The accompanying footnotes are an integral part of
these unaudited consolidated financial statements.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Note 1. General Organization and Business
GlobeStar Therapeutics Corporation (the “Company”)
was incorporated on April 29, 2016. The Company’s year-end is September 30. On October 4, 2019, the Company filed Articles of Continuance
with the Secretary of State of Wyoming to continue its business in the state of Wyoming. As part of these Articles of Continuance, effective
October 4, 2019, the Company has no limit on the authorized shares of common stock that can be issued. The Company filed its Certificate
of Dissolution with the Secretary of State of Nevada on October 21, 2019 because it is no longer a Nevada corporation.
The Company is developing an expanded platform of
products that include addition of treatment for Multiple Sclerosis and other neurodegenerative diseases. The potential pharmaceutical
products related to treatment for multiple sclerosis are licensed to the Company through the worldwide licensing agreement described in
Note 6.
Note 2. Going Concern and Summary of Significant
Accounting Policies
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. For the six months ended March 31, 2023, the Company had a net loss of
$316,146 and cash flow used in operating activities of $92,889. As of March 31, 2023, the Company had negative working capital of $1,290,670.
Management does not anticipate having positive cash flow from operations in the near future. The Company has minimal revenue. Without
additional capital, the Company will not be able to remain in business.
These factors raise a substantial doubt about the
Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that
may result from the possible inability of the Company to continue as a going concern.
Management has plans to address the Company’s
financial situation as follows:
In the near term, management plans to continue to
focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing
to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will advance
capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding
and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.
In the long term, management believes that the Company’s
projects and initiatives will be successful and will provide cash flow to the Company, which will be used to finance the Company’s
future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company
will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt
or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to
achieve adequate profitability and cash flows from operations to sustain its operations.
Interim Financial Statements
The accompanying unaudited financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and with the instructions to Form 10-Q and Regulation S-X and should be read in conjunction with
the audited financial statements and notes thereto for the year ended September 30, 2022 which are included on our Form 10-K filed
on January 9, 2023. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The
results of operations for the three and six months ended March 31, 2023 are not necessarily indicative of the results to be
expected for the full fiscal year ending September 30, 2023.
Consolidated Financial Statements
The consolidated financial statements of the Company
include the accounts of the Company and its wholly owned subsidiaries, SomaCeuticals, Inc., First Titan Energy, LLC and First Titan Technical,
LLC from the date of their formations or acquisition. Significant intercompany transactions have been eliminated in consolidation.
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Table of Contents
Recently Issued Accounting Pronouncements
We have reviewed the FASB issued Accounting Standards
Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported
and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles
and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position
or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain
standards are under consideration.
Note 3. Convertible Notes Payable
Convertible notes payable consisted of the following
at March 31, 2023 and September 30, 2022:
| |
|
|
|
|
|
|
|
| |
|
March 31,
2023 |
|
September 30,
2022 |
|
| Convertible note dated April 13, 2017 in the original principal amount of $20,000, no stated maturity date, bearing interest at 3% per year, convertible into common stock at a rate of $0.01 per share. |
|
$ |
— |
|
$ |
20,000 |
|
| |
|
|
|
|
|
|
|
| Total current convertible notes payable, net of discount |
|
$ |
— |
|
$ |
20,000 |
|
All principal along with accrued interest is payable
on the maturity date. The notes are convertible into common stock at the option of the holder. The holder of the notes cannot convert
the notes into shares of common stock if that conversion would result in the holder owning more than 4.99% of the outstanding stock of
the Company.
As of March 31, 2023 and September 30, 2022, accrued
interest on convertible notes payable was $222,287.
Conversions to Common Stock
During the six months ended March 31, 2023, the holders of the convertible notes payable elected to convert principal
of $20,000 into 2,000,000 shares of common stock. The conversion was in accordance with the terms of the agreement and no gain or loss was recognized.
Advances
As of March 31, 2023 and September 30, 2022, the
Company had non-interest bearing advances payable to third parties of $59,650. These advances are payable on demand.
Note 4. Related Party Transactions
As of March 31, 2023 and September 30, 2022, the Company owed
$467,981 and $379,126 to officers of the Company for compensation which are recorded as accounts payable related party. Additionally,
the Company received short term, unsecured, non-interest bearing advances from the Company’s CEO totaling $700. As of March 31, 2023, the Company owed $13,100 on these related party advances.
