UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For
the quarterly period ended
OR
For the transition period from _______ to ______
Commission
File No.
|
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices, zip code)
(
(Registrant’s telephone number, including area code)
7 Grand View Avenue
Somerville, MA 02143
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| none | not applicable | not applicable |
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 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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| 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 or 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
APPLICABLE ONLY TO CORPORATE ISSUERS
As of January 27, 2025, there were shares of common stock outstanding.
1
INNOVATION1 BIOTECH INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED NOVEMBER 30, 2023
INDEX
2
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about risks associated with:
| • | Risks related to our business, including: | ||
| • | we have a history of losses; | ||
| • | our auditors have raised substantial doubts about our ability to continue as a going concern; | ||
| • | we have a working capital deficit and need to raise additional capital to develop our business plan; and | ||
| • | our reliance on our officer and director. | ||
| • | Risks related to regulation applicable to our industry, including: | ||
| • | compliance with existing laws and regulations and possible future changes in laws and regulations. | ||
| • | Risks related to the ownership of our securities, including: | ||
| • | the applicability of penny stock rules; and | ||
| • | material weaknesses in our internal control over financial reporting; and | ||
| • | the significant dilution to our stockholders upon the conversion of the outstanding Series C and Series C-1 Convertible Preferred Stock. | ||
You should read thoroughly this report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements including those made in Part I. Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, as filed with the Securities and Exchange Commission (the “SEC”) on January 17, 2024 (the “2023 Form 10-K”). New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.
All references in this report to the “Company”, “Innovation1 Biotech Inc.”, “Innovation1”, “we”, “us,” or “our” are to Innovation1 Biotech Inc. (formerly “Gridiron BioNutrients, Inc.”), a Nevada corporation.
3
INNOVATION1 BIOTECH INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
| November 30, 2023 | August 31, 2023 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Other assets | ||||||||
| Equipment, net | ||||||||
| Trademarks | ||||||||
| Total other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued expenses - related parties | ||||||||
| Short term loans | ||||||||
| Note payable, current portion | ||||||||
| Dividends payable | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities: | ||||||||
| Convertible note payable net of discount | ||||||||
| Total long term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholders’ equity (deficiency): | ||||||||
| Preferred stock - Series A, $ par value; shares authorized; | ||||||||
| -- issued and outstanding as of November 30, 2023 and August 31, 2023 | ||||||||
| Preferred stock - Series B, $ par value; shares authorized; | ||||||||
| issued and outstanding as of November 30, 2023 and August 31, 2023 | ||||||||
| Preferred stock - Series B-1, $ par value; shares authorized; | ||||||||
| issued and outstanding as of November 30, 2023 and August 31, 2023 | ||||||||
Common stock, $ par value; shares authorized; and issued and outstanding as of November 30, 2023 and August 31, 2023, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
INNOVATION1 BIOTECH INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
| For the Three Months Ended | ||||||||
| November 30, | November 30, | |||||||
| 2023 | 2022 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross margin | ||||||||
| Operating expenses: | ||||||||
| Advertising | ||||||||
| Consulting fees | ||||||||
| General and administrative | ||||||||
| Professional fees | ||||||||
| Research and development | ||||||||
| Salaries | ||||||||
| Depreciation | ||||||||
| Total operating expenses | ||||||||
| Net operating loss | ( | ) | ( | ) | ||||
| Other (income) expense: | ||||||||
| Interest expense | ||||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Total Other (income) expense | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Preferred dividends | ( | ) | ( | ) | ||||
| Net loss available to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Total Other expense | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding – basic and diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
INNOVATION1 BIOTECH INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
| Preferred Stock - Series A | Preferred Stock - Series B | Preferred Stock - Series B1 | Common Stock | Additional | Total | |||||||||||||||||||||||||
| Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||||||
| Balance at August 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Convertible Notes Payable - Warrant | — | — | — | — | ||||||||||||||||||||||||||
| Shares issued - settlement agreement | — | — | — | |||||||||||||||||||||||||||
| Dividends on preferred stock accrued | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Cumulative adjustment due to adoption of ASU No. 2020-06 | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss, period ended November 30, 2023 | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at November 30, 2023 (Unaudited) | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Balance at August 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Convertible Notes Payable BCF and Warrant | — | — | — | — | ||||||||||||||||||||||||||
| Dividends on preferred stock accrued | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss, period ended November 30, 2022 | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at November 30, 2022 (Unaudited) | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
INNOVATION1 BIOTECH INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| For the Three Months Ended | ||||||||
November 30, 2023 | November 30, 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of ROU Asset | ||||||||
| Amortization of discount, warrants, BCF on convertible notes payable | ||||||||
| Changes in operating assets and liabilities: | — | |||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Accounts payable | ||||||||
| Related party payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Accrued expenses - related parties | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash paid for asset purchase | ||||||||
| Notes receivable investment | ||||||||
| Net cash used in investing activities | ||||||||
| Cash flows from financing activities | ||||||||
| Proceeds from short term notes payable | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash – beginning of the period | ||||||||
| Cash – end of the period | $ | $ | ||||||
| Supplemental disclosures: | ||||||||
| Interest paid | $ | $ | ||||||
| Non-cash investment and financing activities: | ||||||||
| Preferred stock dividends accrued | $ | $ | ||||||
| Sale of Mioxal assets | $ | $ | ||||||
| Transfer of Mioxal liabilities | $ | $ | ( | ) | ||||
| Receivable created with sale of Mioxal assets | $ | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Innovation1 Biotech Inc. (the “Company”) was formed under the laws of the state of Nevada in 2014, under the name of My Cloudz, Inc. Gridiron BioNutrients completed a reverse merger with My Cloudz, Inc. in October 2017 and the Company then changed its name to Gridiron BioNutrients, Inc. Effective March 31, 2022, as approved by the shareholders, the name of the Company was changed from Gridiron BioNutrients, Inc. (trading symbol GVMP) to Innovation1 Biotech Inc. (trading symbol IVBT).
