United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM
For
the quarterly period ended:
Or
For the transition period ended:
(Exact name of Registrant as specified in its Charter)
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices)
(Registrant’s Telephone Number, including area code)
(Former name or former address, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate
by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
(1)
Yes ☒ No ☐; (2)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:
As of November 12, 2021, the registrant had common shares outstanding.
Documents incorporated by reference: None.
QSAM BIOSCIENCES, INC.
FORM 10-Q
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Report”), including this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may”, “could” and variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. In particular, as discussed in greater detail below, our financial condition and results could be materially adversely affected by the continued impacts and disruptions caused by the novel coronavirus (COVID-19) global pandemic and governmental responses thereto. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth or anticipated in our forward-looking statements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed elsewhere in this Report, including under “Risk Factors”, and in other reports the Company files with the Securities and Exchange Commission (“SEC”), including the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on April 15, 2021 (under the heading “Risk Factors” and in other parts of that report).
Summary Risk Factors
We face risks and uncertainties related to our business, many of which are beyond our control. In particular, risks associated with our business include:
| ● | COVID-19 and the related governmental restrictions have had, and are expected to continue to have, a material and adverse effect on our business, financial condition and results of operations. | |
| ● | Drug development is a long and inherently uncertain process with a high risk of failure at every stage of development. | |
| ● | The future of our business and operations depends on the success of our development and commercialization programs. | |
| ● | If we do not obtain regulatory approval for our product candidates or if the terms of any approval impose significant restrictions or limitations on use, our business, results of operations and financial condition will be adversely affected. | |
| ● | Setbacks in clinical development programs could have a material adverse effect on our business. | |
| ● | Our business is highly dependent on our lead product candidate, CycloSam®, and a failure to obtain regulatory approval or successfully commercialize our product could adversely affect our financial condition and results of operations. | |
| ● | Our FDA approvals are dependent upon successful clinical trials for our product candidates. Clinical trial results may be unfavorable or inconclusive, and often take longer and cost more than expected. | |
| ● | We are subject to extensive and ongoing regulation, which can be costly and time consuming, may interfere with marketing approval for our product candidates, and can subject us to unanticipated limitations, restrictions, delays and fines. |
| 3 |
| ● | We are increasingly dependent on information technology, and potential cyberattacks, security problems, or other disruption and expanding social media vehicles present new risks. | |
| ● | We have been and expect to continue to be dependent on collaborators for the development, manufacturing and sales of certain products and product candidates, which expose us to the risk of reliance on these collaborators. | |
| ● | Manufacturing resources could limit or adversely affect our ability to commercialize products. | |
| ● | Failure of any manufacturer of our various product candidates to comply with applicable regulatory requirements could subject us to penalties and have a material adverse effect on supplies of our product candidates. | |
| ● | The validity, enforceability and commercial value of our patents and other intellectual property rights are highly uncertain. | |
| ● | We have a limited operating history and are operating at a loss, and there is no guaranty that we will remain as a going concern or become profitable. | |
| ● | Because our history is limited and we are subject to intense competition, any investment in us would be inherently risky. | |
| ● | We have a high concentration of stock ownership and control within our executive officers and certain existing stockholders. | |
| ● | The Company has Preferred Stock with additional priority rights. | |
| ● | We are a smaller reporting company, and we cannot be certain if the reduced reporting requirements applicable to smaller reporting companies will make our common shares less attractive to investors. | |
| ● | We have identified certain material weaknesses in our internal control over financial reporting and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired. |
| 4 |
Exchange Act Reporting Requirements
Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act like we are to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to shareholders at a special or annual meeting thereof or pursuant to a written consent will require us to provide our shareholders with the information outlined in Schedules 14A (where proxies are solicited) or 14C (where consents in writing to the action have already been received or anticipated to be received) of Regulation 14, as applicable; and preliminary copies of this information must be submitted to the SEC at least 10 days prior to the date that definitive copies of this information are forwarded to our shareholders. We are also required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K. All public filing made with the SEC are available via the SEC’s website on EDGAR at www.sec.gov.
