ITEM 1. BUSINESS.
Plandaí
Biotechnology,
Inc. (the “Company”) and its subsidiaries focus on the production of proprietary botanical extracts for the nutriceutical
and pharmaceutical industries. The company grows much of the live plant material used in its products on a 3,000 hectare estate
it operates under a 49-year notarial lease in the Mpumalanga region of South Africa. Plandaí uses a patented extraction
process that is designed to yield highly bioavailable products of pharmaceutical-grade purity. The first product to be brought
to market is Phytofare™ Catechin Complex, a green-tea derived extract that has multiple potential wellness applications.
The company’s principle holdings consist of land, farms and infrastructure in South Africa.
The Company was incorporated, as Jerry's Inc.,
in the State of Florida on November 30, 1942. The company catered airline flights and operated coffee shops, lounges and gift shops
at airports and other facilities located in Florida, Alabama and Georgia. The company's airline catering services included the
preparation of meals in kitchens located at, or adjacent to, airports and the distribution of meals and beverages for service on
commercial airline flights. The company also provided certain ancillary services, including, among others, the preparation of beverage
service carts, the unloading and cleaning of plates, utensils and other accessories arriving on incoming aircraft, and the inventory
management and storage of airline-owned dining service equipment. In March of 2004 we moved our domicile to Nevada and changed
our name to Diamond Ranch Foods, Ltd. Diamond Ranch Foods, Ltd. was engaged in the meat processing and distribution industry. Operations
consisted of packing, processing, custom meat cutting, portion controlled meats, private labeling, and distribution of our products
to a diversified customer base, including, but not limited to; in-home food service businesses, retailers, hotels, restaurants
and institutions, deli and catering operators, and industry suppliers. On November 17, 2011, the Company, through its wholly-owned
subsidiary, Plandaí Biotechnologies, Inc. consummated a share exchange with Global Energy Solutions Corporation Limited,
an Irish corporation. Under the terms of the Share Exchange, GES received 76,000,000 shares of Diamond Ranch that had been previously
issued to Plandaí Biotechnologies, Inc. in exchange for 100% of the issued and outstanding capital of GES. On
November 21, 2011, the Company filed an amendment to the articles of incorporation to change the name of the company to Plandaí
Biotechnology, Inc. GES was subsequently folded up into Plandaí and the legal status terminated, leaving Plandaí
Biotechnology, Inc. as the surviving entity.
The Company is actively
pursuing additional financing and has had discussions with various third parties, although no firm commitments have been obtained.
Management believes these efforts will generate sufficient cash flows from future operations to pay the Company's obligations and
realize positive cash flow. There is no assurance any of these transactions will occur.
In April 2012, through our subsidiary
companies, we secured a 100 million Rand (approximately $13 million) financing with the Land and Agriculture Bank of South Africa
which has been used to build infrastructure and further operations.
DISPOSITION OF SUBSIDIARY
On November 17, 2011, the Company sold its subsidiary, Diamond Ranch,
Ltd., together with its wholly-owned subsidiary, Executive Seafood, Inc. to the former officer and director of Diamond Ranch. Under
the terms of the sale, the purchaser assumed all associated debt as consideration. During the three and six months ended
December 31, 2011, Diamond Ranch, Ltd. and Executive Seafood, Inc. had negligible revenues from operations, generated a net loss
of $126,000, and as of the date of disposition, liabilities exceeded assets by over $5,000,000.
As a result of the Share Exchange Agreement and disposition of Diamond
Ranch, Ltd., the operations of Plandaí Biotechnology, Inc. consist entirely of the operations of the former GES entity its
subsidiaries.
PRODUCTS AND SERVICES
Plandaí has a proprietary technology
that extracts a high level of bio-available compounds from organic matter including green tea leaves and most other organic materials.
Various tests have been conducted over the past ten years using this technology that generates functional chemical compounds possessing
nutritive properties that act effectively as preventive agents in the healthcare field. Polyphenols from green tea are an excellent
source antioxidant and anti-carcinogenic substances.
The Company intends to use its plantation leases
to
focuses on the farming of whole fruits, vegetables and live plant material and the production of proprietary functional
foods and botanical extracts for the health and wellness industry using its proprietary extraction technology.
Many botanical extracts have demonstrated varying
degrees of health benefit, and many pharmaceutical drugs are either derived directly from plant extracts or are synthetic analogs
of phytonutrient molecules. Green tea leaf, for example, has shown promising in-vitro results as an anti-oxidant, with hundreds
of different published studies demonstrating its potential usefulness in weight loss, anti-viral, anti-cancer, and anti-parasitic
applications, amongst others.