Pursuant to an exclusive worldwide, royalty-bearing license (as more fully described below in Note 9 – Subsequent Events) to research, develop, make or have made, use, import, market, offer for sale, and sell the licensed assets (each a “Licensed Asset”), the Company intends to (1) sell natural supplements under the brand name NutraFlu and Nutravid19 (together, referred to as “Nutra”) for the treatment of symptoms associated with the flu and long covid, respectively, based on research conducted by the licensor on its anti-viral NLC001 clinical programs and (2) develop the licensors Phase II clinical program for its anti-viral molecule designated NLC001, for the treatment of long covid and other viral indications.
The Company has elected an August 31st year end.
Change in Control
On November 9, 2021, the Company completed the asset acquisition of ST Biosciences, Ltd., consisting substantially of intellectual property assets, relating to Mioxal® as discussed in Note 3 – Asset Acquisition. The closing of the acquisition resulted in a change of control of the Company. As part of the acquisition, Mr. Orr stepped down as the Company’s Chief Executive Officer and assumed the role of the Company’s Chief Financial Officer. Mr. Orr has since resigned from his position and as a director. Pursuant to the terms of the Asset Purchase Agreement, Jeffrey J. Kraws was appointed as the Company’s Chief Executive Officer and a director of the Company. On December 6, 2022, Mr. Kraws stepped down as the Company’s Chief Executive Officer. He remains a director. In addition, the Company agreed to appoint Jason Frankovich as a director of the Company subject to the Company’s compliance with Rule 14F-1 of the Exchange Act. Mr. Frankovich has since resigned as a director. On December 6, 2022, Frederick E. Pierce was appointed as the Interim Acting Chief Executive Officer. See “Note 9- Subsequent Events”.
Going Concern
The
Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business. The Company had no revenue and a net loss of
$255,228 for the three months ended November 30, 2023. The Company has a working capital deficit of $
The ability of the Company to fully commence its operations is dependent upon, among other things, obtaining additional financing to continue operations and execution of its business plan. In response to these concerns, management plans to fund operations through additional debt and equity financing. Debt instruments may be convertible or non-convertible and will vary based on the Company’s needs and financing options available at such times. There can be no assurance that management’s plan will be successful.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This summary of accounting policies for Innovation1 is presented to assist in understanding the Company’s financial statements. The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“US GAAP”), which have been consistently applied in the preparation of the financial statements.
The accompanying unaudited financial information as of and for the three months ended November 30, 2023 and 2022 has been prepared in accordance with US GAAP for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such date and the operating results and cash flows for such periods. Operating results for the three months ended November 30, 2023 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission, or the SEC. These unaudited financial statements and related notes should be read in conjunction with our audited financial statements for the year ended August 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on January 17, 2024 (the “2023 Form 10-K”).
8
The condensed consolidated balance sheet at August 31, 2023 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.
Basis of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Innovation1 Biotech Inc. and its wholly owned subsidiary. Intercompany accounts and transactions have been eliminated in consolidation.
Cash and cash equivalents
The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. The Company did not have any cash equivalents as of November 30, 2023 and August 31, 2023.
Fair Value of Financial Instruments
Fair value of certain of the Company’s financial instruments including cash, prepaid expenses, accounts payable, accrued expenses, notes payable, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.
Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.
The Company did not have any Level 1 or Level 2 assets and liabilities at November 30, 2023, and August 31, 2023. The Company had Level 3 liabilities related to outstanding warrants at November 30, 2023. All financial assets and liabilities approximate fair value.
Property and Equipment
Property and equipment are carried at cost. Expenditures for maintenance and repairs are expensed in the period incurred. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.
Depreciation is computed for financial statement purposes on a straight-line basis over estimated useful lives of the related assets and the modified accelerated cost recovery system for federal income tax purposes. The estimated useful lives of depreciable computers and other equipment are three years.
9
With
the asset acquisition as discussed in Note 3 – Asset Acquisition the Company wrote off the remaining property and
equipment as impaired in the statement of operations for the year ended August 31, 2022. Depreciation expense was $
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year.
The Series B and Series B1 convertible preferred shares would convert to shares of the Company’s common stock in addition to the outstanding shares at November 30, 2023. The Series B and Series B1 Convertible Preferred shares would convert to shares of the Company’s common stock in addition to the outstanding shares at November 30, 2022. The Company calculates diluted earnings per share by dividing the Company’s net income available to common shareholders less preferred dividends by the diluted weighted average number of shares outstanding during the period. The conversion of the Company’s Series B Convertible Preferred shares are excluded from the computation of diluted earnings per share as they are anti-dilutive due to the Company’s operating losses for the three months ended November 30, 2023 and 2022.
