Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion relates to the historical operations and financial statements of Allied Corp. for the nine months ended May 31, 2021 and 2022.
Forward-Looking Statements
The following Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Quarterly Report. The Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Annual Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Risks Factors” in our various filings with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report.
The following discussion highlights the Company’s results of operations and the principal factors that have affected its consolidated financial condition as well as its liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the Company’s consolidated financial condition and results of operations presented herein. The following discussion and analysis are based upon Allied Corp’s unaudited financial statements contained in this Current Report on Form 10-Q, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Overview
Allied Corp. (“Allied” or the “Company”) is a Nevada corporation, based in Kelowna, British Columbia, Canada. Allied is an international medical cannabis production company with a mission to address today’s medical issues by researching, creating and producing targeted cannabinoid health solutions. Allied uses what it considers to be an evidence-informed scientific approach to make this mission possible, through cutting-edge pharmaceutical research and development, innovative plant-based production and unique development of therapeutic products.
References in this periodic report on Form 10-Q to “Allied” or the “Company” may include references to the operations of our subsidiaries AM (Advanced Micro) Biosciences, Inc., Allied Colombia S.A.S., Baleno Ltd., Tactical Relief, LLC, and Allied US Products, LLC. Each of these corporations is a 100% wholly owned subsidiary of Allied and consequentially reports quarterly financials up to a consolidated quarterly submission.
Allied’s focus is on the development of medicinal cannabis and psilocybin products for patients with conditions potentially suitable for treatment therewith. Such conditions include anxiety, insomnia, anorexia, chronic pain, epilepsy, chemotherapy-induced nausea and vomiting, post-traumatic stress disorder (PTSD), Parkinson’s disease, Tourette syndrome, irritable bowel syndrome (IBS) and spasticity associated with multiple sclerosis (MS) and spinal cord injury (SCI)1.
Allied’s objective is to be a company that controls its own international vertically integrated supply chain or CBD, cannabis, and psilocybin products in order to maximize cash flow and profit margins. Our management team believes that having control over our supply chain should enable us to provide a consistent, rolling-harvest supply to the global cannabis community.
Given the average cost of production in North America being approximately $1.00 to $2.00 per gram, we believe our anticipated significantly lower cash cost of cannabis production based on historical production of our operations and other companies growing raw flowers in Columbia afforded by our Colombian production and cultivation should provide us a competitive advantage.
In addition to what we consider our demonstrated ability to cultivate low-cost, high margin cannabis in Colombia primarily for use in proprietary cannabinoid drug and natural health products for international distribution, we have hemp derived CBD natural health products for sale in the United States, have received commercial approval for sale of medical cannabis being produced in Colombia for export to nations other than the United States, and have initiated human clinical phase I trial for our psilocybin-based pharma products ALID 11, ALID 12 and Psilonex™ which are protected under provisional patent and trademarks in the United States.
Effects of COVID-19
In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and the related adverse public health developments have adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. While COVID-19 delayed shipment of some of our products, management has determined that there has been no significant impact to the Company’s operations, however management continues to monitor the situation.
Critical Accounting Policies
Business Presentation
The unaudited condensed consolidated interim financial statements and related notes in this Quarterly Report on Form 10-Q are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and are expressed in United States dollars. The Company’s fiscal year end is August 31.
The unaudited condensed consolidated interim financial statements have been prepared in accordance with US GAAP for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all of the information and footnotes required by US GAAP for complete financial statements. Therefore, the unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended August 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC.
The unaudited condensed consolidated interim financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position at May 31, 2022, and the results of its operations for the three and nine months ended May 31, 2022, and cash flows for the three and nine months ended May 31, 2022. The results of operations for the period ended May 31, 2022 are not necessarily indicative of the results to be expected for future quarters or the full year.
The significant accounting policies followed are:
a) Principles of consolidation
The consolidated financial statements include accounts of Allied Corp. and its majority owned subsidiaries. Subsidiaries are consolidated from the date of acquisition and control and continue to be consolidated until the date that such control ceases. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect these returns through its power over the investee. All intercompany balances, income, expenses, and unrealized gains and losses resulting from intercompany transactions are eliminated on consolidation.
b) Cash and cash equivalents
Cash is comprised of cash on hand, cash held in trust accounts and demand deposits. Cash equivalents are short-term, highly liquid investments with maturities within three months when acquired. The Company did not have any cash equivalents as of May 31, 2022 and August 31, 2021.
c) Property, plant and equipment
Property, plant and equipment are stated at cost. The Company depreciates the cost of property, plant and equipment over their estimated useful lives at the following annual rates and methods:
| Farm facility and equipment | | 1 - 10 years straight-line basis |
| | | |
| Office and computer equipment | | 5 - 10 years straight-line basis |
| | | |
| Land equipment | | 10 years straight-line basis |
d) Inventory
Inventory is comprised of raw materials, supplies, vegetative and flowering plants, dried flower, diluted crude and CBD isolates available for sale, and purchased cannabis products.
