Basis of Presentation and Going Concern
|12 Months Ended|
Dec. 31, 2020
|Organization, Consolidation and Presentation of Financial Statements [Abstract]|
|Basis of Presentation and Going Concern||
NOTE 2 – BASIS OF PRESENTATION AND GOING CONCERN
For the year ended December 31, 2020, the Company used cash in operating activities for its continuing operations of $742,899 and incurred a loss from its continuing operations of $4,862,683. The accumulated deficit since inception is $15,911,895, which was comprised of operating losses and other expenses for both the continuing and discontinued operations.
The Company raised a total of $2,851,908 in convertible bridge notes (the “Bridge Notes”) starting in March 2017 and ending in 2019. In 2020, $2,928,679 of the Bridge Notes inclusive of principal and accrued and capitalized interest were converted by the holders into 13,312,175 shares of common stock. As of December 31, 2020, approximately $1.4 million of Bridge Notes inclusive of principal and accrued and capitalized interest remained outstanding and in default. As of March 31, 2021, all remaining Bridge Notes including principal and accrued and capitalized interest were converted into common stock (see Note 14 - Subsequent Events).
The Company’s convertible debentures totaling $137,500 and $600,000 of redeemable convertible preferred stock were in default as of December 31, 2020. Management is in discussions with the holders of these debt and equity securities to reach an agreement to convert the outstanding balances into common stock. As of March 31, 2021, only $35,000 of the debentures and $480,000 of the preferred stock remained outstanding and in default (see Note 14 - Subsequent Events).
As of December 31, 2020, the Company had a working capital deficit of $4,168,618.
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. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
In 2018, the Company signed an eight-year Management Agreement with EPH to oversee all of the operations of EPH and its acquired subsidiaries for an initial annual fee of $200,000, and acquired 124,999 Class B Membership Units of EPH, equal to 19.9% of the voting interests of EPH, for $50,000. In January 2019, the Company acquired an additional 53,970 Class B Membership Units in EPH for $21,588 through a subscription payable which was paid off in April 2020, and received an additional annual management fee of $500,000 plus expenses. Pursuant to the Separation Agreement (see Note 4 – Separation Agreement), the Management Agreement was terminated in November 2020, and operations from the Management Agreement have been included in discontinued operations on the accompanying statements of operations and are not part of the continuing operation of the Company (see Note 9 - Discontinued Operations). The Company evaluated its ownership interest held in EPH and concluded that EPH is an equity method investment. The primary investor, and not the Company, has ultimate control over major decisions affecting EPH and the greatest economic risk. In 2021, the Company divested its equity interest in EPH completely (see Note 14 – Subsequent Events).
Our net loss from continuing operations in 2020 and 2019 resulted largely from activities related to the public company and in 2020 also from certain license and research expenses in connection with the continuing operations of the Company’s drug development business. All income and losses related to expenses from the Legacy Business are included in discontinued operations (see Note 9 - Discontinued Operations).
Management is taking steps to improve its balance sheet and negative cashflow. Commencing in December 2020 and closing in February 2021, management raised $2.5 million in Series B Preferred Stock to support its new business model, which is expected to support continuing operations through the end of 2021 (see Note 14 – Subsequent Events). In 2020, management also was able to reduce debt significantly, in part from the forgiveness of notes payable owed to EPH (see Note 4 – Separation Agreement) and also by converting a portion of additional liabilities into common stock (see Note 7 – Debentures, Convertible Bridge Notes and Notes Payable).
The entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef