NOTE
2 GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As
of September 30, 2019, the Company had cash of $14,117 and a working capital deficit of $8,493,543. During the nine months ended
September 30, 2019, the Company used net cash in operating activities of $225,332. The Company has not yet generated revenue and
has incurred net losses since inception. These conditions indicate that there is substantial doubt about the Company’s ability
to continue as a going concern within one year from the issuance date of the condensed consolidated financial statements.
During
the nine months ended September 30, 2019, the Company raised aggregate net proceeds of $200,030 through the issuance of notes
payable – short-term and convertible (see Note 5 – Notes Payable – Short-Term and Note 6 – Convertible
Debt). The Company does not believe that its current cash on hand will be sufficient to fund its projected operating requirements.
The Company is filing a unit offering on Form S-1A to register shares and Class A Warrants for a capital raise of up to $3 million
(the “Unit Offering”). However, there can be no assurance that such Unit Offering will be successfully completed.
The
Company’s primary source of operating funds since inception has been cash proceeds from the private placements of convertible
debt and short-term debt. The Company intends to raise additional capital through private placements of debt and equity securities,
but there can be no assurance that these funds will be available on terms acceptable to the Company or will be sufficient to enable
the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional
funds, it will have to develop and implement a plan to further extend payables and indebtedness, reduce overhead, or scale back
its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance
that such a plan will be successful.
Accordingly,
the accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally
accepted in the United States of America (“U.S. GAAP”), which contemplate continuation of the Company as a going concern
and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets
and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement
values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this
uncertainty.
NOTE
3 SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The
condensed consolidated financial statements include the accounts of Accelerated Pharma, Inc. and its wholly owned subsidiary,
Acceler. All significant intercompany balances and transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures 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. Significant estimates include, assumptions used in the fair value of equity instruments, the valuation allowance against
deferred tax assets, and the estimates of fair value of warrant liabilities.
Foreign
Currency Translation
The
operations of Acceler are conducted in local currency, which represents its functional currency. The balance sheet accounts of
Acceler were translated from foreign currency into U.S. dollars at the exchange rate in effect at the balance sheet date and income
statement accounts were translated at the average rate of exchange prevailing during the period. Equity accounts are translated
at historical rates, except for the change in accumulated deficit during the period, which is the result of the income statement
translation process. Translation adjustments resulting from this process, were included in accumulated other comprehensive loss
on the accompanying condensed consolidated balance sheets.
Comprehensive
Loss
Comprehensive
loss consists of net loss and other gains and losses affecting equity that are excluded from net loss, which consists of foreign
currency translation.
The
exchange rates used to translate amounts in Russian rubles (“RUB”) into U.S. Dollars (“USD”) for the purposes
of preparing the condensed consolidated financial statements were as follows:
Balance
Sheets:
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Period-end RUB: USD exchange rate
|
|
$
|
64.4156
|
|
|
$
|
65.5906
|
|
Statements
of Operations:
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Average Period RUB: USD exchange rate
|
|
$
|
64.5685
|
|
|
$
|
61.7324
|
|
Net
Loss per Share of Common Stock
The
Company computes basic net loss per share by dividing net loss per share available to common stockholders by the weighted average
number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings
per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive
securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The
computation of basic and diluted loss per share for the nine months ended September 30, 2019 and 2018 excludes potentially dilutive
securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price
of the common stock during the period.
Potentially
dilutive securities excluded from the computation of basic and diluted net loss per share as of September 30, 2019 and 2018 are
as follows:
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Common stock issuable upon conversion of convertible debt and accrued interest
|
|
|
1,611,359
|
|
|
|
1,823,607
|
|
Warrants to purchase common stock
|
|
|
134,908
|
|
|
|
145,863
|
|
Warrants to purchase Series A convertible preferred stock
|
|
|
266,667
|
|
|
|
392,000
|
|
Options to purchase common stock
|
|
|
210,000
|
|
|
|
436,100
|
|
Series A convertible preferred stock
|
|
|
350,000
|
|
|
|
490,000
|
|
Totals
|
|
|
2,572,934
|
|
|
|
2,469,722
|
|
Recent
Accounting Pronouncements
There
are various updates recently issued, most of which represented technical corrections to the accounting literature or application
to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations
or cash flows.
