UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarter Ended September 30, 2016

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______ 

 

Commission File Number 000-52886

 

EASTGATE BIOTECH CORP.

(Exact name of registrant as specified in its charter)

 

Nevada

 

87-0639378

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

2203-65 Harbour Square|Toronto, Ontario|Canada M5J 2L4

(Address of principal executive offices)

 

(647) 692-0652

(Registrant's telephone number, including area code)

 

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 past 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. Yes o No x

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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). 1 Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company

 

Large accelerated filer

o  

Accelerated filer

o

Non-accelerated filer

o   

Smaller reporting company

x  

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

 

Class

 

Outstanding as of March 15, 2017

Common Stock, $0.00001 par value

 

306,822,175

 

 
 
 
 

  

TABLE OF CONTENTS

 

Heading

 

 

Page

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

Financial Statements

 

 

3

 

 

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

 

10

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

15

 

 

 

 

 

Item 4.

Controls and Procedures

 

 

15

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

 

16

 

 

 

 

 

Item 1A.

Risk Factors

 

 

16

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

16

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

 

16

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

 

16

 

 

 

 

 

Item 5.

Other Information

 

 

16

 

 

 

 

 

Item 6.

Exhibits

 

 

17

 

 

 

 

 

Signatures

 

 

18

 

 

 
2
 
 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

The accompanying unaudited balance sheet of Eastgate Biotech Corp. at September 30, 2016, related unaudited statements of operations and cash flows for the periods ended September 30, 2016 and 2015 have been prepared by management in conformity with United States generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2015 audited financial statements. Operating results for the period ended September 30, 2016, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2016 or any other subsequent period.

 

 
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EASTGATE BIOTECH CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

September 30

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current

 

 

 

 

 

 

Cash

 

$ -

 

 

$ 19,241

 

Deposits

 

 

251,160

 

 

 

14,595

 

Sales tax recoverable

 

 

98,283

 

 

 

79,681

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

349,443

 

 

 

113,517

 

 

 

 

 

 

 

 

 

 

Other assets

 

 

 

 

 

 

 

 

Property & Equipment, net

 

 

143,746

 

 

 

184,402

 

 

 

 

 

 

 

 

 

 

Total other assets

 

 

493,189

 

 

 

297,919

 

 

 

 

 

 

 

 

 

 

Total assets

 

$ 493,189

 

 

$ 297,919

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Bank indebtedness

 

 

935

 

 

 

 

 

Accounts payable and accrued liabilities

 

$ 367,204

 

 

$ 361,094

 

Deferred revenue

 

 

-

 

 

 

23,847

 

Accrued liabilities related party

 

 

1,949,737

 

 

 

732,125

 

Deferred rent

 

 

1,026

 

 

 

2,064

 

Capital lease obligation

 

 

10,102

 

 

 

8,130

 

Accrued interest - related parties

 

 

395,282

 

 

 

292,769

 

Notes payable - related parties

 

 

1,506,672

 

 

 

1,308,585

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

4,230,958

 

 

 

2,728,614

 

 

 

 

 

 

 

 

 

 

Long term liabilities

 

 

 

 

 

 

 

 

Capital lease obligation long term

 

 

41,391

 

 

 

50,386

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

4,272,349

 

 

 

2,779,000

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

 

Authorized:

 

 

 

 

 

 

 

 

Preferred stock:50,000,000 shares authorized at $0.00001 par value no shares issued at September 30, 2016 and December 31, 2015

 

 

-

 

 

 

-

 

Common stock: 450,000,000 shares authorized at $0.00001 par value 306,822,175 and 282,872,175 shares issued and outstanding at September 30, 2016 and December 31, 2015 respectively

 

 

3,069

 

 

 

2,829

 

Additional paid-in capital

 

 

9,891,004

 

 

 

9,137,764

 

Accumulated other comprehensive income

 

 

23,246

 

 

 

31,846

 

Deficit accumulated

 

 

(13,696,479 )

 

 

(11,653,520 )

 

 

 

 

 

 

 

 

 

Total stockholders' equity (deficit)

 

 

(3,779,160 )

 

 

(2,481,081 )

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity (deficit)

 

$ 493,189

 

 

$ 297,919

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
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EASTGATE BIOTECH CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

$ 1,689

 

 