Inventory is stated at the lower of cost or net realizable value, determined using weighted average cost. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. At the end of each reporting period, the Company performs an assessment of inventory and records write-downs for excess and obsolete inventories based on the Company’s estimated forecast of product demand, production requirements, market conditions, regulatory environment, and spoilage. Actual inventory losses may differ from management’s estimates and such differences could be material to the Company’s consolidated balance sheets, statements of net loss and comprehensive loss and statements of cash flows.
e) Intangible assets
Intangible assets include licenses which are being amortized over their estimated useful lives of 10 years. The Company’s licenses are amortized over their economic or legal life on a straight-line basis, whichever is shorter. The licenses have been amortized from the date of acquisition.
The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives.
For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value.
f) Long-lived assets
In accordance with ASC 360, Property, Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
g) Foreign currency translation and functional currency conversion
Items included in the consolidated financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entities operate (the “functional currency”).
Prior to September 10, 2019, the Company’s functional currency was the Canadian dollar. Translation gains and losses from the application of the U.S. dollar as the reporting currency during the period that the Canadian dollar was the functional currency are included as part of cumulative currency translation adjustment, which is reported as a component of shareholders’ equity under accumulated other comprehensive loss.
The Company re-assessed its functional currency and determined as at September 10, 2019, its functional currency changed from the Canadian dollar to the U.S. dollar based on management’s analysis of changes in our organization. The change in functional currency was accounted for prospectively from September 10, 2019 and prior period financial statements were not restated for the change in functional currency.
For periods commencing September 10, 2019, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates in effect at the balance sheet date. Opening balances related to non-monetary assets and liabilities are based on prior period translated amounts, and non-monetary assets and non-monetary liabilities incurred after September 10, 2019 are translated at the approximate exchange rate prevailing at the date of the transaction. Revenue and expense transactions are translated at the approximate exchange rate in effect at the time of the transactions. Foreign exchange gains and losses are included in the statement of operations and comprehensive loss as foreign exchange gains.
The Company assessed the functional currency for Allied Colombia to be the Colombian peso. The functional currency for all other subsidiaries is the U.S. dollar.
h) Share issuance costs
Costs directly attributable to the raising of capital are charged against the related share capital. Costs related to shares not yet issued are recorded as deferred share issuance costs. These costs are deferred until the issuance of the shares to which the costs relate, at which time the costs will be charged against the related share capital or charged to operations if the shares are not issued.
i) Research and development costs
Research and development costs are expensed as incurred.
j) Revenue recognition
The Company’s revenue is comprised of sales of cannabis products.
The Company’s revenue-generating activities have a single performance obligation and revenue is recognized at the point in time when control of the product transfers and the Company’s obligations have been fulfilled. This generally occurs when the product is shipped or delivered to the customer, depending upon the method of distribution and shipping terms set forth in the customer contract. Revenue is measured as the amount of consideration the Company expects to receive in exchange for the sale of the Company’s product. Certain of the Company’s customer contracts may provide the customer with a right of return. In certain circumstances the Company may also provide a retrospective price adjustment to a customer. These items give rise to variable consideration, which is recognized as a reduction of the transaction price based upon the expected amounts of the product returns and price adjustments at the time revenue for the corresponding product sale is recognized. The determination of the reduction of the transaction price for variable consideration requires that the Company make certain estimates and assumptions that affect the timing and amounts of revenue recognized.
Sales of products are for cash or otherwise agreed-upon credit terms. The Company’s payment terms vary by location and customer; however, the time period between when revenue is recognized and when payment is due is not significant. The Company estimates and reserves for its bad debt exposure based on its experience with past due accounts and collectability, write-off history, the aging of accounts receivable and an analysis of customer data.
k) Net income (loss) per common share
Net income (loss) per share is calculated in accordance with ASC 260, Earnings per Share. The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding to the extent the effect would not be antidilutive. Dilutive potential common shares are additional common shares assumed to be exercised.
Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding.
l) Income taxes
The Company accounts for income taxes under ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
m) Related party transactions
Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company. The Company discloses related party transactions that are outside of normal compensatory agreements, such as salaries. Related party transactions are measured at the exchange amounts.
n) Significant accounting estimates and judgments
The preparation of the financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Although management uses historical experience and its best knowledge of the amount, events or actions to for the basis for judgments and estimates, actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.
Significant estimates and assumptions included in these financial statements relate to the valuation assumptions related to the estimated useful lives and recoverability of long-lived assets, stock-based compensation, and deferred income tax assets and liabilities. Judgments are required in the assessment of the Company’s ability to continue to as going concern.
o) Financial instruments
ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 825 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The financial instruments consist principally of cash, due from related parties, accounts payable, note payable, and convertible notes payable. The fair value of cash when applicable is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all other financial instruments which are categorized as loans and receivables approximate their current fair values because of their nature and respective relatively short maturity dates or current market rates of interest for similar instruments.