| 5 |
PART I – FINANCIAL INFORMATION
Item 1: Financial StatementS
QSAM BIOSCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Deferred offering costs | - | |||||||
| TOTAL CURRENT ASSETS | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued payroll and related expenses | ||||||||
| Accrued interest - related parties | - | |||||||
| Notes payable - related parties | ||||||||
| Paycheck Protection Program Loan - current portion | - | |||||||
| Debentures | ||||||||
| Convertible bridge notes, at fair value | - | |||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Paycheck Protection Program Loan - net of current portion | - | |||||||
| TOTAL LIABILITIES | ||||||||
| Redeemable convertible preferred stock - Series A; $par value, designated
Series A, and and shares issued and outstanding (liquidation preference of $ | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, Series B, $par value; shares authorized, and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | - | |||||||
| Preferred stock, Series E-1, $par value; shares authorized, and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | - | |||||||
| Common stock, $par value, shares authorized, and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | ||||||||
| Unearned deferred compensation | ( | ) | ( | ) | ||||
| Subscription receivable | - | ( | ) | |||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
See notes to the unaudited condensed consolidated financial statements.
| 6 |
QSAM BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| REVENUES | $ | $ | $ | $ | ||||||||||||
| OPERATING EXPENSES FROM CONTINUING OPERATIONS | ||||||||||||||||
| Compensation and related expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM CONTINUING OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE) FROM CONTINUING OPERATIONS | ||||||||||||||||
| Financing costs including interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of convertible bridge notes | - | ( | ) | - | ( | ) | ||||||||||
| Other miscellaneous income | - | - | - | |||||||||||||
| Gain on sale of equity method investment | - | - | ||||||||||||||
| Loss on debentures and accrued expenses converted to common stock | - | - | ( | ) | - | |||||||||||
| Gain on forgiveness of debt from Paycheck Protection Program | - | - | ||||||||||||||
| Gain (loss) on conversion of bridge notes including accrued interest and debt forgiveness | - | ( | ) | ( | ) | ( | ) | |||||||||
| Total Other Income (Expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss from continuing operations before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| INCOME TAXES | - | - | - | - | ||||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| DISCONTINUED OPERATIONS: | ||||||||||||||||
| Income from discontinued operations before income taxes | - | - | ||||||||||||||
| INCOME TAXES | - | - | - | - | ||||||||||||
| Income from discontinued operations | - | - | ||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| PREFERRED STOCK | ||||||||||||||||
| Series A and Series B preferred contractual dividends and deemed dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS: BASIC AND DILUTED: | ||||||||||||||||
| CONTINUING OPERATIONS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| DISCONTINUED OPERATIONS | - | - | ||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||
See notes to the unaudited condensed consolidated financial statements.
| 7 |
QSAM BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED)
| Series B Preferred Stock | Series E-1 Preferred Stock | Common Stock | Deferred | Additional | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||
| Shares | Par Value |
Shares | Par Value |
Shares | Par Value |
Stock-based Compensation |
Paid-In Capital |
Stock Subscription |
Accumulated Deficit |
Equity (Deficit) |
||||||||||||||||||||||||||||||||||
| Balance, January 1, 2021 | - | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||
| Stock-based compensation for services | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Conversion of debentures and accrued expenses | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Conversion of bridge notes and accrued interest to common stock | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Conversion of Series A preferred stock to common stock | - | - | - | - | - | - | ( |
) | ||||||||||||||||||||||||||||||||||||
| Series A, preferred stock contractual dividends | - | - | - | - | - | - | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||
| Issuance of Series B, preferred stock for cash | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
| Issuance of Series B, conversion of notes payable to preferred stock | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation to employees and directors | - | - | - | - | ( |
) | - | - | ||||||||||||||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2021 | - | - | - | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | ( |
) | - | ( |
) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation for services and warrant modification | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Deemed dividend from warrant modification | - | - | - | - | - | - | - | - | ( |
) | - | |||||||||||||||||||||||||||||||||
| Series A, preferred stock contractual dividends | - | - | - | - | - | - | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||
| Stock-based compensation to employees and directors | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net loss period for the three months ended June 30, 2021 | - | - | - | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | ( |
) | - | ( |
) | |||||||||||||||||||||||||||||||||||||||
| Conversion of Series B preferred stock to common stock | ( |
) | - | - | - | - | ( |
) | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of stock for services | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Incremental value from warrant modifications | - | - | - | - | - | - | - | - | ( |
) | - | |||||||||||||||||||||||||||||||||
| Cumulative contractual dividends of Series B preferred stock | - | - | - | - | - | - | - | - | ( |
) | - | |||||||||||||||||||||||||||||||||
| Series A, preferred stock contractual dividends | - | - | - | - | - | - | - | ( |
) | - | - | ( |
) | |||||||||||||||||||||||||||||||
| Cumulative contractual dividends of Series B preferred stock converted to common stock | - | - | - | - | - | - | - | - | ( |
) | - | |||||||||||||||||||||||||||||||||
| Compensation expense due to warrant modification | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Stock-based compensation to employees and directors | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Net loss for the three months ended September 30, 2021 | - | - | - | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||
See notes to the unaudited condensed consolidated financial statements.