In February 2022, the Company entered into an amended
and restatement employment agreement with Jim Katzaroff, the CEO. Mr. Katzaroff is entitled to an annual salary of $180,000 and a bonus
as determined by the Board of Directors. Mr. Katzaroff may elect to receive payment in shares of stock based on the average of the three
lowest trading prices for the 15 days prior to election of payment in stock. Further, in the event of a change of control of the Company,
Mr. Katzaroff is entitled to a payment equal to 2.99 multiplied by the larger of the total compensation paid to Mr. Katzaroff over the
prior 12-month period or the average compensation paid or payable to the Consultant over the prior three years.
The Company awarded Mr. Katzaroff a total of 35,000,000
common stock options with an exercise price of $0.009 per share, an exercise term of five years. The options vest 50% immediately, and
the remainder on monthly basis over two years. Mr. Katzaroff is also entitled to additional options in the event of the Company issuing
equity or equity equivalents in the future, with him receiving an equal amount of options as those instruments that are issued. The exercise
price of these additional options will be 110% of the price per equity equivalent. The total fair value of these option grants at issuance
was $284,840. During the six months ended March 31, 2023 and 2022, the Company recognized $35,606 and $154,095 of stock-based compensation, related to
outstanding stock options under this agreement, respectively. At March 31, 2023, the Company had $62,308 of unrecognized expense related to options.
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Table of Contents
Additionally, Mr. Katzaroff will earn a fee related
to any strategic transaction, as defined in the agreement, including but not limited to acquisitions, divestitures, partnerships or joint
ventures, of at least 2% for any transactions not introduced by Mr. Katzaroff, or 4% for any introduced by Mr. Katzaroff of up to $20,000,000,
and an additional 0.75% - 3.5% for amounts above that threshold. As of March 31, 2023, no amounts have been earned or paid.
Mr. Katzaroff will also receive an activity fee of
3% of gross revenues related to activities including securing a variety of vendor, sales or advertising relationships, or any new revenue
generating activity. If such activity is a cost saving initiative instead of revenue generating, Mr. Katzaroff will receive 10% of the
cost savings. As of March 31, 2023, no amounts have been earned or paid.
Note 5. Stockholders’ Deficit
Preferred Stock
Series A Preferred Stock –
Our board of directors has designated up to 6,000,000 shares of Series A Preferred Stock. The Series A Preferred Stock has a liquidation
value of $2.00 per share. The initial number issued is 5,000,000 with additional shares to be issued as a dividend not to exceed a total
of 6,000,000 shares. The rank of the Series A is prior to all common and preferred shares. In addition, the Series A Preferred Stock retains
protective provisions to maintain their seniority with respect to liquidation or dissolution. The Series A Preferred Stock holds no voting
rights and earns an 8% per annum dividend, payable in additional shares of Series A Preferred Stock. At March 31, 2023 and September
30, 2022, there were no shares of our Series A Preferred Stock outstanding, respectively.
Series B Preferred Stock –
Our board of directors has designated up to 1,000,000 shares of Series B Preferred Stock. The Series B Preferred Stock has a liquidation
value of $1.00 per share. The holders of the Series B Preferred Stock are entitled to dividends of 8% per year payable quarterly in cash
or in shares of common stock at the option of the Company. The holders of the Series B Preferred Stock have no voting rights. The Series
B Preferred Stock is redeemable at the option of the Company at a price of $1.00 per share. At March 31, 2023 and September 30, 2022,
there were no shares of our Series B Preferred Stock outstanding.
Series C Preferred Stock –
On September 12, 2017, our board of directors designated up to 1,200,000
shares of Series C Preferred Stock with a liquidation value of $0.50
per share. The holders of the Series C Preferred Stock have no voting rights. The Series C Preferred Stock is convertible at the
option of the holder into shares of common stock at a rate of one share of common stock for each share of Series C Preferred Stock. The
Series C Preferred Stock is redeemable at the option of the Company at a price of $0.50 per share. The Series C Preferred Stock has been
canceled, and there are no shares of Series C Preferred Stock outstanding as of March 31, 2023 and September 30, 2022.
Series D Preferred Stock –
On September 21, 2017, our board of directors designated up to 539,988 shares of Series D Preferred Stock with a liquidation value of
$1.00 per share. The holders of the Series D Preferred Stock have no voting rights. The Series D Preferred Stock is convertible at the
option of the holder into shares of common stock at a rate of $0.01 per share of common stock. The Series D Preferred Stock is not redeemable.