$ 73,179

 

 

$ 93,525

 

 

$ 131,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

-

 

 

 

11,059

 

 

 

13,963

 

 

 

19,489

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross (loss) profit

 

 

1,689

 

 

 

62,120

 

 

 

79,562

 

 

 

112,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

19,886

 

 

 

26,757

 

 

$ 24,191

 

 

$ 123,960

 

Research & development

 

 

115,518

 

 

 

257,380

 

 

 

367,070

 

 

 

951,358

 

General and administrative

 

 

435,994

 

 

 

464,756

 

 

 

1,287,603

 

 

 

1,974,458

 

Marketing and selling

 

 

107,454

 

 

 

119,594

 

 

 

327,144

 

 

 

439,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

678,852

 

 

 

868,487

 

 

 

2,006,008

 

 

 

3,489,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(677,163 )

 

 

(806,367 )

 

 

(1,926,446 )

 

 

(3,376,873 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(39,778 )

 

 

(29,449 )

 

 

(116,516 )

 

 

(78,802 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other items

 

 

(39,778 )

 

 

(29,449 )

 

 

(116,516 )

 

 

(78,802 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS BEFORE INCOME TAXES

 

 

(716,941 )

 

 

(835,816 )

 

 

(2,042,962 )

 

 

(3,455,675 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$ (716,941 )

 

$ (835,816 )

 

$ (2,042,962 )

 

$ (3,455,675 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED LOSS PER SHARE

 

$ (0.002 )

 

$ (0.00 )

 

$ (0.007 )

 

$ (0.02 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED

 

 

306,732,501

 

 

 

217,302,267

 

 

 

303,779,292

 

 

 

161,087,899

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A summary of the components of other comprehensive loss for the periods ended is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(716,941 )

 

 

(835,816 )

 

 

(2,042,962 )

 

 

(3,455,675 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Loss - foreign currency translation

 

 

3,213

 

 

 

15,107

 

 

 

(8,600 )

 

 

9,794

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Loss

 

$ (713,728 )

 

$ (820,709 )

 

$ (2,051,562 )

 

$ (3,445,881 )

  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
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EASTGATE BIOTECH CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

For the Nine Months Ended

 

 

 

 

 

 

September 30,

 

 

September 30,

 

 

 

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net loss for the period

 

 

(2)

 

$ (2,042,962 )

 

$ (3,455,675 )

Adjustments to reconcile net loss to net cash used by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Expenses paid on the Company's behalf by a related party

 

 

8

 

 

 

(3,145 )

 

 

 

 

Common stock issued for services

 

 

1

 

 

 

753,480

 

 

 

1,413,109

 

Depreciation

 

 

3

 

 

 

40,656

 

 

 

30,693

 

Stock options issued

 

 

 

 

 

 

(6 )

 

 

291,427

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accrued interest

 

 

-

 

 

 

102,513

 

 

 

78,802

 

Prepaid asset

 

 

(2)

 

 

(236,565 )

 

 

(55,333 )

Accounts payable

 

 

-5

 

 

 

(7,403 )

 

 

67,498

 

Accounts Receivable

 

 

 

 

 

 

-

 

 

 

(38,392 )

Accrued liabilities related party

 

 

2

 

 

 

1,212,628

 

 

 

1,150,291

 

Sales tax recoverable

 

 

(6)

 

 

(14,124 )

 

 

(31,283 )

Deferred rent

 

 

 

 

 

 

(1,147 )

 

 

(1,206 )

Deferred revenue

 

 

 

 

 

 

(25,048 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows used in operating activities

 

 

(1)

 

 

(221,124 )

 

 

(550,069 )

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(3)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows used in investing activities

 

 

(3)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

Payment of capital lease obligation

 

 

-

 

 

 

(7,023 )

 

 

(4,130 )

Proceeds from notes payable related party

 

 

8

 

 

 

201,233

 

 

 

280,624

 

Payments on notes payable related party

 

 

(5)

 

 

-

 

 

 

(5,536 )

Common stock issued for cash

 

 

-

 

 

 

-

 

 

 

5,000

 

Cash Overdraft

 

 

 

 

 

 

 

 

 

 

6,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows provided by financing activities

 

 

3

 

 

 

194,210

 

 

 

282,303

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

 