| 8 |
| Series B Preferred Stock | Series E-1 Preferred Stock | Common Stock | Deferred Stock-based | Additional Paid In |
Stock |
Accumulated | Total Stockholders’ |
||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Compensation | Capital | Receivable | Deficit | Deficit | |||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | - | $ | $ | - | $ | $ | - | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||
| Stock-based compensation for services | - | - | - | - | (29,167 | ) | - | - | |||||||||||||||||||||||||||||||||||
| Stock-based compensation expense and stock option modification | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Series A, preferred stock contractual dividends | - | - | - | - | - | - | - | ( |
) | - | - | ( |
) | ||||||||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2020 | - | - | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Balance, March 31, 2020 | $ | $ | - | $ | $ | (29,167 | ) | $ | $ | - | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||
| Stock-based compensation for services | - | - | - | - | - | 25,000 | - | - | - | ||||||||||||||||||||||||||||||||||
| Series A, preferred stock contractual dividends | - | - | - | - | - | - | - | ( |
) | - | - | ( |
) | ||||||||||||||||||||||||||||||
| Net loss period for the three months ended June 30, 2020 | - | - | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | - | $ | $ | (4,167 | ) | $ | $ | - | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||
| Stock-based compensation for services | - | - | - | 4,167 | - | - | |||||||||||||||||||||||||||||||||||||
| Conversion of bridge notes and accrued interest to common stock | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Series A, preferred stock contractual dividends | - | - | - | - | - | - | - | ( |
) | - | - | ( |
) | ||||||||||||||||||||||||||||||
| Net loss for the three months ended September 30, 2020 | - | - | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | - | $ | $ | - | $ | $ | - | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||
See notes to the unaudited condensed consolidated financial statements.
| 9 |
QSAM BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the nine months ended | For the nine months ended | |||||||
| September 30, | September 30, | |||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Stock-based compensation for services and warrant modification | ||||||||
| Stock-based compensation to employees and directors | ||||||||
| Stock-based compensation and stock option modification | - | |||||||
| Loss on conversion bridge notes and accrued interest | - | |||||||
| Loss on conversion of debentures and accrued expense to common stock | - | |||||||
| Change in fair value of convertible bridge notes | - | |||||||
| Amortization of debt issuance costs | - | |||||||
| Paid-in-kind interest - convertible bridge notes | ||||||||
| Loss on extinguishment of debt | - | |||||||
| Gain on forgiveness of debt | ( | - | ||||||
| Changes in operating assets and liabilities | ||||||||
| Increase in prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Deferred offering costs | ( | ) | - | |||||
| (Decrease) increase in accounts payable and accrued expenses | ( | ) | ||||||
| Increase accrued payroll and related expenses | - | |||||||
| Increase in accrued interest– related parties | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from convertible notes payable and notes payable - related parties | - | |||||||
| Repayment on promissory notes – related party | ( | ) | ||||||
| Proceeds from convertible notes payable | - | |||||||
| Proceeds for the issuance of preferred stock – Series B | ||||||||
| Proceeds from Paycheck Protection Program | - | |||||||
| Net cash provided by financing activities | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH - Beginning of period | ||||||||
| CASH - End of period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES: | ||||||||
| Payment of interest in cash | $ | $ | ||||||
| Payment of income taxes | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Accrual of contractual dividends on Series A convertible preferred stock | $ | $ | ||||||
| Accrual of contractual dividends on Series B convertible preferred stock | $ | $ | - | |||||
| Deemed dividend on conversion of Series A preferred stock to common stock | $ | $ | ||||||
| Deemed Dividend on warrant modifications | $ | $ | ||||||
| Conversion of convertible bridge notes and accrued interest to 6,627,692 and 11,418,069 shares of common stock, respectively | $ | $ | ||||||
| Conversion of debentures and accrued expenses to common stock | $ | $ | ||||||
| Conversion of Series A preferred stock to common stock | $ | $ | ||||||
| Conversion of notes payable with related parties to Series B preferred stock and warrants | $ | $ | ||||||
See notes to the unaudited condensed consolidated financial statements.
