The following discussion highlights the principal factors that have affected our
financial condition and results of operations as well as our liquidity and
capital resources for the periods described. This discussion should be read in
conjunction with our financial statements and the related notes included in this
report. This discussion contains forward-looking statements. Please see
"Cautionary Note Regarding Forward-Looking Statements" for a discussion of the
uncertainties, risks and assumptions associated with these forward-looking
statements.
Results of Operations
Comparison of Results of Operations for the fiscal years ended December 31, 2022
and 2021
During our fiscal year ended December 31, 2022, we generated revenues of
$4,345,603, compared to revenues of $228,426, in 2021. The increase was the
result of our acquisition of Nora Pharma in October 2022, which accounted for
$3,803,106 of these revenues. The cost of sales in 2022 and 2021 for generating
these revenues was $2,649,028 and $117,830, respectively.
General and administrative expenses for our fiscal year ended December 31, 2022,
were $28,697,325, compared to $2,550,730 during our fiscal year ended December
31, 2021, an increase of $26,146,595. The increase was largely a result of
goodwill impairment of $18,326,719 and costs and expenses relating to the Nora
Pharma acquisition.
We also incurred $39,412 in interest expense and $0 in losses from debt
conversion in 2022, compared to $328,818 in interest expense and $9,726,485 in
losses from debt conversion in 2021. The decrease in interest expense and losses
from debt conversion in 2022 was due to our repayment of all outstanding debt in
2022.
As a result, we incurred a net loss of $26,511,136 for the year ended December
31, 2022, compared to a net loss of $12,436,447 for the year ended December 31,
2021.
20
Liquidity and Capital Resources
As of December 31, 2022, we had cash and cash equivalents of $21,826,437.
On February 17, 2022, we completed an underwritten public offering of common
stock and warrants for gross proceeds of $8 million. We received net proceeds of
approximately $6.8 million from the offering.
On March 14, 2022, we completed a private placement of common stock and warrants
for gross proceeds of $8 million. We received net proceeds of approximately $6.8
million from the private placement.
On April 28, 2022, we completed a private placement of common stock and warrants
for gross proceeds of approximately $19.5 million. We received net proceeds of
approximately $16.8 million from the private placement.
During the fiscal year ended December 31, 2022, we received aggregate proceeds
of $13,193,177 in connection with warrant exercises.
During the year ended December 31, 2021, we issued a total of 559,144 shares of
our common stock valued at $12,705,214 for the conversion of outstanding notes
payable, reducing the debt by $2,867,243 and interest payable by $127,986 and
generating a loss on conversion of $9,726,485.
During the year ended December 31, 2021, we did not sell any of our capital
stock for cash; however, we entered into the following new debt arrangements:
· On January 12, 2021, we issued a note in the principal amount of
$150,000 with interest accruing at 5% per year, due January 12, 2023.
The note was convertible after 180 days from issuance into common stock
at a price of $0.30 per share. This note was converted to common stock
on December 20, 2021.
· On January 27, 2021, we issued a note in the principal amount of
$300,000 with interest accruing at 5% per year, due January 27, 2023.
The note was convertible after 180 days from issuance into common stock
at a price equal to $0.50 per share. This note was converted to common
stock on December 20, 2021.
· On February 12, 2021, we issued a note in the principal amount of
$700,000 with interest accruing at 5% per year, due February 12, 2023.
The note was convertible after 180 days from issuance into common stock
at a price of $0.60 per share. This note was converted to common stock
on December 20, 2021.
· On April 5, 2021, we issued a note in the principal amount of $330,000
with interest accruing at 10% per year, due January 5, 2022. The note
was convertible after 180 days from issuance into common stock at a
price 35% below market value. On October 13, 2021, the noteholder
converted $330,000 in principal and $16,500 in accrued interest into
26,250 shares of common stock leaving a principal balance of $0. We
repaid this note
· On April 20, 2021, we issued a note in the principal amount of $500,000
with interest accruing at 5% per year, due April 20, 2023. The note was
convertible after 180 days from issuance into common stock at a price
of $0.30 per share. We repaid this note following the closing of our
public offering in February 2022.