For certain of the Company’s financial instruments, including accounts payable, due from related parties, notes and loans payable, the carrying amounts approximate their fair values due to the short maturities.
The Company does not have any assets or liabilities measured at fair value on a recurring basis presented on the Company’s balance sheet as of May 31, 2022 and August 31, 2021 other than cash.
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions.
p) Leases
The Company determines if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases with terms greater than twelve months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. Unless a lease provides all of the information required to determine the implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. The Company uses the implicit interest rate in the lease when readily determinable.
Our lease terms include all non-cancelable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that we will exercise that option. Leases with terms of twelve months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of an asset or liability.
q) Reverse Acquisitions
Identification of the accounting acquirer
The Company considers factors in ASC 805-10-55-10 through 55-15 in identifying the accounting acquirer. The Company uses the existence of a controlling financial interest to identify the acquirer - the entity that obtains control of the acquiree. Other pertinent facts and circumstances also shall be considered in identifying the acquirer in a business combination effected by exchanging equity interests, including the following: (a) The relative voting rights in the combined entity after the business combination, where the acquirer usually is the combining entity whose owners as a group retain or receive the largest portion of the voting rights in the combined entity taking into consideration the existence of any unusual or special voting arrangements and options, warrants, or convertible securities; (b) the existence of a large minority voting interest in the combined entity if no other owner or organized group of owners has a significant voting interest, and where the acquirer usually is the combining entity whose single owner or organized group of owners holds the largest minority voting interest in the combined entity; (c) the composition of the governing body of the combined entity, where the acquirer usually is the combining entity whose owners have the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity; (d) the composition of the senior management of the combined entity, where the acquirer usually is the combining entity whose former management dominates the management of the combined entity; and (e) the terms of the exchange of equity interests, where the acquirer usually is the combining entity that pays a premium over the pre-combination fair value of the equity interests of the other combining entity or entities, where the acquirer usually is the combining entity whose relative size (measured in, for example, assets, revenues, or earnings) is significantly larger than that of the other combining entity or entities.
Pursuant to ASC Paragraph 805-40-05-2, as one example of a reverse acquisition, a private operating entity may arrange for a public entity to acquire its equity interests in exchange for the equity interests of the public entity. In this situation, the public entity is the legal acquirer because it issued its equity interests, and the private entity is the legal acquiree because its equity interests were acquired. However, application of the guidance in ASC 805-10-55-11 through 55-15 results in identifying: (a) The public entity as the acquiree for accounting purposes (the accounting acquiree); and (b) the private entity as the acquirer for accounting purposes (the accounting acquirer).
Measuring the consideration transferred
Pursuant to ASC 805-40-30-2 and 30-3 in a reverse acquisition, the accounting acquirer usually issues no consideration for the acquiree. Instead, the accounting acquiree usually issues its equity shares to the owners of the accounting acquirer. Accordingly, the acquisition-date fair value of the consideration transferred by the accounting acquirer for its interest in the accounting acquiree is based on the number of equity interests the legal subsidiary would have had to issue to give the owners of the legal parent the same percentage equity interest in the combined entity that results from the reverse acquisition. The fair value of the number of equity interests calculated in that way can be used as the fair value of consideration transferred in exchange for the acquiree. The assets and liabilities of the legal acquiree are measured and recognized in the consolidated financial statements at their pre-combination carrying amounts (see ASC 805-40-45-2(a)).
Presentation of consolidated financial statements post reverse acquisition
Pursuant to ASC 805-40-45-1 and 45-2, consolidated financial statements following a reverse acquisition are issued under the name of the legal parent (accounting acquiree) but described in the notes as a continuation of the financial statements of the legal subsidiary (accounting acquirer), with one adjustment, which is to retroactively adjust the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree. That adjustment is required to reflect the capital of the legal parent (the accounting acquiree). Comparative information presented in those consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent (accounting acquiree). The consolidated financial statements reflect all of the following: (a) The assets and liabilities of the legal subsidiary (the accounting acquirer) recognized and measured at their pre-combination carrying amounts; (b) the assets and liabilities of the legal parent (the accounting acquiree) recognized and measured in accordance with the guidance in Topic 805 "Business Combinations"; (c) the retained earnings and other equity balances of the legal subsidiary (accounting acquirer) before the business combination; (d) the amount recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary (the accounting acquirer) outstanding immediately before the business combination to the fair value of the legal parent (accounting acquiree) determined in accordance with the guidance in this topic applicable to business combinations. However, the equity structure (that is, the number and type of equity interests issued) reflects the equity structure of the legal parent (the accounting acquiree), including the equity interests the legal parent issued to effect the combination.
