ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
AngioSoma is a clinical stage biotechnology company focused on improving the effectiveness of current standard-of-care treatments, especially related to endovascular interventions in the treatment of peripheral artery disease (PAD).
AngioSoma is developing its lead product, a drug candidate called Liprostin
TM
for the treatment of peripheral artery disease, or PAD, which has completed FDA Phase I and three Phase II clinical trials. We are in discussions with several contract research organizations for completion of our FDA protocol for Phase III and submission of our new drug application for marketing in the US and its territories.
Critical Accounting Policies
We prepare our consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the condensed consolidated financial statements are prepared. We regularly review our accounting policies, and how they are applied and disclosed in our condensed consolidated financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
Results of Operations
Nine Months Ended June 30, 2017 Compared to the Period from Inception (April 29, 2016) through June 30, 2016
General and administrative expense.
We recognized general and administrative expense of $435,890 for the nine months ended June 30, 2017 primarily related to accrued compensation and stock-based compensation. General and administrative expense for the period from inception (April 29, 2016) through June 30, 2016 was $25,292.
Interest expense.
We recognized interest expense of $259,578 for the nine months ended June 30, 2017 compared to $59,676 for the period from inception (April 29, 2016) through June 30, 2016. The increase was primarily related to the short time period of the comparable period and the amortization of discounts on convertible notes payable.
Net loss.
We recognized a net loss of $695,468 for the nine months ended June 30, 2017 and $83,918 for the period from inception (April 29, 2016) through June 30, 2016. The increase was a result of the increases in general and administrative expense and interest expense discussed above.
Three Months Ended June 30, 2017 Compared to the Period from Inception (April 29, 2016) through June 30, 2016
General and administrative expense.
We recognized general and administrative expense of $79,188 for the three months ended June 30, 2017 primarily related to accrued compensation and stock-based compensation. General and administrative expense for the period from inception (April 29, 2016) through June 30, 2016 was $25,292.
Interest expense.
We recognized interest expense of $103,464 for the three months ended June 30, 2017 compared to $59,676 for the period from inception (April 29, 2016) through June 30, 2016. The increase was shorter time period of the comparable period.
Net loss.
We recognized a net loss of $182,652 for the three months ended June 30, 2017 and $83,918 for the period from inception (April 29, 2016) through June 30, 2016. The increase was a result of the increases in general and administrative expense and interest expense discussed above.
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Liquidity and Capital Resources
At June 30, 2017, we had cash on hand of $11,295. The Company has negative working capital of $916,071. Net cash used in operating activities for the three months ended June 30, 2017 was $56,550. Cash on hand is adequate to fund our operations for less than one month. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to the Company. We have no material commitments for capital expenditures as of June 30, 2017.
Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
Off Balance Sheet Arrangements
We do not have any 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 investors.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Internal Control over Financial Reporting
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2017. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2017, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
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As of June 30, 2017, we did not maintain effective controls over the control environment. Specifically, we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
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As of June 30, 2017, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.
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Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Change in Internal Controls Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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