(1)

 

 

(26,913 )

 

 

(267,766 )

Effect of foreign currency translation adjustments

 

 

 

 

 

 

7,672

 

 

 

(18,715 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, beginning of the period

 

 

 

 

 

 

19,241

 

 

 

286,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, end of the period

 

 

 

 

 

$ -

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

 

 

 

 

$ -

 

 

$ -

 

Cash paid for interest

 

 

 

 

 

$ 10,429

 

 

$ 1,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non Cash Financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to convert liabilities

 

 

 

 

 

$ -

 

 

$ 1,317,330

 

Common stock issued - subscription payable

 

 

 

 

 

$ -

 

 

$ -

 

Common stock issued for placement fees

 

 

 

 

 

$ -

 

 

 

85,401

 

Employee Advance repaid for reduction of Notes payable Related Party

 

 

 

 

 

 

-

 

 

$ 3,359

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
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EASTGATE BIOTECH CORP.

Notes to Condensed Financial Statements

September 30, 2016 and December 31, 2015

 

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

 

The accompanying financial statements have been prepared by the Eastgate Biotech Corp without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2016, and for all periods presented herein have been made.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2015 audited financial statements. The results of operations for the periods ended September 30, 2016 and 2015 are not necessarily indicative of the operating results for the full years.

 

NOTE 2 - GOING CONCERN

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has accumulated deficit of $13,696,479 as of September 30, 2016. The Company currently has limited liquidity, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time, raising substantial doubt about its ability to continue as a going concern.

 

Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management's efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.


NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

The consolidated financial statements include the accounts of Eastgate Biotech Corp. and its wholly-owned subsidiary Eastgate Pharmaceuticals Inc. All intercompany accounts and transactions have been eliminated in consolidation.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with a maturity of six months or less to be cash equivalents to the extent the funds are not being held for investment purposes.

 

 
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Revenue Recognition

The Company recognizes revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collection is reasonably assured.

 

Research and Development Costs

The Company expenses research and development costs to operations as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including employee-related expenses; laboratory supplies and other direct expenses; third-party contractual costs relating to nonclinical studies and related contract manufacturing expenses, development of manufacturing processes and regulatory registration.

 

Foreign Currency Translation

Foreign denominated assets and liabilities of the Company are translated into U.S. dollars at the prevailing exchange rates in effect at the end of the reporting period. Income statement accounts are translated at a weighted average of exchange rates which were in effect during the period. Translation adjustments that arise from translating the foreign subsidiary's financial statements from local currency to U.S. currency are recorded in the other comprehensive loss component of stockholders' equity.

 

Recent Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as "Development Stage Entities" (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and shareholder equity. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company has adopted this standard and will not report inception to date financial information.

 

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company's financial position or statements.

 

NOTE 4 - RELATED-PARTY TRANSACTIONS

 

Notes payable – related parties

The Company has recorded loans from shareholders, amounts due to shareholders for expenses paid on its behalf by shareholders as Notes payable - related parties on the balance sheet. The amounts comprising Notes payable – related parties bear interest ranging from 5 percent per annum to 10 percent per annum, are unsecured and are due and payable upon demand.


During the nine months ended September 30, 2016 the CEO and companies owned by the CEO as well as a company owned by a related party shareholder have advanced cash to the Company of $201,233, and have had expenses paid by the Company of $3,146 on their behalf. At September 30, 2016 the Company has not repaid any of related party loans. During the year ended December 31, 2015 the CEO and the current President advanced the company cash of $310,825 and were repaid $5,536 of advances made. In addition during this period they paid $2,337 of expenses on behalf of the company and were reimbursed for $5,432 in expenses they previously paid. This accounts for the increase in notes payable related party for the year ended December 31, 2015 of $302,194. As of September 30, 2016 and December 31, 2015, the Company owed $395,281 and $292,798 of accrued interest to related parties, respectively, resulting from interest expense of $102,483 and $109,954, respectively.

 

 
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NOTE 5 - SALES TAX RECOVERABLE

 

Sales tax receivable

The Company recovers sales tax paid, for which returns are filed on annual basis. At September 30, 2016, $98,283 was claimed as recoverable compared to the December 31, 2015 balance of $79,681. Sales tax recoverable is a result of sales tax paid on eligible expenses.

