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, 2020 are not necessarily indicative of the results that the Company will have for any subsequent period or for the calendar year ended December 31, 2020. 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, 2019 which was filed with the SEC on April 14, 2020.

For the nine months ended September 30, 2020, the Company used cash in operating activities of $620,118 and incurred a loss of $3,734,635. The accumulated deficit as of September 30, 2020 since inception is $14,783,844, which was comprised of operating losses and other expenses. Additionally, certain of the Company’s debentures totaling $165,000 and redeemable convertible preferred stock matured on July 1, 2019 and are currently in default. Management is in discussions with the holders to either extend the maturity dates or find an alternate settlement solution.

As of September 30, 2020, $1,777,516 of principal and accrued capitalized interest under multiple convertible bridge notes (the “Bridge Notes”), which were issued by the Company primarily between March 31, 2017 and the end of 2018, were in default; and $2,511,975 in principal and accrued and capitalized interest under additional Bridge Notes were settled during the period ended September 30, 2020, with the holders of these notes converting their debt into 11,418,069 shares of common stock of the Company. After September 30, 2020, an additional $130,000 of Bridge Notes including accrued and capitalized interest that was previously in default was also settled for the issuance of, and agreement to issue, a total of 590,909 shares of common stock (see Note 11). The Company is in discussions with the remaining group of Bridge Note holders – amounting to $1,646,646 in principal and accrued and capitalized interest — to reach a settlement which may include an extension of the notes, conversion into equity, or some other combination of these options.

As of September 30, 2020, the Company had a working capital deficit of $4,960,244.

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 operations. The ability of the Company to continue as a going concern is dependent on management’s plans which include implementation of its new business model to develop and commercialize its drug candidate, and continue to raise funds for the Company through equity offerings. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Management is aware of the Company’s liquidity and going concern issues and is actively taking steps to improve its negative cashflow and reduce its significant debt burden. Such steps were advanced in the fourth quarter of 2020 (see Note 11). Further, the Company expects to raise up to $3 million of new equity to pursue the QSAM drug development opportunity. There are no guarantees that the Company will be successful in these efforts.