Accordingly, the equity structure of the legal subsidiary (the accounting acquirer) is restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent (the accounting acquiree) issued in the reverse acquisition; and (e) the non-controlling interest’s proportionate share of the legal subsidiary’s (accounting acquirer’s) pre-combination carrying amounts of retained earnings and other equity interests as discussed in ASC 805-40-25-2 and 805-40-30-3.
Pursuant to ASC 805-40-45-4 and 45-5, in calculating the weighted-average number of common shares outstanding (the denominator of the earnings-per-share (“EPS”) calculation) during the period in which the reverse acquisition occurs: (a) The number of common shares outstanding from the beginning of that period to the acquisition date shall be computed on the basis of the weighted-average number of common shares of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement; and (b) the number of common shares outstanding from the acquisition date to the end of that period shall be the actual number of common shares of the legal acquirer (the accounting acquiree) outstanding during that period.
The basic EPS for each comparative period before the acquisition date presented in the consolidated financial statements following a reverse acquisition shall be calculated by dividing (a) by (b): (a) The income of the legal acquiree attributable to common shareholders in each of those periods; and (b) the legal acquiree’s historical weighted average number of common shares outstanding multiplied by the exchange ratio established in the acquisition agreement.
As a result of the controlling financial interest of the former stockholders of AMBI, for financial statement reporting purposes, the asset acquisition has been treated as a reverse acquisition with AMBI deemed the accounting acquirer and the Company deemed the accounting acquiree under the acquisition method of accounting in accordance with ASC 805-10-55 of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). The reverse acquisition is deemed a capital transaction and the net assets of AMBI (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the acquisition. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of AMBI which are recorded at their historical cost. The equity of the Company is the historical equity of AMBI.
These consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries, AM Biosciences effective from the date of the reverse take—over transaction on September 10, 2019 and Allied Colombia (from the date of acquisition, February 18, 2020). All intercompany balances and transactions have been eliminated upon consolidation.
r) Recent accounting pronouncements
The Company does not expect that recent accounting pronouncements or changes in accounting pronouncements during the nine months ended May 31, 2022, are of significance or potential significance to the Company.
Financial Condition and Results of Operations
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss for the nine months ended May 31, 2022 of $15,038,613, has generated minimal revenue and as at May 31, 2022 has a working capital deficit of $6,462,833. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to raise sufficient financing to acquire or develop a profitable business. Management intends on financing its operations and future development activities largely from the sale of equity securities with some additional funding from other traditional financing sources, including related party loans until such time that funds provided by future planned operations are sufficient to fund working capital requirements.
Results of Operations
Comparison of Unaudited Results for the Three Months Ended May 31, 2022 compared to the Three Months Ended May 31, 2021
Sales and Revenue
For the three-month periods ended May 31, 2022 we had $6,628 in revenue compared to no revenue for the three-month period ended May 31, 2021. We are just at the beginning of sales of our products which we expect to improve during the current fiscal year.
Operating Expenses
Operating expenses for the three-month period ended May 31, 2022 totaled $2,406,658 compared to $2,179,481 for the three month period ended May 31, 2021. Operating expenses for the three-month period ended May 31, 2022 is mainly a result of stock-based compensation (options) of $1,028,835, inventory write-off to net realizable value of $264,865, office and miscellaneous expense of $242,676, professional fees of $316,643, and consulting fees of $262,467. Operating expenses for the three-month period ended May 31, 2021 is mainly a result of stock-based compensation (options) of $430,478, office and miscellaneous expense of $727,565, professional fees of $223,106 and consulting fees of $232,651.
Net Loss
As a result of the changes described above, net loss from operations after income taxes decreased to $2,645,387 during the three months ended May 31, 2022 compared to $2,753,489 during the three-month period ended May 31, 2021.
Comparison of Unaudited Results for the Nine Months Ended May 31, 2022 compared to the Nine Months Ended May 31, 2021
Sales and Revenue
For the nine-month periods ended May 31, 2022 we had $49,184 in revenue compared to $5,260 for the nine-month period ended May 31, 2021. We are just at the beginning of sales of our products which we expect to improve during the current fiscal year.
Operating Expenses
Operating expenses for the nine-month period ended May 31, 2022 totaled $14,598,325 compared to $5,625,633 for the nine-month period ended May 31, 2021. Operating expenses for the nine-month period ended May 31, 2022 is mainly a result of stock-based compensation (bonus shares) of $4,585,425, stock-based compensation (consulting services) of $3,584,392, stock-based compensation (options) of $2,262,773, office and miscellaneous expense of $947,589 and consulting fees of $832,124. Operating expenses for the nine-month period ended May 31, 2021 is mainly a result of stock-based compensation (options) of $1,810,598, office and miscellaneous expense of $1,073,027 and consulting fees of $724,386. The increase in operating expense during the quarter ended May 31, 2022 is principally the result of an increase in stock-based compensation (bonus shares) of $4,585,425 and stock-based compensation (consulting services) of $3,584,392.