In
June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting (“ASU 2018-07”), which primarily aligns the measurement and classification guidance
for share-based payments to nonemployees with the guidance for share- based payments to employees. ASU 2018-07 also clarifies
that any share-based payment issued to a customer should be evaluated under ASC 606, Revenue from Contracts with Customers.
ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.
The adoption of ASU 2018-07 did not have a material effect on its condensed consolidated financial statements.
In
July 2019, the FASB issued ASU 2019-07, “Codification Updates to SEC Sections — Amendments to SEC Paragraphs Pursuant
to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company
Reporting Modernization and Miscellaneous Updates (SEC Update)” (“ASU 2019-07”). ASU 2019-07 aligns the guidance
in various SEC sections of the Codification with the requirements of certain SEC final rules. ASU 2019-07 is effective immediately.
The adoption of ASU 2019-07 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
Recent
Accounting Pronouncements - Continued
In
November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit
Losses” (“ASU 2019-11”). ASU 2019-11 is an accounting pronouncement that amends ASU 2016-13, “Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments update
guidance on reporting credit losses for financial assets. These amendments affect loans, debt securities, trade receivables, net
investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded
from the scope that have the contractual right to receive cash. The amendments in this ASU are effective for annual reporting
periods beginning after December 15, 2022, including interim periods within those fiscal years. All entities may adopt the amendments
through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance
is effective (that is, a modified-retrospective approach). The Company is currently evaluating ASU 2019-11 and its impact on its
condensed consolidated financial statements and financial statement disclosures.
In
December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”
(“ASU 2019-12”). The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions
to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas
of Topic 740 by clarifying and amending existing guidance. This update for fiscal years beginning after December 15, 2021, and
interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted, including
adoption in any interim period for periods for which financial statements have not yet been made available for issuance. An entity
that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual
period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in
the same period. The Company is currently evaluating ASU 2019-12 and its impact on its condensed consolidated financial statements
and financial statement disclosures.
Reclassification
Certain
amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no
effect on previously reported net loss.
Subsequent
Events
The
Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based
upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required
adjustment or disclosure in the condensed consolidated financial statements, except as disclosed.
NOTE
4 OUT-OF-PERIOD ADJUSTMENT
During
the nine months ended September 30, 2019, the Company discovered an error which occurred during the three months ended March
31, 2017, and impacts the Company’s annual and interim financial statements for the years ended December 31, 2017 and
2018. The Company evaluated such error in accordance with Staff Accounting Bulletin (“SAB”) 108 and determined
that such error was immaterial to the current and prior periods. Accordingly, the Company corrected the error during the nine
months ended September 30, 2019, by recording approximately $53,000 of research and development expense related to
2017 services provided by a vendor.
Between
January 1, 2019 and September 30, 2019, the Company entered into separate securities purchase and loan agreements with five investors
(the “Lenders”) pursuant to which the Company issued to the Lenders promissory notes in the aggregate principal amount
of $200,030 (the “2019 Short-term Notes”). The 2019 Short-term Notes, as amended, have (a) no conversion rights, (b)
bear interest at 6% per annum payable at maturity, and (c) are due at the earlier of: (i) December 31, 2019, depending on the
note; or (ii) the receipt by the Company of proceeds from a financing of at least $500,000 pursuant to a registration statement
filed with the Securities and Exchange Commission.
As
an inducement to the Lenders and in connection with the issuance of the 2019 Short-term Notes, the Company agreed to issue to
the Lenders a total of 34,060 Class B Warrants. The Class B Warrants have an exercise price of $6.47 per share and are exercisable
for three years upon the effectiveness of a registration statement. The aggregate issuance date fair value of the Class B Warrants
was determined to be de minimis.
