UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
FORM 10-Q/A
Amendment No. 1
(Mark One)
|
|
| |
|
|
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to ___________________ to ________
Commission File Number Number: 000-52886
EASTGATE BIOTECH CORP.
(Exact name of registrant as specified in its charter)
| |
|
Nevada | 87-0639378 | |
(State or other jurisdiction of incorporation |
| (I.R.S. Employer Identification No.) |
2203-65 Harbour Square, | Toronto, Ontario, | Canada M5J 2L4
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (647) 692-0652647-692-0652
_______________________________________________________________
(Registrant’s telephone number, including area code)
Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o [ ] No x[ X ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 1Yes x [ X ] No o[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| Accelerated filer |
| |
Non-accelerated filer |
| Smaller reporting company |
| |
| Emerging growth company | [ ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o [ ] No x
APPLICABLE ONLY TO CORPORATE ISSUERS[X]
Indicate the number of shares outstanding of each of the issuer’sissuer’s classes of common equity,stock, as of the latest practicable date.date: 2,057,545,708 as of February 12, 2019.
EASTGATE BIOTECH CORP.
| ||||
| ||||
|
|
|
EXPLANATORY NOTE
We are filing this Amendment No. 1 on Form 10-Q/A to amend and restate in their entirety the following items of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 as originally filed with the Securities and Exchange Commission on February 27, 2017 (the “Original Form 10-Q”): (i) Item 1 of Part I “Financial Information,” (ii) Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” (iii) Item 4 of Part I, “Controls and Procedures,” and (iv) Item 6 of Part II, “Exhibits”, and we have also updated the signature page, the certifications of our Chief Executive Officer and President, treasurer and coporate secretaryin Exhibits 31.1, 31.2, 32.1 and 32.2, and our financial statements formatted in Extensible Business Reporting Language (XBRL) in Exhibits 101. No other sections were affected, but for the convenience of the reader, this report on Form 10-Q/A restates in its entirety, as amended, our Original Form 10-Q. This report on Form 10-Q/A is presented as of the filing date of the Original Form 10-Q and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the restatement described below.
On or about May 3, 2017, the Board of Directors, upon the recommendation of the Company’s management and after discussions with our then current independent registered public accounting firm, Sadler, Gibb & Associates, LLC (“Sadler”), concluded that the quarterly financial statements for the periods ended March 31, 2016, June 30, 2016 and September 30, 2016 (collectively, the “Non-Reliance Periods”) as previously issued should no longer be relied upon (the “Non-Reliance Determination”).
The Company made the Non-Reliance Determination because the quarterly financial statements had been filed without Sadler;s review. Our quarterly financial statements have been restated to correct errors in the Original 10-Q. We have made necessary conforming changes in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” resulting from the correction of such errors in the Original 10-Q
Page | |||||
| FINANCIAL INFORMATION |
| |||
ITEM 1 | Financial Statements | ||||
Consolidated balance sheets as of September 30, 2017, and December 31, 2016 (unaudited) | 3 | ||||
Consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016 (unaudited) | 4 | ||||
Consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 (unaudited) | 5 | ||||
Notes to consolidated financial statements (unaudited) | 7-12 | ||||
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |||
13-18 | |||||
Quantitative and Qualitative Disclosures | 18 | ||||
ITEM 4. | Controls and Procedures | 18-19 | |||
|
|
| |||
ITEM 1. | |||||
19 | |||||
ITEM 1A. | |||||
19 | |||||
ITEM 2. | |||||
18 | |||||
ITEM 3. | Defaults Upon Senior Securities | 18 | |||
ITEM 4. | Mine Safety Disclosures | 18 | |||
ITEM 5. | Other Information | 18 | |||
ITEM 6. | Exhibits | 18 | |||
SIGNATURES | 19 | ||||
| |||||
| |||||
| |||||
| |||||
|
PART I —1 - FINANCIAL INFORMATION
Item 1.Financial StatementsStatements.
Forward Looking Statements
The accompanyingThis quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:
·
the uncertainty that we will not be able to successfully execute our business plan;
·
risks related to the large number of established and well-financed entities that are actively seeking suitable business opportunities;
·
risks related to the failure to successfully manage or achieve growth of a new business opportunity; and
·
other risks and uncertainties related to our business strategy.
This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully, and readers should not place undue reliance on our forward-looking statements.
Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited balance sheet of Eastgate Biotech Corp. at June 30, 2016, related unauditedconsolidated financial statements of operationsare stated in United States dollars (US$) and cash flows for the periods ended June 30, 2016 and 2015 have beenare prepared by management in conformityaccordance with United States generally accepted accounting principles.Generally Accepted Accounting Principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2015 audited financial statements.included. Operating results for the interim period ended JuneSeptember 30, 2016,2017, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2016 or any other subsequent period.full year.
As used in this quarterly report, the terms “we”, “us”, “our”, “our company” and “Eastgate” mean Eastgate Biotech, Corp., a Nevada corporation, and its’ wholly-owned subsidiary, Eastgate Pharmaceuticals, Inc., a Canadian corporation.
EASTGATE BIOTECH CORP. CONDENSED CONSOLIDATED BALANCE SHEETS June 30 December 31, 2016 2015 ASSETS Current Cash Deposits Sales tax recoverable Total current assets Other assets Property & Equipment, net Total other assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities Accounts payable and accrued liabilities Deferred revenue Accrued liabilities related party Deferred rent Capital lease obligation Accrued interest - related parties Notes payable - related parties Total current liabilities Long term liabilities Capital lease obligation long term Total Liabilities Commitments and Contingencies Stockholders' deficit Authorized: Preferred stock:50,000,000 shares authorized at $0.00001 par value no shares issued at June 30, 2016 and December 31, 2015 Common stock: 450,000,000 shares authorized at $0.00001 par value 306,272,175 and 282,872,175 shares issued and outstanding at June 30, 2016 and December 31, 2015 respectively Additional paid-in capital Accumulated other comprehensive income Deficit accumulated Total stockholders' deficit Total liabilities and stockholders' deficit $ 72,543 $ 19,241 14,595 - 79,681 72,543 113,517 - 184,402 - 184,402 $ 72,543 $ 297,919 $ 285,346 $ 361,094 94,166 23,847 1,484,349 732,125 1,430 2,064 8,453 8,130 359,121 292,769 1,468,262 1,308,585 3,701,127 2,728,614 48,091 50,386 3,749,218 2,779,000 - - - - 3,063 2,829 9,891,010 9,137,764 17,706 31,846 (13,588,454 ) (11,653,520 ) (3,676,675 ) (2,481,081 ) $ 72,543 $ 297,919
3
EASTGATE BIOTECH CORP. & SUBSIDIARY | |||
CONSOLIDATED BALANCE SHEETS | |||
(Unaudited) | |||
| September 30, 2017 |
| December 31, 2016 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash | $ 4,911 |
| $ - |
Accounts receivable other | 28,735 |
| - |
Prepaid expenses - current | 21,680 |
| - |
Inventory | 112,944 |
| - |
Total current assets | 168,270 |
| - |
|
|
|
|
Fixed and intangible assets: |
|
|
|
Furniture and fixtures | 9,152 |
| - |
Leasehold improvements | 65,595 |
| - |
Medical and surgical equipment | 768,239 |
| - |
Website | 8,849 |
| - |
Total fixed and intangible assets | 851,835 |
| - |
Accumulated amortization and depreciation | (150,020) |
