The following discussion should be read in conjunction with our financial
statements and the related notes that appear elsewhere in this annual report.
The following discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. 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 this Annual
Report. 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 annual
report on Form 10-K.
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Overview
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).
Innovation1 Biotech Inc. ("IVBT") believes it will be among the first companies
to harness the raw power of botanical therapeutics by transforming them into
fully synthetic drugs that are safely, reliably and consistently delivered.
There are two fundamental limitations in exploiting botanical Schedule 1
molecules:
1. Large and unpredictable pharmacokinetic excursions, both high and low,
that make the drug potentially dangerous or ineffective
2. Insolubility in water that curtails bioavailability across mucosal
membranes
To address these limitations, ST Biosciences, Ltd. engaged with Salzman Group,
and Innovation1 later assumed the contractual obligations subsequent to the
Asset Purchase Agreement completed on November 9, 2021 in order to gain access
to a broader portfolio of intellectual property. According to Dr. Andrew
Salzman, the Salzman Group, has pioneered the design and development of novel
small molecules in the fields of cancer, heart disease, lung injury,
intermediary metabolism and ophthalmology. The firm is currently regarded as a
world leader in the design and optimization of rare cannabinoids.
IVBT has acquired five proprietary preclinical prodrugs, all fully synthetic
without connection to botanical sourcing: a mushroom-derived psychedelic
molecule for treatment post-traumatic stress disorder and depression, a novel
cannabinoid and tree bark derived psychedelic for treatment of addiction and
three additional novel cannabinoid prodrugs addressing clinical indications of
refractory pediatric epilepsy, hypertrophic scarring from burn wound injury and
ocular inflammation of the cornea and anterior uvea. IVBT's drug portfolio
uniquely positions IVBT to capitalize on the growing global demand for
pharmaceutical Schedule 1 drugs.
Going Concern and Cash Flows
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 operating loss
of $40,877,813 for the fiscal year ended August 31, 2022. The Company has
working capital deficit of $29,525,460 and an accumulated deficit of $44,551,043
as of August 31, 2022. 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.
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.
The Company is attempting to commence operations and generate sufficient
revenue; however, the Company's cash position may not be sufficient to support
its daily operations. While the Company believes in the viability of its
strategy to commence operations and generate sufficient revenue and in its
ability to raise additional funds, there can be no assurances to that effect.
The ability of the Company to continue as a going concern is dependent upon its
ability to further implement its business model and generate sufficient revenue
and its ability to raise additional funds by way of a public or private
offering.
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COVID-19
In December 2019, a novel strain of COVID-19 was reported in China.
Subsequently, the COVID-19 spread globally including across North America and
the United States. The spread of COVID-19 from China to other countries has
resulted in the World Health Organization (WHO) declaring the outbreak of
COVID-19 as a "pandemic," or a worldwide spread of a new disease, on March 11,
2020. While the threat of continued or resurgent lockdowns or containment
efforts have abated, we caution that our business could be materially and
adversely affected by the risks, or the public perception of the risks, related
to additional outbreaks of COVID-19.
Critical Accounting Policies
Please refer to Note 2 - Summary of Significant Accounting Policies in the
accompanying Notes to the Consolidated Financial Statements.
Results of Operations
Overview. We had revenues of $0 and $3,080 for the years ended August 31, 2022
and 2021, respectively. We incurred a net income (loss) of ($40,690,155) and
$1,039,932 for the years ended August 31, 2022 and 2021, respectively. The
decrease in net income is attributable to the factors discussed below.
Revenues. We had revenues from operations of $0 and $3,080 for the years ended
August 31, 2022 and 2021, respectively. Our revenues for the year ended August
31, 2021 consisted primarily of our retail line of health water infused with
probiotics and minerals and the sale of one liter of T-free distillate. The
extent to which, and the amount of revenues which may be generated from our
future business operations and activities is unknown.
Gross Margin. Once cost of revenue and other expenses to generate revenue are
considered, we had gross margins of $0 and $1,659 from our operations for the
years ended August 31, 2022 and 2021, respectively.
Expenses. Our operating expenses were $40,877,813 and $260,100 for the years
ended August 31, 2022 and 2021, respectively. The increase was primarily
attributable to increased impairment expense of $35,780,148 of the Mioxal
intangible assets, as well as increases of $4,237 in advertising, $324,658 in
consulting fees, $125,518 in general and administrative expenses, $359,978 in
professional fees, $201,165 in research and development, $1,259,519 in salaries,
and $2,546,362 in depreciation and amortization expenses.
Other (Income) Expense. Our total other (income) expense was ($152,080) and
($1,298,373) for the years ended August 31, 2022 and 2021, respectively. The
decrease in other expenses was attributable to a decrease of $99,910 in interest
expense, a decrease of $41,929 in interest income, a decrease $1,454,480 in gain
on change in fair value of a derivative liability, a decrease of $8,349 in other
income, and an increase of $143,956 in gain on extinguishment of debt.
Liquidity and Capital Resources
For the year ended August 31, 2022, we used net cash of $3,127,852 for operating
activities, primarily attributable to our aforementioned operating expenses. We
used $853,138 in investing activities primarily attributable to our purchase the
Mioxal asset. For the year ended August 31, 2022, we were provided $4,000,000
from financing activities for proceeds from our series B-1 preferred stock
purchase agreements. We will require additional working capital to continue.
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Assets
We had total assets of $43,963,413 as of August 31, 2022, which consisted of
$156,486 cash, other receivable of $56,421, prepaid expenses of $74,049,
equipment of $2,615 (net of accumulated depreciation), trademarks of $1,680,
intangibles of $42,980,076, ROU asset of $482,086 and security deposits of
$210,000 ($150,000 paid to Herring Creek Pharmaceuticals and $60,000 as part of
a lease agreement).