 

NOTE 6 - STOCKHOLDERS' EQUITY

 

On February 1 st 2016, the Company issued a total of 23,400,000 restricted shares of common stock to various consultants for services rendered at the price of $0.0322 per share.

 

On July 16, 2016, 550, 251 warrants were exercised by their holders using cashless exercise provision at the price of $0.00001 per share. This resulted in 550,000 common shares being issued to these holders.

 

The following table summarizes the stock options that are issued, outstanding and exercisable

 

 

 

 

 

Stock Options Issued & Outstanding

 

Exercise

 

 

Expiration

 

September 30

 

 

December 31

 

Price

 

 

Date

 

2016

 

 

2015

 

$

0.286

 

 

February 12, 2020

 

 

10,375,000

 

 

 

10,375,000

 

  

As of September 30, 2016, the Company had 41,164,901 warrants to purchase common stock. All outstanding warrants have a weighted average price of $0.07 per share and have a weighted average remaining life of 2.81 years.

 

The following table summarizes warrants that are issued, outstanding and exercisable

 

 

 

 

 

 

Warrants Issued & Outstanding

 

Exercise

 

 

Expiration

 

September 30

 

 

December 31

 

Price

 

 

Date

 

2016

 

 

2015

 

$

0.25

 

 

March 14, 2019

 

 

3,495,000

 

 

 

3,495,000

 

$

0.25

 

 

March 21, 2019

 

 

3,480,000

 

 

 

3,480,000

 

$

0.25

 

 

June 6, 2019

 

 

2,022,300

 

 

 

2,022,300

 

$

0.05

 

 

October 16, 2019

 

 

150,000

 

 

 

150,000

 

 

0.04

 

 

December 31, 2019

 

 

8,125,000

 

 

 

8,125,000

 

$

0.04

 

 

January 5, 2020

 

 

8,146,225

 

 

 

8,146,225

 

 

0.04

 

 

August 19, 2020

 

 

125,000

 

 

 

125,000

 

 

0.00001

 

 

October 6, 2020

 

 

15,621,376

 

 

 

16,171,627

 

 

 

 

 

 

 

 

41,164,901

 

 

 

41,715,152

 

 

NOTE 7 - SUBSEQUENT EVENTS

 

In accordance with ASC 855 Company management reviewed all material events through the date of this report and determined that there are no material subsequent events to report except as described below:

 

 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

Results of Operations

 

The following selected comparative financial information has been derived from and should be read in conjunction with the company's financial statements for the nine months ended September 30, 2016 and 2015.

 

 

 

For the Three Months ended

 

 

For the Nine Months ended

 

 

 

September 30

 

 

September 30

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Revenues

 

$ 1,689

 

 

$ 73,179

 

 

$ 93,525

 

 

$ 131,722

 

Cost of sales

 

 

-

 

 

 

11,059

 

 

 

13,963

 

 

 

19,489

 

Gross profit

 

 

1,689

 

 

 

62,120

 

 

 

79,562

 

 

 

112,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

19,886

 

 

 

26,759

 

 

 

24,191

 

 

 

123,960

 

Research & development

 

 

115,518

 

 

 

257,380

 

 

 

367,070

 

 

 

951,358

 

General & administrative

 

 

435,994

 

 

 

464,756

 

 

 

1,287,603

 

 

 

1,974,458

 

Marketing and selling

 

 

107,454

 

 

 

119,594

 

 

 

327,144

 

 

 

439,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

678,852

 

 

 

868,487

 

 

 

2,006,008

 

 

 

3,489,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(677,163 )

 

 

(806,367 )

 

 

(1,926,446 )

 

 

(3,376,873 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(39,778 )

 

 

(29,449 )

 

 

(116,516 )

 

 

(78,802 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (716,941 )

 

$ (835,816 )

 

$ (2,042,962 )

 

$ (3,455,675 )

 

 

 

September 30

 

 

December 31

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Total assets

 

$ 493,189

 

 

$ 297,919

 

Working Capital

 

$ (3,881,515 )

 

$ (2,615,097 )
  

Results of Operations

 

During the three months ended September 30 2016 company recorded revenue from royalty income. During the three months ended September 30, 2016, our net loss was $716,941 compared to a net loss of $835,816 for the three months ended September 30, 2015. The decreased loss for 2016 of $118,875 was primarily due to the fact the company had reduced G&A expenses by 28,762, the research and development expenses by $141,862, professional fees decreased respectively by $6,871 and marketing & selling expenses decreased by $12,140. These changes in expenditures combined with a gross profit on royalty revenue of $1,689 resulted in the decreased loss of $118,875 for the quarter.

 

 
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During the nine months ended September 30, 2016 company recorded revenue of $93,525. During the nine months ended September 30, 2016, our net loss was $2,042,962 compared to a net loss of $3.455.675 for the nine months ended September 30, 2015. The decreased loss for 2016 of $1,412,713 was due to the fact the company was less active in the nine month period ended September 30, 2016 due to lack of funding. The primary reasons for the decrease were decrease in operating expenses including a decrease in professional fees of $99,769, a decrease in R&D expenses of $584,288, a decrease in marketing and selling of $112,186 and a decrease of general and administrative expense of $686,855.

 

Sales 

 

This quarter we recorded revenue of $1,689 from royalty income. Cost of sales was nil for a gross profit of $1,689 compared to sales of $73,179with the cost of sales of $11,059 for a gross profit of $62,120 in the same quarter ending September 30 2015 

 

During the nine months ended September 30 2016 we have recorded $93,525 in revenues. Cost of sales was $13,963 for a gross profit of $79,562 compared to revenue of $131,722with the cost of sales of $19,489 for a gross profit of $112,233 for the nine months ended September 30 2015.

 

Operating Expenses

 

Professional fees

 

During the third quarter ended September 30, 2016, professional fees expenses were $19,886, a decrease of $6,871 from the third quarter of 2015 professional fees expense of $26,757. The decrease can be attributed to decrease in legal expenses for the quarter.

 

During the first nine months ended September 30, 2016, professional fees expenses were $24,191, a decrease of $99,769 from the first nine months of 2015 professional fees expense of $123,960. The first quarter of 2015 included the costs of an equity raise; the company did not have these expenses in the nine months ended September 30 2016.

 

Research and development

 

Research and development costs consist of fees paid to consultants for laboratory evaluation of product chemistry and formulation as well as tests and studies to assess the efficacy and potential safety of our products. Also included in research and development are laboratory consumables.

 

During the third quarter ended September 30, 2016, research and development expenses of $115,518 decreased by $141,862 from $257,380 for the third quarter of 2015. The decrease was a result of the company's lack of funding.

 

During the nine months ended September 30, 2016, research and development expenses of $367,070 decreased by $584,288 from $951,358 for the first nine months of 2015. The decrease was a result of the company’s lack of funding.

 

General and administrative

 

During the third quarter of 2016, we incurred general and administrative expenses of $435,994 a decrease of $28,762 from $464,756 for the third quarter of 2015.

 

During the first nine months of 2016, we incurred general and administrative expenses of $1,287,603, a decrease of $686,855 from $1,974,458 for the first nine months of 2015.

 

 
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Marketing and selling

 

During the third quarter ended September 30, 2016, marketing and selling expenses of $107,454 decreased by $12,140 from $119,594 for the third quarter of 2015. The decrease is a result of the company reduced promotional activities during 2016.

 

During the nine months ended September 30, 2016, marketing and selling expenses of $327,144 decreased by $112,186 from $439,330 for the nine months ended September 30, 2015. The decrease is a result of lack of funding. The company continuing negotiations in various parts of the world for the sale of distribution licenses for the sale of the company’s pharmaceutical and nutraceutical products.

 

Interest expense

 

Interest expense of $39,778 for the third quarter ended September 30, 2016 an increase of $10,329 from $29,449 for the third quarter of 2015. The increase is attributed to an increase in loans from stockholders during the period.

 

Interest expense of $116,516 for the nine months ended September 30, 2016 an increase of $37,714 from $78,802 for the nine months ended September 30, 2015. The increase is attributed to an increase in loans from stockholders during the period.

 

Liquidity and Capital Resources

 

At September 30, 2016 we had a working capital deficit of $3,881,515 which is an increase of $1,266,418 from the December 31, 2015 deficit balance of $2,615,097. The increase in the deficit is primarily a result of the loss for the nine months of $2,042,962 netted by the $753,480 of this loss having been paid by issuing common stock for services.

 

Expenses incurred during 2016 have been paid for by related parties including our current CEO and current President as well as through issuing the company’s common stock. Because we have no cash reserves or generate sufficient revenue, we expect to continue to rely on the stockholders and equity raises to pay expenses until such time as we can generate sufficient cash flows to pay our ongoing operational costs. There is no assurance that the company will be able to obtain equity raises before the company develops revenue sources with sufficient cash flow to cover expenses.

 

During the nine months ended September 30, 2016 the stockholders contributed a net amount of $198,087, made up of $201,233 advanced in cash less $3,146 of expenses paid by the company on behalf of the related party. At September 30, 2016 and December 31, 2015, we had bank overdraft of $935 and cash on hand of $19,241, respectively. At September 30, 2016 we had accrued liabilities - related party of $1,949,737, compared to $732,125 at December 31, 2015. The increase represents the accrual of wages to company executive officers during the nine month ended September 30, 2016. At September 30, 2016 we had notes payable - related party of $1,506,672, compared to $1,308,585 at December 31, 2015. The increase represents additional contributions from stockholders during the nine months ended September 30, 2016. Accrued interest – related party at September 30, 2016 was $395,281 compared to $292,769 at December 31, 2015, which reflects the added interest of $102,513 on the related party payable. Accounts payable and accrued liabilities increased by $6,110 from $361,094 at December 31, 2015, to $367,204 at September 30, 2016, primarily a result of the fact the company is in a fund raising situation.

 

In the opinion of management, inflation has not and will not have a material effect on our operations until such time as we raise funds or successfully complete an acquisition or merger. At that time, management will evaluate the possible effects of inflation related to our business and operations.

 

At September 30, 2016, we had a stockholders' deficit of $3,779,160 compared to a stockholders' deficit of $2,481,081 at December 31, 2015. The increase in stockholders' deficit is primarily attributed to operating loss offset by the issuance of common stock for service in the first nine months of 2016.

 

 
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As of March 10, 2017, we had cash on hand of $2,428. We believe that our available cash combined with continued advances from related parties will be sufficient to carry on general corporate functions for the next three months, although we will need to limit cash outlays for research and product development until we can secure additional funds. We are presently investigating possible funding opportunities to arrange for additional funds, although we do not have any definitive agreement or arrangement for such funds. We expect that additional funding to proceed with development of the intellectual property acquired in 2015 will most likely be from the sale of securities or from stockholder loans. We may not be successful in our efforts to obtain equity financing to carry out our business plan and there is doubt regarding our ability to complete our planned development program. We estimate that cash requirements for the next twelve months will be approximately $5,000,000. In the past year, we have relied on advances from related parties for financing our operations. We continue to explore potential funding opportunities, which may be in the form of debt or the sale of equity securities. In the event we are unsuccessful in arranging for outside funding, we will most likely continue to rely on related parties to provide funding, although there are no firm commitments or agreements with any related party to provide funds in the future.

 

Net Operating Loss

 

We have accumulated a net operating loss carryforward of approximately $11,653,520 as of December 31, 2015. This loss carry forward may be offset against future taxable income through the year 2033. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. In the event of certain changes in control, there will be an annual limitation on the amount of net operating loss carryforwards that can be used. No tax benefit has been reported in the financial statements for the year ended December 31, 2015 or the nine month period ended September 30, 2016 because it has been fully offset by a valuation reserve. The use of future tax benefit is undeterminable because we presently have no operations.

 

Recent Accounting Pronouncements

 

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as "Development Stage Entities" (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and shareholder equity. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company has adopted this standard and will not report inception to date financial information.

 

The company has evaluated other recent accounting pronouncements and their adoption has not had nor is expected to have a material impact on the company's financial position or statements.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

 

Plan of Operation

 

Following the closing of a patent acquisition agreement (the "Acquisition Agreement") in 2012, we have become engaged in the development and ultimate formulation of other novel formulations of natural compounds and pharmaceutical products that have limitations in effective use for human consumption. We believe our self-emulsifying drug delivery technology can improve the efficacy of existing products and formulations based on natural or well-established compounds and known biologically active compounds. We intend to conduct our research and development through collaborative programs. We anticipate relying on arrangements with third party drug developers such as contract research organizations and clinical research sites for a significant portion of our product development efforts.

 

The Acquisition Agreement enabled us to acquire certain products, formulas, processes, proprietary technology and/or patents and patent applications related to pharmaceutical, nutraceutical, food supplements and consumer health products. We have not formulated any final products or receive approvals from any regulatory agencies or generated any revenues from product sales. We have not been profitable since our inception through the current date.

 

 
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We expect to incur significant operating losses for the next several years and until we are able to formulate a commercially viable product. We also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we:

 

 

· Continue to undertake formulation of novel products and subsequent preclinical and clinical trials for our product candidates;

 

 

 

 

· Seek regulatory approvals for our product candidates;

 

 

 

 

· Develop, formulate, manufacture and commercialize our products;

 

 

 

 

· Implement additional internal systems and develop new infrastructure;

 

 

 

 

· Acquire or in-license additional products or technologies, or expand the use of our technology;

 

 

 

 

· Maintain, defend and expand the scope of our intellectual property; and

 

 

 

 

· Hire qualified personnel.

 

Future product revenue will depend on our ability to develops, receive regulatory approvals for, and successfully market, our product candidates. In the event that our development efforts result in regulatory approval and successful commercialization of our product candidates, we will generate revenue from direct sales of our products and/or, if we license our products to future collaborators, from the receipt of license fees and royalties from licensed products.

 

Management estimates that our research and development expenses for the next 12 months will be approximately $3.0 million, primarily for research and pilot studies. We also estimate that other expenses, including personnel, general and administrative and miscellaneous expenses could be as much as $2.0 million during the same time period. Because we currently have no revenues, most likely the only source of funding these expenses will be through the private sale of our securities, either equity or debt. We are currently exploring possible funding sources, but we have not entered into any arrangements or agreements for funding as of this time. If we are unable to raise the necessary funding, our research and development plans will be delayed indefinitely. There can be no assurance that we will be able to raise the funds necessary to carry out our business plan on terms favorable to the company, or at all.

 

Forward-Looking and Cautionary Statements

 

Statements contained in this report which are not historical facts, may be considered "forward-looking statements," which term is defined by the Private Securities Litigation Reform Act of 1995. Any "safe harbor under this Act does not apply to a "penny stock" issuer, which definition would include the company. Forward-looking statements are based on current expectations and the current economic environment. We caution readers that such forward-looking statements are not guarantees of future performance. Unknown risks and uncertainties as well as other uncontrollable or unknown factors could cause actual results to materially differ from the results, performance or expectations expressed or implied by such forward-looking statements.

 

 

 

 
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

This item is not required for a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures . Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.

 

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our management, including our chief executive officer and chief financial officer, concluded that, as of September 30, 2016, our disclosure controls and procedures were not effective due to a lack of adequate segregation of duties and the absence of an audit committee.

 

Changes in Internal Control Over Financial Reporting . Management has evaluated whether any change in our internal control over financial reporting occurred during the quarter ended September 30, 2016. Based on its evaluation, management, including the chief executive officer and chief financial officer, has concluded that there has been no change in our internal control over financial reporting during the quarter ended September 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
15
 
Table of Contents

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

There are no material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.

 

Item 1A. Risk Factors

 

This item is not required for a smaller reporting company.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On February 1, 2016, we issued 23,400,000 shares of common stock to consultants for services rendered at the price of $0.0322 per share. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended by virtue of Section 4(a)(2) thereof, as a transaction by an issuer not involving a public offering.

 

Item 3. Defaults Upon Senior Securities

 

This Item is not applicable.

 

Item 4. Mine Safety Disclosures

 

This Item is not applicable.

 

Item 5. Other Information

 

This Item is not applicable.

 

 
16
 
Table of Contents

 

Item 6. Exhibits

 

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 
17
 
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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.

 

 

 

EASTGATE BIOTECH CORP.

 

 

 

 

 

Date: March 15, 2017

By:

/s/ Anna Gluskin

 

 

 

Anna Gluskin

 

 

 

Chief Executive Officer

 

 

 

(Principal Executive Officer)

 

 

Date: March 15, 2017

By: 

/s/ Rose Perri

 

 

 

Rose Perri

 

 

 

President and Treasurer

 

 

 

(Principal Financial and Accounting Officer)

 

 

 

 

18

 

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