| - |
Fixed and intangible assets, net | 701,814 |
| - |
|
|
|
|
Other assets: |
|
|
|
Investment in subsidiaries | 800,000 |
| - |
Total other assets | 800,000 |
| - |
|
|
|
|
Total assets | $ 1,670,084 |
| $ - |
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT |
|
|
|
Current liabilities: |
|
|
|
Bank overdraft | $ - |
| $ 32,787 |
Accounts payable and accrued expenses | 653,783 |
| 279,688 |
Accrued interest | 52,308 |
| - |
Accrued liabilities related party | 2,524,253 |
| 2,095,891 |
Deferred revenue | - |
| 92,516 |
Deferred rent | 96,014 |
| 627 |
Capital lease obligation | 376,564 |
| 10,368 |
Notes payable | 318,192 |
| - |
Accrued interest - related party | 556,089 |
| 432,943 |
Notes payable - related party | 2,383,798 |
| 1,633,222 |
Total current liabilities | 6,961,001 |
| 4,578,042 |
|
|
|
|
Long-term liabilities: |
|
|
|
Capital lease obligation | - |
| 40,024 |
Total long-term liabilities | - |
| 40,024 |
|
|
|
|
Total liabilities | 6,961,001 |
| 4,618,066 |
|
|
|
|
Commitments and contingencies | - |
| - |
|
|
|
|
Stockholders’ deficit |
|
|
|
Preferred A stock - $0.00001 par value; authorized - 50,000,000 shares; shares issued and outstanding -0- and -0-, respectively. | - |
| - |
Common Stock - $0.00001 par value; 10,000,000,000 shares authorize; shares issued and outstanding 1,136,695,708 and 309,522,175, respectively. | 11,320 |
| 3,096 |
Additional paid-in capital | 13,218,261 |
| 9,970,127 |
Other comprehensive income | (121,180) |
| 39,702 |
Accumulated deficit | (18,399,319) |
| (14,630,991) |
Total stockholders' deficit | (5,290,917) |
| (4,618,066) |
|
|
|
|
Total liabilities and stockholders' deficit | $ 1,670,084 |
| $ - |
See accompanying notes to the financial statements | |||
F-1 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
EASTGATE BIOTECH CORP. & SUBSIDIARY | |||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | |||||||
(Unaudited) | |||||||
|
|
|
|
|
|
|
|
| For the three months ended |
| For the nine months ended | ||||
| September 30, 2017 |
| September 30, 2016 |
| September 30, 2017 |
| September 30, 2016 |
Revenues | $ 23,138 | $ - |
| $ 137,638 | $ - | ||
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
|
|
|
|
|
Cost of goods and services | 92,349 |
| - |
| 149,275 |
| - |
|
|
|
|
|
|
|
|
Gross profit | (69,212) |
| - |
| (11,638) |
| - |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Professional fees | 70,176 |
| 19,886 |
| 152,216 |
| 24,191 |
Research and development | (12,046) |
| 115,610 |
| 258,384 |
| 381,124 |
General and administrative | 1,518,182 |
| 234,072 |
| 2,472,700 |
| 1,498,107 |
Marketing and selling | 75,859 |
| 63,954 |
| 213,600 |
| 203,894 |
Loss from Impairment of Assets | 25,247 |
| - |
| - |
| 184,402 |
Gain on extinguishment of debt | (55,759) |
| - |
| (55,759) |
| - |
Total operating expenses | 1,621,660 |
| 433,522 |
| 3,041,142 |
| 2,291,718 |
|
|
|
|
|
|
|
|
Loss from operations | (1,690,872) |
| (433,522) |
| (3,052,780) |
| (2,291,718) |
|
|
|
|
|
|
|
|
Other Income / (Expense): |
|
|
|
|
|
|
|
Interest expense | 57,985 |
| (39,778) |
| (196,547) |
| (116,516) |
Total other income / (expense) | 57,985 |
| (39,778) |
| (196,547) |
| (116,516) |
|
|
|
|
|
|
|
|
Net loss applicable to common stock holders | $ (1,632,887) | $ (473,300) | $ (3,249,327) |
| $ (2,408,234) | ||
|
|
|
|
|
|
|
|
Per share data |
|
|
| ||||
Net Loss per share - basic and diluted | $ (0.00) |
| $ (0.002) |
| $ (0.01) |
| $ (0.01) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding - basic and diluted | 1,111,741,360 |
| 306,272,175 |
| 641,858,541 |
| 303,779,292 |
|
|
|
|
|
|
|
|
Net Loss | (1,632,887) |
| (473,300) |
| (3,249,327) |
| (2,408,234) |
Other Comprehensive Gain (Loss) - foreign currency translation | (172,021) |
| 4,614 |
| (160,882) |
| (9,527) |
Comprehensive Loss | (1,804,907) |
| (468,686) |
| (3,410,208) |
| (2,417,761) |
|
|
|
|
|
|
|
|
See accompanying notes to the financial statements | |||||||
F-2 |
EASTGATE BIOTECH CORP. & SUBSIDIARY | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(Unaudited) | |||
| For the nine months ended | ||
| September 30, 2017 |
| September 30, 2016 |
Cash flows from operating activities: |
|
|
|
Net loss | $ (3,249,327) |
| $ (2,408,234) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
Expenses paid on the Company's behalf by related party | - |
| 3,145 |
Common stock issued for services | 67,570 |
| 753,480 |
Stock based compensation | 361,000 |
| - |
Amortization and depreciation | 73,695 |
| - |
Loss from impairment of assets | - |
| 184,402 |
Changes in operating asset and liability account balances: |
|
|
|
Accounts receivable | 45,651 |
| - |
Accounts receivable - other | 219,508 |
| - |
Accrued liabilities related party | - |
| 1,089,378 |
Reserve for recoverable taxes | - |
| 67,726 |
Deferred rent | - |
| (1,038) |
Deferred revenue | 2,871 |
| 70,699 |
Inventory | (21,635) |
| - |
Prepaid asset | 8,474 |
| 14,595 |
Accrued interest | 175,454 |
| 102,513 |
Accounts payable and accrued expenses | 733,692 |
| (92,173) |
Total adjustments | 1,666,280 |
| 2,192,726 |
|
|
|
|
Net cash used in operating activities | (1,583,047) |
| (215,508) |
|
|
|
|
Cash flows from investing activities |
|
|
|
Purchase of equipment | (51,684) |
| - |
Net cash used in investing activities | (51,684) |
| - |
|
|
|
|
Cash flows from financing activities: |
|
|
|
Payment of capital lease obligation | (85,948) |
| (8,995) |
Proceeds from related party notes payable | 1,214,930 |
| 198,087 |
Proceeds from notes payable | 430,928 |
| - |
Proceeds from sale of common stock | 120,000 |
| - |
Bank overdraft | (58,923) |
| - |
Net cash provided by financing activities | 1,620,987 |
| 189,092 |
|
|
|
|
Net increase (decrease) in cash | (13,744) |
| (26,416) |
|
|
|
|
Effect of foreign currency translation adjustments | 18,655 |
| 7,175 |
|
|
|
|
Cash at beginning of period | - |
| 19,241 |
|
|
|
|
Cash at end of period | $ 4,911 |
| $ - |
|
|
|
|
Supplemental Schedule of Cash Flow Information: |
| ||
Cash paid for interest | $ - |
| $ 10,429 |
|
|
|
|
Supplemental Schedules of Noncash Investing and Financing Activities: |
|
|
|
Common stock issued for services | $ 285,170 |
| $ - |
Payment made by 3(a)10 firm to noteholders on Company's behalf | $ 406,109 |
| $ - |
Assets taken over and liabilities assumed from Omni | $ 1,645,000 |
| $ - |
|
|
|
|
See accompanying notes to the financial statements | |||
F-3 |
EASTGATE BIOTECH CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS For the Three Months Ended For the Six Months Ended June 30, June 30, 2016 2015 2016 2015 - Interest expense Losses from impairment of Assets Total other items NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED A summary of the components of other comprehensive loss for the periods ended is as follows: Comprehensive Loss REVENUES $ $ 58,543 $ $ 58,543 Cost of goods sold 8,430 8,430 - - Gross (loss) profit - 50,113 - 50,113 OPERATING EXPENSES Professional fees 1,669 46,783 $ 4,305 $ 97,203 Research & development 126,873 297,858 265,514 693,978 General and administrative 231,815 455,427 1,264,035 1,509,702 Marketing and selling 69,659 50,551 139,940 319,736 430,016 850,619 1,673,794 2,620,619 LOSS FROM OPERATIONS (430,016 ) (800,506 ) (1,673,794 ) (2,570,506 ) Other items (41,402 ) (26,703 ) (76,738 ) (49,353 ) - (184,402 ) (41,402 ) (26,703 ) (261,140 ) (49,353 ) LOSS BEFORE INCOME TAXES (471,418 ) (827,209 ) (1,934,934 ) (2,619,859 ) PROVISION FOR INCOME TAXES - - - - NET LOSS $ (471,418 ) $ (827,209 ) $ (1,934,934 ) $ (2,619,859 ) BASIC AND DILUTED LOSS PER SHARE $ (0.002 ) $ (0.01 ) $ (0.01 ) $ (0.02 ) WEIGHTED AVERAGE 306,272,175 154,771,152 302,286,461 132,514,850 COMPREHENSIVE LOSS Net Loss (471,418 ) (827,209 ) (1,934,934 ) (2,619,859 ) Other Comprehensive Loss - foreign currency translation 1,484 (5,224 ) (14,140 ) (5,312 ) $ (469,934 ) $ (832,433 ) $ (1,949,074 ) $ (2,625,171 )
The accompanying notes are an integral part of these condensed consolidated financial statements.
