UNITED STATES
SECURITY AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM
____________________
(MARK ONE)
For the quarterly period ended
or
For the transition period from _________ to _________
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification Number) | |
(Address of principal executive offices) | (Zip code) |
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 preceding 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.
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
☒ | Smaller reporting company | |||
Emerging growth company |
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐
Securities registered pursuant to Section 12(b) of the Act: None.
Title of each class | Trading Symbol | Name of each exchange on which registered |
N/A |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 14, 2023,
shares of common stock issued and outstanding.
TABLE OF CONTENTS
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
OTHER PERTINENT INFORMATION
When used in this report, the terms, “we,” the “Company,” “our,” and “us” refers to GlobeStar Therapeutics Corporation, a Wyoming corporation and its subsidiaries unless the context specifically indicates otherwise.
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PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLOBESTAR THERAPEUTICS CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, | September 30, | ||||||
2023 | 2022 | ||||||
(Unaudited) | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | $ | $ | |||||
Prepaid expenses | |||||||
Total current assets | |||||||
TOTAL ASSETS | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
Current Liabilities | |||||||
Accounts payable and accrued liabilities | $ | $ | |||||
Accounts payable to related party | |||||||
Related party advances | |||||||
Advances payable | |||||||
Current portion of convertible notes payable, net of discount of $ |
|||||||
Series G Preferred Stock Liability, net of discount of $ |
|||||||
Accrued interest payable | |||||||
Total current liabilities | |||||||
TOTAL LIABILITIES | |||||||
COMMITMENTS AND CONTINGENCIES | |||||||
STOCKHOLDERS' DEFICIT | |||||||
Common stock, $ | par value; and shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively|||||||
Preferred stock; | shares authorized:|||||||
Series A Preferred Stock, $ | par value, shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively|||||||
Series D Preferred Stock, $ | par value; shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively|||||||
Series E Preferred Stock, $ | par value; shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively|||||||
Series F Preferred Stock; $ | par value; shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively|||||||
Additional paid-in capital | |||||||
Stock payable, consisting of | and shares to be issued at June 30, 2023 and September 30, 2022, respectively|||||||
Accumulated deficit | ( |
) | ( |
) | |||
TOTAL STOCKHOLDERS' DEFICIT | ( |
) | ( |
) | |||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | $ |
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
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GLOBESTAR THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended | Nine Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||
REVENUE | $ | $ | $ | $ | |||||||||
Cost of goods sold | |||||||||||||
Gross profit (loss) | |||||||||||||
OPERATING EXPENSES | |||||||||||||
General and administrative expenses | |||||||||||||
Total operating expenses | |||||||||||||
LOSS FROM OPERATIONS | ( |
) | ( |
) | ( |
) | ( |
) | |||||
OTHER INCOME (EXPENSE) | |||||||||||||
Gain (loss) on settlement of liabilities, related party | ( |
) | |||||||||||
Loss on conversion of preferred stock liability | ( |
) | ( |
) | |||||||||
Interest expense | ( |
) | ( |
) | ( |
) | ( |
) | |||||
Total other expense | ( |
) | ( |
) | ( |
) | ( |
) | |||||
Net Loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |
Net loss per share available to common shareholders | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |
Weighted average shares outstanding - basic and diluted |
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
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GLOBESTAR THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
Series D | Series E | Series F | Additional | Total | |||||||||||||||||||||||||||||
Common Stock | Preferred Stock | Preferred Stock | Preferred Stock | Paid-in | Stock | Accumulated | Equity | ||||||||||||||||||||||||||
Shares | Par | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Payable | Deficit | (Deficit) | ||||||||||||||||||||||
Balance, September 30, 2021 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
Conversion of Series F Preferred Stock to common | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
Common stock issued for stock payable | — | — | — | ( |
) | ||||||||||||||||||||||||||||
Common stock issued for settlement of liability | — | — | — | ||||||||||||||||||||||||||||||
Net loss for the three months ended December 31, 2021 | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance, December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
— | |||||||||||||||||||||||||||||||||
Conversion of Series G Preferred Stock to common | — | — | — | ||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||
Stock-based compensation, related parties | — | — | — | — | |||||||||||||||||||||||||||||
