The following discussion of our financial condition and results of operations
for the three months ended November 30, 2022 and 2021 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,
2022, as filed with the SEC on December 15, 2022 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
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, with 3 exits totaling $1.4 billion,
federal R&D grants and contracts totaling $160M and capital raises of $152M. The
firm is currently regarded as a world leader in the design and optimization of
rare cannabinoids.
According to Salzman Group, the pharmaceutical firm has invented novel,
proprietary, water-soluble prodrugs of the most promising botanical molecules
existing today. It is the stated goal of Salzman Group to exploit the vast
intrinsic therapeutic power of botanical Schedule 1 molecules.
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.
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 $631,666
for the quarter ended November 30, 2022. The Company has working capital deficit
of $1,793,174 and an accumulated deficit of $45,370,280 as of November 30, 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. A debt instrument
has been obtained that, if fully funded, would provide an additional $150,000 in
operating funds to the Company beyond the $150,000 funding already provided as
of the date of filing this report. There can be no assurance that management's
plan to attract additional equity or debt financing will be successful.
16
Table of Contents
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.
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 for the Three Months Ended November 30, 2022 and 2021
Overview. We had revenues of $0 for the three months ended November 30, 2022 and
2021, respectively. We incurred a net loss of $631,666 and $361,072 for the
three months ended November 30, 2022 and 2021, respectively. The increase in net
loss is attributable to the factors discussed below.
Revenues. We had $0 revenues from operations for the three months ended November
30, 2022 and 2021. 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,
2022 and 2021.
Expenses. Our operating expenses were $628,820 and $361,072 for the three months
ended November 30, 2022 and 2021, respectively. We experienced an increase of
$5,081 in advertising, $148,544 in general and administrative, $36,045 in
professional fees, $15,000 in research and development, $180,647 in salaries,
and $261 in depreciation and amortization expense. While we experienced a
decrease of $117,830 in consulting fees.
Other (Income) Expense. Our total other (income) expense was $2,846 and
($121,219) for the three months ended November 30, 2022 and 2021, respectively.
The $118,373 decrease in other income was attributable to a gain on
extinguishment of debt during the prior year, a decrease in interest expense and
a decrease in impairment expense.
Liquidity and Capital Resources
For the three months ended November 30, 2022, we used net cash of $195,235 from
operating activities, primarily attributable salaries, professional fees and
general and administrative expenses.
For the three months ended November 30, 2022, we had no investing activities.
For the three months ended November 30, 2022, cash of $50,000 was provided from
financing activities received as an advance on our private placement financing.
Assets
We had total assets of $4,245,284 as of November 30, 2022, which consisted of
$11,251 cash, other receivable of $56,421, prepaid expenses of $53,069,
equipment of $2,353, security deposit of $210,000, $430,434 right-of-use asset,
trademarks of $1,680, receivable - Ingenius of $100,000 and intangibles asset of
$3,380,076 related to our disposition of the Mioxal Asset (Note 3 - Asset
Acquisition).
Liabilities
We had total liabilities of $2,161,947 as of November 30, 2022 consisting of
accounts payable of $204,242, accrued expenses of $ 98,870, accrued expenses -
related party of $361,044, note payable - current portion of $10,000, lease
payable - current portion of $204,225, lease payable $245,312, dividends payable
of $1,025,369 for our Series B and Series B-1 Convertible Preferred stock and
convertible notes payable net of discount of $2,720.
17
Table of Contents
Cash Requirements
At November 30, 2022, we had a cash balance of $11,251. 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.
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 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 Mioxal and indemnify the Company from
all claims relating to the Mioxal Product following the date of the Disposition.
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.
18
Table of Contents
Entry into a Material Definitive Agreement
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.
The Company received $50,000 of cash during the quarter ended November 30, 2022
under these notes.
© Edgar Online, source Glimpses
INNOVATION1 BIOTECH INC. 