Liabilities
We had total liabilities of $41,110,839 as of August 31, 2022 consisting of
accounts payable and accrued expenses of $265,415, lease liability of $497,626,
note payable of $10,000, dividends payable of $837,798, and the Mioxal liability
of $39,500,000.
Cash Requirements
At August 31, 2022, we had a cash balance of $156,486. Such cash amount of
$156,486 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.
Subsequent Events
Departure of Directors or Certain Officers; Election of Directors
On September 9, 2022, the Board of Directors of Innovation1 Biotech Inc.
appointed Frederick E. Pierce, II as a member of the Board. On December 6, 2022,
Mr. Pierce was appointed Chairman of the Board, President and Interim Acting
Chief Executive Officer.
On December 6, 2022, Jeffrey Kraws resigned as the Company's Chief Executive
Officer. He remains a member of the Board.
On October 19, 2022, Dr. Andrew Salzman resigned from the Board. On November 10,
2022, Dr. Salzman resigned as Chief Science Officer of the Company.
On December 5, 2022, the Board appointed Charles W. Allen and Dr. Shahin
Gharakhanian as members of the Board. On December 6, 2022, Mr. Allen was
appointed Treasurer and Secretary, replacing Jamie Lynn Coulter as Secretary.
Completion of Acquisition or Disposition of Assets
On November 7, 2022, Innovation1 Biotech Inc completed the disposition of all of
the assets, including intellectual property assets and associated debt, relating
to Mioxal® to Ingenius Biotech S.L. The disposition was completed pursuant to
the terms of certain Agreements Relating to the Transfer of the Mioxal Product,
dated as of November 7, 2022.
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,
par value $0.001 per share, to Ingenius and Ingenius agreed to pay the Company
(i) $100,000 upon the first to occur of Ingenius' first sale or
commercialization of the Mioxal product or Ingenius' sale, license, transfer or
other disposition of the Mioxal Product to a third party, and (ii) a 5% royalty
on worldwide net sales of the Mioxal product by Ingenius or a third party
commencing on the date of the first sale of Mioxal products and ending on the
18-month anniversary of the last to expire of any patent covering the Mioxal
products. Additionally, Ingenius agreed to release the Company from all of its
liabilities and obligations relating to the Mioxal products and indemnify the
Company from all claims relating to the Mioxal Product following the date of the
Disposition.
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Amendments to Articles of Incorporation or Bylaws
On November 18, 2022, the Board of Directors of the Company ("Board") approved
and adopted a second amendment and restatement of the Company's bylaws (the
"Amended and Restated Bylaws"), effective as of such date. The amendments set
forth in the Amended and Restated Bylaws include among other things, (1)
revisions to the procedures for calling special meetings, allowing for special
meetings to be called by the President, Chief Executive Officer, Company
shareholders entitled to cast not less than a majority in interest of the number
of shares entitled to be cast a meeting, and a majority of the Board, compared
to the previous Bylaws of the Company ("Bylaws") which only allowed for a
special meeting to be called by the Board, (2) revisions to the provision for
the election of directors by stockholders, which now provides that the directors
shall be elected by a plurality of the votes cast, compared to the previous
Bylaws which provided that the directors were to be elected by affirmative vote
of a majority of the directors, (3) revisions to the provision calling for the
frequency of board meetings, now providing that Board meetings are to be held no
less than quarterly, compared to the previous Bylaws which provided that the
meetings of the Board were to be held at such time and place as the Board shall
fix.
The amendments set forth in the Amended and Restated Bylaws also include
additional provisions, which were not contemplated in the previous Bylaws, these
amendments include among other things, (1) the inclusion of an additional
provision which provides that shareholder behavior which demonstrates a lack of
due care for regulatory agencies, may cause the ownership and title of shares to
be clouded, and shall prevent such shareholder from voting such shares at a
meeting, until a court or administrative agency approves in writing the
shareholders authority to vote, (2) the inclusion of an additional provision
which provides that the Board members shall hold office for a period of 2 years
or until their successors are duly elected and qualified or until their removal
or resignation, (3) the inclusion of an additional provision which provides that
officers of the Company may be removed by the Board by a vote of a majority of
the entire number of directors then in office, (4) the inclusion of an
additional provision which provides that each member of the Board acknowledges
that they have fiduciary duties on behalf of the Company and may receive
confidential information regarding the Company, and the executive officers or
Board may limit or restrict the confidential information provided to the Board
in order to protect sensitive or competitive information, (5) the inclusion of
an additional section (Section 6) which provides for the indemnification of
officers and directors in the event of a proceeding and allows for advancements
to be made to such directors and officers, and (6) certain other language and
conforming changes and other technical edits and updates.
These actions were taken pursuant to NRS 78.120 and in accordance with Article
IX of the Company's prior bylaws.
Entry into a Material Definitive Agreement
Subsequent to the year ended August 31, 2022, the Company has entered into a
private placement to receive net cash proceeds up to $300,000, after the
original issue discount, from secured convertible promissory notes with attached
$0.08 warrants to purchase up to 4,411,764 shares of common stock. Each note is
discounted 15% with a maturity date of 18 months from original issuance. The
notes bear interest of 8% per annum to be paid monthly. Each note is convertible
into common shares by dividing the outstanding principal on the note by the
conversion price of $0.08. The warrants are exercisable for a period of seven
years at an exercise price of $0.08 per share.
OFF-BALANCE SHEET ARRANGEMENTS
Not Applicable.
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INNOVATION1 BIOTECH INC. 