Net loss for the three months ended March 31, 2022 | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
Conversion of Series G Preferred Stock to common | — | — | — | ||||||||||||||||||||||||||||||
Stock-based compensation, related parties | — | — | — | — | |||||||||||||||||||||||||||||
Net loss for the three months ended June 30, 2022 | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance, June 30, 2022 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) |
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GLOBESTAR THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
Series D | Series E | Series F | Additional | Total | |||||||||||||||||||||||||||||
Common Stock | Preferred Stock | Preferred Stock | Preferred Stock | Paid-in | Stock | Accumulated | Equity | ||||||||||||||||||||||||||
Shares | Par | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Payable | Deficit | (Deficit) | ||||||||||||||||||||||
Balance, September 30, 2022 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
Common stock subscribed for cash proceeds | — | — | — | — | |||||||||||||||||||||||||||||
Conversion of Series G Preferred Stock to common | — | — | — | ||||||||||||||||||||||||||||||
Stock-based compensation, related parties | — | — | — | — | |||||||||||||||||||||||||||||
Net loss for the three months ended December 31, 2022 | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
Common stock subscribed for cash proceeds | — | — | — | — | |||||||||||||||||||||||||||||
Conversion of Series G Preferred Stock to common | — | — | — | ||||||||||||||||||||||||||||||
Common stock issued for the conversion of debt | — | — | — | ||||||||||||||||||||||||||||||
Stock-based compensation, related parties | — | — | — | — | |||||||||||||||||||||||||||||
Net loss for the three months ended March 31, 2023 | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
Common stock subscribed for cash proceeds | — | — | — | — | |||||||||||||||||||||||||||||
Conversion of Series G Preferred Stock to common | — | — | — | ||||||||||||||||||||||||||||||
Common stock issued for stock payable | — | — | — | ( |
) | ||||||||||||||||||||||||||||
Common stock issued for settlement of liability | — | — | — | ||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||||||||||||||||
Stock-based compensation, related parties | — | — | — | — | |||||||||||||||||||||||||||||
Net loss for the three months ended June 30, 2023 | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance, June 30, 2023 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) |
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
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GLOBESTAR THERAPEUTICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended | |||||||
June 30, | |||||||
2023 | 2022 | ||||||
CASH FLOW FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | ( |
) | $ | ( |
) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Stock compensation | |||||||
Stock compensation, related parties | |||||||
Amortization of discount on convertible note payable | |||||||
(Gain) Loss on settlement of liabilities | ( |
) | |||||
Loss on conversion of preferred stock liability | |||||||
Changes in operating assets and liabilities | |||||||
Prepaid expenses | |||||||
Accounts payable and accrued liabilities | |||||||
Accounts payable and accrued liabilities to related party | |||||||
Accrued interest payable | |||||||
NET CASH USED IN OPERATING ACTIVITIES | ( |
) | ( |
) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Proceeds from convertible note payable, net | |||||||
Proceeds from sale of Series G Preferred Stock | |||||||
Proceeds from related party advances | |||||||
Repayment of related party advances | ( |
) | ( |
) | |||
Proceeds from common stock subscribed | |||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | |||||||
NET CHANGE IN CASH | ( |
) | ( |
) | |||
Cash at beginning of period | |||||||
Cash at end of period | $ | $ | |||||
Cash paid during the period for: | |||||||
Interest | $ | $ | |||||
Taxes | $ | $ | |||||
Noncash investing and financing transactions: | |||||||
Conversion of Series F preferred stock | $ | $ | |||||
Conversion of Series G preferred stock | $ | $ | |||||
Common stock issued for stock payable | $ | $ | |||||
Common stock issued for settlement of liabilities | $ | $ | |||||
Common stock issued for the conversion of debt | $ | $ | |||||
Expenses paid on the Company's behalf for subscription agreement | $ | $ |
The accompanying footnotes are an integral part of these unaudited consolidated financial statements.
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GLOBESTAR THERAPEUTICS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2023
(Unaudited)
Note 1. General Organization and Business
GlobeStar Therapeutics Corporation (the “Company”) was incorporated on April 29, 2016. The Company’s year-end is September 30. On October 4, 2019, the Company filed Articles of Continuance with the Secretary of State of Wyoming to continue its business in the state of Wyoming. As part of these Articles of Continuance, effective October 4, 2019, the Company has no limit on the authorized shares of common stock that can be issued. The Company filed its Certificate of Dissolution with the Secretary of State of Nevada on October 21, 2019 because it is no longer a Nevada corporation.