The company is presently developing for market
two unique extracts: Phytofare™ Catechin Complex and Phytofare™ Limonoid Glycoside Complex. The catechin complex is
derived from green tea harvested locally on the Senteeko Tea Estate in Mpumalanga, South Africa, and then processed on a state-of-the-art
extraction facility constructed onsite using funds obtained from the Land and Agriculture Bank of South Africa. The facility is
expected to become operational in December 2013, with initial sales commencing first quarter 2014. The limonoid glycoside product
is extracted from lemons which are sourced from local plantations in South Africa and then produced in the same factory that makes
the green tea product. The Phytofare™ Limonoid Glycoside Complex will be introduced to the market in July 2014.
In August 2014, Plandaí entered into
a license agreement with North-West University in Potchefstroom, South Africa, which granted the company the exclusive right to
use the University’s Pheroid™ technology to product nano-entrapped botanical extracts for human and animal use. The
company believes that this technology will enable it to develop products with much higher absorption coefficients in both topical
use and oral consumption.
COMPETITION
The Company faces competition from a variety
of sources. There are several large producers of farm products including green tea and there are numerous companies that develop
and market nutraceutical products that include bio-available compounds including those from green tea and citrus extracts. Many
of these competitors benefit from established distribution, market-ready products, and greater levels of financing. Plandaí
intends to compete by producing higher quality and higher concentration extracts, producing at lower costs, and controlling a vertically
integrated market that includes all stages from farming through production and marketing. The company’s unique patent-pending
technology, combined with the patented Pheroid™ technology, should provide several unique market advantages in the form of
higher absorption, increased bioavailability, and lower dosage requirements.
CUSTOMERS
Plandaí will market to nutriceutical
and supplement companies that require high-quality bio-available extracts for their products. As pharmaceutical products clear
their human clinical trials and receive market approval from the FDA, Plandaí will enlist distribution companies to sell
to various end user outlets. In addition, the Company anticipates having surplus farm products including timber, fruits, and nuts
which will be sold to local markets.
ITEM 1A. RISK FACTORS
An investment in our securities is highly speculative,
involves a high degree of risk and is suitable only for investors with substantial means who can bear the economic risk of the
investment for an indefinite period of time, have no need for liquidity of the investment, and have adequate means of providing
for their current needs and contingencies. An investment in the securities should be made only by persons able to bear the risk
in the event the investment results in a total loss.
We Have Historically Lost Money and Losses May Continue in the
Future
We have historically lost money. The
loss for the fiscal year June 30, 2013 was $2,108,005 and future losses are likely to occur. Accordingly, we may experience
significant liquidity and cash flow problems if we are not able to raise additional capital as needed and on acceptable terms.
No assurances can be given we will be successful in reaching or maintaining profitable operations.
We Will Need to Raise Additional Capital to Finance Operations
Our operations have relied almost entirely
on external financing to fund our operations. Such financing has historically come from a combination of borrowings and from
the sale of common stock and assets to third parties. We will need to raise additional capital to fund our anticipated operating
expenses and future expansion. Among other things, external financing will be required to cover our operating costs. We
cannot assure you that financing whether from external sources or related parties will be available if needed or on favorable terms.
The sale of our common stock to raise capital may cause dilution to our existing shareholders. Our inability to obtain
adequate financing will result in the need to curtail business operations. Any of these events would be materially harmful
to our business and may result in a lower stock price.
There is Substantial Doubt About Our Ability to Continue as a
Going Concern Due to Recurring Losses and Working Capital Shortages, Which Means that We May Not Be Able to Continue Operations
Unless We Obtain Additional Funding
Our independent certified public accountant
has stated in their report included in this filing that we have suffered recurring losses from operations that raise
substantial doubt about our ability to continue as a going concern.
The Company has experienced recurring operating
losses and we currently have a working capital deficiency. There is a possibility that our revenues will not be sufficient to meet
our operating costs. To date our liabilities have greatly exceeded our current assets. There is a substantial doubt that we can
continue as a going concern.