NOTE
6 CONVERTIBLE DEBT
Effective
as of January 30, 2019, the Company entered into a note extension agreement, as amended (the “Extension Agreement”)
with certain holders of the Company’s convertible debt. The Company and the noteholders mutually agreed to extensions of
the maturity date of their debt from maturity dates ranging from January 31, 2019 to August 31, 2019 to a new maturity date of
December 31, 2019 and to waive any defaults. Upon the effective date of the Unit Offering, (i) certain noteholders agreed to mandatorily
convert their respective debt in the aggregate principal amount of $3,901,000, plus the respective accrued interest on such principal,
into shares of the Company’s common stock at a price of $1.60 per share and (ii) certain other noteholders agreed to mandatorily
convert respective debt in the aggregate principal amount of $1,035,000, plus respective accrued interest, into an amount of shares
of the Company’s Series C Convertible Preferred Stock equivalent to if the holders had converted such outstanding indebtedness
into common stock at a price of $1.60 per share. The Company accounted for the Extension Agreement as a modification and, as a
result, no gain or loss was recorded during the nine months ended September 30, 2019 related to the Extension Agreement. Additionally,
the Company determined that (i) that the conversion option should not be bifurcated and accounted for as a derivative liability
since there is currently no market for the Company’s common stock, and (ii) the mandatory conversion option represented
a contingent beneficial conversion feature which would be accounted for at the time the contingency was resolved. As of September
30, 2019, convertible debt in the principal amount of $110,000 was past maturity.
During
the nine months ended September 30, 2019, the Company entered into a securities purchase and loan agreement with an investor pursuant
to which the Company issued to the investor a convertible note payable in the aggregate principal amount of $20,000. The convertible
note matures (a) on April 9, 2020, (b) bears interest at a rate of 10% per annum payable at maturity, and (c) is convertible starting
180 days from the issuance date of the note at a conversion price equal to the great of (i) $0.25 per share or (ii) 50% of the
market price of the Company’s common stock, as defined within the note. The Company determined that the conversion option
will be accounted for at the time the note becomes convertible. The note has a prepayment premium, whereby, in the event that
the Company elects to prepay the note during the one hundred eighty-day period following the issue date, the holder is entitled
to receive a prepayment premium of up to 45% on the then outstanding principal balance and accrued interest.
NOTE
7 NOTES PAYABLE – RELATED PARTY
During
the nine months ended September 30, 2019, the Company amended and restated a $35,000 promissory note with a related party. The
agreement extended the previous maturity date from August 20, 2019 to May 31, 2020.
NOTE
8 STOCKHOLDERS’ EQUITY
On
May 31, 2019, the Company’s board of directors and majority stockholders approved an increase to the number of authorized
shares of Series C Convertible Preferred Stock from 7,000 shares to 15,000 shares.
On
June 6, 2019, the Company’s board of directors and majority stockholders approved an increase to (i) the number of authorized
shares of common stock from 45,000,000 shares of common stock to 500,000,000 shares of common stock and (ii) the number of authorized
shares of preferred stock from 5,000,000 shares of preferred stock to 20,000,000 shares of preferred stock.
Effective
January 15, 2020, pursuant to authority granted by the stockholders of the Company, the Company implemented a 1-for-1.47 reverse
split of the Company’s issued and outstanding common stock. All share and per share information has been retroactively adjusted
to reflect the Reverse Split for all periods presented (see Note 1).
NOTE
9 SUBSEQUENT EVENTS
Notes
Payable
Subsequent
to September 30, 2019, the Company entered into a securities purchase and loan agreement with an investor pursuant to which
the Company issued to the investor a note payable in the principal amount of $20,010. The note matures on the earlier of (a)
March 31, 2020, or (b) the receipt of the Company of proceeds of at least $500,000 from the Unit Offering, and bears
interest at a rate of 2% per month payable at maturity. In connection with the note issuance, the Company has agreed to issue
the investor Class B Warrants to purchase 65,000 shares of the Company’s common stock.
Convertible
Debt
Subsequent
to September 30, 2019, the Company entered into a securities purchase and loan agreement with an investor pursuant to which the
Company issued to the investor a convertible note payable in the principal amount of $7,000. The convertible note matures (a)
on June 9, 2020, (b) bears interest at a rate of 10% per annum payable at maturity, and (c) is convertible starting 180 days from
the issuance date of the note at a conversion price equal to the greater of (i) $0.25 per share or (ii) 50% of the market price
of the Company’s common stock, as defined within the note. The note has a prepayment premium, whereby, in the event that
the Company elects to prepay the note during the one hundred eighty-day period following the issue date, the holder is entitled
to receive a prepayment premium of up to 45% on the then outstanding principal balance and accrued interest.