At March 31, 2023 and September 30, 2022, there were 509,988 shares of Series D Preferred Stock outstanding.
Series E Preferred Stock –
On August 3, 2015, our board of directors designated 1,000,000 shares of Series E Preferred stock. The Series E Preferred stock is subordinate
to our common stock. It does not receive dividends and does not participate in equity distributions. The Series E Preferred stock retained
2/3 of the voting rights in the Company.
At March 31, 2023 and September 30, 2022, there
were 1,000,000 shares of Series E Preferred stock outstanding. Dividends, when, as and if declared by the Board of Directors, shall be
paid out of funds at the time legally available for such purposes.
Series F Preferred Stock –
On September 21, 2017, our board of directors designated up to 501,975 shares of Series F Preferred Stock with a liquidation value of
$1.00 per share. The holders of the Series F Preferred Stock have no voting rights. The Series F Preferred Stock is convertible at the
option of the holder into shares of common stock at a rate of $0.01 per share of common stock. The Series F Preferred Stock is not redeemable.
At September 30, 2021, 386,975 shares of the Series F Preferred Stock were issued and outstanding. During the year ended September 30,
2022, 257,984 shares of Series F Preferred Stock was converted into 25,798,400 shares of common stock. At March 31, 2023 and September
30, 2022, 128,991 shares of the Series F Preferred Stock were issued and outstanding.
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Table of Contents
Common stock issued for stock payable
In September 2022, the Company received $5,000
of cash as a subscription for 1,515,152
shares of common stock and an equal number of warrants to purchase common stock at an exercise price of $0.01
for one year. In December 2022, the Company received $5,000
of cash as a subscription for an additional 1,515,152
shares of common stock and an equal number of warrants to purchase common stock at an exercise price of $0.01
for one year. The warrants had a fair value of $4,067 based on a Black-Scholes pricing model using the following assumptions: 1) volatility of 176.37%; 2) risk free rate of 4.74%; 3) dividend yield of 0% and 4) expected term of 1 year. In February 2023, the Company received $8,000 of cash and $7,000 of expenses paid on the Company’s behalf as a
subscription for 7,500,000 shares of common stock. The common shares were not yet issued as of March 31, 2023.
Common Stock Warrants
The following table summarizes the stock warrant activity
for the six months ended March 31, 2023:
| |
|
Warrants |
|
Weighted-
Average
Exercise Price
Per Share |
|
| Outstanding, September 30, 2022 |
|
|
71,385,152 |
|
$ |
0.02 |
|
| Granted |
|
|
1,515,152 |
|
|
0.01 |
|
| Exercised |
|
|
— |
|
|
— |
|
| Forfeited |
|
|
— |
|
|
— |
|
| Expired |
|
|
— |
|
|
— |
|
| Outstanding, March 31, 2023 |
|
|
72,900,304 |
|
$ |
0.02 |
|
As of March 31, 2023, the outstanding warrants had
an expected remaining life of 2.45 years and have no aggregate intrinsic value.
Common Stock Options
The Company recognized $35,606 of expense related to the fair value of
options vesting during the six months ended March 31, 2023. At March 31, 2023, the Company had $62,308 of unrecognized expenses
related to options.
The following table summarizes the stock option activity
for the six months ended March 31, 2023:
| |
|
Options |
|
Weighted-
Average
Exercise Price
Per Share |
|
| Outstanding, September 30, 2022 |
|
|
105,000,000 |
|
$ |
0.02 |
|
| Granted |
|
|
— |
|
$ |
— |
|
| Exercised |
|
|
— |
|
$ |
— |
|
| Forfeited |
|
|
— |
|
$ |
— |
|
| Expired |
|
|
— |
|
$ |
— |
|
| Outstanding, March 31, 2023 |
|
|
105,000,000 |
|
$ |
0.02 |
|
As of March 31, 2023, all outstanding options had
an expected remaining life of 1.36 years and have no aggregate intrinsic value.
Note 6. Series G Preferred Stock
On August 11, 2021, our board of directors designated
up to 1,000,000 shares of Series G Preferred Stock with a liquidation value of $1.00 per share. The holders of the Series G Preferred
Stock have no voting rights except on matters related specifically to the Series G Preferred Stock. The Series G Preferred Stock carries
a dividend of 8% of the stated value per share, which is cumulative and payable upon redemption, liquidation or conversion, and increases
to 22% in case of default. The Series G Preferred Stock and accrued dividends are convertible beginning 180 days from issuance at the
option of the holder into shares of common stock at a rate of a conversion price of 75% of the average three lowest trading prices during
the 15 days prior to conversion. The Company will be required to redeem the Series G Preferred Stock upon the earlier of 15 months from
issuance date or upon on event of default as defined in the agreement.
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Table of Contents
Based on the economic characteristics of the Series
G Preferred Stock, the Company determined that the Series G should be accounted for as a liability under ASC 480-10, based on the discounted
conversion price providing an effectively fixed monetary amount that the preferred stock is convertible into.
During the six months ended March 31, 2023, the
Company sold an aggregate of 89,100 shares of Series G Preferred Stock for net cash proceeds of $73,000. The Company recorded a debt discount
of $16,100 for the difference between the cash proceeds and the total amount to be redeemed by the holder of $89,100. The Company amortized
$15,584 of discount related to Series G Preferred Stock for the six months ended March 31, 2023. The dividends on the Series G Preferred
Stock are accrued as interest. The Company recognized $3,262 of interest on the Series G Preferred Stock and had an accrued interest balance
of $1,690 and $3,983 as of March 31, 2023 and September 30, 2022, respectively. During the six months ended March 31, 2023, the
holder of the Series G converted 138,875 shares of Series G and $5,555 of dividends into 56,100,514 shares of common stock. The conversions were in accordance with the terms of the agreement and no gain or loss was recognized.
As of March 31, 2023 and September 30, 2022, 89,100
and 138,875
shares of the Series G Preferred Stock were issued and outstanding, respectively. The balance of the Series G Preferred stock
liability was $76,003
and $126,294,
respectively, net of unamortized discount of $13,097
and $12,581,
respectively.
Note 7. License Agreement
Effective August 23, 2020 the Company’s wholly-owned
subsidiary, SomaCeuticals, Inc. entered into an exclusive global license agreement with 7 to Stand, Inc. for the rights to U.S. patent
10,610,592 issued to Fabrizio de Silvestri, Terni, Italy, as inventor, April 7, 2020 for treatment of Multiple Sclerosis. In consideration
for the license agreement, SomaCeuticals agreed to pay 7 to Stand a royalty of 7.1% of the net sales of any product developed under the
patent on a worldwide basis. Additionally, the Company will issue shares of common stock to 7 to Stand upon completion of the following
milestones:
| ● |
Common shares representing 5% of total number of outstanding common shares of the Company immediately following any change of control of the Company; the Company issued 29,130,167 shares of common stock as a result of the change of control discussed in Note 5. These shares were issued in July 2021. |
| |
|
| ● |
29,130,167 Common shares immediately following the first round of funding under a private offer of equity or debt securities; These shares were issued in July 2021. |
| |
|
| ● |
29,130,167 Common shares immediately following the commencement of clinical trials for Federal Drug Administration clearance of the product; and |
| |
|
| ● |
Common shares representing an adjustment to increase 7 to Stand’s total ownership to 19.99% of total number of outstanding common shares of the Company immediately following FDA clearance of the product for sale. The Company expects to issue 29,130,166 shares of common stock related to this provision if met. |
| |
|
| ● |
$40,000 of royalties to be paid to 7 to Stand annually, on a quarterly basis. The license agreement may be terminated by 7 to Stand if 1) SomaCeuticals does not begin clinical trials within one year of the agreement; 2) if SomaCeuticals terminates the continuation of the clinical trials; or 3) shall not commence marketing the product within reasonable time after obtaining FDA approval. |
The Company paid no royalties and accrued $23,852
of royalties and late fees during the six months ended March 31, 2023. The Company owes $50,102 of royalties and late fees under
this agreement as of March 31, 2023 and $26,250 as of September 30, 2022.
The Company is currently in default of this agreement.
- 13 -
Table of Contents
Note 8. Commitments
In February 2022, the Company entered into a consulting
agreement with Spivak Management, Inc. (the “Consultant”). Under the agreement, the Consultant will provide business strategy
advice and introductions to the Company for a period of five years unless mutually terminated sooner. Concurrently, the Consultant entered
into a stock purchase agreement with the Company to purchase 6,000,000 shares of common stock for $25,000 cash. The purchase and issuance
of the shares was to be completed by June 30, 2022 but has not yet occurred.