EASTGATE BIOTECH CORP. Statements of Stockholders' Equity (Deficit) Deficit Accumulated Accumulated Total Additional other During the Stockholders' Common Stock Paid-In Subscription comprehensive Development Equity Shares Amount Capital Payable income Stage (Deficit) Balance, December 31, 2014 Shares issued in conversion of accrued compensation Shares issued for services Stock options and Warrants issued Shares issued for Acquisition of Assets/Lease Private placement shares and warrants issued for cash Shares an warrants (units) issued for accrued compensation Shares issued for bonus Foreign Currency Transaltion adjustments Net loss for the Year ended December 31, 2015 Balance, December 31, 2015 Shares issued in conversion of accrued compensation Shares issued for services Stock options and Warrants issued Shares issued for Acquisition of Assets/Lease Private placement shares and warrants issued for cash Shares an warrants (units) issued for accrued compensation Shares issued for bonus Foreign Currency Transaltion adjustments Net loss for the Year ended December 31, 2015 Balance, June 30, 2016 89,635,234 896 5,957,771 - 15,268 (7,372,210 ) (1,398,275 ) 117,898,608 1,179 1,236,151 1,237,330 24,253,333 243 560,351 560,594 488,351 488,351 1,500,000 15 20,985 21,000 335,000 3 24,997 25,000 - 49,250,000 493 849,158 849,651 16,578 16,578 (4,281,310 ) (4,281,310 ) - 282,872,175 2,829 9,137,764 0 31,846 (11,653,520 ) (2,481,081 ) - 0 0 0 23,400,000 234 753,246 753,480 0 0 - - 0 0 - - - - 0 - - - - (14,140 ) (14,140 ) (1,934,934 ) (1,934,934 ) - 306,272,175 3,063 9,891,010 - 17,706 (13,588,454 ) (3,676,675 )
The accompanying notes are an integral part of these financial statements.
EASTGATE BIOTECH CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, June 30, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period Adjustments to reconcile net loss to net cash used by operating activities: Expenses paid on the Company's behalfby a related party Common stock issued for services Depreciation Losses from Impairment of Assets Stock options issued Changes in operating assets and liabilities: Accrued interest Prepaid asset Accounts payable Accrued liabilities related party Reserve for Recoverable Tax Deferred rent Deferred revenue Cash flows used in operating activities CASH FLOWS FROM FINANCING ACTIVITIES Payment of capital lease obligation Proceeds from notes payable related party Payments on notes payable related party Cash Overdraft Cash flows provided by financing activities NET INCREASE (DECREASE) IN CASH Effect of foreign currency translation adjustments Cash, beginning of the period Cash, end of the period Supplemental disclosures of cash flow information: Cash paid for income taxes Cash paid for interest Non Cash Financing activities: Common stock issued to convert liabilities $ (1,934,934 ) $ (2,619,859 ) (1,827 ) 753,480 1,077,743 18,564 184,402 - - 291,427 66,352 49,353 14,595 (6,597 ) 2,028 49,242 745,639 725,452 (9,606 ) (24,436 ) (760 ) (820 ) 66,950 9,831 (113,681 ) (430,100 ) (1,973 ) - 161,505 159,750 - (5,536 ) 6,611 159,532 160,825 45,851 (269,275 ) 7,451 (17,206 ) 19,241 286,481 $ 72,543 $ - $ - $ - $ 6,027 $ - $ - 761,849
The accompanying notes are an integral part of these condensed consolidated financial statements.
EASTGATE BIOTECH CORP.Eastgate Biotech Corp. and Subsidiary
Notes to Condensedthe Unaudited Consolidated Financial Statements
JuneFor the nine months ended September 30, 20162017 and December 31, 20152016
1.
Basis of Presentation
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
Interim Unaudited Consolidated Financial Statements
The accompanyingunaudited interim consolidated financial statements have been prepared by theof Eastgate Biotech Corp without audit. In the opinionCorporation (the “Company,” “Eastgate,” “we,” “our” or “us”) as of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at JuneSeptember 30, 2016,2017 and for allthe nine-month periods presented herein have been made.
Certain informationended September 30, 2017 and footnote disclosures normally included2016 contained in financial statementsthis Quarterly Report (collectively, the “Unaudited Interim Consolidated Financial Statements”) were prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2015 audited financial statements.(U.S. GAAP) for all periods presented. The results of operations for the periodsnine-month period ended JuneSeptember 30, 2016 and 20152017 are not necessarily indicative of the operating results that may be expected for the full years.entire fiscal year.
NOTE 2 - GOING CONCERN
The accompanying Unaudited Interim Consolidated Financial Statements have been prepared in accordance with the regulations for interim financial information of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited accompanying statements of financial condition and related interim statements of operations, cash flows, and stockholders’ deficit include all adjustments (which consist only of normal and recurring adjustments) considered necessary for a fair presentation in conformity with U.S. GAAP. These Unaudited Interim Consolidated Financial Statements should be read in conjunction with our consolidated financial statements as of and for the year ended December 31, 2016.
2.
Organization and Nature of Operations
Organization
Eastgate Biotech Corp. (The Company) was organized on September 8, 1999, under the laws of the State of
Nevada.
During the year ended December 31, 2012 the Company acquired Eastgate Pharmaceuticals Inc. (“EPI”), as a wholly-owned subsidiary of the Company, from our CEO, Anna Gluskin, its sole shareholder, officer, and director. EPI is a Province of Ontario, Canada corporation.
On March 31, 2017, the Company acquired Omni Age Management and Surgery Center (“Omni”) as a wholly-owned subsidiary of the Company. The Company acquired the corporation, name and operating assets of Omni from a creditor who had foreclosed on Omni in a bankruptcy proceeding.
Nature of Business
The Company is engaged in the research and development of drug delivery innovations, development of improved and novel formulations, and forms of alternative dosage delivery of existing biologically active molecules.
We are primarily engaged in the development of novel formulations of natural compounds and pharmaceutical products. We intend to accomplish this by developing our proprietary self-emulsifying drug delivery systems, predominantly forming Nano-emulsions. Although we have not finalized any pharmaceuticals products and are in the early stages of research, our goal is to be able to develop patentable and Trade Secret formulations of pharmaceutical, nutraceutical dietary supplements and consumer health products. We recently started marketing and distribution and have limited sales for some of our nutraceutical’s products.
F-4
Some of our proposed products under development are based on existing natural compounds. Many of these proposed products are made of essential oils and plant extracts. Our proposed products comprise excipients listed in the FDA “Inactive Ingredients Guide” that we believe are safe and approved for human consumption. Additionally, we believe that these proposed products can be manufactured using common equipment. We anticipate that we will be able to apply self-emulsifying technologies for development of a variety of pharmaceuticals and natural products for different applications.
3.
Going Concern
These accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in conformity with generally accepted accounting principles, which contemplatethe normal course of business. As of September 30, 2017, the Company had an accumulated deficit of $18,399,319 and negative working capital of $6,792,731. The continuation of the Company as a going concern.concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities, obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. However, the Company has accumulated deficit of $13,588,454 as of June 30, 2016. The Company currently has limited liquidity, and has not completed its efforts to establish a stabilized source of revenuesthere can be no assurance that these arrangements will be sufficient to cover operating costs over an extended periodfund its ongoing capital expenditures, working capital, and other cash requirements. The outcome of time, raisingthese matters cannot be predicted at this time. These factors raise substantial doubt about itsregarding the Company’s ability to continue as a going concern.
Management anticipates These accompanying unaudited consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company will be dependent, for the near future, on additional investment capitalunable to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
Basis of Presentation
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements includeof the accounts of Eastgate Biotech Corp.Company have been prepared in accordance with US GAAP and its wholly-owned subsidiary Eastgate Pharmaceuticals Inc.are expressed in U.S. dollars. All intercompanyinter-company accounts and transactions have been eliminated in consolidation.eliminated. The Company’s fiscal year end is December 31.
5.
Summary of Significant Accounting Policies
a) Use of Estimates
The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaUS GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuerevenues and expenses during the reporting period. ActualThe Company regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results couldof which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from thosethe Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
b) Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Eastgate Pharmaceuticals, Inc. All significant inter-company transactions are eliminated.