Net Loss
As a result of the changes described above, net loss from operations after income taxes increased to $15,038,613 during the nine months ended May 31, 2022 compared to $6,648,787 during the nine-month period ended May 31, 2021.
Liquidity and Capital Resources
The following table sets forth the major components of our statements and consolidated statements of cash flows for the periods presented.
| | Nine Months Ended May 31, 2022 | | | Nine Months Ended May 31, 2021 | |
Cash used in operating activities | | $ | (3,255,262 | ) | | $ | (3,094,232 | ) |
Cash from financing activities | | $ | 4,250,633 | | | $ | 3,803,557 | |
Cash used in investing activities | | $ | (1,232,051 | ) | | $ | (77,606 | ) |
Change in cash during the period | | $ | (236,680 | ) | | $ | 631,719 | |
Effect of exchange rate change | | $ | (102,451 | ) | | $ | 96,820 | |
Cash, beginning of period | | $ | 419,825 | | | $ | 94,047 | |
Cash, end of period | | $ | 80,694 | | | $ | 822,586 | |
As of May 31, 2022, the Company had $349,809 in current assets, consisting of $80,694 in cash, $229,675 in inventory, $14,495 in receivables, and $24,945 in prepaid expenses. Other assets mainly include deposits and advances of $2,830,542 (principally related to our building to be located in Nevada), property, plant and equipment of $1,654,345, right-of-use assets of $229,290 and intangible assets of $50,444.
To date, the Company has financed its operations through equity sales and through the sale of convertible notes as reflected below.
On May 17, 2021 the Company commenced a private placement pursuant to Rule 506(c) promulgated under Regulation D of the Securities Exchange Act of 1934, as amended. The private placement terminated on November 5, 2021. The private placement sought to raise $5,250,000 through the sale of Units at $0.75 per Unit, each consisting of one share of common stock and one warrant to purchase one share of common stock for two years at an exercise price of $1.25 per share. Boustead Securities LLC acted as the exclusive Placement Agent for this offering on a best efforts basis. Boustead received compensation in cash of 10 percent of the proceeds from such Offering up to $1,000,000 and 7 percent of the proceeds from such Offering thereafter. We obtained $3,178,572 in gross proceeds from this offering.
In February 2022, the Company completed a private placement pursuant to Rule 506(c) promulgated under Regulation D. of the Securities Exchange Act of 1934, as amended. Pursuant to this private placement, the Company obtained $127,000 in gross proceeds from this offering and issued 141,601 shares of common stock and 141,601 warrants to purchase one share of common stock for two years at an exercise price of $1.25 per share.
From February 10, 2022 through March 31, 2022, the Company completed a private placement pursuant to Rule 506(c) promulgated under Regulation D. of the Securities Exchange Act of 1934, as amended. Pursuant to this private placement, the Company obtained $970,000 in gross proceeds from this offering and issued 776,000 shares of common stock and 776,000 warrants to purchase one share of common stock for two years at an exercise price of $1.25 per share.
Convertible Notes during the Quarter ended May 31, 2021
The Company has granted each and every one of the secured convertible note holders referenced below a continuing security interest in, a general lien upon, and a right of setoff against all existing and future assets and property under the terms of a security agreement.
On September 29, 2020, the Company issued a convertible note with a fair value of $163,341 and warrants to purchase 130,673 shares of the Company’s common stock at $1.25 per share for 2 years. The note bears interest at 10% per annum. The note was due on demand after March 27, 2021. The note was convertible into shares of the Company’s common stock at any time prior to March 27, 2021 at a conversion price of $1.25 per share. On March 31, 2021, the Company amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2021. In consideration for extending the maturity date, the Company issued to the convertible note holder 8,268 common shares of the Company. On June 1, 2021, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and was due on demand on or before November 30, 2021 for no additional consideration. On November 1, 2021, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before March 31, 2022 for no additional consideration. On March 31, 2022, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
On October 26, 2020, the Company issued a convertible note with a face value of $37,613 and warrants to purchase 30,090 shares of the Company’s common stock at $1.25 per share for 2 years. The note bears interest at 10% per annum. The note was due on demand after April 23, 2021. The note was convertible into shares of the Company’s common stock at any time prior to April 23, 2021 at a conversion price of $1.25 per share. On June 1, 2021, the Company amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and was due on demand on or before November 30, 2021 for no additional consideration. On November 1, 2021, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before March 31, 2022 for no additional consideration. On March 31, 2022, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
On November 11, 2020, the Company issued a convertible note with a face value of $85,937 and warrants to purchase 68,750 shares of the Company’s common stock at $1.25 per share for 2 years. The note bears interest at 10% per annum and is due on demand after May 9, 2021. The note was convertible into shares of the Company’s common stock at any time prior to April 23, 2021 at a conversion price of $1.25 per share. On June 1, 2021, the Company amended the note. Pursuant to the amendment, the notes bears simple interest at 10% per annum and was due on demand on or before November 30, 2021 for no additional consideration. On November 1, 2021, the Company again amended the note. Pursuant to the amendment, the convertible notes bear simple interest at 10% per annum and is due on demand on or before March 31, 2022 for no additional consideration. On March 31, 2022, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