Recently Adopted Accounting Standards
In
August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, as part of its overall simplification
initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the
information provided to users of financial statements. The ASU becomes effective for public business entities for fiscal years
beginning after December 15, 2021, and December 15, 2023, for all other entities. Early adoption is permitted, but no earlier
than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company early adopted
the new guidance on November 30, 2023, using the modified retrospective approach and recorded a cumulative effect upon adoption
of $
Recently Issued Accounting Standards
As of November 30, 2023, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.
NOTE 3 – ASSET ACQUISITION
On
October 27, 2021, the Company entered into an asset acquisition agreement with ST Biosciences, Ltd., a company organized under
the laws of England and Wales (“STB”), of certain Transferred Assets, consisting substantially of their intellectual
property relating to Mioxal®, a nutraceutical complex composed of essential amino acids, natural coenzymes and minerals. The
Company acquired certain intellectual property, and patent rights, and no tangible assets and assumed certain liabilities of STB,
as discussed below. The acquisition was completed pursuant to the terms of the Amended and Restated Asset Purchase Agreement dated
November 9, 2021. As consideration for the acquisition, the Company paid $
At acquisition the assets and liabilities assumed have been recorded at the fair values as follows:
| Mioxal® | $ | |||
| Other intangible assets | ||||
| Less liabilities assumed: | ||||
| Mioxal® liability assumed | ( | ) | ||
| Other liabilities assumed | ( | ) | ||
| Net value acquired in asset acquisition | $ |
During
the year ended August 31, 2022, additional intangibles of $
10
The
Mioxal® intellectual property, including the patent rights, was acquired by STB from Ingenius Biotech S.L, a Spanish corporation
(“Ingenius”) on September 10, 2021. The Ingenius milestone and stock payments set forth in the Purchase Agreement
between Ingenius and STB, were assumed by the Company in aggregate of $
| ● | on September 10, 2022 - $ (not issued as of the date of this filing) |
| ● | on September 10, 2023 - $ |
| ● | on September 10, 2024 - $ |
| ● | Total stock to be issued - $ |
The
remaining balance was to be paid on an earn-out basis where under Ingenius would earn an
On January 13, 2022, the Company entered into Amendment No. 1 to Purchase Agreement with Ingenius Biotech S.L. to modify the terms of the agreement dated September 10, 2021. Under the amended agreement, the first installment of $1,500,000 was due on June 30, 2022, with an additional extension of the due date to August 30, 2022 (not paid), and the second installment was due on December 31, 2022. See Sale of Mioxal Intangible Assets below for additional details.
The
Mioxal® asset had a 24-year life and was to be tested for impairment on an annual basis. During the three and twelve
months ended August 31, 2022, amortization of $
Impairment of Intangible Assets
At
August 31, 2022, an asset impairment evaluation resulted in the Company recording $
| Valuation at the sale of Mioxal: | ||||
| Cash to be received by the Company | $ | |||
| FV of 350,000 shares transferred to Buyer from third parties ($0.13 per share) | ( | ) | ||
| Debt assumed/forgiven by Buyer | ||||
| Impairment expense | ( | ) | ||
| NPV of estimated future royalty cash stream | ||||
| Total estimated value of intangible assets at August 31, 2023 | ||||
| Carrying value of intangible assets at August 31, 2023 | $ | |||
| Impairment expense at August 31, 2023 on intangible assets | $ | |||
Sale of the Mioxal Intangible Assets:
On
November 7, 2022, the Company completed the disposition of all the assets, including intellectual property assets, and obligations
relating to Mioxal® to Ingenius Biotech S.L., a corporation organized under the laws of Spain (“Ingenius”). As
part of the disposition, certain shareholders of the Company transferred an aggregate of 350,000 shares of the Company’s
currently outstanding common stock, to Ingenius and Ingenius agreed to pay the Company (i) $
11
NOTE 4 – NOTES PAYABLE
Short-Term Notes Payable
On
September 14, 2017, the Company issued a $
In the three months ended November 30,
2023, the Company issued $
Convertible Notes Payable
The
Company has entered into a private placement to receive net cash proceeds up to $
During
the three months ended November 30, 2023, the Company received convertible notes of $
The total fair value of the warrants was estimated using the following weighted average assumptions:
| August 31, 2023 | November 29, 2022 | |
| Market price of common stock on date of issuance | $ - | $ |
| Risk-free interest rate | - % | % |
| Expected dividend yield | ||
| Expected term (in years) | ||
| Expected volatility | – % | % |
Prior
to the adoption of ASU 2020-06, a beneficial conversion feature of $
At
November 30, 2023, the Company had outstanding convertible notes payable of $
NOTE 5 – RELATED PARTY TRANSACTIONS
The
Company has a contract with two consulting and pharmaceutical firms owned by the former Chief Science Officer, Salzman Group LLC
and Herring Creek Pharmaceuticals, under which research and development activities are performed on behalf of the Company. During
the fiscal year 2022, the Company paid $
12
As of November 30, 2023 and August 31,
2023, the Company owed salary of $
NOTE 6 – LEASE LIABILITY
On
January 1, 2022, we adopted ASC Topic 842 – Leases. Under this new guidance, lessees are required to recognize assets and
liabilities on the balance sheet for the rights and obligations created by all leases. Upon adoption, we recognized operating
lease right-of-use (“ROU”) assets and corresponding lease liabilities of $
Lessee accounting
We determine if an arrangement is or contains a lease at inception. Our assessment is based on (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period and (3) whether we have the right to direct the use of the asset. Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for the majority of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of these criteria. The lease classification affects the expense recognition in the income statement. Operating lease costs are recorded entirely in operating expenses. Finance lease costs are split, where amortization of the ROU asset is recorded in operating expenses and an implied interest component is recorded in interest expense.