F-5
c) Cash and Cash Equivalents
For purposes of the statement of cash flows, thecash includes demand deposits, saving accounts and money market accounts. The Company considers all highly liquid instruments purchased with a maturitymaturities of sixthree months or less when purchased to be cash equivalents to the extent the funds are not being held for investment purposes.equivalents.
Researchd) Accounts receivable and Development Costsconcentration of credit risk
The Company expenses research and development costs to operations as incurred. Research and development expenses are comprisedcarries no accounts receivable for the periods reported herein. This has currently eliminated the risk of costs incurreddefault in performing research and development activities, including employee-related expenses; laboratory supplies and other direct expenses; third-party contractual costs relating to nonclinical studies and related contract manufacturing expenses, developmentthe collection of manufacturing processes and regulatory registration.accounts receivable. In addition, our concentration risk, which is evaluated on a quarterly basis is currently, virtually nil.
Foreign Currency Translatione) Allowance for doubtful accounts
Foreign denominated assets and liabilities
The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts and the aging of the accounts receivable. The Company regularly reviews the adequacy of the Company’s allowance for doubtful accounts through identification of specific receivables where it is expected that payments will not be received. The Company also establishes an unallocated reserve that is applied to all amounts that are translated into U.S. dollars atnot specifically identified. In determining specific receivables where collections may not have been received, the prevailing exchange ratesCompany reviews past due receivables and gives consideration to prior collection history and changes in effect at the endcustomer’s overall business condition. The allowance for doubtful accounts reflects the Company’s best estimate as of the reporting period. Income statement accounts are translated at adates.
At September 30, 2017 and December 31, 2016, the Company had an allowance for bad debts in the amount of $0 and $0, respectively.
f) Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of exchange rates which were in effectshares outstanding (denominator) during the period. Translation adjustmentsDiluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
g) Financial Instruments
Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 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 ariseis significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
F-6
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
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, translatingor corroborated by, observable market data.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the foreign subsidiary’svaluation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company did not have any Level 2 or Level 3 assets or liabilities as of September 30, 2017, with the exception of its notes payable. The carrying amounts of these liabilities at September 30, 2017 approximate their respective fair value based on the Company’s incremental borrowing rate.
Cash is considered to be highly liquid and easily tradable as of September 30, 2017 and therefore classified as Level 1 within our fair value hierarchy.
In addition, FASB ASC 825-10-25 Fair Value Option, or ASC 825-10-25, was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial statements from local currencyreporting and permits entities to U.S. currencychoose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.
h) Income Taxes
Potential benefits of income tax losses are recordednot recognized in the other comprehensive loss component of stockholders’ equity.
Recent Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as “Development Stage Entities” (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and shareholder equity. Early application of each of the amendmentsaccounts until realization is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915.more likely than not. The Company has adopted ASC 740 “Accounting for Income Taxes” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in this standardfinancial statement because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
i) Revenue Recognition
The Company recognizes revenue in accordance with ASC-605, “Revenue Recognition,” which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or title has passed; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts.
Revenues are recognized (a) for larger construction type projects based on the percentage of completion method; or (b) for direct sales of products, upon shipment, provided that a signed purchase order has been received, the price is fixed, title has transferred, collection of resulting receivables is reasonably assured, and there are no remaining significant obligations. Reserves for sales returns and allowances, based on historical levels of returns and discounts, current economic trends and changes in customer demand.
F-7
Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not report inceptionbeen delivered or is subject to date financial information.refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
j) Reclassification
Certain reclassifications have been made to conform the prior period data to the current presentation. These reclassifications had no effect on reported net loss.
6.
Notes Payable
Notes Payable to Related Parties:
The Company owed $2,939,887 and $2,066,165 in notes and accrued interest to an officer and director at September 30, 2017 and December 31, 2016, respectively.
During the nine months ended September 30, 2017 and 2016, the Company made no repayments of related party notes or accrued interest.
Notes Payable, others:
The Company has notes due to unrelated parties totaling $318,192 and $0 at September 30, 2017 and December 31, 2016, respectively.
As part of the acquisition of Omni, the Company acquired a note due to a former shareholder of Omni in the amount of $845,000. As of September 30, 2017, the Company had converted approximately $298,000 of the note into common stock.
At September 30, 2017 and December 31, 2016, the Company has accrued interest of $52,308 and $0, respectively.
7.
Related Party Transactions
The Company has evaluated recent accounting pronouncementsowes accrued compensation totaling $2,524,253 and their adoption has not had or$2,095,891 to two officers at September 30, 2017 and December 31, 2016, respectively.
During the nine months ended September 30, 2017 and 2016, the Company made repayments of accrued compensation of $361,000 and $0, respectively.
As of December 31, 2016, $107,069 of the Company’s accounts payable are owed to two formerly related parties.
8.
Income Taxes
Deferred income tax assets as of December 31, 2016 of $3,126,500 resulting from net operating losses and future amortization deductions, have been fully offset by valuation allowances. The valuation allowances have been established equal to the full amounts of the deferred tax assets, as the Company is not assured that it is more likely than not that these benefits will be realized.
F-8
Reconciliation between the statutory United States corporate income tax rate (21%) and the effective income tax rates based on continuing operations is as follows:
September 30, 2017 | December 31, 2016 | ||
Income tax benefit at Federal statutory rate of 21% | $ (716,144) |
| $ (625,269) |
State Income tax benefit, net of Federal effect | (170,510) |
| (148,874) |
Permanent and other differences | 93,305 |
| 215,474 |
|
|
|
|
Change in valuation allowance | 793,349 |
| 558,669 |
Total | $ - |
| $ - |
Components of deferred tax assets were approximately as follows:
September 30, 2017 | December 31, 201 | ||
Net operating loss | $ 3,919,849 |
| $ 3,126,500 |
Asset impairment | - |
| - |
Reserves and other deferred tax attributes | - |
| - |
Valuation allowance | (3,919,849) |
| (3,126,500) |
Total | $ - |
| $ - |
At September 30, 2017, the Company has available net operating losses of approximately $15,075,000 which may be carried forward to apply against future taxable income. These losses will expire in 2035. Deferred tax assets related to these losses have not been recorded due to uncertainty regarding their utilization.
The provisions of ASC 740 require companies to recognize in their financial statements the impact of a tax position if that position is more likely than not to be sustained upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure.
Management does not believe that the Company has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions of ASC 740. Accordingly, the adoption of these provisions of ASC 740 did not have a material impacteffect on the Company’sCompany’s financial position or statements. The Company’s policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.
NOTE 4 –RELATED-PARTY TRANSACTIONS
Notes payable – related parties
The Company has recorded loans from shareholders, amounts due to shareholders for expenses paid onnot filed its behalf by shareholders as Notes payable - related parties on the balance sheet. The amounts comprising Notes payable – related parties bear interest ranging from 5 percent per annum to 10 percent per annum, are unsecuredapplicable Federal and are due and payable upon demand.
During the six months ended June 30, 2016 the CEO and companies owned by the CEO as well as a company owned by a related party shareholder have advanced cash to the Company of $161,505, and have had expenses paid by the Company of $1,827 on their behalf. At June 30, 2016 the Company has not repaid any of related party loans. During the year ended December 31, 2015 the CEO and the current President advanced the company cash of $310,825 and were repaid $5,536 of advances made. In addition during this period they paid $2,337 of expenses on behalf of the company and were reimbursed for $5,432 in expenses they previously paid. This accounts for the increase in notes payable related partyState tax returns for the year ended December 31, 2012, 2013, and 2014 and may be subject to penalties for noncompliance. The Company has filed an extension for the 2015 and 2016 filings. With the completion of $302,194. As of June 30, 2016 and December 31, 2015,the delinquent filings, the Company owed $359,121 and $292,769 of accrued interestintends to related parties, respectively, resulting from interest expense of $66,322 and $109,954, respectively.bring all tax filings up to date.
NOTE 5 –SALES TAX RECOVERABLE
Sales tax receivable
The Company recovers sales tax paid, for which returns are filed on annual basis but company was able to file the return only in 2017. This is reserved as of June 30, 2016, The Balance of $95,149 was claimed as recoverable compared to the December 31, 2015 balance of $79,681. Sales tax recoverable isAs a result of salesstock issuances in 2017 and 2016, the future utilization of the Company’s net operating losses is likely limited pursuant to Internal Revenue Code section 382. The deferred tax paid on eligible expenses.asset derived from these tax loss carry-forwards have been included in consolidated deferred tax assets - net operating loss carry-forwards, and a full valuation allowance has been established since it is not more likely than not that such benefits will be recovered.