There can be no assurance that we will continue
to generate revenues from operations or obtain sufficient capital on acceptable terms, if at all. Failure to obtain such
capital or generate such operating revenues would have an adverse impact on our financial position and results of operations and
ability to continue as a going concern. Our operating and capital requirements during the next fiscal year and thereafter
will vary based on a number of factors, including the level of sales and marketing activities for our services and products. There
can be no assurance that additional private or public finances, including debt or equity financing, will be available as needed
or, if available, on terms favorable to us. Any additional equity financing may be dilutive to stockholders and such additional
equity securities may have rights, preferences or privileges that are senior to those of our existing common stock.
Furthermore, debt financing, if available,
will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility.
Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations.
Our Common Stock May Be Affected By Limited Trading Volume and
May Fluctuate Significantly
There has been a limited public market for
our common stock and there can be no assurance that an active trading market for our common stock will develop. As a result,
this could adversely affect our shareholders' ability to sell our common stock in short time periods, or possibly at all. Our
common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations that could adversely
affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors
such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets
could cause the price of our common stock to fluctuate substantially. Substantial fluctuations in our stock price could significantly
reduce the price of our stock.
There is no Assurance of Continued Public Trading Market and
Being a Low Priced Security may Affect the Market Value of Our Stock
To date, there has been only a limited public
market for our common stock. Our common stock is currently quoted on the OTCBB. As a result, an investor may find it difficult
to dispose of, or to obtain accurate quotations as to the market value of our stock. Our stock is subject to the low-priced security
or so called "penny stock" rules that impose additional sales practice requirements on broker-dealers who sell such securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure in connection with any trades involving
a stock defined as a penny stock (generally, according to recent regulations adopted by the SEC, any equity security that has a
market price of less than $5.00 per share, subject to certain exceptions that we no longer meet). For example, brokers/dealers
selling such securities must, prior to effecting the transaction, provide their customers with a document that discloses the risks
of investing in such securities. Included in this document are the following:
- the bid and offer price quotes in and for the "penny
stock," and the number of shares to which the quoted prices apply,
- the brokerage firm's compensation for the
trade, and
- the compensation received by the brokerage
firm's sales person for the trade.
In addition, the brokerage firm must send the investor:
- a monthly account statement that gives an
estimate of the value of each "penny stock" in the investor's account, and
- a written statement of the investor's financial
situation and investment goals.
If the person purchasing the securities is
someone other than an accredited investor or an established customer of the broker/dealer, the broker/dealer must also approve
the potential customer's account by obtaining information concerning the customer's financial situation, investment experience
and investment objectives. The broker/dealer must also make a determination whether the transaction is suitable for the customer
and whether the customer has sufficient knowledge and experience in financial matters to be reasonably expected to be capable of
evaluating the risk of transactions in such securities. Accordingly, the Commission's rules may limit the number of potential purchasers
of the shares of our common stock.
Resale restrictions on transferring "penny
stocks" are sometimes imposed by some states, which may make transaction in our stock more difficult and may reduce the value
of the investment. Various state securities laws pose restrictions on transferring
"penny stocks" and as a result, investors
in our common stock may have the ability to sell their shares of our common stock impaired.
There can be no assurance we will have market
makers in our stock. If the number of market makers in our stock should decline, the liquidity of our common stock could be impaired,
not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing
of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could
result in persons being unable to buy or sell shares of the common stock on any secondary market.
We Could Fail to Retain or Attract Key Personnel
Our future success depends in significant part
on the continued services of Roger Duffield, our President. We cannot assure we would be able to find an appropriate replacement
for key personnel. Any loss or interruption of our key personnel's services could adversely affect our ability to develop
our business plan.
Nevada Law and Our Charter May Inhibit a Takeover of Our Company
That Stockholders May Consider Favorable
Provisions of Nevada law, such as its business
combination statute, may have the effect of delaying, deferring or preventing a change in control of our company. As a result,
these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.
We have a history of operating
losses and expect to incur losses for the foreseeable future. We may never generate revenues or, if we are able to generate revenues,
achieve profitability.
We are focused on product development,
and we have not generated any revenues to date. We have incurred losses in each year of our operations, and we expect to continue
to incur operating losses for the foreseeable future. These operating losses have adversely affected and are likely to continue
to adversely affect our working capital, total assets and shareholders’ equity.
The Company and its prospects should
be examined in light of the risks and difficulties frequently encountered by new and early stage companies in new and rapidly evolving
markets. These risks include, among other things, the speed at which we can scale up operations, our complete dependence upon development
of products that currently have no market acceptance, our ability to establish and expand our brand name, our ability to expand
our operations to meet the commercial demand of our clients, our development of and reliance on strategic and customer relationships
and our ability to minimize fraud and other security risks.
