable to a related party in the amount of $4,700.

 

In September 2014, the Company issued a note in the amount of $7,900 to a commonly controlled entity for cash. The note was payable in two years from issuance, and accrued interest, payable monthly, at an annual rate of 10%. During the nine months ended November 30, 2015, the remaining balance of $7,900 was paid in full.

 

In July 2014, the Company issued a note payable in the aggregate amount of $250,000 for the purchase of intellectual property from a commonly owned entity. Because of the common ownership, the intellectual property was not marked to fair value and the Company recognized a loss for the amount of the notes, which is included in loss on acquisition of intellectual property from a commonly controlled entity on the condensed consolidated statements of operations. The note is non-interest bearing, matures in 24 months from issuance, and requires principal payments of at least $25,000 every 180 days. During the nine months ended November 30, 2015, the remaining balance of $116,337 was paid in full.

 

On March 3, 2014, the Company executed employment agreements for its Officers that included annual compensation in equal amounts of $156,000 annually, a $75,000 signing bonus, and 6,000,000 shares of common stock options. Prior to the current period ending November 30, 2015, the Officers had elected to forego their annual compensation; however, the Company elected to accrue $303,000 in related compensation to its Officers. During the nine months ended November 30, 2015, the Company converted the deferred compensation to 3,030,000 shares of common stock.

 

During the nine months ended November 30, 2014, the Company issued 2,000,000 shares of its Series A Preferred Stock to related parties as consideration for services rendered. The fair value of the shares of $17,800, based on the value of the control feature, was recorded as expense during the nine months ending November 30, 2015.

 

NOTE 10 – Subsequent Events

 

In December 2015, the Company issued 1,147,959 shares of its common stock to certain investors who previously purchased shares at prices materially above market value.

 

 

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operation

Cautionary Statement Regarding Forward-Looking Statements

 

Certain statements contained in this Quarterly Report constitute "forward-looking statements." These statements, identified by words such as "plan," "anticipate," "believe," "estimate," "should," "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption "Part II - Item 1A.Risk Factors" and elsewhere in this Quarterly Report. We do not intend to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. We advise you to carefully review the reports and documents, particularly our Annual Reports, Quarterly Reports and our Current Reports we file from time to time with the Securities and Exchange Commission (the "SEC").

 

As used in this Quarterly Report, the terms "we," "us," "our," "Radiant," and the "Company" refer to The Radiant Creations Group, Inc. unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.

 

Introduction

 

Effective May 21, 2012, a change of control took place and Clarent Services Corp. acquired from Half Moon Bay Holdings, LLC, 20,000 shares of common stock of the Company, representing all of Half Moon Bay’s holdings of the Company.  The shares constituted approximately 83.33% of the thirty million (24,000) issued and outstanding shares of common stock of the Company. There are no arrangements or understandings among members of the former and new control groups and their associates with respect to election of directors or other matters.

 

Recent Corporate Developments

 

The Company is not aware of any arrangements, including any pledge of securities of the Company, the operation of which may at a subsequent date result in a change of control of the Company.

 

Involvement in Certain Legal Proceedings

During the past five years no director or executive officer of the company (i) has been involved as a general partner or executive officer of any business which has filed a bankruptcy petition; (ii) has been convicted in any criminal proceeding nor is subject to any pending criminal proceeding; (iii) has been subjected to any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (iv) has been found by a court, the Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law.

 

Family Relationships

 

Mr. Gary R. Smith, our Chairman, directly owns fifty percent, Mr. Gary D. Alexander, our CFO, owns twenty five percent, Mr. Michael S. Alexander, our CEO, owns twenty five percent and Mr. Manpreet Singh Thaper has no direct or indirect financial interest in Biodynamic Molecular Technologies, LLC, the majority shareholder of the Company.

 

Plan of Operation

On June 20, 2013, following a change of control and subsequent acquisition of an exclusive license agreement, certain assets and processes to innovative technologies in skin protection and enhancement, which consist of various proprietary products including an anti-aging and revitalizing skin cream generally under the "Radiant Creations" label, the Company changed its principal business to the development and marketing of unique and proprietary scientific technologies and cosmetic and over-the-counter personal enhancement products and devices.

 

As of November 30, 2015, we had cash of $60,156, a working capital deficit of $603,360, and an accumulated deficit of $16,812,093. As such, we anticipate that we will require substantial financing in the near future in order to meet our current obligations and to continue our operations. In addition, in the event that we are successful in identifying suitable alternative business opportunities, of which there is no assurance, we anticipate that we will need to obtain additional financing in order to pursue those opportunities.

 

Off-Balance Sheet Arrangements

None.

Financing Requirements

 

From December 29, 2005 (Inception) to November 30, 2015, we have suffered cumulative losses of $16,812,093. We expect to continue to incur substantial losses as we continue the growth of our business. Since our inception, we have funded operations through common stock issuances, related party loans, and the support of creditors in order to meet our strategic objectives.