Under the guidance of ASC 842, operating leases are included in right-of-use assets, current lease liabilities, and noncurrent lease liabilities on our balance sheets. ROU assets and lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at transition date in determining the present value of future payments. The ROU asset includes any lease payments made but excludes lease incentives and initial direct costs incurred, if any. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
Lease extensions
Many leases have options to either extend or terminate the lease. In determining the lease term, we considered all available contract extensions that are reasonably certain of occurring.
Operating leases
On January 1, 2022, the Company entered into an operating lease for office space. The lease is effective for 3 years from the commencement date with automatic renewal at the expiration date. The lease agreement may be terminated earlier upon ninety days’ prior written notice by either party. The lease requires adjustment upon renewal with an increase to the monthly rent by 10% of the monthly rent due for the month preceding such renewal date or market rate, whichever is the greater amount.
The
Company was unable to pay its December 2022 lease payment and the owner sought legal action. The Company was served with a summons
in December 2022. The summons sought a judgment of $
13
NOTE 7 – STOCKHOLDERS’ EQUITY
Dividends
During
the year ended August 31, 2018, the Company issued Series A Convertible Preferred Stock, which accrues dividends at a rate of
Preferred Stock
There were shares of Series A Convertible Preferred Stock issued and outstanding as of November 30, 2023, and August 31, 2023.
There were shares of Series B Convertible Preferred Stock issued and outstanding as of November 30, 2023, and August 31, 2023, respectively. There were shares of Series B-1 Convertible Preferred Stock issued and outstanding as of November 30, 2023, and August 31, 2023, respectively.
Deemed Dividend related to Series B and B-1 Convertible Preferred Stock Down Round Provision
The
Series B and Series B-1 Convertible Preferred Stock issued contain a down round provision. During the twelve months ended
August 31, 2023, the Company entered into an agreement to issue common shares at $ per share. Pursuant to the down round
provision, the conversion price of the Series B and Series B-1 Convertible Preferred Stock was reduced to $0.225 per share at
February 28, 2023. In addition, the Company recognized a deemed dividend (i.e., a reduction to retained earnings, or in
absence of retained earnings, additional paid-in capital) of $
Common Stock
The Company is authorized to issue up to shares of $ par value common stock.
During the three months ended November 30, 2023, the Company issued shares of restricted common stock under a settlement agreement.
There were and common shares issued and outstanding as of November 30, 2023, and August 31, 2023, respectively.
Warrants
During the three months ended November 30, 2023, the Company issued warrants to purchase shares of the Company’s common stock, as part of the convertible notes financing, see Note 4 – Notes Payable.
At November 30, 2023 and 2022, the following warrants were outstanding:
| Number of warrants | Weighted average exercise price | Weighted average term remaining (years) | ||||||||||
| Balance, August 31, 2023 | $ | |||||||||||
| Issued | ||||||||||||
| Balance, November 30, 2023 | $ | |||||||||||
| Balance, August 31, 2022 | $ | — | ||||||||||
| Issued | ||||||||||||
| Balance, November 30, 2022 | $ | |||||||||||
NOTE 8 – COMMITMENTS AND CONTINGENCIES
On
September 30, 2022, a party identified as New You Inc. filed a complaint with the District Court of Clark County, Nevada against
Innovation 1 Biotech, Inc, ST Biosciences LTD, Jeffrey Kraws and Jason Frankovich. The complaint alleges that during Mr. Frankovich’s
service to New You Inc. as Chairman of the Board of Directors, concurrent with Mr. Frankovich’s and Mr. Kraws’ services
as executives of ST Biosciences LTD, Mr. Frankovich converted funds away from New You Inc. to satisfy obligations of ST Biosciences
LTD and/or Innovation1 and/or to enrich Frankovich and Kraws. The amount of the claim is a total of $
14
NOTE 9 – SUBSEQUENT EVENTS
The Company evaluates events that have occurred after the balance sheet date of November 30, 2023, through the date which the condensed consolidated financial statements were filed. Based upon the review, other than described below, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
Subsequent
to the period ended November 30,2023, the Company has entered into securities purchase agreements to receive net cash proceeds
up to $
Subsequent to the period covered by this
report, effective October 29, 2024, the Company entered into a license agreement, as amended, by and among NLC Ltd., an Israeli
limited company and NLC Viral Defense, LLC, a Delaware limited liability company (NLC Ltd. and NLC Viral Defense, LLC collectively,
“NLC”), with principal offices located at 25 Shlomo Ben Yosef Street, Suite 44, Tel Aviv, Israel. Pursuant to the license
agreement, the Company was granted an exclusive worldwide, royalty-bearing license to research, develop, make or have made, use,
import, market, offer for sale, and sell the following assets (each a “Licensed Asset”): (1) Natural supplements under
the brand name NutraFlu and Nutravid19 (together, referred to as “Nutra”) for the treatment of symptoms associated
with the flu and long covid, respectively, based on research conducted by NLC on its anti-viral NLC001 clinical programs, and (2)
NLC’s Phase II clinical program for its anti-viral molecule designated NLC001, for the treatment of long covid and other
viral indications. In consideration of the license the Company shall pay
Pursuant to the license agreement the Company
paid NLC a fee of $
Effective October 29, 2024, the Company
also entered into a two-year consulting agreement with Dr. Dorit Arad pursuant to which she will oversee and guide the technological
aspects of the Company's operations. Dr. Arad shall receive an initial fee of $
On November 1, 2024, the Company filed
a Certificate of Designation of Preferences, Rights and Limitations of the Series C and on November 12, 2024 the Company filed
a Certificate of Designation of Preferences, Rights and Limitations of the Series C-1. The number of shares constituting the
Series C is shares, par value $ per share, with a conversion price of $ per share. The
number of shares constituting the Series C-1 is , par value $ per share and a conversion price of $
per share. The stated value for the Series C and the Series C-1 is equal to $0.001 (as adjusted for any stock splits,
stock dividends, recapitalizations, or similar transaction with respect to the common stock or any other shares of the Corporation’s
capital stock, including, without limitation, any series of the Company’s preferred stock, the “Stated Value”)).