The Consultant will be paid a signing bonus of $25,000
upon receipt by the Company of the $25,000 cash under the stock purchase agreement described above. The Consultant will also receive the
larger of $12,500 per month, or 50% of the CEO’s fixed cash compensation under the amended employment agreement described in Note
4. The Consultant may elect to receive this payment in stock.
The Consultant may also receive a bonus in each
calendar year of the agreement equal to the larger of any bonus awarded by the Board of Directors to the Consultant or 50% of the
largest bonus payable by the Company to anyone other than the Consultant. If the agreement is terminated with one year of a change
of control of the Company, the Consultant will be entitled to receive a payment equal to 2.99 times the larger of the total
compensation paid to the Consultant over the prior 12 month period or the average compensation paid or payable to the Consultant
over the prior three years. As of March 31, 2023 and September 30, 2022, the Company owed the consultant $162,500
and $100,000, respectively, included in
accounts payable and accrued liabilities.
Note 9. Subsequent Events
On April 25, 2023, the Company issued 7,261,087 shares of common stock to 7 to Stand to settle the outstanding royalty
balance of $50,102 under the License Agreement.
On May 10, 2023, the Company entered into a Securities Purchase Agreement (the “May 2023 Securities Purchase
Agreement”) with 1800 Diagonal Lending LLC (“1800 Diagonal”). Pursuant to the terms of the May 2023 Securities Purchase
Agreement, the Company agreed to issue a convertible promissory note (the “May 2023 Note”) to 1800 Diagonal in the aggregate
principal amount of $21,300. Effective May 10, 2023, the Company issued the May 2023 Note to 1800 Diagonal consistent with the terms of
the May 2023 Securities Purchase Agreement. The May 2023 Note bears interest at 12%, with an Original Issue Discount of $1,050 and matures
on May 10, 2024. Pursuant to the terms of the May 2023 Note, the outstanding principal and accrued interest on the note shall be convertible
into shares of the Company’s common stock as set forth therein.
- 14 -
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
GlobeStar Therapeutics Corporation (the “Company”)
was incorporated on April 29, 2016. The Company’s year-end is September 30. On October 4, 2019, the Company filed Articles of Continuance
with the Secretary of State of Wyoming to continue its business in the state of Wyoming. As part of these Articles of Continuance, effective
October 4, 2019, the Company has no limit on the authorized shares of common stock that can be issued. The Company filed its Certificate
of Dissolution with the Secretary of State of Nevada on October 21, 2019 because it is no longer a Nevada corporation.
We changed our name to GlobeStar Therapeutics Corporation
on April 27, 2021 to better reflect our expanded platform of products that include addition of treatment for Multiple Sclerosis and other
neurodegenerative diseases.
GlobeStar Therapeutics Corporation, based in Richland
Washington, is a clinical stage Pharmaceutical Company introducing a patented formulation of previously approved drugs for the treatment
of Multiple Sclerosis. GlobeStar Therapeutics owns the exclusive global license from the inventors, who are based in Italy. GlobeStar
Therapeutics is initiating discussions with the FDA on clinical trial design in preparation for FDA submission and approval pathway.
Prior to the Company’s current business plan,
the Company was a wellness company dedicated to bringing innovative, effective and high-quality supplement products to the medical, wellness
and adult-use markets through our marketing subsidiary, SomaCeuticalsTM.
Professional Team
We have adopted a Medical Advisory Board and appointed
medical doctors and medical professionals that have extensive education and hands on experience with pharmaceutical and nutraceutical
solution for prevention and treatment of disease.
Management’s Plan to Attract Capital
In the near term, management will utilize equity and
debt financing to complete assembling the professional and management team to commence the process for clinical trials in compliance with
FDA protocol. plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will
continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance,
however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility
of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s
ability to continue as a going concern.
In the midterm, management will enhance its capital
position with a public offering of equity securities to finance clinical trials and the necessary actions to obtain approval of worldwide
marketing of our MS treatment.
In the long term, marketing the Company’s pharmaceutical
and nutraceutical products will provide the necessary cash flow to support future growth. However, there can be no assurances that the
Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term
viability depends on its ability to obtain adequate sources of capital to support near term and midterm business operations, and the ability
of the Company to achieve adequate profitability and cash flows from operations to support its operations.