Reverse
Stock Split
Effective
January 15, 2020, pursuant to authority granted by the stockholders of the Company, the Company implemented a 1-for-1.47 reverse
split of the Company’s issued and outstanding common stock (the “Reverse Split”). All share and per share information
has been retroactively adjusted to reflect the Reverse Split for all periods presented (see Note 8).
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion should be read in conjunction with the financial information included elsewhere in this Quarterly Report
on Form 10-Q (this “Report”), including our unaudited condensed consolidated financial statements and the related
notes. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section
to “us”, “we”, “our” and similar terms refer to Accelerated Pharma, Inc. This discussion includes
forward-looking statements, as that term is defined in the federal securities laws, based upon current expectations that involve
risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could
differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Words such as
“anticipate”, “estimate”, “plan”, “continuing”, “ongoing”, “expect”,
“believe”, “intend”, “may”, “will”, “should”, “could”
and similar expressions are used to identify forward-looking statements.
We
caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties,
risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections
upon which the statements are based. Any one or more of these uncertainties, risks and other influences could materially affect
our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results,
performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake
no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
Overview
We
are a clinical stage biopharmaceutical company focused on utilizing our genomic technology to (i) enhance the development of pre-existing
pharmaceutical products for the treatment of various cancer indications, (ii) prospectively identify patients that may respond
to such pharmaceutical products and (iii) commercialize such pharmaceutical products for sale in various markets.
Our
lead product candidate is Picoplatin, a new generation platinum-based cancer therapy that has the potential for use in different
formulations, as a single agent or in combination with other anti-cancer agents, to treat multiple cancer indications. We hold
and are the exclusive, worldwide licensee of patented and proprietary technology related to Picoplatin. We will initially use
our genomic technology to identify suitable patients prospectively for our anticipated Picoplatin clinical trials described below
in hope of obtaining regulatory approval for Picoplatin and commercializing the therapy. We believe that our genomic program will
allow us to identify additional drug candidates that can be substantially improved for the treatment of various cancer indications
and ultimately create a targeted approach for cancer treatment by selecting patients who will respond to therapy in advance of
administering such therapy.
Picoplatin
is a chemotherapeutic designed to treat solid tumors that are resistant to existing platinum-based cancer therapies. Clinical
studies have been conducted by a prior licensee of Picoplatin with respect to small cell lung cancer (or SCLC), metastatic colorectal
cancer (or CRC), castration-resistant (hormone-refractory) prostate cancer and ovarian cancer. For more information regarding
these prior clinical studies see the subsection below entitled “Picoplatin and Platinum-Based Chemotherapeutics.”
We
believe that our strategy to employ our genomic technology to develop Picoplatin is timely. Recently, there has been a significant
focus on further developing and using genomics as an important tool in the treatment of cancer. Large pharmaceutical companies
have recognized the value of genomics in their drug development efforts and have implemented large-scale changes to move in that
direction. In an April 2016 press release, AstraZeneca announced “an integrated genomics initiative to transform drug discovery
and development across its entire research and development pipeline” and that the Company had sequenced “2 million
genomes in the hunt for new drugs.” Additionally, in October 2016, the U.S. federal government’s Moonshot Task Force
released its report entitled “Cancer Moonshot — Ending Cancer as We Know It”, a significant portion of which
was dedicated to describing the government’s goal to provide substantial funds to drug developers and research organizations
in an effort to enhance genomics as a tool to fight cancer.
In
2015, we requested a meeting in a letter to FDA to obtain its input on our proposed plans for a clinical study of Picoplatin to
be conducted in patients with head and neck cancer. In January 2016, FDA responded to our questions relating to manufacturing,
whether we should conduct certain pre-clinical studies as well as our genomics-signature-driven study design submitted to the
agency. FDA agreed with our strategy and confirmed that no additional preclinical studies are needed and that it did not object
to our study design and did not object to a plan to develop gene expression signatures in order to identify patients who are more
likely to respond to Picoplatin. This provided us with clarity for our genomic-driven strategy for the development of Picoplatin
and our planned Phase II clinical trials. FDA further agreed that we may submit an IND application that cross references the original
IND submitted by Poniard, and such application will include a complete protocol of our Phase II trials. We submitted an IND for
head and neck cancer trial in August 2016. Following review of our IND for head and neck cancer trial, the FDA gave us permission
to initiate Phase II trials of Picoplatin in patients with squamous cell carcinoma of the head and neck. More recently, in connection
with the initiation of our Phase II clinical trial, the FDA has requested us to supplement our clinical trial plan with a more
detailed statistical plan to provide a robust justification for the patient sample size that we have proposed. The FDA is requiring
that we submit this plan before recruiting over twenty patients, which we intend to do by analyzing genomic and drug response
data from first recruited patients to substantiate requested statistical estimates. With respect to our clinical trial plan, the
FDA has also provided comments on sample collection and suggested that we begin discussions with the FDA regarding in vitro diagnostic
genomic assay before we begin the second arm of our clinical trial.