On December 2, 2020, the Company issued a convertible note with a face value of $600,000 and warrants to purchase 240,000 shares of the Company’s common stock at $1.25 per share for 2 years. The note bears interest at 10% per annum and is due on demand after November 27, 2021. The note is convertible into shares of the Company’s common stock at any time prior to November 27, 2021 at a conversion price of $1.25 per share. On October 1, 2021, the Company amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before March 31, 2022 for no additional consideration. On March 31, 2022, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
On January 7, 2021, the Company issued a convertible note with a face value of $300,000. The note bears interest at 10% per annum and is due on demand after November 27, 2021. The note is convertible into shares of the Company’s common stock at any time prior to November 27, 2021 at a conversion price of $1.25 per share. On October 1, 2021, the Company amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before March 31, 2022 for no additional consideration. On March 31, 2022, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
On March 26, 2021, the Company issued a convertible note with a face value of $18,000 and warrants to purchase 18,000 shares of the Company’s common stock at $0.50 per share for one year. The Note bears interest at 10% per annum and is due on demand on September 26, 2021. The Note is convertible into shares of the Company’s common stock at any time at a conversion price of $1.25 per share. On November 1, 2021, the Company amended the note. Pursuant to the amendment, the convertible notes bear simple interest at 10% per annum and is due on demand on or before March 31, 2022 for no additional consideration. On March 31, 2022, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
On March 26, 2021, the Company issued a convertible note with a face value of $100,000 and warrants to purchase 100,000 shares of the Company’s common stock at $0.50 per share for one year. The Note bears interest at 10% per annum and is due on demand on September 26, 2021.The Note is convertible into shares of the Company’s common stock at any time at a conversion price of $1.25 per share. On November 1, 2021, the Company amended the note. Pursuant to the amendment, the convertible notes bear simple interest at 10% per annum and is due on demand on or before March 31, 2022 for no additional consideration. On March 31, 2022, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
On April 29, 2021, the Company issued a convertible note with a face value of $180,000 and warrants to purchase 180,000 shares of the Company’s common stock at $1.00 per share for one year. The Note bears interest at 10% per annum and is due on demand on October 29, 2021.The Note is convertible into shares of the Company’s common stock at any time at a conversion price of $1.00 per share. On November 1, 2021, the Company amended the note. Pursuant to the amendment, the convertible notes bear simple interest at 10% per annum and is due on demand on or before March 31, 2022 for no additional consideration. On March 31, 2022, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
On April 30, 2021, the Company issued a convertible note with a face value of $100,000 and warrants to purchase 100,000 shares of the Company’s common stock at $1.00 per share for one year. The Note bears interest at 10% per annum and is due on demand on October 31, 2021.The Note is convertible into shares of the Company’s common stock at any time at a conversion price of $1.00 per share. On November 1, 2021, the Company amended the note. Pursuant to the amendment, the convertible notes bear simple interest at 10% per annum and is due on demand on or before March 31, 2022 for no additional consideration. On March 31, 2022, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
Convertible Notes during the Quarter ended May 31, 2022
On October 1, 2021, the Company issued a convertible note with a face value of $100,000 and warrants to purchase 100,000 shares of the Company’s common stock at $1.25 per share for 1 year. The note bears interest at 10% per annum and is due on demand after March 31, 2022. The note is convertible into shares of the Company’s common stock at any time prior to March 31, 2022 at a conversion price of $1.25 per share. On November 1, 2021, the Company amended the note. Pursuant to the amendment, the convertible notes bear simple interest at 10% per annum and is due on demand on or before March 31, 2022 for no additional consideration. On March 31, 2022, the Company again amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
On October 25, 2021, the Company issued a convertible note with a face value of $100,000 and warrants to purchase 100,000 shares of the Company’s common stock at $1.25 per share for 1 year. The note bears interest at 10% per annum and is due on demand after March 31, 2022. The note is convertible into shares of the Company’s common stock at any time prior to March 31, 2022 at a conversion price of $1.25 per share. On March 31, 2022, the Company amended the note. Pursuant to the amendment, the note bears simple interest at 10% per annum and is due on demand on or before September 30, 2022 for no additional consideration.
On December 23, 2021, the Company issued two convertible notes with a face value of $100,000 each. The notes bears interest at 10% per annum and is due on demand after June 23, 2022. The note is convertible into shares of the Company’s common stock at any time prior to June 23, 2022 at a conversion price of $1.25 per share.
On January 11, 2022, the Company issued a convertible note with a face value of $150,000. The note bears interest at 10% per annum and is due on demand after July 10, 2022. The note is convertible into shares of the Company’s common stock at any time prior to July 10, 2022 at a conversion price of $1.25 per share.