| 10 |
QSAM BIOSCIENCES INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
QSAM
Biosciences Inc. (hereinafter the “Company”, “we”, “our”, “us”), incorporated in Delaware
on August 26, 2004, is currently engaged in the business of developing a novel radiopharmaceutical drug candidate for the treatment of
bone cancer. This business line commenced in earnest in the fourth fiscal quarter of 2020 as a result of the separation and transfer
pursuant to an Omnibus Separation Agreement dated November 6, 2020 (the “Separation Agreement”) of the Company’s prior
business of managing compost and soil manufacturing facilities (the “Legacy Business”) through an unconsolidated investee
entity called Earth Property Holdings LLC, a Delaware limited liability company (“EPH”). Pursuant to the Separation Agreement,
the Company transferred to EPH all assets and related liabilities in connection with the Legacy Business in return for a forgiveness
of debt. The financial statements presented herein have been adjusted to account for the Legacy Business as discontinued operations (see
Note 4 – Separation Agreement and Note 9 – Discontinued Operations). The Company sold its entire equity interest in EPH to
a third party in the first quarter of 2021 for $
In April 2020, the Company established QSAM Therapeutics Inc. (“QSAM”) as a wholly-owned subsidiary incorporated in the state of Texas, and through QSAM, executed a Patent and Technology License Agreement and Trademark Assignment (the “License Agreement”) with IGL Pharma, Inc. (“IGL”). The License Agreement provides QSAM with exclusive, worldwide and sub-licensable rights to all of IGL’s patents, product data and knowhow with respect to Samaium-153 DOTMP aka CycloSam® (the “Technology”), a clinical stage novel radiopharmaceutical meant to treat different types of bone cancer and related diseases.
In connection with the transition to the biosciences sector, the Company changed its name to QSAM Biosciences Inc. on September 4, 2020, and subsequently changed its stock symbol to QSAM, to better reflect its business moving forward.
Prior to 2017, the Company owned and licensed technology that converts waste fuels and heat to power, which it sold to a licensee in August of that year. Much of these operations were conducted through a wholly-owned subsidiary of the Company called Q2Power Corp. (“Q2P”), which still exists but has no current operations. Q2P and QSAM are sometimes referred to herein as the “Subsidiary”. Formerly, the Company’s name was Q2Power Technologies, Inc., and before that, Anpath Group, Inc.
The recent outbreak of the novel coronavirus (COVID-19) is impacting worldwide economic activity. COVID-19 poses the risk that we or our employees and our other partners may be prevented from conducting business activities for an indefinite period of time, including due to the spread of the disease or shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the full impact that COVID-19 could have on our business, the continued spread of COVID-19 could disrupt our research and development of CycloSam and other related activities, which could have a material adverse effect on our business, financial condition and results of operations. In addition, a severe or prolonged economic downturn could result in a variety of risks to the business. While we have not yet experienced any material disruptions in our business or other negative consequences relating to COVID-19, the extent to which the COVID-19 pandemic impacts our results will depend on future developments that are highly uncertain and cannot be predicted.