 

Our management believes that sufficient funding will be available to meet our business objectives, including anticipated cash needs for working capital, and are currently evaluating several financing options, including a public offering of securities. However, we do not have any financing arrangements currently in place and there can be no assurance that we will be able to obtain sufficient financing when needed. As a result of the foregoing, there exists substantial doubt about our ability to continue as a going concern.

 

There is no assurance that we will be able to obtain additional financing if and when required. We anticipate that additional financing may come in the form of sales of additional shares of our common stock which may result in dilution to our current shareholders.

 

Going Concern Qualification

 

Several conditions and events cast substantial doubt about the Company’s ability to continue as a going concern.  The Company has a working capital deficit of $603,360 and has incurred net losses of $16,812,093 for the period from December 29, 2005 (inception) to November 30, 2015 and the Company will require additional financing in order to finance its business activities on an ongoing basis.  The Company’s future capital requirements will depend on numerous factors including, but not limited to, executing the company’s marketing and business plans and the pursuit of other business opportunities. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained.  In the interim, we are dependent upon shareholders of the Company to continue meeting our operating costs.  Management believes that actions presently being taken to revise the Company’s operating and financial requirements provide them with the opportunity to continue as a going concern. 

 

Liquidity and Capital Resources

It is the intent of our management, stockholders, and specifically the majority Shareholder, BioDynamic Molecular Technologies, LLC and our Chairman, Gary R. Smith, our Chief Financial Officer, Gary D. Alexander, our Chief Operating Officer, Manpreet Singh Thaper to provide sufficient working capital necessary to support and preserve the integrity of our Company as a corporate entity.  However, there is no legal obligation for either the majority Shareholder(s) or Officer(s) to provide additional future funding. If our management ceases to provide us the needed financing and we fail to identify any alternative sources of funding, we may have to alter or discontinue our business plan.

 

We have no current plans, proposals, arrangements or understandings with respect to the sale or issuance of additional securities.  As a result, there can be no assurance that sufficient funds will be available to us to enable us to pay the expenses related to such activities.

 

Regardless of whether or not our available cash proves to be adequate to meet our operational needs, we may have to compensate providers of services by issuances of our common stock in lieu of cash and there are no guarantees this will be on favorable terms, if accepted at all.

 

At November 30, 2015, we had $60,156 in cash, $1,711,199 in liabilities, and an accumulated deficit of $16,812,093. Our primary source of liquidity has been from loans from shareholders and outside parties.  As of November 30, 2015, the Company owed $1,570,731 in notes and accrued interest.

  

Net cash used in operating activities was $915,835 during the nine months ended November 30, 2015. The Company’s operating expenses for the nine month period included executive compensation, marketing, and office administration expenses. The expenses were funded through proceeds from loans and notes payable and the issuance of common stock of the Company.

 

During the nine months ended November 30, 2015, net cash used in investing activities was $13,935 which represents payments towards patent costs.

 

Cash provided by financing activities was $974,633 during the nine months ended November 30, 2015. The Company’s financed its operations through loans and notes payable, the issuance of common stock of the Company, and through the sale of common stock of its subsidiary.

 

Our expenses to date are largely due to professional fees that include accounting and legal fees, executive compensation, and interest expense.

Revenue

Revenue for the three months ended November 30, 2015 and 2014 was $143,027 and $69,082 respectively, while costs of revenue were ($1,091) and $103,608 for 2015 and 2014, respectively. The abnormal balance in cost of revenue of ($1,091) is a reflection of understated inventory at November 30, 2015. The excess in costs over revenue for the three months ended November 30, 2014 is a reflection of inventory adjustments made whereby inventory was overstated for the period.

 

 

Revenue for the nine months ended November 30, 2015 and 2014 was $192,004 and $477,538, respectively, while costs of revenue were $16,811 and $139,810 for 2015 and 2014, respectively. There is a twenty-percent overall increase in gross profit margin for the nine months ending November 30, 2015 as compared to November 30, 2014 and reflects lower production costs and lower fees associated with merchant processor services.

 

Net Loss

 

We incurred a net loss of $463,204 and $1,409,802 for the three months ended November 30, 2015 and 2014, respectively.  Our basic and diluted loss per share was $(1.78) and $(43.03) for the three months ended November 30, 2015 and 2014, respectively.

 

We incurred a net loss of $7,859,454 and $3,868,743 for the nine months ended November 30, 2015 and 2014, respectively.  From inception, we have an accumulated deficit of $16,812,093.  Our basic and diluted loss per share was $(16.41) and $(96.25) for the nine months ended November 30, 2015 and 2014, respectively.