NOTE 6 – STOCKHOLDERS’ DEFICIT
F-9
On9.Stockholders’ Equity
a)
Authorized
Authorized capital stock consists of:
· 10,000,000,000 shares of common stock with a par value of $0.00001 per share; and
·
50,000,000 preferred shares with a par value of $0.00001 per share
b) Share Issuances
During the period ended September 30, 2017, the Company issued the following common shares:
·
In January 2017, the Company issued 1,000,000 shares of common stock at an average price of $0.0318 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In February 1st 2016,2017, the Company issued 8,100,000 shares of common stock at an average price of $0.0399 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In March 2017, the Company issued 3,000,000 shares of common stock at an average price of $0.04 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In March 2017, the Company issued a total of 23,400,000 restricted4,000,000 shares of common stock to variousthree research consultants for services rendered(2.0 million, 1.0 million and 1.0 million shares each) at the price of $0.0322 per share which was the closing price on February 1st 2016.
The following table summarizes the stock options that are issued, outstanding and exercisable
|
|
|
| Stock Options Issued & Outstanding |
| |||||||
Exercise |
|
| Expiration |
| June 30 |
|
| December 31 |
| |||
Price |
|
| Date |
| 2016 |
|
| 2015 |
| |||
$ | 0.286 |
|
| February 12, 2020 |
|
| 10,375,000 |
|
|
| 10,375,000 |
|
As of June 30, 2016, the Company had 41,164,901 warrants to purchase common stock. All outstanding warrants have a weightedan average price of $0.07$0.04 per share (the share price at the time of issuance) for research and havedevelopment work.
·
In March 2017, the Company issued 500,000 shares of common stock at an average price of $0.043 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In April 2017, the Company issued 55,000,000 shares of common stock at an average price of $0.0057 per share to a weightedfirm resolving debt of the Company under a 3(a)10 filing.
·
In April 2017, the Company issued 20,000,000 shares of common stock at an average remaining lifeprice of 3.06 years.$0.04 per share (the share price at the time of issuance) to acquire Omni Age Management and Surgery Center.
·
In April 2017, the Company issued 100,000 shares of common stock at an average price of $0.043 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In May 2017, the Company issued 89,973,200 shares of common stock at an average price of $0.0023 per share to a firm resolving debt of the Company under a 3(a)10 filing.
·
In May 2017, the Company issued 5,250,000 shares of common stock at an average price of $0.0019 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In June 2017, the Company issued 48,267,000 shares of common stock at an average price of $0.0011 per share to a firm resolving debt of the Company under a 3(a)10 filing.
·
In June 2017, the Company issued 507,000,000 shares of common stock at an average price of $0.00001 per share (the share price at the time of issuance) in exchange for compensation.
F-10
The following table summarizes warrants that are
· In June 2017, the Company issued outstanding and exercisable25,000,000 shares of common stock at an average price of $0.0018 per share (the share price at the time of issuance) to a debt holder who also is an accredited investor.
|
|
|
| Warrants Issued & Outstanding |
| |||||||
Exercise |
|
| Expiration |
| June 30 |
|
| December 31 |
| |||
Price |
|
| Date |
| 2016 |
|
| 2015 |
| |||
$ | 0.25 |
|
| March 14, 2019 |
|
| 3,495,000 |
|
|
| 3,495,000 |
|
$ | 0.25 |
|
| March 21, 2019 |
|
| 3,480,000 |
|
|
| 3,480,000 |
|
$ | 0.25 |
|
| June 6, 2019 |
|
| 2,022,300 |
|
|
| 2,022,300 |
|
$ | 0.05 |
|
| October 16, 2019 |
|
| 150,000 |
|
|
| 150,000 |
|
| 0.04 |
|
| December 31, 2019 |
|
| 8,125,000 |
|
|
| 8,125,000 |
|
$ | 0.04 |
|
| January 5, 2020 |
|
| 8,146,225 |
|
|
| 8,146,225 |
|
| 0.04 |
|
| August 19, 2020 |
|
| 125,000 |
|
|
| 125,000 |
|
| 0.00001 |
|
| October 6, 2020 |
|
| 15,621,376 |
|
|
| 16,171,627 |
|
|
|
|
|
|
|
| 41,164,901 |
|
|
| 41,715,152 |
|
·
NOTE 7– SUBSEQUENT EVENTS
In accordance with ASC 855June 2017, the Company management reviewed allissued a total of 32,000,000 shares of common stock to three research consultants (12.0 million, 10.0 million and 10.0 million shares each) at an average price of $0.0018 per share (the share price at the time of issuance) for research and development work.
·
In June 2017, the Company issued 19,333,333 shares of common stock at an average price of $0.0018 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In July 2017, the Company issued 4,000,000 shares of common stock at an average price of $0.002 per share (the share price at the time of issuance) to consultants who are also accredited investors.
10.
Commitments and Contingencies
Litigation
The Company may, from time to time, become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. The Company is currently not aware of any such legal proceedings that it believes will have, individually or in the aggregate, a material adverse effect on its earnings.
12.
Acquisition of Assets of ‘Omni Surgery and Skin Rejuvenation’
On March 31, 2017, Eastgate Biotech entered into a series of transactions to acquire the assets of Omni Surgery and Skin Rejuvenation (“Omni”) a Saskatchewan corporation.
Omni was in default on various notes to banks and lenders, one of which William Abajian (“Abajian”) had a security interest in the equipment of the company in support of a loan in the amount of $845,000. Abajian foreclosed on the Company. Subsequently, Eastgate acquired a ninety-nine percent (99%) equity interest in Omni from Abajian and a second shareholder in exchange for the acquisition of the $845,000 note, and issuance of 20,000,000 common shares of Eastgate Biotech Corp. simultaneously,
Abajian can redeem the shares back to the Company in amounts not to exceed 2.0 million shares per year. In addition, Abajian holds a security interest to the 99% equity interest Eastgate holds in Omni until such time as his Eastgate shares are fully redeemed. As of the date of this filing, the balance due to Abajian is $547,000.
3.
Subsequent Events
We have evaluated subsequent events through the date of this reportissuance of the unaudited consolidated financial statements, and determined that therebelow are nothe material recognizable subsequent events to report except as described below:events.
On January 1st 2017, the Company issued 1,000,000 share of common stock to two lawyers as part of their compensation. The issuance of these securities was deemed to be exempt from the registration requirements for the securities act of 1933, as amended by virtue of sections 4(a)(2) thereof, as a transaction by an issuer not involving a public offering.·
On February 1stIn October 2017, the Company issued 8,000,000 shareshares of common stock to two consultants as partin exchange for their services. The shares were issued at $0.001 per share.
·
In October 2017, the Company issued 5,000,000 shares of common stock to consultants in exchange for their compensation.services. The issuance of these securities was deemed to be exempt from the registration requirements for the securities act of 1933, as amended by virtue of sections 4(a)(2) thereof, as a transaction by an issuer not involving a public offering.shares were issued at $0.0013 per share.
· In November 2017,the Company issued 15,000,000 shares of common stock at an average price of $0.0003 per share to a firm resolving debt of the Company under a 3(a)10 filing.
·
In January 2018, the Company issued 5,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price on the date of issuance.
·
In April 2018, the Company issued 7,500,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price on the date of issuance.
·
In June 2018, the Company issued 275,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price on the date of issuance.
·
In July 2018, the Company issued 12,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price on the date of issuance.
·
In August 2018, the Company issued 555,000,000 shares of common stock to employees in payment of accrued payroll. The shares were issued at $0.0001 per share.
·
In August 2018, the Company issued 50,000,000 shares of common stock to a consultant in exchange for their services. The shares were issued at the market price on the date of issuance.
·
In September 2018, the Company issued 9,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price of $0.009 per share.
·
In September 2018, the Company issued 30,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price on the date of issuance.
F-12
Item 2.
Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
ResultsCertain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,��� “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of Operationsfuture plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Overview & General History
Organization
Eastgate Biotech Corp. (The Company) was organized on September 8, 1999, under the laws of the State of
Nevada, and is traded on the OTCPink exchange.