NOTE 2 – BASIS OF PRESENTATION AND GOING CONCERN
The accompanying unaudited condensed financial statements are prepared in accordance with Rule 8-01 of Regulation S-X of the Securities Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures included in these unaudited condensed financial statements are adequate to make the information presented not misleading. The unaudited condensed financial statements included in this document have been prepared on the same basis as the annual financial statements, and in our opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with US GAAP and SEC regulations for interim financial statements. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that the Company will have for any subsequent period or for the calendar year ended December 31, 2021. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes to those statements for the year ended December 31, 2020 which was filed with the SEC on April 15, 2021.
| 11 |
The
Company raised a total of $
The
Company’s convertible debentures of $
For
the nine months ended September 30, 2021, the Company used net cash in operating activities for its continuing operations of $
The Company has supported operations through the issuance of common stock, preferred stock and debt over the last 12 months. This includes the Series B preferred stock offering in the first quarter of 2021, the recent exercise of warrants issued in connection with the Series B offering, and also a recent convertible debt offering conducted after the end of the third quarter of 2021. Management expects expenses to increase in 2022 as our drug technology enters into clinical trials, and as a result, we will need to raise additional capital to support these operations. Management believes that it can do so through equity raises in 2022; however, there is no guarantee that such plan will be successful. If we are not successful in raising additional capital, we may need to delay clinical trials, reduce overhead, or in the most extreme scenario, shut down operations.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. There is no guarantee whether the Company will be able to generate revenue and/or raise capital sufficient to support its continuing operations. The ability of the Company to continue as a going concern is dependent on management’s plans which include implementation of its business model to develop and commercialize its drug candidate, seek strategic partnerships to advance clinical trials and other research endeavors which could provide additional capital to the Company, and continue to raise funds for the Company through equity or debt offerings. There is no assurance, however, that the Company will be successful in raising the needed capital and, if funding is available, that it will be available on terms acceptable to the Company. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties.
In
January 2021, the Company closed a $
Subsequent to
September 30, 2021, eight non-affiliated investors in the Company’s Series B Preferred stock exercised their warrants at
$
Also, subsequent to
September 30, 2021, the Company issued six convertible promissory notes in a private placement offering among six non-affiliated
accredited investors in the total amount of $
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The unaudited condensed financial statements include the accounts of the Company and its Subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. References herein to the Company include the Company and its Subsidiary unless the context otherwise requires.
| 12 |
Cash and Cash Equivalents
The
Company considers cash, short-term deposits, and other investments with original maturities of no more than ninety days when acquired
to be cash and cash equivalents for the purposes of the statement of cash flows. The Company maintains cash balances at one financial
institution and has experienced no losses with respect to amounts on deposit. The Company held
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers (“ASC 606”) and all the related amendments.
The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than previously required under U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.
The
Company had
The Company applies the fair value method of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, “Share Based Payment”, in accounting for its stock-based compensation with employees and non-employees. This standard states that compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. The Company values stock-based compensation at the market price for the Company’s common stock and other pertinent factors at the grant date.
The Black-Scholes option pricing valuation method is used to determine fair value of stock options consistent with ASC 718, “Share Based Payment”. Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the awards and risk-free interest rates.
Research and Development
Research
and development costs are expensed as incurred. Research and development costs were $
Fair Value Measurement
The Company measures fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Company’s convertible Bridge Notes are valued by using Monte Carlo Simulation methods and discounted future cash flow models. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs. These convertible Bridge Notes do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy.
| 13 |
Equity Method Investment
Investments in partnerships, joint ventures and less-than majority-owned subsidiaries in which we have significant influence are accounted for under the equity method. The Company’s consolidated net income includes the Company’s proportionate share of the net income or loss of our equity method investee. When we record our proportionate share of net income, it increases income (loss) — net in our consolidated statements of operations and our carrying value in that investment. Conversely, when we record our proportionate share of a net loss, it decreases income (loss) — net in our consolidated statements of income and our carrying value in that investment. The Company’s proportionate share of the net income or loss of our equity method investees includes significant operating and nonoperating items recorded by our equity method investee. These items can have a significant impact on the amount of income (loss) — net in our consolidated statements of operations and our carrying value in those investments. The Company divested its investment in its equity method investee in March 2021.
Discontinued Operations
In accordance with ASC 205-20 Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-10. In the period in which the component meets held-for-sale or discontinued operations criteria the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations.