 

Operating and Administration Expenses

 

Operating expenses for the three months ended November 30, 2015 were $569,215 as compared to $434,972 for the three months ended November 30, 2014.  The increase is mainly attributable to higher office administration expenses.

 

Operating expenses for the nine months ended November 30, 2015 and 2014 were $1,785,964 and $3,494,500, respectively. The decrease is attributable to lower stock compensation expense. Expenses consisted primarily of office administration, compensation, professional and regulatory compliance, investor relations and interest expense.

 

Other Income/Expense 

For the three months ended November 30, 2015, the Company recognized other expenses of $38,107 as compared to other expenses in the amount of $940,304 for the three months ended November 30, 2014. The change is the result of lower interest expense from amortization of debt discounts, fluctuations in derivative related costs, and loss on intellectual property from a related party.

 

For the nine months ended November 30, 2015, the Company recognized other expenses of $6,248,682 as compared to other income in the amount of $711,971 for the nine months ended November 30, 2014. The change is the result of changes in interest expense from amortization of debt discounts, fluctuations in derivative related costs, and loss on modification of convertible debt.

 

Common and Preferred Stock

We are authorized by our Amended and Restated Articles of Incorporation and our Additional Articles of Incorporation to issue an aggregate of 1,001,000,000 shares of capital stock, of which 900,000,000 are shares of common stock, par value $0.00001 per share and 101,000,000 are shares of preferred stock, par value $0.00001 per share.

 

On August 24, 2015, the Board of Directors of the Company approved a reverse split of the Company’s commons stock at a ratio of one for one thousand two hundred and fifty (1,250) shares, (1-for-1,250). As of August 24, 2015, (prior to the Reverse Split), we had 439,445,822 shares of common stock outstanding and 460,554,178 common shares available for issuance. Upon effectiveness (September 25, 2015) of the Reverse Split, the Company remained authorized to issue 900,000,000 common shares and had 351,557 shares outstanding with the ability to issue 899,648,443 additional common shares. The Company’s financial statements for all periods presented have been retroactively adjusted to reflect the stock split made effective on September 25, 2015.

 

As of November 30, 2015, 20,186,578 shares of Common Stock were issued and outstanding and there were 79 shareholders of our Common Stock. Also at November 30, 2015, there were 3,000,000 Series A – Super Voting Control shares outstanding and 20,000,000 Series B shares of Preferred Stock issued and outstanding.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not Applicable.

 

 

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

For purposes of this Item 4., the term disclosure controls and procedures means controls and other procedures of the Company (i) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (15 U.S.C. 78a  et seq. and hereinafter the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “Commission”), and (ii)  include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures do not comply with the requirements in (i) and (ii) above and are not effective.  

 

On January 22, 2016, our CEO, Michael S. Alexander, has reviewed the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) as of the end of the period covered by the report and has concluded that (i) the Company’s disclosure controls and procedures are not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Commission, and (ii) the Company’s controls and procedures have not been designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  

 

The material weakness identified relate to the lack of proper segregation of duties and lack of a formal audit committee. Additionally, the Company does not maintain adequate accounting personnel to ensure transactions are properly identified, accounted for, and disclosed in the financial statements.

 

Changes in Internal Controls over Financial Reporting

 

There were no changes in our internal control over financial reporting identified in connection with our evaluation of these controls as of the third fiscal quarter ended November 30, 2015 as covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Inherent Limitations on Effectiveness of Controls 

The Company's management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. 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. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

ITEM 1. Legal Proceedings

 

None.

PART II - OTHER INFORMATION 

ITEM 1A. Risk Factors

 

The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.

 

WE HAVE LIMITED BUSINESS OPERATIONS AND ONE PRODUCT AVAILABLE FOR SALE. WE HAVE NOT IDENTIFIED ANY ALTERNATIVE BUSINESS OPPORTUNITIES. OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS WILL CONSIST OF EXECUTING OUR MARKETING AND BUSINESS PLANS AND RESEARCHING NEW OPPORTUNITIES.

 

Our assets consist of an exclusive license purchased from Dr. Yin-Xiong Li, MD, Ph.D. to his patent in Enhanced Broad-Spectrum UV Radiation Filters and Methods as disclosed and claimed in U.S. Patent No. US Patent # 6,117,846 - Nucleic acid filters and US Patent Application # 20080233626 - Enhanced broad-spectrum UV radiation filters and methods, and the following international filings European Application # 07811023.6, and Australian Application # 2007281485 and as trade secrets associate with the above listed intellectual property and trade secrets and potential patent applications for an anti-aging skin rejuvenation cream, an acne OTC treatment, a wrinkle reduction cream, BioSalt redistribution technology using supplements.  The License Agreement, as of June 25, 2013 has added an addendum to it allowing Renewable to transfer the license agreement to The Radiant Creations Group.