The holders of Series C and Series C-1 shall vote with the shares of common stock, on an as-converted to common stock
basis, with respect to all matters on which the holders of common stock are entitled to vote, subject to any applicable beneficial
ownership limitations. The Series C holders are subject to a
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, prior and in preference to the common stock or any other series of preferred stock except for the Series C-1 or Series C, respectively, the holders shall be entitled to receive on an in pari passu basis with the holders of the Series C-1 or Series C, respectively, out of the assets available for distribution to stockholders an amount in cash equal to 120% of the aggregate Stated Value of all shares of Series C or all shares of Series C-1, as applicable, held by such holder. Each share of Series C and Series C-1 shall be convertible, at any time and from time to time after the original issue date, at the option of the holder thereof, into that number of shares of common stock determined by dividing the Stated Value of such share of Series C or Series C-1 by the conversion price. Commencing January 1, 2025 and continuing thereafter on each successive six-month anniversary holders of Series C and Series C-1 shall be entitled to receive, and the Company shall pay, by issuing shares of common stock to holders as calculated as follows (subject to applicable law), dividends on shares of preferred stock, based on the Stated Value, at a rate of 6% per annum, commencing on the original issue date until the earlier of (i) the date that the preferred stock is converted to common stock or redeemed by the Company, or (ii) the date no shares of Series C and/or Series C remain outstanding.
On November 1, 2024, the Company entered
into a Securities Purchase Agreement with three officers and directors of the Company and sold the officers and directors an aggregate
of shares of the Company’s Series C for gross proceeds of $
Upon the closing of the Series C and Series C-1 securities purchase agreements, Charles Allen and Fredrick Pierce II resigned as officers and directors of the Company and Francis Knuettel II was appointed Executive Chairman of the Board, and the Company intends to appoint Dr. Dorit Arad as Chief Medical Officer and Chief Technical Officer and Sam Knipper as Interim Chief Executive Officer and Chief Financial Officer following the effectiveness of the Authorized Share Increase. Dr. Arad continues to serve as the chief executive officer of NLC.
On January 9, 2025 our board of directors approved an amendment to the Company’s Articles of Incorporation, as amended, to increase the number of shares of Common Stock the Company is authorized to issue from shares to shares (“the “Authorized Share Increase”) which is described in this Information Statement. We obtained written consent by the holders of the Company’s outstanding Series C Senior Convertible Preferred Stock holding a majority of the voting power of the Company’s outstanding capital stock, approving the Authorized Share Increase. Once we decide to implement the Authorized Share Increase, it would become effective on the date of filing of Articles of Amendment to our articles with the office of the Secretary of State of the State of Nevada. However, a U.S. Securities and Exchange Commission rule requires the Articles of Amendment may not be filed until at least 20 calendar days after the mailing of an information statement to our non-consenting shareholders
15
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our financial condition and results of operations for the three months ended November 30, 2023 and 2022 should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements because of several factors, including those set forth under the Part I, Item 1A, Risk Factors and Business sections in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, as filed with the SEC on January 17, 2024 and our other filings with the SEC. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this report.
Overview
During the period covered by this report the Company currently had no sources of revenue and no specific business plan or purpose. The Company’s business plan was to seek a business combination.
Subsequent to the period covered by this report, effective October 29, 2024, the Company entered into a license agreement, as amended, by and among NLC Ltd., an Israeli limited company and NLC Viral Defense, LLC, a Delaware limited liability company (NLC Ltd. and NLC Viral Defense, LLC collectively, “NLC”), with principal offices located at 25 Shlomo Ben Yosef Street, Suite 44, Tel Aviv, Israel. Pursuant to the license agreement, the Company was granted an exclusive worldwide, royalty-bearing license to research, develop, make or have made, use, import, market, offer for sale, and sell the following assets (each a “Licensed Asset”): (1) Natural supplements under the brand name NutraFlu and Nutravid19 (together, referred to as “Nutra”) for the treatment of symptoms associated with the flu and long covid, respectively, based on research conducted by NLC on its anti-viral NLC001 clinical programs, and (2) NLC’s Phase II clinical program for its anti-viral molecule designated NLC001, for the treatment of long covid and other viral indications. In consideration of the license the Company shall pay the following royalties, if any to NLC: (1) In respect of sales of Nutra: 12.0% on the first $2.5 million in net sales generated from the sale of Nutra, 9.0% on the next $2.5 million in net sales generated from the sale of Nutra and 6% of net sales generated from the sale of Nutra thereafter; and (2) In respect of sales of NLC001: 12.0% on the first $2.5 million in net sales generated from the sale of NLC001, 9.0% on the next $2.5 million in net sales generated from the sale of NLC001 and 6% of net sales generated from the sale of NLC001 thereafter. Commencing on the second anniversary of the closing of the license agreement and for the remainder of the term of the license agreement, the Company shall also be entitled to a minimum payment of $25,000 per quarter. The license agreement is subject to standard terms and conditions. The Company requires significant working capital to research and develop the Licensed Assets and there are no assurances the Company will receive any financing or financing on reasonable terms. Furthermore, there are no assurances that the Company will develop or license any products based on the Licensed Assets. To date the Company has not developed any Licensed Assets into products for sale. The Company requires financing to fund research and development, marketing and general administrative and general business expenses as it attempts to develop marketable products. There are no assurances the Company will obtain such financing or that such financing will be available on reasonable terms. See below, “Part II, Item 5” below for subsequent events.