The Company disposed of a component of its business pursuant to a Separation Agreement in November 2020, which met the definition of a discontinued operation. Accordingly, the operating results of the business disposed are reported as income (loss) from discontinued operations in the accompanying unaudited condensed statements of operations for the three months ended September 30, 2021 and 2020. For additional information, see Note 4 – Separation Agreement and Note 9 - Discontinued Operations.
Income Taxes
Income
taxes are accounted for under the asset and liability method as stipulated by FASB ASC 740, “Income Taxes” (“ASC
740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities
or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated
amounts to be realized by the use of a valuation allowance.
In the event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax positions would be recorded if the Company determined it is probable that a position would not be sustained upon examination or if payment would have to be made to a taxing authority and the amount is reasonably estimated. As of September 30, 2021 and December 31, 2020, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities; however, federal returns have not been filed since the Company’s inception in 2014. Such delinquencies are being resolved by management and a retained tax expert. Interest and penalties related to any unrecognized tax benefits is recognized in the unaudited condensed consolidated financial statements as a component of income taxes. The Company will need to be in compliance with the tax authorities by filing past federal and state income tax returns.
| 14 |
Net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period plus any potentially dilutive shares related to the issuance of stock options, shares from the issuance of stock warrants, shares issued from the conversion of redeemable convertible preferred stock and shares issued for the conversion of convertible debt.
| Shares from the conversion of Series B Preferred Stock not inclusive of dividends | ||||
| Shares from the conversion of Series E-1 Preferred Stock (subject to and potential forfeiture) | ||||
| Shares from common stock options | ||||
| Shares from common stock warrants | ||||
| Shares from the conversion of debentures | ||||
| Shares from the conversion of redeemable convertible preferred stock (based upon an assumed conversion price at September 30, 2021 of $ |
As of September 30, 2020, there were the following potentially dilutive securities that were excluded from diluted net loss per share because their effect would be anti-dilutive:
| Shares from common stock options | ||||
| Shares from common stock warrants | ||||
| Shares from the conversion of debentures | ||||
| Shares that may be converted from Bridge Notes (based upon an assumed conversion price at September 30, 2020 of $ per share) | ||||
| Shares from the conversion of redeemable convertible preferred stock (inclusive of cumulative dividends which may be converted to shares of common stock under certain conditions). |
Significant Estimates
U.S. Generally Accepted Accounting Principles (“GAAP”) requires the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited financial statements, the reported amounts of revenues and expenses, cash flows and the related footnote disclosures during the period. On an on-going basis, the Company reviews and evaluates its estimates and assumptions, including, but not limited to, those that relate to the fair value of stock-based compensation fair value of convertible bridge notes, and a valuation allowance on deferred tax assets and contingencies. Actual results could differ from these estimates.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on its unaudited financial statements.
Reclassifications
Certain reclassifications of prior year amounts have been made to conform to the 2021 presentation. These reclassifications had no effect on net loss or loss per share as previously reported.
| 15 |
Concentration of Risk
The
Company expects cash to be the asset most likely to subject the Company to concentrations of credit risk. The Company’s bank deposits
may at times exceed federally insured limits. The Company’s policy is to maintain its cash with high credit quality financial institutions
to limit its risk of loss exposure. The Company’s cash balance as of September 30, 2021, is in excess of FDIC limits in the amount
of approximately $
The Company is subject to a number of risks similar to those of other companies at a clinical-stage for radiopharmaceutical drug candidates, including dependence on key individuals; the need to develop commercially viable therapeutics; competition from other companies, many of which are larger and better capitalized; and the need to obtain adequate additional financing to fund the development of its products. The Company currently depends on third-party, suppliers for key materials and services used in its research and development manufacturing process, and is subject to certain risks related to the loss of these third-party suppliers or their inability to supply the Company with adequate materials and services.
The Company had no revenue from its continuing operations for the three and nine months ended September 30, 2021 and 2020. Revenue included in discontinued operations was generated from one related customer for the three and nine months ended September 30, 2020.
Fair Value of Financial Instruments
In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments, disclosures of fair value information about financial instruments are required, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Cash is carried fair value.