 

In the event the Company is unable to maintain compliance with the terms of the exclusive license agreement the grantor could elect to limit or terminate the agreement which would have a material impact on our financial condition.

 

We May Not be Able to Obtain Additional Financing

 

As of November 30, 2015, we had cash on hand of $60,156 and a working capital deficit of $603,360.

 

Currently, our ability to obtain additional financing may be substantially limited. If sufficient financing is not available or obtainable as and when needed, we may not be able to continue as a going concern and investors may lose a substantial portion or all of their investment. We currently do not have any financing arrangements in place and there are no assurances that we will be able to acquire financing on acceptable terms or at all.

 

We Have Limited Officers and Directors

 

Because management consists of only four persons, Gary R. Smith, Chairman, Michael S. Alexander, Director and CEO, Gary D. Alexander, CFO and Corporate Secretary, and Manpreet Singh Thaper, Director and COO will be the only individuals responsible in conducting the day-to-day operations of the Company.  We do not benefit from having access to multiple judgments that a greater number of directors or officers would provide, and we will rely completely on the judgment of our four officers when selecting a target products to market.  Mr. Smith, Messrs. Alexander and Mr. Singh Thaper anticipate devoting only a limited amount of time per month to the business of the Company.  Mr. Smith, Messrs. Alexander and Mr. Singh Thaper all anticipate executing written employment agreements with the Company in the near future however we do not anticipate obtaining key man life insurance on Mr. Smith, Messrs. Alexander or Mr. Singh Thaper. The loss of the services of Mr. Smith, Messrs. Alexander or Mr. Singh Thaper would adversely affect development of our business and our likelihood of continuing operations.

 

We Depend on Management and Management's Participation is Limited

 

We will be entirely dependent upon the experience of our officers and directors in seeking, investigating, and acquiring new business opportunities and in making decisions regarding our operations.  It is possible that, from time to time, the inability of such persons to devote their full time attention to the Company will cause the Company to lose an opportunity.

We May Conduct Further Offerings in the Future in Which Case Investors' Shareholdings' will be Diluted 

We may conduct equity offerings in the future to finance any future business projects that we decide to undertake. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, investors' percentage interest in us will be diluted. The result of this could reduce the value of their stock.

 

 

Because Our Stock is a Penny Stock, Shareholder will be More Limited in Their Ability to Sell Their Stock

 

The shares of our common stock constitute "penny stocks" under the Exchange Act. The shares will remain classified as a penny stock for the foreseeable future. The classification as a penny stock makes it more difficult for a broker/dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker/dealer engaged by the purchaser for the purpose of selling his or her shares will be subject to rules 15g-1 through 15g-10 of the Exchange Act. Rather than having to comply with these rules, some broker-dealers will refuse to attempt to sell a penny stock.

 

The "penny stock" rules adopted by the SEC under the Exchange Act subjects the sale of the shares of our common stock to certain regulations which impose sales practice requirements on broker/dealers. For example, brokers/dealers selling such securities must, prior to effecting the transaction, provide their customers with a document that discloses the risks of investing in such securities.

Legal remedies, which may be available to an investor in "penny stocks," are as follows:

 

(a) if "penny stock" is sold to an investor in violation of his or her rights listed above, or other federal or states securities laws, the investor may be able to cancel his or her purchase and get his or her money back.

 

(b) if the stocks are sold in a fraudulent manner, the investor may be able to sue the persons and firms that caused the fraud for damages.

 

(c) if the investor has signed an arbitration agreement, however, he or she may have to pursue his or her claim through arbitration.

 

If the person purchasing the securities is someone other than an accredited investor or an established customer of the broker/dealer, the broker/dealer must also approve the potential customer's account by obtaining information concerning the customer's financial situation, investment experience and investment objectives. The broker/dealer must also make a determination whether the transaction is suitable for the customer and whether the customer has sufficient knowledge and experience in financial matters to be reasonably expected to be capable of evaluating the risk of transactions in such securities. Accordingly, the SEC's rules may limit the number of potential purchasers of the shares of our common stock.

 

ITEM 2. Unregistered Sale of Equity Securities and Use of Proceeds

 

None.

 

ITEM 3. Defaults on Senior Securities

 

None.

 

ITEM 4. Mining Safety Disclosure

 

Not Applicable.

 

ITEM 5. Other Information

 

None.

 

ITEM 6. Exhibits

 

EXHIBIT 31	Section 302 Certification of Chief Executive Officer and Chief Financial Officer
EXHIBIT 32	Section 906 Certification of Chief Executive Officer and Chief Financial Officer

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

THE RADIANT CREATIONS GROUP, INC.

 

 

Dated:  February 2, 2016	By: /s/ Michael S. Alexander Michael S. Alexander, Chief Executive Officer
Dated:   February 2, 2016	By: /s/ Gary D. Alexander Gary D. Alexander, Chief Financial Officer