Nature of Business
The following selected comparative financial information has been derived from and should be readCompany is engaged in conjunction with the company’s financial statements for the three and six months ended June 30, 2016 and 2015.
|
| For the Three Months ended |
|
| For the Six Months ended |
| ||||||||||
|
| June 30 |
|
| June 30 |
| ||||||||||
|
| 2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
| ||||
Revenues |
| $ | - |
|
| $ | 58,543 |
|
| $ | - |
|
| $ | 58,543 |
|
Cost of sales |
|
|
|
|
|
| 8,430 |
|
|
|
|
|
|
| 8,430 |
|
Gross profit |
|
|
|
|
|
| 50,113 |
|
|
|
|
|
|
| 50,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees |
|
| 1,669 |
|
|
| 46,783 |
|
|
| 4,305 |
|
|
| 97,203 |
|
Research & development |
|
| 126,873 |
|
|
| 297,858 |
|
|
| 265,514 |
|
|
| 693,978 |
|
General & administrative |
|
| 231,815 |
|
|
| 455,427 |
|
|
| 1,264,035 |
|
|
| 1,509,702 |
|
Marketing and selling |
|
| 69,659 |
|
|
| 50,551 |
|
|
| 139,940 |
|
|
| 319,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
| 430,016 |
|
|
| 850,619 |
|
|
| 1,673,794 |
|
|
| 2,620,619 |
|
|
|
|
|
|
|
|
| |||||||||
Loss from operations |
|
| (430,016 | ) |
|
| (800,506 | ) |
|
| (1,673,794 | ) |
|
| (2,570,506 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (41,402 | ) |
|
| (26,703 | ) |
|
| (76,738 | ) |
|
| (49,353 | ) |
Losses from impairment of Assets |
|
|
|
|
|
|
|
|
|
| (184,402 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (471,418 | ) |
| $ | (827,209 | ) |
| $ | (1,934,934 | ) |
| $ | (2,619,859 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30 |
|
| December 31 |
| ||
|
|
|
|
|
|
|
|
|
| 2016 |
|
| 2015 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
| $ | 167,692 |
|
| $ | 297,919 |
|
Working Capital |
|
|
|
|
|
|
|
|
| $ | (3,628,584 | ) |
| $ | (2,615,097 | ) |
Results of Operations
During the three months ended June 30, 2016, our net loss was $471,418 compared to a net loss of $827,209 for the three months ended June 30, 2015. The decreased loss for 2016 of $355,791 was primarily due to the fact the company had decreased G&A expenses of $223,612, the research and development expensesof drug delivery innovations, development of improved and professional fees decreased respectively by $170,985novel formulations, and $45,114, whereas marketing & selling expenses increased by $19,108. These changes in expenditures resultedforms of alternative dosage delivery of existing biologically active molecules.
We are primarily engaged in the decreased lossdevelopment of $471,418novel formulations of natural compounds and pharmaceutical products. We intend to accomplish this by developing our proprietary self-emulsifying drug delivery systems, predominantly forming Nano-emulsions. Although we have not finalized any pharmaceuticals products and are in the early stages of research, our goal is to be able to develop patentable and Trade Secret formulations of pharmaceutical, nutraceutical dietary supplements and consumer health products. We recently started marketing and distribution and have limited sales for some of our nutraceuticals products.
Some of our proposed products under development are based on existing natural compounds. Many of these proposed products are made of essential oils and plant extracts. Our proposed products comprise excipients listed in the FDA “Inactive Ingredients Guide” that we believe are safe and approved for human consumption. Additionally, we believe that these proposed products can be manufactured using common equipment. We anticipate that we will be able to apply self-emulsifying technologies for development of a variety of pharmaceuticals and natural products for different applications.
Results of Operations for the quarter.
During the sixnine months ended JuneSeptember 30, 2017 and 2016.
Operating Revenues
In the nine-month period ended September 30, 2017 and 2016, we generated $137,638 and $0, respectively, in revenue from the sales of the newly acquired Omni Aging and Surgery Center from the sale of products and services.
16
Cost of Goods Sold
In the nine-month periods ended September 30, 2017 and 2016, we incurred $149,275 and $0, respectively, as cost of services sold.
Gross profit (loss)
In the nine-month periods ended September 30, 2017 and 2016, the Company did not recorded any revenue. During the six months ended June 30, 2016, our net loss was $1,934,934 compared to a nethad gross loss of $2,619,859 for the six months ended June 30, 2015. The decreased loss for 2016 of $684,925 was due to the fact the company was less active in the six month period ended June 30, 2016 due to lack of funding. The primary reasons for the decrease was due to the decrease in operating expenses which included a decrease in professional fees of $92,898, a decrease in R&D expenses of $428,464, a decrease in marketing and selling of $179,796$11,638 and a decreaseloss of general and administrative expense of $245,667.
Sales
During the three months ended June 30 2016 the company recorded no sales from our nutraceutical products division but all the sales were deferred compared to sales of $58,543, cost of sales $8,430 for a gross profit of $50,113 in the same quarter ending June 30 2015
During the six months ended June 30 2016 we have recorded no revenues, all the sales were deferred compared to revenue of $58,543, cost of sales was $8,430 for a gross profit of $50,113 for the six months ended June 30 2015.
$-0-, respectively.
Operating Expenses
Professional fees
During the second quarter ended June 30, 2016, professional fees expenses were $1,669, a decrease of $45,114 from the second quarter of 2015 professional fees expense of $46,783. The decrease can be attributed to decrease in legalOur operating expenses for the quarter.
During the first six monthsthree and nine-month periods ended JuneSeptember 30, 2017 and 2016 professional fees expenses were $4,305, a decrease of $92,898 from the first six months of 2015 professional fees expense of $97,203. The first quarter of 2015 included the costs of an equity raise; the company did not have these expensesare outlined in the six months ended June 30 2016.table below:
Three Months Ended | Nine Months Ended | ||||||
September 30, | September 30, | ||||||
2017 | 2016 | 2017 | 2016 | ||||
Professional fees | $ 70,176 | $ 19,886 | $ 152,216 | $ 24,191 | |||
Research & development | (12,046) | 115,610 | 258,384 | 381,124 | |||
General and administrative | 1,518,182 | 234,072 | 2,472,700 | 1,498,107 | |||
Marketing & selling | 75,859 | 63,954 | 213,600 | 203,894 | |||
Loss from Impairment of Assets | 25,247 | - | - | ||||
Gain on extinguishment of debt | (55,759) | - | (55,759) | - | |||
Total | $ 1,621,660 | $ 433,522 | $ 3,041,142 | $ 2,291,718 |
Research and development
Research and development costs consist of fees paid to consultants for laboratory evaluation of product chemistry and formulation as well as tests and studies to assess the efficacy and potential safety of our products. Also included in research and development are laboratory consumables.
During the second quarter ended June 30, 2016, research and developmentOperating expenses of $126,873 decreased by $170,985 from $297,858 for the second quarter of 2015.nine-months ended September 30, 2017 and 2016 was $3,041,142 and $2,291,718, respectively. The decrease was a result ofincrease in operating expense during the company’s lack of funding.
During the six monthsnine-months ended JuneSeptember 30, 2017 versus 2016 research and development expenses of $265,514 decreased by $428464 from $693,978 for the first six months of 2015. The decrease was a result of the company’s lack of funding.
General and administrative
During the second quarter of 2016, we incurredis primarily attributed to an increase in general and administrative costs and professional fees. In addition, for the nine-month period ended September 30, 2016, the Company recorded a loss from impairment of assets with no similar discontinued operations of $184,402 and for the nine-month period ended September 2017, the Company recorded a gain on extinguishment of debt of $55,759.
Other Expenses
In addition to operating expenses, we incurred interest expenses of $231,815, decrease$196,547 and $116,516 during the nine-months ended September 30, 2017, and 2016, respectively. The increase in interest expense during the period ended September 30, 2017 is primarily attributable to the fact that debt was added incrementally throughout 2017.
Net Loss
We incurred a net loss of $223,612 from $455,427$3,249,327 and $2,408,234 for the second quarternine-months periods ended September 30, 2017 and 2016, respectively.
Liquidity and Capital Resources
Liquidity is the ability of 2015.a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
To date we have financed our operations through sales of common stock and the issuance of debt.