The process of developing our products
requires significant clinical, development and laboratory testing and clinical trials. In addition, commercialization of our product
candidates will require that we obtain necessary regulatory approvals and establish sales, marketing and manufacturing capabilities,
either through internal hiring or through contractual relationships with others. We expect to incur substantial losses for the
foreseeable future as a result of anticipated increases in our research and development costs, including costs associated with
conducting preclinical testing and clinical trials, and regulatory compliance activities.
Our ability to generate revenues
and achieve profitability will depend on numerous factors, including success in:
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developing and testing product candidates;
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receiving regulatory approvals;
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commercializing our products;
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establishing a favorable competitive position.
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Many of these factors will depend
on circumstances beyond our control. We cannot assure you that we will ever have a product that we will bring to market or, if
we are successful in doing so, that we will ever become profitable.
We
expect to incur substantial additional operating expenses over the next several years as our research, development, pre-clinical
testing, and clinical trial activities increase. The amount of future losses and when, if ever, we will achieve profitability are
uncertain. We have no products that have generated any commercial revenue, do not expect to generate revenues from the commercial
sale of products in the near future, and might never generate revenues from the sale of products. Our ability to generate revenue
and achieve profitability will depend on, among other things, successful completion of the development of our product candidates;
the successful testing of our product in both in
in vitro
and
in vivo
trials; establishing manufacturing, sales,
and marketing arrangements with third parties; and raising sufficient funds to finance our activities. We might not succeed at
any of these undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of
operations may be materially adversely affected.
We received a report from our
independent registered public accounting firm with an explanatory paragraph for the year ended June 30, 2013 with respect to our
ability to continue as a going concern. The existence of such a report may adversely affect our stock price and our ability to
raise capital.
In their report dated September 25,
2013, our independent registered public accounting firm expressed substantial doubt about our ability to continue as a going concern
as we have incurred losses, have a negative cash flow from operations and have working capital and stockholders’ deficiencies.
Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding from
outside sources, including obtaining additional funding from the sale of our securities, increasing sales or obtaining loans and
grants from various financial institutions where possible. Our continued net operating losses increase the difficulty in meeting
such goals and there can be no assurances that such methods will prove successful.
We have no approved products on the market and have generated
no product revenues to date.
To
date, we have no approved product on the market and have generated no product revenues. Until and unless we receive approval from
regulatory authorities for our product candidates, we cannot sell our products and will not have product revenues. Therefore, for
the foreseeable future, we will have to fund all of our operations and capital expenditures from cash on hand, licensing fees and
grants and additional financings, to the extent such financings can be obtained.
We need additional capital. If
additional capital is not available or is available at unattractive terms, we may be forced to delay, reduce the scope of or eliminate
our research and development programs, reduce our commercialization efforts or curtail our operations.
In order to develop and bring our
product candidates to market, we must commit substantial resources to costly and time-consuming production development, research,
clinical trials and marketing activities. We anticipate that our existing cash and cash equivalents will enable us to maintain
our current operations for at least the next six months. We anticipate using our cash and cash equivalents to fund further research
and development with respect to our lead product candidates. We may, however, need to raise additional funding sooner if our business
or operations change in a manner that consumes available resources more rapidly than we anticipate. Our requirements for additional
capital will depend on many factors, including:
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successful commercialization of our product candidates;
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the time and costs involved in obtaining regulatory approval
for our product candidates;
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costs associated with protecting our intellectual property
rights;
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development of marketing and sales capabilities;
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payments received under future collaborative agreements, if any; and
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market acceptance of our products.
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To the extent we raise additional
capital through the sale of equity securities, the issuance of those securities could result in dilution to our shareholders. In
addition, if we obtain debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal
and interest on such indebtedness, thus limiting funds available for our business activities. If adequate funds are not available,
we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization
efforts or curtail our operations. In addition, we may be required to obtain funds through arrangements with collaborative partners
or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek
to develop or commercialize ourselves or license rights to technologies, product candidates or products on terms that are less
favorable to us than might otherwise be available.
The Company will require substantial
additional funds to support its research and development activities and eventual commercialization. Such additional sources of
financing may not be available on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms,
we could be forced to discontinue product development, forego sales and marketing efforts and forego attractive business opportunities.