We
intend to conduct Phase II clinical trials both in CRC and squamous cell cancer of the head-and-neck. We expect to first pursue
a Phase II clinical trial in squamous cell cancer of the head-and-neck using the proceeds of this Offering. In 2017 we completed
GMP manufacturing campaign which produced enough drug product to conduct this trial and several others needed for approval of
the drug.
Commencing
after the closing of this Offering and over the next 24 months thereafter, we expect to conduct a Phase II clinical trial in squamous
cell cancer of the head-and-neck in order to determine the genomic signatures for Picoplatin with respect to these indications.
We have not yet determined when we will begin a Phase II clinical trial for CRC. For more information on how we will spend the
proceeds from this Offering, see “Use of Proceeds” below. If one or both of these trials meets their primary endpoints,
we expect to conduct a Phase III study in order to utilize the genomic classifiers (which are individual genes or sets of genes
which allow the separation of tumors which differ in response to treatment by looking at their gene expressions) identified in
the Phase II clinical trials to prospectively identify patients that we expect to respond positively to and to not respond positively
to Picoplatin prior to receiving treatment such that we can achieve positive progression-free survival endpoints, significantly
increasing the patient response rate to Picoplatin, which will support submission for drug approval from the FDA and other regulatory
agencies.
We
are a clinical stage biopharmaceutical company focused on utilizing our genomic technology to enhance the development of pharmaceutical
products for the treatment of various cancer indications. We were formed in May 2014, and we acquired the worldwide rights to
Picoplatin from a third party in December 2014. We thus have a very limited history of operations.
Consolidated
Results of Operations
Three
Month-Period Ended September 30, 2019 Compared to the Nine Month-Period Ended September 30, 2018
Summary
Table
The
following table presents a summary of the changes in our results of operations for the three months ended September 30, 2019,
compared with the three months ended September 30, 2018:
|
|
For the Three Months Ended
|
|
|
Percentage
|
|
|
|
September 30,
|
|
|
Increase
|
|
|
|
2019
|
|
|
2018
|
|
|
(Decrease)
|
|
General and Administrative
|
|
$
|
42,644
|
|
|
$
|
11,480
|
|
|
|
271
|
%
|
Research and Development
|
|
$
|
454
|
|
|
$
|
-
|
|
|
|
100
|
%
|
Total Operating Expenses
|
|
$
|
43,098
|
|
|
$
|
11,480
|
|
|
|
275
|
%
|
Other Expenses
|
|
$
|
126,255
|
|
|
$
|
141,951
|
|
|
|
-11
|
%
|
Net Loss
|
|
$
|
169,353
|
|
|
$
|
153,431
|
|
|
|
10
|
%
|
General
and Administrative Expenses
General
and administrative expenses consist primarily of professional accounting and legal fees, office expense, and rent expense.
For
the three months ended September 30, 2019, our general and administrative expenses increased by $31,164, or 271%, to $42,644 as
compared to $11,480 during the three months ended September 30, 2018. The increase is primarily due to an increase in professional
legal and accounting fees related to our Unit Offering.
We
expect that our general and administrative expenses will continue to increase as we become a public company.
Research
and Development Expenses
For
the three months ended September 30, 2019, research and development expenses increased to $454 as compared to $0 during the three
months ended September 30, 2018. We expect our research and development expenses will increase after successful completion of
our Unit Offering.
Other
Expense
For
the three months ended September 30, 2019, other expenses decreased by $15,696, or 11%, to $126,255 as compared to $141,951 during
the three months ended September 30, 2018. The decrease was primarily due to a decrease in foreign currency exchange loss.
