NOTE
7 – SUBSEQUENT EVENTS
Issuance
of Loans Payable
Subsequent
to December 31, 2020, the Company received an aggregate of $275,000 related to the issuance of 14 notes payable to various noteholders,
including an aggregate of $35,000 as a result of two notes payable issued to the Company’s Chief Executive Officer, a related party.
The notes are unsecured, bear interest at 1.5% per annum, and mature on September 30, 2021. To date, the Company has made
principal and accrued interest payment of $65,000 and $14,191, respectively. As of the date of this report, the original due date of
such notes has not been extended and are in default.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
This
report contains forward-looking statements. The following discussion should be read in conjunction with the financial statements and
related notes contained in our Annual Report on Form 10-K, as filed with the Securities & Exchange Commission on December 19, 2022.
Certain statements made in this discussion are “forward-looking statements” within the meaning of The Private Securities Litigation
Reform Act of 1995. Forward-looking statements are projections in respect of future events or financial performance. In some cases, you
can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue”
or the negative of these terms or other comparable terminology.
These
statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section
entitled “Risk Factors” set forth in our Annual Report on Form 10-K for the year ended September 30, 2020, as filed on December 19,
2022, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking
statements. These risks may cause the Company’s or its industry’s actual results, levels of activity or performance to be materially
different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Although
the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results,
levels of activity or performance. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness
of these forward-looking statements. The Company is under no duty to update any forward-looking statements after the date of this report
to conform these statements to actual results.
As
used in this quarterly report and unless otherwise indicated, the terms “we,” “us,” “our,” “Peak,”
or the “Company” refer to Peak Pharmaceuticals, Inc, including our wholly-owned subsidiary Peak BioPharma Corp (“Peak
BioPharma”). Unless otherwise specified, all dollar amounts are expressed in United States dollars.
Corporate
History and Overview
We
were first incorporated in Nevada as Surf A Movie Solutions, Inc. on December 18, 2007 to engage in the business of the development sale
and marketing of online video sales. We were not successful in our efforts and discontinued this line of business. Since that time and
until August 8, 2014, we were a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act).
On
August 30, 2013, we changed our name to Frac Water Systems, Inc. and, on October 10, 2013, we decided to engage in the business of providing
economically and environmentally sound solutions for the treatment and recycling of wastewater resulting principally from oil and gas
exploration and production activities. Due to our research of the business opportunities, on December 31, 2013, we determined not to
move forward with this line of business.
In
early March 2014, we decided to enter into the business of developing, manufacturing and marketing pharmaceutical level products containing
phytocannabinnoids, an abundant and pharmaceutically active component of industrial hemp, for the prevention and alleviation of various
conditions and diseases. In connection therewith, on March 17, 2014, we changed our name to Cannabis Therapy Corporation and, on March
24, 2014, changed our trading symbol on OTC Markets to “CTCO”. On December 23, 2014, we changed our name to Peak Pharmaceuticals,
Inc. and our trading symbol changed to “PKPH” on February 5, 2015.
In
March 2014 we began operating as a bio-pharmaceutical and nutraceutical company seeking to develop, manufacture, market and sell safe,
high quality, medicinal products based on extracts from hemp. Our primary initial focus was on exploitation of the exclusive license
we received from Canna-Pet, LLC, a developer of ingestible health products for pets made from hemp. We had also taken initial steps related
to development of over-the-counter, THC-free, hemp-based products for the human market for the prevention and alleviation of symptoms
associated with inflammatory and auto-immune diseases.
On
July 29, 2014, through our wholly-owned subsidiary, Peak BioPharma Corp., we entered into a License Agreement (the “License Agreement”)
with Canna-Pet, LLC, (“Licensor”) a Washington limited liability corporation. They own the brand name “Canna-Pet”
and certain related intellectual property including, but not limited to, trademarks and copyrights, formulations, recipes, production
processes and systems, websites, domain names, customer lists, supplier lists, trade secrets and know-how, and other related intellectual
property (collectively, the “Licensed Intellectual Property”). This is used by the Licensor in the conduct of its business
related to the production and sale of medical products made from industrial hemp, which are intended exclusively for consumption by pets.
Pursuant to the License Agreement, the Licensor granted to us a perpetual, exclusive, world-wide license to use the Licensed Intellectual
Property in conjunction with our business and the production and sale of medical products made from industrial hemp, as well as the right
to sublicense the Licensed Intellectual Property to third parties. The License Agreement gave us the right to produce and sell existing
products utilizing the Licensed Intellectual Property and to develop new products, jointly with Licensor or otherwise, based upon the
Licensed Intellectual Property. The License Agreement provided us with an immediate revenue source and access to Licensor’s customer
base. The License Agreement specified that during the term of the license, all intellectual property rights in and to the Licensed Intellectual
Property remain the exclusive property of Licensor.
In
consideration of the grant of the license, we agreed to pay Licensor license fees in the form of royalty payments calculated based on
gross proceeds received by us from sales of products manufactured, marketed or sold by us utilizing the Licensed Intellectual Property
or any subsequently developed intellectual property which is jointly owned by us and Licensor. We began selling Canna-Pet products in
October 2014.
Based
upon recent regulatory activity related to imposition of restrictions and limitations on the sale of hemp-based health products for pets,
we elected to terminate our license agreement with the Licensor, effective as of October 1, 2015, and to cease all operations relating
to sale of hemp-based products for pets.
On
October 12, 2015, we entered into an agreement for the termination (“Termination Agreement”) of the License Agreement, effectively
selling the discontinued operations. Furthermore, based on advice from the Food and Drug Administration, as well as our regulatory counsel,
we decided to revise our strategy and discontinue all efforts to develop and market hemp-based health products. We currently are pursuing
to acquire or merge with an entity with significant operations in order to create a viable business model and value for our shareholders.
Since October 2015 we have been a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act).
All
of our business operations are carried out through our wholly owned subsidiary, Peak BioPharma Corp., a Colorado corporation. Throughout
this Report, unless otherwise noted or required by the context, references to “the Company,” “us,” “we,”
“our,” and similar terms refer to Peak Pharmaceuticals, Inc. and our wholly owned subsidiary, Peak BioPharma Corp.
We
currently have authorized 325,000,000 shares of capital stock, consisting of (i) 300,000,000 shares of common stock, and (ii) 25,000,000
shares of “blank check” Preferred Stock.
On
August 15, 2012, our board of directors and stockholders owning a majority of our outstanding common shares, authorized a 50 for 1 forward
stock split of our issued and outstanding common stock. The forward split became effective on September 27, 2012. Due to the forward
split, each outstanding share was split into 50 shares. On March 11, 2014, our board of directors authorized a 1.5 for 1 forward stock
split of our common stock in the form of a dividend. In connection therewith, our shareholders of record as of the close of business
on March 28, 2014, received an additional 0.5 share of our common stock for each share of our issued and outstanding common stock held
by them on such date. The forward stock split became effective on April 1, 2014.
Results
of Operations
Comparison
of the Three Months Ended December 31, 2020 to the Three Months Ended December 31, 2019
Revenue
No
revenue or cost of sales were generated for the three months ended December 31, 2020 or December 31, 2019.
Operating
Expenses
The
Company’s expenses for the three months ended December 31, 2020 and 2019, are summarized as follows:
| | |
Three Months Ended December 31, | |
| | |
2020 | | |
2019 | |
| | |
| |
| General and administrative
(including $4,730 and $0 of fees paid to related party) | |
$ | 4,972 | | |
$ | 1,138 | |
| Total operating expenses | |
$ | 4,972 | | |
$ | 1,138 | |
The
increase in general and administrative expenses for the three months ended December 31, 2020 compared to the three months ended December
31, 2019 of $3,834 is due primarily to an increase in filing fees.
Other
Expenses
| | |
Three Months Ended December 31, | |
| | |
2020 | | |
2019 | |
| Interest Expense | |
$ | 2,382 | | |
$ | 2,382 | |
| Total other expenses | |
$ | 2,382 | | |
$ | 2,382 | |
Interest
expense was unchanged for the three months ended December 31, 2020 from the comparative period of 2019 representing accrued interest
on the Company’s notes payable.
Liquidity
and Capital Resources
Working
Capital
The
following table sets forth a summary of changes in working capital as of ended December 31, 2020 and September 30, 2020:
| | |
As of | |
| | |
December 31, 2020 | | |
September 30, 2020 | |
| Current Assets | |
$ | 378 | | |
$ | 408 | |
| Current Liabilities | |
| 257,828 | | |
| 250,504 | |
| Working capital | |
$ | (257,450 | ) | |
$ | (250,096 | ) |
The
decrease in current assets of $30 is mainly due to a decrease in cash from the payment of outstanding bills during the three months ended
December 31, 2020. The increase in current liabilities of $7,324 is primarily due to an increase in accounts payable and accrued liabilities
during the three months ended December 31, 2020.
Cash
Flows
The
following table sets forth a summary of changes in cash flows for the three months ended December 31, 2020 and 2019:
| | |
Three Months Ended December 31, | |
| | |
2020 | | |
2019 | |
| Net cash used in operating activities | |
$ | (30 | ) | |
$ | (29 | ) |
| Change in cash | |
$ | (30 | ) | |
$ | (29 | ) |
As
of December 31, 2020, our cash balance was $378. The Company does not expect its current cash and operating income to be sufficient to
meet its financial needs for continuing operations over the next twelve months.
Net
cash used in operations for the three months ended December 31, 2020 of $30 was mainly due to the net loss that was incurred during the
period.
We
may need to evaluate raising additional capital through the sale of equity securities, through an offering of debt securities or through
borrowing from individuals. There can be no assurance that such a plan will be successful.
Cash
Requirements
As
of the date of this filing, we do not have sufficient cash on hand to cover our operating expenses through the next fiscal year. As of
December 16, 2022, we had cash of approximately $97,000. During the year ended September 30, 2021, the Company received an
aggregate of $275,000 related to the issuance of 14 notes payable to various noteholders, including an aggregate of $35,000 as a result
of two notes payable issued to the Company’s Chief Executive Officer, a related party. The notes are unsecured, bear interest at
1.5% per annum, and mature on September 30, 2021. There can be no assurance, however, that additional financing will be available or,
if it is available, that we will be able to structure such financing on terms acceptable to us and that it will be sufficient to fund
our cash requirements until we can reach a level of profitable operations and positive cash flows. Even if we are able to raise the funds
required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force
us to seek additional financing. If additional financing is not available or is not available on acceptable terms, we will have to curtail
our operations.
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.
Effects
of Inflation
We
do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.
Critical
Accounting Policies and Estimates
Our
unaudited condensed financial statements and accompanying notes have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis. The preparation of unaudited condensed financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and
the reported amounts of revenues and expenses during the reporting periods.
We
regularly evaluate the accounting policies and estimates that we use to prepare our unaudited condensed financial statements. A complete
summary of these policies is included in the notes to our unaudited condensed financial statements, along with the related notes contained
in our Annual Report on Form 10-K as filed with the Securities & Exchange Commission. In general, management’s estimates are
based on historical experience, on information from third party professionals, and on various other assumptions that are believed to
be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
New
accounting standards
For
discussion of Recently Issued Accounting Pronouncements,
see Note 1 to the unaudited condensed financial statements, “Nature of Operations, Basis of Presentation and Summary of Significant
Accounting Policies” in Part I, Item 1, of this Quarterly Report on Form 10-Q.