Any additional sources of financing will likely involve the issuance of our equity securities, which will have a dilutive effect
on our stockholders.
There is no assurance that we will
be successful in raising the additional funds needed to fund our business plan. If we are not able to raise sufficient capital
in the near future, our continued operations will be in jeopardy and we may be forced to cease operations and sell or otherwise
transfer all or substantially all of our remaining assets.
We face intense competition in
the markets targeted by our lead product candidates. Many of our competitors have substantially greater resources than we do, and
we expect that all of our product candidates under development will face intense competition from existing or future drugs.
We expect that all of our product
candidates under development, if approved, will face intense competition from existing and future products marketed by large companies.
These competitors may successfully market products that compete with our products, successfully identify and develop products earlier
than we do, or develop products that are more effective or cost less than our products.
These competitive factors could
require us to conduct substantial new research and development activities to establish new product targets, which would be costly
and time consuming. These activities would adversely affect our ability to commercialize products and achieve revenue and profits.
Competition and technological
change may make our product candidates and technologies less attractive or obsolete.
We
compete with established pharmaceutical and food additive companies that are pursuing other products for the same indications we
are pursuing and that have greater financial and other resources. Other companies may succeed in developing products earlier than
us, or developing products that are more effective than our product candidates. Research and development by others may render our
technology or product candidates obsolete or noncompetitive, or result in treatments or cures superior to any product we develop.
We face competition from companies that internally develop competing technology or acquire competing technology from universities
and other research institutions. As these companies develop their technologies, they may develop competitive positions that may
prevent, make futile, or limit our product commercialization efforts, which would result in a decrease in the revenue we would
be able to derive from the sale of any products.
There can be no assurance that any
of our product candidates will be accepted by the marketplace as readily as these or other competing treatments. Even if our products
are successfully developed and approved for use by all governing regulatory bodies, there can be no assurance that 3
rd
party manufacturers and consumers will prefer our products to those already in the market.
Furthermore, the food additive industry
is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith are numerous and significant.
The effects of competition, intellectual property disputes, and market acceptance preclude us from forecasting revenues or income
with certainty or even confidence.
If we fail to protect our intellectual
property rights, our ability to pursue the development of our technologies and products would be negatively affected.
Our success will depend in part
on our ability to obtain patents and maintain adequate protection of our technologies and products. If we do not adequately protect
our intellectual property, competitors may be able to use our technologies to produce and market drugs in direct competition with
us and erode our competitive advantage. Some foreign countries lack rules and methods for defending intellectual property rights
and do not protect proprietary rights to the same extent as the United States. Many companies have had difficulty protecting their
proprietary rights in these foreign countries. We may not be able to prevent misappropriation of our proprietary rights.
We
are currently seeking patent protection for numerous processes and finished products. However, the patent process is subject to
numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our products by obtaining
and defending patents. These risks and uncertainties include the following: patents that may be issued or licensed may be challenged,
invalidated, or circumvented, or otherwise may not provide any competitive advantage; our competitors, many of which have substantially
greater resources than us and many of which have made significant investments in competing technologies, may seek, or may already
have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell our potential products
either in the United States or in international markets; there may be significant pressure on the United States government and
other international governmental bodies to limit the scope of patent protection both inside and outside the United States for treatments
that prove successful as a matter of public policy regarding worldwide health concerns; countries other than the United States
may have less restrictive patent laws than those upheld by United States courts, allowing foreign competitors the ability to exploit
these laws to create, develop, and market competing products.
Moreover, any patents issued to us
may not provide us with meaningful protection, or others may challenge, circumvent or narrow our patents. Third parties may also
independently develop products similar to our products, duplicate our unpatented products or design around any patents on products
we develop. Additionally, extensive time is required for development, testing and regulatory review of a potential product. While
extensions of patent term due to regulatory delays may be available, it is possible that, before any of our product candidates
can be commercialized, any related patent, even with an extension, may expire or remain in force for only a short period following
commercialization, thereby reducing any advantages of the patent.
In
addition, the United States Patent and Trademark Office (the "PTO") and patent offices in other jurisdictions have often
required that patent applications concerning biotechnology-related inventions be limited or narrowed substantially to cover only
the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges.
Thus, even if we or our licensors are able to obtain patents, the patents may be substantially narrower than anticipated.