On January 31, 2022, the Company issued a convertible note with a face value of $100,000. The note bears interest at 10% per annum and is due on demand after July 31, 2022. The note is convertible into shares of the Company’s common stock at any time prior to July 31, 2022 at a conversion price of $1.25 per share.
On March 29, 2022, the Company issued a convertible note with a face value of $500,000. The note bears interest at 10% per annum and is due on demand after September 30, 2022. The note is convertible into shares of the Company’s common stock at any time prior to September 30, 2022 at a conversion price of $1.25 per share.
Equity Transactions during the Quarter ended May 31, 2021
On September 21, 2020, the Company issued 80,000 shares of common stock at $1.25 per share for gross cash proceeds of $100,000.
On September 30, 2020, the Company issued 120,000 shares of common stock at $1.25 per share for gross cash proceeds of $150,000.
On March 1, 2021, the Company re-issued 100,000 common shares from treasury with fair value of $90,000 for the promissory note of $300,000.
On March 5, 2021, the Company re-issued 200,000 shares of common stock with fair value of $160,000 from treasury for acquisition of Pacific Sun Fungi Inc.
On March 17, 2021, the Company issued 500,000 shares of common stock at $0.50 per share for gross proceeds of $250,000.
On March 17, 2021, the Company issued 86,044 shares of common stock with a fair value of $70,164 to settle $87,483 of accounts payable, which resulted in a gain on settlement of debt of $17,319.
On March 22, 2021, the Company issued 25,000 shares of common stock with a fair value of $22,500 to settle $25,000 of accounts payable, which resulted in a gain on settlement of debt of $2,500.
On April 7, 2021, the Company issued 100,000 shares of common stock at $0.50 per share for gross proceeds of $50,000.
On April 20, 2021, the Company issued 250,000 shares of common stock at $0.50 per share for gross proceeds of $125,000.
On May 7, 2021, the Company issued 50,000 shares of common stock at $0.50 per share for gross proceeds of $25,000.
On May 12, 2021, the Company issued 31,746 shares of common stock with a fair value of $31,746 to settle $31,746 of accounts payable, which resulted in a gain on settlement of debt of $nil.
On May 13, 2021, the Company received 1,200,000 shares of common stock from the counterparties of certain previous cancelled asset acquisitions for no consideration. The shares were cancelled upon being returned to treasury.
On May 14, 2021, the Company issued 200,000 shares of common stock at $0.50 per share for gross proceeds of $100,000.
On May 14, 2021, the Company issued 300,001 shares of common stock at $0.75 per share for gross proceeds of $225,000.
On May 17, 2021, the Company issued 800 shares of common stock as a finder’s fee.
On May 27, 2021, the Company issued 136,000 shares of common stock with a fair value of $149,952 in connection with modifications of a convertible note payable.
Equity Transactions during the Quarter ended May 31, 2022
On September 2, 2021, the Company issued 2,175,933 common shares at fair value of $ 2,447,925 on issuance date from treasury to the CFO and COO and 1,900,000 common shares at fair value of $2,137,500 to certain employees of the Company as bonuses for past services, which is expensed as a total of $4,585,425 for stock-based compensation – bonus shares.
On September 2, 2021, the Company issued 2,997,237 common shares measured at fair value on issuance date of $3,371,892 from treasury for consulting services related to business development for a 12-month period from the issuance date. As the future benefit of the consulting services to be performed cannot be determined, the entire amount was expensed during the nine months ended May 31, 2022. The total $3,584,392 stock-based compensation – consulting services is comprised of this $3,371,892 share issuance plus the $212,500 described in the next paragraph below.
During the year ended August 31, 2021, the Company re-issued 750,000 shares of common stock with total fair value of $637,500 for consulting services, out of which, $425,000 was expensed as consulting fees during the prior year and $212,500 was expensed during the nine months ended May 31, 2022.
On October 20, 2021, the Company issued 3,853,121 units at $0.75 per unit for proceeds of $2,889,841, of which $865,467 was received during the year ended August 31, 2021. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. In connection with the financing, the Company incurred brokerage commission fees and other share issuance costs of $210,736.
On November 5, 2021, the Company issued 705,000 units at $0.75 per unit for proceeds of $528,750. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. In connection with the financing, the Company issued 8,000 shares of common stock with a fair value of $6,000 as a finder’s fee and incurred other finders’ fees and other share issuance costs of $42,654.
On November 30, 2021, the Company issued 8,268 shares as consideration for extending the maturity date of a convertible note.
On January 20, 2022, the Company issued 75,000 units at $0.75 per unit for proceeds of $56,250 which was received during the year ended August 31, 2021. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years.
On January 20, 2022, the Company issued 46,834 units at $0.75 per unit for proceeds of $35,126 which was received during the period ended November 30, 2021. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. The Company adjusted the effective issuance date to October 20, 2021.