Net
loss
During
the three month-period ended September 30, 2019, we incurred a net loss of $169,353 as compared to a net loss of $153,431 in the
same period in the prior year. Our net loss increased by $15,922, or 27%, mainly due to an increase in operating expenses.
Nine
Month-Period Ended September 30, 2019 Compared to the Nine Month-Period Ended September 30, 2018
Summary
Table
The
following table presents a summary of the changes in our results of operations for the nine months ended September 30, 2019, compared
with the nine months ended September 30, 2018:
|
|
For the Nine Months Ended
|
|
|
Percentage
|
|
|
|
September 30,
|
|
|
Increase
|
|
|
|
2019
|
|
|
2018
|
|
|
(Decrease)
|
|
General and Administrative
|
|
$
|
230,741
|
|
|
$
|
97,025
|
|
|
|
138
|
%
|
Research and Development
|
|
$
|
57,714
|
|
|
$
|
-
|
|
|
|
100
|
%
|
Total Operating Expenses
|
|
$
|
288,455
|
|
|
$
|
97,025
|
|
|
|
197
|
%
|
Other Expenses
|
|
$
|
374,903
|
|
|
$
|
424,089
|
|
|
|
-12
|
%
|
Net Loss
|
|
$
|
663,358
|
|
|
$
|
521,114
|
|
|
|
27
|
%
|
General
and Administrative Expenses
General
and administrative expenses consist primarily of professional accounting and legal fees, office expense, and rent expense.
For
the nine months ended September 30, 2019, general and administrative expenses increased by $133,716, or 120%, to $230,741 as compared
to $97,025 during the nine months ended September 30, 2018. The increase is primarily due to an increase in professional legal
and accounting fees related to our Unit Offering.
We
expect that our general and administrative expenses will continue to increase as we become a public company.
Research
and Development Expenses
For
the nine months ended September 30, 2019, research and development expenses increased to $57,714 as compared to $0 during the
nine months ended September 30, 2018 primarily due to an out-of-period adjustment related to 2017 services provided by a vendor.
See Note 4 - Out-Of-Period Adjustment in the notes to our condensed consolidated financial statements for the nine months ended
September 30, 2019 and 2018.
We
expect our research and development expenses will increase after successful completion of our Unit Offering.
Other
Expense
For
the nine months ended September 30, 2019, other expenses decreased by $49,186, or 12%, to $374,903 as compared to $424,089 during
the nine months ended September 30, 2018. The decrease was primarily due to a decrease in foreign currency exchange loss in the
period.
Net
loss
During
the nine month-period ended September 30, 2019, we incurred a net loss of $663,358 as compared to a net loss of $521,114 in the
same period in the prior year. Our net loss increased by $142,244, or 27%, mainly due to an increase in operating expenses.
Liquidity
and Capital Resources
As
of September 30, 2019, we had total current assets consisting of $14,117 in cash. We had property and equipment valued at $126
as of September 30, 2019. We had total assets of $14,243 as of September 30, 2019.
As
of December 31, 2018, we had total current assets consisting of $18,871 in cash. We had property and equipment valued at $618
as of December 31, 2018. We had total assets of $19,489 as of December 31, 2018.
As
of September 30, 2019, we had total current liabilities of $8,525,958 consisting of $907,837 in accounts payable, $1,796,783 in
accrued interest payable, $50,303 in accrued expenses, a $35,000 note payable to a related party, a total of $323,035 in notes
payable, and $5,411,000 in convertible notes outstanding. As of September 30, 2019, the Company had no long-term liabilities.
As
of December 31, 2018, we had total current liabilities of $7,868,380 consisting of $895,246 in accounts payable, $1,457,543 in
accrued interest payable, a $35,000 note payable to a related party, a total of $125,005 in notes payable, and $5,355,586 in convertible
notes outstanding. As of December 31, 2018, the Company had no long-term liabilities.
Net
Cash Used in Operating Activities
During
the nine months ended September 30, 2019 and 2018, cash used in operating activities was $225,332 and $125,965, respectively.