Cash Flows & Going Concern
Our financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company had no revenue and a net loss of $255,228 for the quarter ended November 30, 2023. The Company has a working capital deficit of $2,638,693 and an accumulated deficit of $59,047,177 as of November 30, 2023. We do not have sufficient funds to support our daily operations for the next twelve (12) months. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
16
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Please refer to Note 2 – Summary of Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2023 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 2023 Form 10-K.
Results of Operations for the Three Months Ended November 30, 2023 and 2022
Overview. We had revenues of $0 for the three months ended November 30, 2023 and 2022, respectively. We incurred a net loss of $255,228 and $631,666 for the three months ended November 30, 2023, and 2022, respectively. The decrease in net loss is attributable to the factors discussed below.
Revenues. We had $0 revenues from operations for the three months ended November 30, 2023, and 2022. The extent to which, and the amount of revenues which may be generated from our future business operations and activities is unknown.
Gross Margin. We had $0 gross margin for the three months ended November 30, 2023 and 2022.
Expenses. Our operating expenses were $155,832 and $628,820 for the three months ended November 30, 2023, and 2022, respectively. We experienced decreases of $5,237 in advertising, $147,556 in general and administrative, $80,219 in professional fees, $15,000 in research and development, $241,282 in salaries, and these were offset by an increase of $16,306 in consulting fees.
Other (Income) Expense. Our total other (income) expense was $99,396 and $2,846 for the three months ended November 30, 2023, and 2022, respectively. The increase in other (income) expense was attributable to an increase in interest expense of $101,218 which was offset by a $4,668 gain on extinguishment of debt.
Liquidity and Capital Resources
For the three months ended November 30, 2023, we used net cash of $150,920 from operating activities, primarily attributable salaries, professional fees and general and administrative expenses and the issuance of shares for settlement agreement.
For the three months ended November 30, 2023, we had no investing activities.
For the three months ended November 30, 2023, cash of $106,890 was provided from financing activities received on various notes payable.
Assets
We had total assets of $20,057 as of November 30, 2023, which consisted of $5,819 cash, prepaid expenses of $11,250, equipment of $1,308 and trademarks of $1,680.
Liabilities
We had total liabilities of $3,070,314 as of November 30, 2023, consisting of accounts payable of $357,342, accrued expenses of $162,219, accrued expenses – related party of $106,923, short term loans $40,000, note payable - current portion of $10,000, dividends payable of $1,979,278 for our Series B and Series B-1 Convertible Preferred stock and convertible notes payable net of discount of $414,552.
Cash Requirements
At November 30, 2023, we had a cash balance of $5,819. This cash amount is not sufficient to continue our 12-month plan of operation. We will need to raise capital to realize our 12-month plan of operation and fund our ongoing operational expenses. Additional funding will likely come from equity financing from the sale of our common stock or from entering into notes payable. If we are successful in completing equity financing, existing shareholders will experience dilution of their interest in our Company. In the absence of such financing, our business will likely fail. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing.
17
See below, “Part II, Item 5” below for subsequent events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 3.
ITEM 4. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, our principal executive officer and our principal financial officer are responsible for conducting an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of November 30, 2023 as a result of continuing weaknesses in our internal control over financial reporting as set forth in our 2023 Form 10-K.
18
Changes in Internal Control Over Financial Reporting. There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company could become a party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating, and settling similar matters. At June 30, 2024, there were no such actions or proceedings, either individually or in the aggregate, that, if decided adversely to the Company’s interests, the Company believes would be material to its business.
ITEM 1A. RISK FACTORS.
We incorporate by reference the risk factors disclosed in Part I, Item 1A of our 2023 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
19
ITEM 5. OTHER INFORMATION.