Other financial instruments, including accounts payable, accrued liabilities and short-term debt, are carried at cost, which approximates fair value given their short-term nature.
Deferred Offering Cost
Costs incurred prior to an equity offering are capitalized until the offering occurs. Upon the equity offering, all accumulated costs are charged against proceeds. If the Company determines that the equity offering will not occur, the accumulated costs are charged to operations.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, the Company views its operations and manages its business as one segment.
NOTE 4 – SEPARATION AGREEMENT
On November 6, 2020, the Company entered into the Separation Agreement with its unconsolidated investee, EPH. The Company’s board of directors approved the Separation Agreement in support of the Company’s previously disclosed plan to secure new technologies and business opportunities in the broader biosciences sector, and to significantly reduce debt and liabilities of the Company and eliminate under-performing assets and agreements. The Separation Agreement resulted in the discontinuance of the Company’s management of businesses and assets focused on compost and soil manufacturing to focus solely on the development of its exclusively licensed pharmaceutical Technology, as well as other drug candidates that it may license or otherwise secure in the future. Pursuant to the Separation Agreement:
| ● | The Management Agreement, dated January 18, 2019, as amended, between EPH and the Company was terminated by mutual agreement of the parties. Fees from this agreement constituted most of the Company’s revenue over the prior two years. |
| ● | In
lieu of any severance or other termination payments due under the Management Agreement, EPH released the Company from a total of
$ | |
| ● | The
Company agreed to transfer to EPH its license agreement with Agrarian Technologies LLC and Mulch Masters Inc. for the ABS soil enhancement
product and all associated knowhow, trade secrets and trademark/service marks. Accrued license fees in connection with this license
agreement were also assumed by EPH in the amount of $ | |
| ● | The prior officers and employees of the Company engaged in the Legacy Business were released from any non-competition, non-solicitation or other restricted covenant pursuant to their respective employment agreements. Effective October 1, 2020, several of these employees had already separated from the Company. | |
| ● | EPH received the right in its sole discretion to use the name “Q2Earth” in all jurisdictions of the United States and worldwide. |
| 16 |
Pursuant to ASC 205-20 Presentation of Financial Statements: Discontinued Operations and amended by ASU No. 2014-08, management has determined that the Separation Agreement results in the disposal of a component that represents a strategic shift in the Company’s business operations that will have a major effect on the Company’s operations and financial results. Therefore, the net income (loss) generated from this disposed component have been presented as discontinued operations for the period ended September 30, 2020 on the statement of operations.
NOTE 5 – EQUITY METHOD INVESTMENT
During
November 2018, the Company invested $
Our prior Chairman and CEO of the Company, also serves as President of EPH; and Christopher Nelson, General Counsel and Director of the Company, also serves as General Counsel and Secretary of EPH. See Note 6 – Related Party Transactions for transactions with our equity method investment during the three and nine months ended September 30, 2021 and 2020.
NOTE 6 – RELATED PARTY TRANSACTIONS
The
Company currently has a License Agreement with IGL Pharma, Inc., an entity in which the Company’s Executive Chairman serves as
President, holds options to purchase less than a
The Company currently maintains an executive office in Florida, which is leased by an investment firm in which the Company’s General Counsel serves as an officer but does not hold any equity or voting rights. The Company has no formal agreement for this space and pays no rent.
During
the three and months ended September 30, 2020, the Company received $
In
the nine-month period ended September 30, 2021, the Company paid to EPH $
During
the year ended December 31, 2020, the Company received $
| 17 |
During
the three and nine months ended September 30, 2021, the Company incurred $
NOTE 7 – DEBENTURES, CONVERTIBLE BRIDGE NOTES, AND NOTES PAYABLE
Debentures
The
Company has Original Issue Discount Senior Secured Convertible Debentures (the “Debentures”) in the aggregate amount of $
Convertible Bridge Notes
In
2017 and 2018, the Company issued a total of $
As
of March 31, 2021, all Bridge Notes remaining at the end of 2020, inclusive of principal and accrued and capitalized interest, were settled
with the holders of these notes converting their debt into a total of shares of common stock of the Company with a
fair value of $
Pursuant
to ASC 825-10-25-1, Fair Value Option, the Company made an irrevocable election at the time of issuance to report the Bridge Notes at
fair value, with changes in fair value recorded through the Company’s condensed consolidated statements of operations as other
income (expense) in each reporting period. The estimated fair value of the remaining outstanding Bridge Notes as of September 30, 2021
and December 31, 2020 was $
Paycheck Protection Program
On
April 14, 2020, the Company received $
| 18 |
NOTE 8 – FAIR VALUE MEASUREMENT
The Company measures fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
| Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; | |
| Level 2 | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and | |
| Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
As disclosed in Note 7, the Bridge Notes are reported at fair value, with changes in fair value recorded through the Company’s condensed consolidated statements of operations as a component of other income (expense) in each reporting period.