Our cash used in operations during the nine months ended September 30, 2019 was due to a net loss of $663,358, adjusted for net
non-cash expenses related to depreciation and amortization costs of $35,906, offset by an increase in accounts payable of $12,577,
an increase in accrued expenses of $50,303 and an increase in accrued interest payable of $339,240. Our cash used in operations
during the nine months ended September 30, 2018 was due to a net loss of $521,114, adjusted for net non-cash expenses related
to depreciation and amortization costs of $53,818, a decrease in accounts payable of $24,994, offset by an increase in accrued
compensation of $35,371 and an increase in accrued interest payable of $330,904.
Net
Cash Provided by Financing Activities
During
the nine months ended September 30, 2019 and 2018, cash provided by financing activities was $220,0300 and $110,000, respectively.
Cash provided by financing activities during the nine months ended September 30, 2019 was due to proceeds from short-term notes
of $200,030 and proceeds of $20,000 from the issuance of a convertible notes. Cash provided by financing activities during the
nine months ended September 30, 2018 was due to proceeds from convertible notes of $110,000.
We
have not yet achieved profitability and expect to continue to incur cash outflows from operations.
As
of September 30, 2019, we have not generated any revenues from operations, and we have incurred cumulative losses of approximately
$13,136,794 since inception. As of September 30, 2019, we had a negative working capital of $8,511,715. Such conditions raise
substantial doubt about the entity’s ability to continue as a going concern for at least 12 months from the date of this
filing. We have funded our operations primarily from the issuance of convertible notes which will be converted into shares of
our Common Stock upon the successful completion of our Unit Offering. Our convertible debt financings are convertible into equity
at a price per share averaging $3.23 per share.
Based
upon our lack of revenue expected for 2020, together with the planned expenditures, management currently believes that current
cash will be insufficient to fund our research and development expenses and general and administrative expenses beyond December
31, 2019. We will require the estimated $2.8 million in proceeds of our Unit Offering to fund our operations over the 12 - month
period from the completion of this Unit Offering, of which there can be no assurance. Upon completion of our Unit Offering, the
expected net proceeds from such Offering of approximately $2.8 million, excluding any proceeds from the exercise of Class A Warrants,
if any, added to our current cash, is anticipated to be sufficient to fund our operations through September 2020.
Furthermore,
if our assumptions underlying our anticipated timing for the completion of our clinical and regulatory program and our anticipated
expenses prove to be wrong, we may have to raise additional capital sooner than anticipated. Because of numerous risks and uncertainties
associated with the research, development and future commercialization of our product candidate, we are unable to estimate with
certainty the amounts of increased capital outlays and operating expenditures associated with our anticipated clinical trials
and development activities. Our current estimates may be subject to change as circumstances regarding requirements further develop.
We may decide to raise capital through public or private equity offerings, debt financings or corporate collaboration and licensing
arrangements. We do not have any existing commitments for future external funding. We may seek to sell additional equity or debt
securities or obtain a bank credit facility if available. The sale of additional equity or debt securities, if convertible, could
result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also
result in covenants that would restrict our operations or other financing alternatives.
Our
ability to continue as a going concern may be dependent on our ability to raise additional capital, to fund our research and development
and commercial programs and meet our obligations on a timely basis. If we are unable to successfully raise sufficient additional
capital , we may not have sufficient cash flow and liquidity to fund our business operations, forcing us to delay, discontinue
or prevent product development and clinical trial activities or the approval of any of our potential products or curtail our activities
and, ultimately, potentially cease operations. Even if we are able to raise additional capital, such financings may only be available
on unattractive terms, or could result in significant dilution of stockholders’ interests and, in such event, the value
and potential future market price of our Common Stock may decline. In addition, the incurrence of indebtedness would result in
increased fixed obligations and could result in covenants that would restrict our operations or other financing alternatives.
Recently
Issued Accounting Pronouncements
See
Note 3 – Summary of Significant Accounting Policies of our consolidated financial statements included within this prospectus
for a summary of recently issued and adopted accounting pronouncements.
Critical
Accounting Policies
See
Note 3 – Summary of Significant Accounting Policies of our consolidated financial statements for the year ended December
31, 2018 included within this prospectus for our critical accounting policies.
Off-Balance
Sheet Arrangements
There
are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or
future effect on financial conditions, changes in financial conditions, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to stockholders.