The Company is developing an expanded platform of products that include addition of treatment for Multiple Sclerosis and other neurodegenerative diseases. The potential pharmaceutical products related to treatment for multiple sclerosis are licensed to the Company through the worldwide licensing agreement described in Note 7.
Note 2. Going Concern and Summary of Significant Accounting Policies
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. For the nine months ended June 30, 2023, the Company had a net loss of $
These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.
In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company, which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.
Interim Financial Statements
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X and should be read in conjunction with the audited financial statements and notes thereto for the year ended September 30, 2022 which are included on our Form 10-K filed on January 9, 2023. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the three and nine months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2023.
Consolidated Financial Statements
The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, SomaCeuticals, Inc., First Titan Energy, LLC and First Titan Technical, LLC from the date of their formations or acquisition. Significant intercompany transactions have been eliminated in consolidation.
Recently Issued Accounting Pronouncements
We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
Note 3. Convertible Notes Payable and Advances
Convertible notes payable consisted of the following at June 30, 2023 and September 30, 2022:
June 30, 2023 |
September 30, 2022 |
||||||
Convertible note dated |
$ | $ | |||||
Convertible note dated |
|||||||
Unamortized Discount | ( |
) | |||||
Total current convertible notes payable, net of discount | $ | $ |
All principal along with accrued interest is payable
on the maturity date.
On May 10, 2023, the Company entered into a Securities
Purchase Agreement (the “May 2023 Securities Purchase Agreement”) with 1800 Diagonal Lending LLC (“1800 Diagonal”).
Pursuant to the terms of the May 2023 Securities Purchase Agreement, the Company issued a convertible promissory note (the “May
2023 Note”) to 1800 Diagonal in the aggregate principal amount of $
As of June 30, 2023 and September 30, 2022, accrued
interest on convertible notes payable was $
Conversions to Common Stock
During the nine months ended June 30, 2023, the holders
of the April 2017 convertible note payable elected to convert principal of $
Advances
As of June 30,
2023 and September 30, 2022, the Company had non-interest bearing advances payable to third parties of $
As of June 30, 2023 and September 30, 2022, the Company
had non-interest bearing advances payable to third parties of $
- 10 -
Note 4. Related Party Transactions
As of June 30, 2023 and September 30, 2022, the Company
owed $
In February 2022, the Company entered into an amended
and restatement employment agreement with Jim Katzaroff, the CEO. Mr. Katzaroff is entitled to an annual salary of $
The Company awarded Mr. Katzaroff a total of
Mr. Katzaroff will also receive an activity fee of 3% of gross revenues related to activities including securing a variety of vendor, sales or advertising relationships, or any new revenue generating activity. If such activity is a cost saving initiative instead of revenue generating, Mr. Katzaroff will receive 10% of the cost savings. As of June 30, 2023, no amounts have been earned or paid.
On April 4, 2023, the Company issued
Note 5. Stockholders’ Deficit
The Company is authorized to issue an unlimited number of common shares of stock with a par value of $
per share, and the following series of preferred stock:
Preferred Stock
Series A Preferred Stock –
Our board of directors has designated up to shares of Series A Preferred Stock. The Series A Preferred Stock has a liquidation
value of $ per share. The initial number issued is with additional shares to be issued as a dividend not to exceed a total
of shares. The rank of the Series A is prior to all common and preferred shares. In addition, the Series A Preferred Stock retains
protective provisions to maintain their seniority with respect to liquidation or dissolution. The Series A Preferred Stock holds no voting
rights and earns an
Series B Preferred Stock –
Our board of directors has designated up to shares of Series B Preferred Stock. The Series B Preferred Stock has a liquidation
value of $ per share. The holders of the Series B Preferred Stock are entitled to dividends of
Series C Preferred Stock – On September 12, 2017, our board of directors designated up to shares of Series C Preferred Stock with a liquidation value of $ per share. The holders of the Series C Preferred Stock have no voting rights. The Series C Preferred Stock is convertible at the option of the holder into shares of common stock at a rate of one share of common stock for each share of Series C Preferred Stock. The Series C Preferred Stock is redeemable at the option of the Company at a price of $ per share. The Series C Preferred Stock has been canceled, and there are shares of Series C Preferred Stock outstanding as of June 30, 2023 and September 30, 2022.