The following tables set forth the Company’s unaudited financial assets and liabilities measured at fair value by level within the fair value hierarchy as of September 30, 2021 and December 31, 2020. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Convertible Bridge Notes | $ | $ | $ | $ | ||||||||||||
| Fair value as of September 30, 2021 | $ | $ | $ | $ | ||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Convertible Bridge Notes | $ | $ | $ | - | $ | |||||||||||
| Fair value as of December 31, 2020 | $ | $ | $ | $ | ||||||||||||
The following tables present a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis that use significant unobservable inputs (Level 3) that has been recorded in the condensed consolidated balance sheets which is as follows:
| Fair value, December 31, 2020 | $ | |||
| Accrued interest | ||||
| Conversion to shares of common stock | ( | ) | ||
| Fair value, September 30, 2021 | $ |
NOTE 9 – DISCONTINUED OPERATIONS
On November 6, 2020, the Company executed a Separation Agreement (see Note 4 – Separation Agreement), whereby the Company transferred its Legacy Business and the related assets and liabilities to EPH, a related party and equity method investee.
ASC 205-20 “Discontinued Operations” establishes that the disposal or abandonment of a component of an entity or a group of components of an entity should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s unaudited operations and financial results. As a result, the component’s results of operations have been reclassified as discontinued operations on a retrospective basis for the period ended September 30, 2020. There were no results of operations from the component in the current period. As of September 30, 2021, there were no assets or liabilities held associated with this business. The results of operations of this component, for all periods, are separately reported as “discontinued operations” on the unaudited condensed statements of operations.
As disclosed in Note 4 – Separation Agreement, the Company sold its equity interest in EPH as of March 31, 2021. There have been no transactions between the Company and EPH since the Separation Agreement.
A reconciliation of the major classes of line items constituting the income (loss) from discontinued operations, net of income taxes as is presented in the consolidated statements of operations for the three and nine month ended September 30, 2021 and 2020, are summarized below:
| 19 |
Reconciliation of revenue and expense items in discontinued operations in the unaudited condensed statements of operations:
| For the Three Months Ended | For the Nine Months Ended | |||||||
| September 30, | September 30, | |||||||
| 2020 | 2020 | |||||||
| REVENUES | $ | $ | ||||||
| OPERATING EXPENSES | ||||||||
| Payroll and related expenses | 106,310 | 320,463 | ||||||
| General and administrative | ||||||||
| Total operating expenses | 119,872 | 371,838 | ||||||
| Operating Income | ||||||||
| Financing costs including interest | ( | ) | ( | ) | ||||
| OTHER EXPENSE | ( | ) | ( | ) | ||||
| INCOME FROM DISCONTINUED OPERATIONS | $ | $ | ||||||
Reconciliation of cash flows from operating activities and financing activities on the unaudited condensed statements of cash flows:
| Nine Months ended | ||||
| September 30, | ||||
| 2020 | ||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| Net income from discontinued operations | $ | |||
| Adjustments to reconcile net income to net cash provided by discontinued operations: | ||||
| Changes in operating assets and liabilities | ||||
| Increase in accounts payable and accrued expenses | ||||
| Increase in accrued interest - related party | ||||
| Net cash provided by operating activities | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||
| Proceeds from promissory notes - related parties | ||||
| Net cash provided by financing activities | ||||
| Net cash provided by discontinued operations | $ | |||