Subsequent to the period covered by this report, effective October 29, 2024, the Company entered into a license agreement, as amended, with NLC. Pursuant to the license agreement, the Company was granted an exclusive worldwide, royalty-bearing license to research, develop, make or have made, use, import, market, offer for sale, and sell the following assets (each a “Licensed Asset”): (1) Natural supplements under the brand name NutraFlu and Nutravid19 (together, referred to as “Nutra”) for the treatment of symptoms associated with the flu and long covid, respectively, based on research conducted by NLC on its anti-viral NLC001 clinical programs, and (2) NLC’s Phase II clinical program for its anti-viral molecule designated NLC001, for the treatment of long covid and other viral indications. In consideration of the license the Company shall pay the following royalties, if any to NLC: (1) In respect of sales of Nutra: 12.0% on the first $2.5 million in net sales generated from the sale of Nutra, 9.0% on the next $2.5 million in net sales generated from the sale of Nutra and 6% of net sales generated from the sale of Nutra thereafter; and (2) In respect of sales of NLC001: 12.0% on the first $2.5 million in net sales generated from the sale of NLC001, 9.0% on the next $2.5 million in net sales generated from the sale of NLC001 and 6% of net sales generated from the sale of NLC001 thereafter. Commencing on the second anniversary of the closing of the license agreement and for the remainder of the term of the license agreement, the Company shall also be entitled to a minimum payment of $25,000 per quarter. The license agreement is subject to standard terms and conditions. The Company requires significant working capital to research and develop the Licensed Assets and there are no assurances the Company will receive any financing or financing on reasonable terms. Furthermore, there are no assurances that the Company will develop or license any products based on the Licensed Assets. To date the Company has not developed any Licensed Assets into products for sale. The Company requires financing to fund research and development, marketing and general administrative and general business expenses as it attempts to develop marketable products. There are no assurances the Company will obtain such financing or that such financing will be available on reasonable terms.
Pursuant to the license agreement the Company paid NLC a fee of $100,000 and pursuant to a stock issuance agreement committed to issue NLC Ltd. 1,023,511,950 shares of restricted common stock, representing an aggregate of 10.0% of the Company’s issued and outstanding shares of common stock on a fully diluted basis (the “NLC Shares”), which the Company agreed to issue following the effective date of the Authorized Share Increase. In addition, the Company paid NLC approximately $35,000 plus VAT at the applicable rate on the date of payment for NLC’s reasonable and documented legal expenses incurred by it in connection with the negotiation of the license agreement and related transactions.
Effective October 29, 2024, the Company also entered into a two-year consulting agreement with Dr. Dorit Arad pursuant to which she will oversee and guide the technological aspects of the Company's operations. Dr. Arad shall receive an initial fee of $12,500 per month, until the Company has raised $1,500,000 in financing capital. Once the Company has raised $1,500,000 in financing capital, Dr. Arad shall receive a fee of $15,000 per month, until the Company has reached profitability in accordance with generally accepted accounting principles, consistently applied (“GAAP Profitability”). Once the Company has reached GAAP Profitability, Dr. Arad shall receive a fee of $20,000 per month through the term of her consultancy. In addition to the foregoing, Dr. Arad shall be considered for performance-based bonuses in accordance with the general compensation and bonus policy of the Company then in effect. Upon the raising of at least $2 million by the Company in aggregate proceeds from investors (not referred by Dr. Arad), Dr. Arad shall receive a one-time bonus of $100,000. Dr. Arad serves as the chief executive officer of NLC. The Company intends to appoint Dr. Dorit Arad as Chief Medical Officer and Chief Technical Officer following the effectiveness of the Authorized Share Increase (as defined below).
On November 1, 2024, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series C and on November 12, 2024 the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series C-1. The number of shares constituting the Series C is 1,200,000 shares, par value $0.001 per share, with a conversion price of $0.000000586216897634410 per share. The number of shares constituting the Series C-1 is 15,000,000, par value $0.001 per share and a conversion price of $0.00000209963072212 per share. The stated value for the Series C and the Series C-1 is equal to $0.001 (as adjusted for any stock splits, stock dividends, recapitalizations, or similar transaction with respect to the common stock or any other shares of the Corporation’s capital stock, including, without limitation, any series of the Company’s preferred stock, the “Stated Value”)). The holders of Series C and Series C-1 shall vote with the shares of common stock, on an as-converted to common stock basis, with respect to all matters on which the holders of common stock are entitled to vote, subject to any applicable beneficial ownership limitations. The Series C holders are subject to a 4.99% beneficial ownership limitations but are not subject to any beneficial ownership limitations and vote on an as converted basis for the Authorized Share Increase.
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, prior and in preference to the common stock or any other series of preferred stock except for the Series C-1 or Series C, respectively, the holders shall be entitled to receive on an in pari passu basis with the holders of the Series C-1 or Series C, respectively, out of the assets available for distribution to stockholders an amount in cash equal to 120% of the aggregate Stated Value of all shares of Series C or all shares of Series C-1, as applicable, held by such holder. Each share of Series C and Series C-1 shall be convertible, at any time and from time to time after the original issue date, at the option of the holder thereof, into that number of shares of common stock determined by dividing the Stated Value of such share of Series C or Series C-1 by the conversion price. Commencing January 1, 2025 and continuing thereafter on each successive six-month anniversary holders of Series C and Series C-1 shall be entitled to receive, and the Company shall pay, by issuing shares of common stock to holders as calculated as follows (subject to applicable law), dividends on shares of preferred stock, based on the Stated Value, at a rate of 6% per annum, commencing on the original issue date until the earlier of (i) the date that the preferred stock is converted to common stock or redeemed by the Company, or (ii) the date no shares of Series C and/or Series C remain outstanding.