Our success depends on patent applications
that are licensed exclusively to us and other patents to which we may obtain assignment or licenses. We may not be aware, however,
of all patents, published applications or published literature that may affect our business either by blocking our ability to commercialize
our product candidates, by preventing the patentability of our product candidates to us or our licensors, or by covering the same
or similar technologies that may invalidate our patents, limit the scope of our future patent claims or adversely affect our ability
to market our product candidates.
In addition to patents, we rely on
a combination of trade secrets, confidentiality, nondisclosure and other contractual provisions, and security measures to protect
our confidential and proprietary information. These measures may not adequately protect our trade secrets or other proprietary
information. If they do not adequately protect our rights, third parties could use our technology, and we could lose any competitive
advantage we may have. In addition, others may independently develop similar proprietary information or techniques or otherwise
gain access to our trade secrets, which could impair any competitive advantage we may have.
Patent protection and other intellectual
property protection is crucial to the success of our business and prospects, and there is a substantial risk that such protections
will prove inadequate.
If testing or clinical trials
for our product candidates are unsuccessful or delayed, we will be unable to meet our anticipated development and commercialization
timelines.
We rely and expect to continue to
rely on third parties, including clinical research organizations and outside consultants, to conduct, supervise or monitor some
or all aspects of testing or clinical trials involving our product candidates. We have less control over the timing and other aspects
of testing or clinical trials than if we performed the monitoring and supervision entirely on our own. Third parties may not perform
their responsibilities for our testing or clinical trials on our anticipated schedule or, for clinical trials, consistent with
a clinical trial protocol. Delays in preclinical and clinical testing could significantly increase our product development costs
and delay product commercialization. In addition, many of the factors that may cause, or lead to, a delay in the clinical trials
may also ultimately lead to denial of regulatory approval of a product candidate.
The commencement of clinical trials can be delayed for a variety
of reasons, including delays in:
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demonstrating sufficient safety and efficacy to obtain regulatory approval
to commence a clinical trial;
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reaching agreement on acceptable terms with prospective contract research
organizations and trial sites;
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manufacturing sufficient quantities of a product candidate; and
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obtaining institutional review board approval to conduct a clinical trial
at a prospective site.
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Once a clinical trial has begun,
it may be delayed, suspended or terminated due to a number of factors, including:
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ongoing discussions with the FDA or other regulatory authorities regarding
the scope or design of our clinical trials;
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failure to conduct clinical trials in accordance with regulatory requirements;
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lower than anticipated recruitment or retention rate of patients in clinical trials;
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lack of adequate funding to continue clinical trials; or
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negative results of clinical trials
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If clinical trials are unsuccessful,
and we are not able to obtain regulatory approvals for our product candidates under development, we will not be able to commercialize
these products, and therefore may not be able to generate sufficient revenues to support our business.
If we are unable to hire additional qualified personnel, our
ability to grow our business may be harmed.
Over time we will need to hire additional
qualified personnel with expertise in clinical testing, clinical research and testing, government regulation, formulation and manufacturing,
financial matters and sales and marketing. We compete for qualified individuals with numerous biopharmaceutical companies, universities
and other research institutions. Competition for such individuals is intense, and we cannot be certain that our search for such
personnel will be successful. Attracting and retaining qualified personnel will be critical to our success.
Data provided by collaborators
and others upon which we rely that has not been independently verified could turn out to be false, misleading, or incomplete.
We rely on third-party vendors,
scientists, and collaborators to provide us with significant data and other information related to our projects, clinical trials,
and our business. If such third parties provide inaccurate, misleading, or incomplete data, our business, prospects, and results
of operations could be materially adversely affected.
Successful development of our products is uncertain
.
Our development of current and future
product candidates is subject to the risks of failure and delay inherent in the development of new biotech products, including:
delays in product development, clinical testing, or manufacturing; unplanned expenditures in product development, clinical testing,
or manufacturing; failure to receive regulatory approvals; emergence of superior or equivalent products; inability to manufacture
on its own, or through any others, product candidates on a commercial scale; and failure to achieve market acceptance.
Because of these risks, our research
and development efforts may not result in any commercially viable products. If a significant portion of these development efforts
are not successfully completed, required regulatory approvals are not obtained or any approved products are not commercially successfully,
our business, financial condition, and results of operations may be materially harmed.
We do not have, and may never
obtain, the regulatory approvals we need to market our product candidates.