On January 24, 2022, the Company issued 36,000 units at $0.75 per unit for proceeds of $27,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. The Company adjusted the effective issuance date to October 20, 2021. The Company adjusted the effective issuance date to November 24, 2021.
On January 28, 2022, the Company issued 66,667 units at $0.75 per unit for proceeds of $50,000 which was received during the period ended November 30, 2021. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years.
On February 7, 2022, the Company issued 66,667 units at $0.75 per unit for proceeds of $50,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years.
On February 10, 2022, the Company issued 33,334 units at $0.75 per unit for proceeds of $25,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years.
On February 10, 2022, the Company issued 80,000 units at $1.25 per unit for proceeds of $100,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. In connection with the financing, the Company incurred finder’s fee of $8,000.
On February 20, 2022, the Company issued 40,000 units at $1.25 per unit for proceeds of $50,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. In connection with the financing, the Company incurred finder’s fee of $4,000.
On February 21, 2022, the Company issued 300,000 units at $1.25 per unit for proceeds of $375,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. In connection with the financing, the Company incurred finder’s fee of $30,000.
On February 22, 2022, the Company issued 80,000 units at $1.25 per unit for proceeds of $100,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. In connection with the financing, the Company incurred finder’s fee of $8,000.
On February 24, 2022, the Company issued 41,600 units at $0.75 per unit for proceeds of $31,200. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years.
On February 24, 2022, the Company issued 40,000 units at $1.25 per unit for proceeds of $50,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. In connection with the financing, the Company incurred finder’s fee of $4,000.
On February 25, 2022, the Company issued 96,000 units at $1.25 per unit for proceeds of $120,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. In connection with the financing, the Company incurred finder’s fee of $9,600.
On February 28, 2022, the Company issued 120,000 units at $1.25 per unit for proceeds of $150,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. In connection with the financing, the Company incurred finder’s fee of $12,000.
On May 26, 2022, the Company issued 161,066 units at $0.75 per unit for proceeds of $120,800. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years. In connection with the financing, the Company incurred finder’s fee of $2,000.
On May 26, 2022, the Company issued 40,000 units at $1.25 per unit for proceeds of $50,000. Each unit consists of one common share of the Company and one warrant to purchase the Company’s one common shares at $1.25 for a period of two years.
During the nine months ended May 31, 2022, the Company issued 728,001 common shares to certain investors for no consideration by error. The Company is in the process of retracting the shares.
At May 31, 2022, the Company had received $25,000 in cash for share subscriptions.
Future Financing
In connection with its proposed business plan and currently ongoing and proposed acquisitions, in addition to the possible proceeds from this offering the Company will be required to complete substantial and significant additional capital formation. Such formation could be through additional equity offerings, debt, bank financings or a combination of any source of financing. There can be no assurance that the Company will be successful in completion of such financings.
Plan of Operations
As noted above, the continuation of our current plan of operations requires us to raise significant additional capital. If we are successful in raising capital through the sale of convertible notes or common shares, we believe that we will have sufficient cash resources to fund our plan of operations through 2022. If we are unable to do so, we may have to curtail and possibly cease some operations. We intend to use the net proceeds from the offering for operating capacity in Colombia, Canada and the United States, regulatory compliance, intellectual property, working capital and general corporate purposes.
We continually evaluate our plan of operations to determine the manner in which we can most effectively utilize our limited cash resources. The timing of completion of any aspect of our plan of operations is highly dependent upon the availability of cash to implement that aspect of the plan and other factors beyond our control. There is no assurance that we will successfully obtain the required capital or revenues, or, if obtained, that the amounts will be sufficient to fund our ongoing operations.
Capital Expenditures
As of May 31, 2022, the Company had purchased property plant and equipment of $1,219,940 and intangible assets of $12,111. As of August 31, 2021, the Company purchased property plant and equipment of $267,835 and paid net cash of $3,156,163 in deposits and advances for an asset acquisition.
Xtreme Cubes Building
In June 2019, AM Biosciences signed the production and manufacturing contract to begin the manufacturing of a building for an extraction and production facility. This building will be a fully scalable, modular building. The Company made an upfront payment of $230,000 USD in June 2019, an additional payment of $903,385 in August 2019 and an additional payment of $92,000 in March 2020. At May 31, 2022, Company had deposits of $2,656,695 to purchase prefabricated buildings. As of May 31, 2022, the Company had not yet received the building and the amounts have been recorded as deposits.
Commitments and Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Going Concern
As reflected in the accompanying financial statements, the Company had an accumulated deficit of $34,432,425 at May 31, 2022 and a net loss of $15,038,613 for the nine months ended May 31, 2022.
The Company does not yet have a history of financial stability. Historically, the principal source of liquidity has been the issuance of convertible notes and equity securities. In addition, the Company has generated no revenues since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue operations is dependent on the success of Management’s plans, which include the raising of capital through the issuance of equity securities, until such time that funds provided by operations are sufficient to fund working capital requirements.
The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash will be sufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.