· On July 6, 2021, we issued a note in the principal amount of $900,000
with interest accruing at 5% per year, due July 6, 2023. The note was
convertible after 180 days from issuance into common stock at a price
of $0.30 per share. We repaid this note following the closing of our
public offering in February 2022. In connection with this debt
financing, we agreed to allow the lender, who is also the holder of a
note dated November 25, 2020, to convert a total of $240,000 in
principal into 120,000 shares of common stock leaving a principal
balance of $10,000 and accrued interest of $7,750. On July 6, 2021, we
paid off the remaining principal balance of this note and received
forgiveness of the accrued interest.
· On August 18, 2021, we issued a note in the principal amount of
$500,000 with interest accruing at 5% per year, due August 18, 2023.
The note is convertible after 180 days from issuance into common stock
at a price equal to $0.30 per share. We repaid this note following the
closing of our public offering in February 2022.
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Cash flows used in investing activities were $14,619,390 during the year ended
December 31, 2022, compared to $0 during our fiscal year ended December 31,
2021. The reason for the increase was due to the acquisition of Nora Pharma. Net
cash flows provided by financing activities were $39,465,107 in 2022 compared to
$2,904,675 in 2021. The increase was primarily a result of the three (3) rounds
of financing which took place in February, March, and April 2022. Net cash used
in operations was $5,248,358 in 2022, compared to $1,829,128 in 2021. The reason
for the increase was the acquisition of Nora Pharma.
We are not generating adequate revenues from our operations to fully implement
our business plan as set forth herein. On February 17, 2022, we received net
proceeds of approximately $6.8 million from the sale of common stock and
warrants in an underwritten public offering. On March 14, 2022, we received net
proceeds of approximately $6.8 million from the sale of common stock and
warrants in a private placement. On April 28, 2022, we received net proceeds of
approximately $16.8 million from the sale of common stock and warrants in a
private placement. We believe our existing cash will be sufficient to fund our
operations, including general and administrative expenses, expanded research and
development activities, and OTC supplements business, for the next 24 months.
There is no assurance our estimates will be accurate. We have no committed
sources of capital and we anticipate that we will need to raise additional
capital in the future, including for further research and development activities
and possibly clinical trials, as well as expansion of our generic
pharmaceuticals operations arising from the Nora Pharma acquisition. Additional
capital may not be available on terms acceptable to us, or at all.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On an on-going
basis, we evaluate our estimates based on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.
Leases
We follow the guidance in ASC 842 "Accounting for Leases," as amended, which
requires us to evaluate the lease agreements we enter into to determine whether
they represent operating or capital leases at the inception of the lease.
Our wholly owned subsidiary, Nora Pharma, currently occupies a 15,000 square
foot facility located at 1565 Boulevard Lionel-Boulet, Varennes, Quebec, Canada,
J3X 1P7 pursuant to a lease agreement that expires January 31, 2025, with an
option to extend for 5 years. This site is comprised of 15,000 square feet that
includes 10,000 square feet of warehouse space and 5,000 square feet of
executive office space. The facility houses all administrative, marketing,
quality control, regulatory affairs, and other operations personal, as well as,
a Health Canada licensed warehouse space. We pay a monthly rent of $17,250 CAD
(approximately $12,750 USD), including taxes.
Recently Adopted Accounting Standards
In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit
Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs
Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on
Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic
842) which amends the effective date of the original pronouncement for smaller
reporting companies. ASU 2016-13 and its amendments will be effective for the
Company for interim and annual periods in fiscal years beginning after December
15, 2022. The Company believes the adoption will modify the way the Company
analyzes financial instruments, but it does not anticipate a material impact on
results of operations. The Company is in the process of determining the effects
adoption will have on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815 - 40), ("ASU 2020-06"). ASU 2020-06 simplifies
the accounting for certain financial instruments with characteristics of
liabilities and equity, including convertible instruments and contracts on an
entity's own equity. The ASU2020-06 amendments are effective for fiscal years
beginning after December 15, 2023, and interim periods within those fiscal
years. Early adoption is permitted, but no earlier than fiscal years beginning
after December 15, 2020, including interim periods within those fiscal years.
The Company is evaluating the impact of this guidance on its unaudited
consolidated financial statements.
22
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources and would be considered material to investors.
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