17
The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing and generating profitable operations from the Company’s future operations. However, there can be no assurance that these arrangements will be sufficient to fund its ongoing capital expenditures, working capital, and other cash requirements. The outcome of these matters cannot be predicted at this time. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
Working Capital
|
|
|
|
| Percentage |
| September 30, |
| December 31, |
| Increase |
| 2017 |
| 2016 |
| (Decrease) |
Current Assets | $ 168,270 |
| $ - |
| - % |
Current Liabilities | $ 6,961,001 |
| $ 4,578,042 |
| 52.1 % |
Working Capital Deficit | $ (6,792,731) |
| $ (4,578,042) |
| 48.4 % |
During the first six monthsAt September 30, 2017, our cash balance was $4,911 compared to $0 at December 31, 2016. The increase in cash is attributed to proceeds of 2016, we incurred general$1,214,930 in notes payable to a related party, proceeds of $430,928 from other notes, and administrative expensesproceeds from sale of $1,264,035, a decreasecommon stock of $245,667 from $1,509,702 for the first six months$120,000, all of 2015.which were used to pay operating expenses.
Marketing and selling
During the second quarter ended JuneAt September 30, 2016, marketing and selling expenses2017, we had total current liabilities of $69,659, increased by $19,108 from $50,551 for the second quarter$6,961,000, compared with total current liabilities of 2015.
During the six months ended June 30, 2016, marketing and selling expenses of $139,940 decreased by $179,796 from $319,736 for the six months ended June 30, 2015.$4,578,042 at December 31, 2016. The decrease is a result of lack of funding to spend on marketing expenses. The company continuing negotiationsincrease in various parts of the world for the sale of distribution licenses for the sale of the company’s pharmaceutical and nutraceutical products.
Interest expense
Interest expense of $41,402 for the second quarter ended June 30, 2016 an increase of $14,699 from $26,703 for the second quarter of 2015. The increasetotal liabilities is attributed to an increase in loans from stockholders during the period.
Interest expensenotes payable to related parties of $76,738 for the six months ended June 30, 2016 an increase$1,214,930, deferred sales of $27,385 from $49,353 for the six months ended June 30, 2015. The increase is attributed to an increase$2,871, and increases in loans from stockholders during the period.
Loss from Impairmentaccounts payable and accrued liabilities of Assets,
During the six month ended June 30 2016 the company recognized losses from impairment$733,692 and accrued interest of lab equipment of $184,402, previously company never recorded such losses. The equipment cost value were $271,040, accumulated amortization were $86,638.
Liquidity and Capital Resources$175,454.
At JuneSeptember 30, 20162017, we had a working capital deficit of $3,628,584 which$6,792,731 compared with a working capital deficit of $4,578,042 at December 31, 2016. The increase in working capital deficit is primarily due to an increase in related party loans and increases in accounts payable and accrued expenses which were offset by cash obtained from proceeds of $1,013,488common stock sales.
Cash Flows
| For the Nine Months Ended |
| Percentage | ||
| September 30, |
| September 30, |
| Increase |
| 2017 |
| 2016 |
| (Decrease) |
Cash Used in Operating Activities | $ (1,583,047) |
| $ (1,048,221) |
| 51.0 % |
Cash Used in Investing Activities | (51,684) |
| - |
| - % |
Cash Provided by Financing Activities | 1,620,987 |
| 92,104 |
| 1,659.9 % |
Net Increase (decrease) in Cash | $ (13,744) |
| $ (956,117) |
| (98.6) % |
Cash flow from Operating Activities
During the December 31, 2015 deficit balancenine months ended September 30, 2017, we used $1,583,047 of $2,615,097.cash in operating activities compared to the use of $1,048,221 of cash for operating activities during the nine months ended September 30, 2016. The increase in the deficit is primarily a resultuse of cash for operating activities was mainly attributed to an increase in the loss for the six months of $1,934,934 netted by the $753,480 of this loss having been paid by issuing common stock for services.
Expenses incurred during 2016 have been paid for by related parties including our current CEO and current President as well as through issuing the company’s common stock. Because we have no cash reserves or generate sufficient revenue, we expect to continue to rely on the stockholders and equity raises to pay expenses until such time as we can generate sufficient cash flows to pay our ongoing operational costs. There is no assurance that the company will be able to obtain equity raises before the company develops revenue sources with sufficientpositive cash flow adjustments of $1,666,280 to cover expenses.our 2017 period net loss of $3,249,327, which were more than the positive cash flow adjustments of $1,360,013 to our 2016 period loss of $2,408,234.
18
Cash flow from Investing Activities
During the nine months ended September 30, 2017 and 2016, we used $51,684 and $0 in investing activities, respectively.
Cash flow from Financing Activities
During the sixnine months ended JuneSeptember 30, 2016 the stockholders contributed a net amount of $159,677, made up of $161,505 advanced in cash less $1,827 of expenses paid by the company on behalf of the related party. At June 30, 20162017 and December 31, 2015, we had cash on hand of $72,543 and $19,241, respectively. At June 30, 2016, we had accrued liabilities - related partyreceived net proceeds of $1,564,099, compared to $732,125 at December 31, 2015. The increase represents the accrual of wages to company executive officers during the six month ended June 30, 2016. At June 30, 2016 we had notes payable - related party of $1,468,262, compared to $1,308,585 at December 31, 2015. The increase represents additional contributions$1,620,987 and $92,104, respectively from stockholders during the six months ended June 30, 2016. Accrued interest – related party at June 30, 2016 was $359,121 compared to $292,769 at December 31, 2015, which reflects the added interest of $66,352 on the related party payable. Accounts payable and accrued liabilities increased by $19,401 from $361,094 at December 31, 2015, to $380,495 at June 30, 2016, primarily a result of the fact the company is in a fund raising situation.
In the opinion of management, inflation has not and will not have a material effect on our operations until such time as we raise funds or successfully complete an acquisition or merger. At that time, management will evaluate the possible effects of inflation related to our business and operations.
At June 30, 2016, we had a stockholders’ deficit of $3,676,675 compared to a stockholders’ deficit of $2,481,081 at December 31, 2015.financing activities. The increase in stockholders’ deficitproceeds from financing activities is primarilymainly attributed to operating loss$430,928 in proceeds from notes payable and issuance$120,000 in sale of common stock for serviceversus $-0- in the first six months2016 period, and proceeds from notes payable related parties of 2016.$1,214,930 in the 2017 period compared to $94,077 in the 2016 period.
Going Concern
These accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of JuneSeptember 30, 2016, we2017, the Company had cash on handan accumulated deficit of $72,543. We believe$18,399,319 and negative working capital of $6,792,731. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing and generating profitable operations from the Company’s future operations. However, there can be no assurance that our available cash combined with continued advances from related partiesthese arrangements will be sufficient to carry on general corporate functions forfund its ongoing capital expenditures, working capital, and other cash requirements. The outcome of these matters cannot be predicted at this time. These factors raise substantial doubt regarding the next six months, although we will needCompany’s ability to limit cash outlays for research and product development until we can secure additional funds. We are presently investigating possible funding opportunities to arrange for additional funds, although wecontinue as a going concern. These accompanying unaudited consolidated financial statements do not haveinclude any definitive agreement or arrangement for such funds. We expectadjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that additional fundingmight be necessary should the Company be unable to proceed with development of the intellectual property acquired in 2015 will most likely be from the sale of securities or from stockholder loans. We may not be successful in our efforts to obtain equity financing to carry out our business plan and there is doubt regarding our ability to complete our planned development program. We estimate that cash requirements for the next twelve months will be approximately $5,000,000. In the past year, we have relied on advances from related parties for financing our operations. We continue to explore potential funding opportunities, which may be in the form of debt or the sale of equity securities. In the event we are unsuccessful in arranging for outside funding, we will most likely continue to rely on related parties to provide funding, although there are no firm commitments or agreements with any related party to provide funds in the future.as a going concern.
Net Operating Loss
We have accumulated a net operating loss carryforward of approximately $11,653,520 as of December 31, 2015. This loss carry forward may be offset against future taxable income through the year 2033. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. In the event of certain changes in control, there will be an annual limitation on the amount of net operating loss carryforwards that can be used. No tax benefit has been reported in the financial statements for the year ended December 31, 2015 or the six month period ended June 30, 2016 because it has been fully offset by a valuation reserve. The use of future tax benefit is undeterminable because we presently have no operations.
Recent Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as “Development Stage Entities” (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and shareholder equity. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company has adopted this standard and will not report inception to date financial information.
The company has evaluated other recent accounting pronouncements and their adoption has not had nor is expected to have a material impact on the company’s financial position or statements.
Off-Balance Sheet Arrangements
We have no significant 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 isare material to stockholders.