Following completion of clinical
trials, the results are evaluated and, depending on the outcome, may be submitted to the FDA in the form of an NDA in order to
obtain approval to commence commercial marketing using the desired claims. While FDA approval will not be required to sell our
products, in order to make certain health-related claims, FDA approval may be required. In responding to an NDA, the FDA may require
additional testing or information, may require that the product labeling be modified, may impose post-approval study or reporting
requirements or other restrictions on product distribution, or may deny the application. The FDA has established performance goals
for review of NDAs - six months for priority applications and ten months for standard applications. However, the FDA is not required
to complete its review within these time periods. The timing of final FDA review and action varies greatly, but can take years
in some case and may involve the input of an FDA advisory committee of outside experts. Product sales in the United States may
commence only when an NDA is approved.
To date, we have not applied for
or received the regulatory approvals required for the commercial sale of any of our products in the United States or in any foreign
jurisdiction. None of our product candidates has been determined to be safe and effective, and we have not submitted an NDA to
the FDA or an equivalent application to any foreign regulatory authorities for any of our product candidates.
It is possible that none of our
product candidates will be approved for marketing. Failure to obtain regulatory approvals, or delays in obtaining regulatory approvals,
may adversely affect the successful commercialization of any products we develop, may impose additional costs on us or our collaborators,
may diminish any competitive advantages that we or our partners may attain, and/or may adversely affect our receipt of revenues
or royalties.
Even if we obtain regulatory
approval to market our product candidates, our product candidates may not be accepted by the market.
Even if we receive regulatory approval
to market one or more of our product candidates, consumers may not accept it or use it. Acceptance and use of our products will
depend upon a number of factors including: perceptions by members of the health care community, including physicians, about the
safety and effectiveness of our products; cost-effectiveness of our product relative to competing products;
and effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.
If we fail to establish marketing,
sales and distribution capabilities, or fail to enter into arrangements with third parties, we will not be able to create a market
for our product candidates.
Our strategy with our lead product
candidates is to control, directly or through contracted third parties, all or most aspects of the product development process,
including marketing, sales and distribution. Currently, we do not have any sales, marketing or distribution capabilities. In order
to generate sales of any product candidates that receive regulatory approval, we must either acquire or develop an internal marketing
and sales force with technical expertise and with supporting distribution capabilities or make arrangements with third parties
to perform these services for us. The acquisition or development of a sales and distribution infrastructure would require substantial
resources, which may divert the attention of our management and key personnel and defer our product development efforts. To the
extent that we enter into marketing and sales arrangements with other companies, our revenues will depend on the efforts of others.
These efforts may not be successful. If we fail to develop sales, marketing and distribution channels, or enter into arrangements
with third parties, we will experience delays in product sales and incur increased costs.
The establishment of a marketing,
sales, and distribution capability would significantly increase our costs, possibly requiring substantial additional capital. In
addition, there is intense competition for proficient sales and marketing personnel, and we may not be able to attract individuals
who have the qualifications necessary to market, sell, and distribute our products. There can be no assurance that we will be able
to establish internal marketing, sales, or distribution capabilities. If we are unable to, or choose not to establish these capabilities,
or if the capabilities we establish are not sufficient to meet our needs, we will be required to establish collaborative marketing,
sales, or distribution relationships with third parties.
We face the risk of product liability claims and may not be able
to obtain insurance.
Our business exposes us to the risk of product
liability claims that are inherent in the development of consumer products. If the use of one of our products harms people, we
may be subject to costly and damaging product liability claims brought against us by clinical trial participants, consumers, or
others selling our products. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against
potential product liability claims could prevent or inhibit the commercialization of products we develop, alone or with collaborators.
We currently do not carry clinical trial insurance or product liability insurance. We intend to obtain such insurance in the future.
We cannot predict all of the possible harms or side effects that may result and, therefore, the amount of insurance coverage we
hold now or in the future may not be adequate to cover all liabilities we might incur. If we are unable to obtain insurance at
an acceptable cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities,
which may materially and adversely affect our business and financial position. If we are sued for any injury allegedly caused by
our or our collaborators' products, our liability could exceed our total assets and our ability to pay the liability. A product
liability claim or series of claims brought against us would decrease our cash and could cause our stock price to fall.
EMPLOYEES
The Company,
including subsidiaries, currently employs 100 full time employees, of which 80 are engaged in farming, 5 in research and development,
and 15 in management and operations. Once the Company has completed testing on its Phytofare™ products and has its production
facility nearing completion, management expects to increase the number of employees engaged in farming, production, and operations
significantly. We assess employee relations to be excellent.