On November 1, 2024, the Company entered into a Securities Purchase Agreement with three officers and directors of the Company and sold the officers and directors an aggregate of 1,200,000 shares of the Company’s Series C for gross proceeds of $12,000. On November 12, 2024, the Company entered into Exchange Agreements with certain accredited investors to exchange all of the Company’s issued and outstanding Series B Preferred Stock, Series B-1 Preferred Stock, promissory notes and warrants issued by the Company to the investors (the “Original Securities”) for an aggregate of 14,250,000 shares of Series C-1. Upon consummation of the exchange, all of the Original Securities were cancelled. In addition, the Company entered into a Securities Purchase Agreements dated November 12, 2024 with two accredited investors and issued to the investors an aggregate of 750,000 shares of the Company’s Series C-1 for gross proceeds of $600,000. The investors under the Series C and Series C-1 securities purchase agreements also entered into registration rights agreements with the Company to register the shares of common stock issuable upon conversion of Series C and Series C-1.
Upon the closing of the Series C and Series C-1 securities purchase agreements, Charles Allen and Fredrick Pierce II resigned as officers and directors of the Company and Francis Knuettel II was appointed Executive Chairman of the Board. Mr. Knuettel was initially appointed to serve as a member of the Company’s Board and the Interim Chief Executive Officer of the Company effective November 7, 2024. The Company intends to appoint Dr. Dorit Arad as Chief Medical Officer and Chief Technical Officer and Sam Knipper as Interim Chief Executive Officer and Chief Financial Officer following the effectiveness of the Authorized Share Increase. Dr. Arad continues to serve as the chief executive officer of NLC. Francis Knuettel II is currently the Company’s sole officer and director.
On January 9, 2025 our board of directors approved an amendment to the Company’s Articles of Incorporation, as amended, to increase the number of shares of Common Stock the Company is authorized to issue from 200,000,000 shares to 250,000,000,000 shares (“the “Authorized Share Increase”) which is described in this Information Statement. We obtained written consent by the holders of the Company’s outstanding Series C Senior Convertible Preferred Stock holding a majority of the voting power of the Company’s outstanding capital stock, approving the Authorized Share Increase. Once we decide to implement the Authorized Share Increase, it would become effective on the date of filing of Articles of Amendment to our articles with the office of the Secretary of State of the State of Nevada. However, a U.S. Securities and Exchange Commission rule requires the Articles of Amendment may not be filed until at least 20 calendar days after the mailing of an information statement to our non-consenting shareholders
20
ITEM 6. EXHIBITS.
(a) The following Exhibits, as required by Item 601 of Regulation SK, are attached or incorporated by reference, as stated below.
|
Incorporated by Reference |
Filed or Furnished |
||||||||||
| No. | Exhibit Description | Form | Date Filed | Number | Herewith | ||||||
| 3.1.1 | Articles of Incorporation | S-1 | 4/13/15 | 3.1 | |||||||
| 3.1.2 | Certificate of Amendment | 10-K | 12/15/17 | 3.1.2 | |||||||
| 3.1.3 | Certificate of Amendment | 8-K | 2/21/18 | 3.1.1 | |||||||
| 3.1.4 | Certificate of Amendment | 8-K | 8/16/18 | 3.1.1 | |||||||
| 3.1.5 | Certificate of Amendment | 8-K | 8/16/18 | 3.1.2 | |||||||
| 3.1.6 | Certificate of Designation | 8-K | 8/16/18 | 3.1.3 | |||||||
| 3.1.7 | Certificate of Correction | 8-K | 8/16/18 | 3.1.4 | |||||||
| 3.1.8 | Articles of Amendment filed December 22, 2020 effective January 8, 2021 | 8-K | 1/11/21 | 3.1.8 | |||||||
| 3.1.9 | Articles of Amendment filed March 31, 2022 effective March 31, 2022 | 8-K | 4/6/22 | 3.1.9 | |||||||
| 3.1.10 | Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of the Series B Convertible Preferred Stock | 8-K | 11/24/21 | 3.1 | |||||||
| 3.1.11 | Amendment to Certificate of Designations, Preferences and Rights of the Series B-1 Convertible Preferred Stock | 8-K | 11/24/21 | 3.2 | |||||||
| 3.1.12 | Certificate of Designations, Preferences and Rights of the Series C Senior Convertible Preferred Stock | Filed | |||||||||
| 3.1.13 | Certificate of Designations, Preferences and Rights of the Series C-1 Senior Convertible Preferred Stock | Filed | |||||||||
| 3.2 | Amended and Restated Bylaws | S-1 | 11/30/22 | 3.2 | |||||||
| 10.1 | Stock Issuance Agreement dated October 29, 2024+ | Filed | |||||||||
| 10.2 | License Agreement dated October 29, 2024+ | Filed | |||||||||
| 10.3 | Form of Leak-Out Agreement dated November 12, 2024 | Filed | |||||||||
| 10.4 | Form of Securities Purchase Agreement dated November 12, 2024+ | Filed | |||||||||
| 10.5 | Form of Registration Rights Agreement dated November 12, 2024+ | Filed | |||||||||
| 10.6 | Form of Exchange Agreement dated November 12, 2024+ | Filed | |||||||||
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed | |||||||||
| 32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished* | |||||||||
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | Filed | |||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed | |||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed | |||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed | |||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed | |||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed | |||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | Filed | |||||||||
+ Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the SEC Staff upon request.
* This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
21
SIGNATURES
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.
| INNOVATION1 BIOTECH, INC. | |||
| (Name of Registrant) | |||
| Date: January 27, 2025 | By: | /s/ Francis Knuettel II | |
| Name: | Francis Knuettel II | ||
| Title: | Interim Acting Chief Executive Officer Principal Executive and Principal Financial Officer |
||
22