Plan of Operation
Following the closing of a patent acquisition agreement (the “Acquisition Agreement”) in 2012, we have become engaged in the development and ultimate formulation of other novel formulations of natural compounds and pharmaceutical products that have limitations in effective use for human consumption. We believe our self-emulsifying drug delivery technology can improve the efficacy of existing products and formulations based on natural or well-established compounds and known biologically active compounds. We intend to conduct our research and development through collaborative programs. We anticipate relying on arrangements with third party drug developers such as contract research organizations and clinical research sites for a significant portion of our product development efforts.
The Acquisition Agreement enabled us to acquire certain products, formulas, processes, proprietary technology and/or patents and patent applications related to pharmaceutical, nutraceutical, food supplements and consumer health products. We have not formulated any final products or receive approvals from any regulatory agencies or generated any revenues from product sales. We have not been profitable since our inception through the current date.Future Financings
We expect to incur significant operating losses for the next several years and until we are able to formulate a commercially viable product. We also expectintend to continue to incur significant operatingrely on loans from related parties and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we:
Future product revenue will depend on our ability to develops, receive regulatory approvals for, and successfully market, our product candidates. In the event that our development efforts result in regulatory approval and successful commercialization of our product candidates, we will generate revenue from directprivate sales of our products and/or, if we licenseshares of common stock in order to continue to fund our productsbusiness operations. Issuances of additional shares will result in dilution to future collaborators, from the receipt of license fees and royalties from licensed products.
Management estimates that our research and development expenses for the next 12 months will be approximately $3.0 million, primarily for research and pilot studies. We also estimate that other expenses, including personnel, general and administrative and miscellaneous expenses could be as much as $2.0 million during the same time period. Because we currently have no revenues, most likely the only source of funding these expenses will be through the private sale of our securities, either equity or debt. We are currently exploring possible funding sources, but we have not entered into any arrangements or agreements for funding as of this time. If we are unable to raise the necessary funding, our research and development plans will be delayed indefinitely.existing stockholders. There can beis no assurance that we will be ableachieve any additional sales of the equity securities or arrange for debt or other financing to raise the funds necessary to carry outfund our business plan on terms favorable to the company, or at all.operations and other activities.
Forward-Looking and Cautionary StatementsCritical Accounting Policies
Statements containedOur financial statements and accompanying notes have been prepared in this report which are not historical facts, may be considered “forward-lookingaccordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements” which term in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
19
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is defined byincluded in the Private Securities Litigation Reform Act of 1995. Any “safe harbor under this Act does not applynotes to a “penny stock” issuer, which definition would include the company. Forward-looking statementsour financial statements. In general, management's estimates are based on current expectationshistorical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the current economic environment. We caution readers that such forward-looking statements are not guarantees of future performance. Unknown risksfacts and uncertainties as well as other uncontrollable or unknown factorscircumstances. Actual results could cause actual results to materially differ from those estimates made by management.
Our significant accounting policies are more fully described in Note 5 to our unaudited consolidated financial statements included in this Quarterly Report.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results performance or expectations expressed or implied by such forward-looking statements.of operations.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of September 30, 2017 and December 31, 2016.
Inflation
We do not believe that inflation has had a material effect on our Company’s results of operations.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
This item is not required for a smaller reporting company.
Item 4.Controls and Procedures.
EvaluationOur management is responsible for establishing and maintaining a system of Disclosure Controls and Procedures. Disclosuredisclosure controls and procedures (as defined in RulesRule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) areAct) that is designed to ensure that information required to be disclosed by us in the reports filedthat we file or submittedsubmit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.
As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our management, including our chief executive officer and chief financial officer, concluded that, as of June 30, 2016, our disclosure controls and procedures were not effective due to a lack of adequate segregation of duties and the absence of an audit committee.
Changes in Internal Control Over Financial Reporting. Management has
During the quarter ended September 30, 2017, management evaluated whether any change in our internal control over financial reporting occurred during the quarterperiod then ended June 30, 2016.had taken place. Based on its evaluation, management, including the chief executive officer and chief financial officer, has concluded that there has been no change in our internal control over financial reporting during the quarter ended JuneSeptember 30, 20162017 that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
PART II — OTHERII-OTHER INFORMATION
Item 1.Legal ProceedingsProceedings.
None
There are no material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.
Item 1A.Risk FactorsFactors.
Not Applicable.
This item is not required for a smaller reporting company.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
·
In January 2017, the Company issued 1,000,000 shares of common stock at an average price of $0.0318 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In February 2017, the Company issued 8,100,000 shares of common stock at an average price of $0.0399 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In March 2017, the Company issued 3,000,000 shares of common stock at an average price of $0.04 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In March 2017, the Company issued a total of 4,000,000 shares of common stock to three research consultants (2.0 million, 1.0 million and 1.0 million shares each) at an average price of $0.04 per share (the share price at the time of issuance) for research and development work.
·
In March 2017, the Company issued 500,000 shares of common stock at an average price of $0.043 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In April 2017, the Company issued 55,000,000 shares of common stock at an average price of $0.0057 per share to a firm resolving debt of the Company under a 3(a)10 filing.
·
In April 2017, the Company issued 20,000,000 shares of common stock at an average price of $0.04 per share (the share price at the time of issuance) to acquire Omni Age Management and Surgery Center.
·
In April 2017, the Company issued 100,000 shares of common stock at an average price of $0.043 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In May 2017, the Company issued 89,973,200 shares of common stock at an average price of $0.0023 per share to a firm resolving debt of the Company under a 3(a)10 filing.
·
In May 2017, the Company issued 5,250,000 shares of common stock at an average price of $0.0019 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In June 2017, the Company issued 48,267,000 shares of common stock at an average price of $0.0011 per share to a firm resolving debt of the Company under a 3(a)10 filing.
·
In June 2017, the Company issued 507,000,000 shares of common stock at an average price of $0.00001 per share (the share price at the time of issuance) in exchange for compensation.
·
In June 2017, the Company issued 25,000,000 shares of common stock at an average price of $0.0018 per share (the share price at the time of issuance) to a debt holder who also is an accredited investor.
None in 2nd quarter
21
· In June 2017, the Company issued a total of 201632,000,000 shares of common stock to three research consultants (12.0 million, 10.0 million and 10.0 million shares each) at an average price of $0.0018 per share (the share price at the time of issuance) for research and development work.
·
In June 2017, the Company issued 19,333,333 shares of common stock at an average price of $0.0018 per share (the share price at the time of issuance) to consultants who are also accredited investors.
·
In July 2017, the Company issued 4,000,000 shares of common stock at an average price of $0.002 per share (the share price at the time of issuance) to consultants who are also accredited investors.
Item 3.Defaults Upon Senior Securities
None.
This Item is not applicable.
Item 4.Mine Safety Disclosures
This Item is notNot applicable.
Subsequent Events
This Item is not applicable.
In October 2017, the Company issued 8,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at $0.001 per share.
In November 2017, the Company issued 15,000,000 shares of common stock at an average price of $0.0003 per share to a firm resolving debt of the Company under a 3(a)10 filing.
In January 2018, the Company issued 5,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price on the date of issuance.
In April 2018, the Company issued 7,500,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price on the date of issuance.
In June 2018, the Company issued 275,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price on the date of issuance.
In July 2018, the Company issued 12,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price on the date of issuance.
In August 2018, the Company issued 555,000,000 shares of common stock to employees in payment of accrued payroll. The shares were issued at $0.0001 per share.
In August 2018, the Company issued 50,000,000 shares of common stock to a consultant in exchange for their services. The shares were issued at the market price on the date of issuance.
In September 2018, the Company issued 9,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price of $0.009 per share.
In September 2018, the Company issued 30,000,000 shares of common stock to consultants in exchange for their services. The shares were issued at the market price on the date of issuance.
22
Item 6.Exhibits
Exhibit | Description of Exhibit | |
31.1 | ||
101.INS | XBRL Instance | |
101.SCH | XBRL Taxonomy Extension Schema | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | XBRL Taxonomy Extension Definition Document | |
101.LAB | XBRL Taxonomy | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |
|
|
_________23
*Attached as Exhibit 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2016 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statement of Stockholders’ Deficit, and (v) related notes to these financial statements.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EASTGATE BIOTECH CORP.
| |||
|
|
| |
| |||
| |||
|
By: /s/ Anna Gluskin
Name: Anna Gluskin
|
(Principal Executive Officer)
Date: March 4, 2019
By: /s/ Rose Perri
Name: Rose Perri
Title: President and Treasurer
(Principal Financial and Accounting Officer)
Date: March 4, 2019
24