Corporate Governance
We have adopted codes and committees for governance
of the corporation that include: (i) audit committee charter, (ii) written acknowledgement of code of ethics for directors and senior
officers, (iii) compensation committee charter, (iv) confidential information policy, iv) corporate governance guidelines, (vi) executive
committee charter, and (vii) nominating committee charter.
Critical Accounting Policies
We prepare our consolidated financial statements in
conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on
historical experience, current trends, and other factors that management believes to be important at the time the consolidated financial
statements are prepared. We regularly review our accounting policies, and how they are applied and disclosed in our consolidated financial
statements.
While we believe that the historical experience, current
trends and other factors considered support the preparation of our consolidated financial statements in conformity with GAAP, actual results
could differ from our estimates and such differences could be material.
- 15 -
Table of Contents
Results of Operations
Three Months Ended
March 31, 2023 Compared to the Three Months Ended March 31, 2022
Revenue. We
had no revenue for the three months ended March 31, 2023 and 2022.
Cost of goods sold.
We had no cost of goods sold for the three months ended March 31, 2023 and 2022.
General and administrative
expense. We recognized general and administrative expense of $142,059 for the three months ended March 31, 2023 compared to $662,310
for the comparable period of 2022. The decrease in general and administrative expense was primarily related decreases in in stock-based
compensation in the three months ended March 31, 2023 related to options issued to an officer and warrants issued to a consultant.
Interest expense.
We recognized interest expense of $8,178 for the three months ended March 31, 2023 compared to $26,248 for the comparable period of 2022,
including amortization of the discount on Series G Preferred Stock liability of $6,241 and $19,664 during the three months ended March
31, 2023 and 2022, respectively.
Net loss. For
the reasons above, we recognized a net loss of $150,237 for the three months ended March 31, 2023 compared to $688,558 for the three months
ended March 31, 2022.
Six Months Ended March
31, 2023 Compared to the Six Months Ended March 31, 2022
Revenue.
We had no revenue for the six months ended March 31, 2023 and 2022.
Cost of goods sold.
We had no cost of goods sold for the six months ended March 31, 2023 and 2022.
General and administrative
expense. We recognized general and administrative expense of $297,300 for the six months ended March 31, 2023 compared to
$828,604 for the comparable period of 2022. The decrease in general and administrative expense was primarily related to stock-based compensation
of $154,095 related to the options issued to the CEO in 2022, $322,266 related to warrants issued to a consultant, decrease in legal fees
of $69,620 and a decrease in royalty expense of $32,399.
Loss on settlement
of liabilities. We recognized $0 and $146,460 loss on the settlement of liabilities during the six months ended March 31,
2023 and 2022. In 2022, the loss was related the issuance of 6,000,0000 shares of common stock and 900,000 warrants for the settlement
of liabilities.
Interest expense.
We recognized interest expense of $18,846 for the six months ended March 31, 2023 compared to $46,335 for the comparable period of 2023.
The decrease was due primarily to the amortization of the discount on convertible notes payable during the current period in the amount
of $15,584 compared to $35,417 during the comparable period of the prior year.
Net loss.
For the reasons above, we recognized a net loss of $316,146 for the six months ended March 31, 2023 compared to $1,021,399 for the six
months ended March 31, 2022.
Liquidity and Capital Resources
At March 31, 2023, we had cash on hand of $176. The
Company has negative working capital of $1,290,670. Net cash used in operating activities for the six months ended March 31, 2023 was
$92,889. Cash on hand is not adequate to fund our operations for less than twelve months. We do not expect to achieve positive cash flow
from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee
that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to the Company. We
have no material commitments for capital expenditures as of March 31, 2023.
During the six months ended March 31, 2023 the net
loss of $316,146 was offset by the following non-cash operating expenses: stock compensation, related parties of $35,606, amortization
of discount of $15,584 resulting in cash flows used in operating activities of $92,889. The Company had cash flows from financing activities
of $86,700, primarily due to $73,000 from the proceeds of sale of Series G Preferred Stock, $13,000 in proceeds from the common stock
subscribed and $700 of related party advances.
- 16 -
Table of Contents
Additional Financing
Additional financing is required to continue operations.
Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of
financing and cannot provide any assurance that such financing will be available.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.