Series D Preferred Stock –
On September 21, 2017, our board of directors designated up to shares of Series D Preferred Stock with a liquidation value of
$ per share. The holders of the Series D Preferred Stock have no voting rights.
Series E Preferred Stock –
On August 3, 2015, our board of directors designated shares of Series E Preferred stock. The Series E Preferred stock is subordinate
to our common stock. It does not receive dividends and does not participate in equity distributions.
At June 30, 2023 and September 30, 2022, there were
shares of Series E Preferred stock outstanding. Dividends, when, as and if declared by the Board of Directors, shall be paid out of funds at the time legally available for such purposes.
Series F Preferred Stock –
On September 21, 2017, our board of directors designated up to shares of Series F Preferred Stock with a liquidation value of
$ per share. The holders of the Series F Preferred Stock have no voting rights.
Common stock issued for stock payable
In September 2022, the Company received two subscriptions
of $
Common Stock Warrants
During the nine months ended June 30, 2023, the Company
amended the exercise price of the common stock warrants issued to investors in its 2021 private placement to reduce the price from $
Warrants | Weighted- Average Exercise Price Per Share |
||||||
Outstanding, September 30, 2022 | $ | ||||||
Granted | |||||||
Exercised | — | — | |||||
Forfeited | — | — | |||||
Expired | — | — | |||||
Outstanding, June 30, 2023 | $ |
As of June 30, 2023, the outstanding warrants had an expected remaining life of
years and have no aggregate intrinsic value.
Common Stock Options
The Company recognized $
At June 30, 2023, the Company had $
Options | Weighted- Average Exercise Price Per Share |
||||||
Outstanding, September 30, 2022 | $ | ||||||
Granted | |||||||
Exercised | — | — | |||||
Forfeited | — | — | |||||
Expired | ( |
) | |||||
Outstanding, June 30, 2023 | $ |
As of June 30, 2023, all outstanding options had an expected remaining life of
years and have aggregate intrinsic value.
Common Stock issued for Services
On April 4, 2023, the Company issued
On April 25, 2023, the Company issued
On April 6, 2023, the Company issued
Note 6. Series G Preferred Stock
On August 11, 2021, our board of directors designated
up to
Based on the economic characteristics of the Series G Preferred Stock, the Company determined that the Series G should be accounted for as a liability under ASC 480-10, based on the discounted conversion price providing an effectively fixed monetary amount that the preferred stock is convertible into.
During the six months ended March 31, 2023, the Company
sold an aggregate of
As of June 30, 2023 and September 30, 2022,
Note 7. License Agreement
Effective August 23, 2020 the Company’s wholly-owned
subsidiary, SomaCeuticals, Inc. entered into an exclusive global license agreement with 7 to Stand, Inc. for the rights to U.S. patent
● | |
● | |
● | |
● | |
● |
The Company paid no royalties and accrued $
The Company owed $
Note 8. Commitments
In February 2022, the Company entered into a consulting
agreement with Spivak Management, Inc. (the “Consultant”). Under the agreement, the Consultant will provide business strategy
advice and introductions to the Company for a period of five years unless mutually terminated sooner. Concurrently, the Kenin Spivak,
who controls Spivak Management, Inc., entered into a stock purchase agreement with the Company to purchase
The Consultant may also receive a bonus in each calendar
year of the agreement equal to the larger of any bonus awarded by the Board of Directors to the Consultant or 50% of the largest bonus
payable by the Company to anyone other than the Consultant. If the agreement is terminated with one year of a change of control of the
Company, the Consultant will be entitled to receive a payment equal to 2.99 times the larger of the total compensation paid to the Consultant
over the prior 12 month period or the average compensation paid or payable to the Consultant over the prior three years. As of June 30,
2023 and September 30, 2022, the Company owed the consultant $
Note 9. Subsequent Events
In July 2023, the Company issued
In August 2023, the Company issued
The Company issued
shares to Mr. Spivak pursuant to the subscription agreement disclosed above.
- 15 -
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
GlobeStar Therapeutics Corporation (the “Company”) was incorporated on April 29, 2016. The Company’s year-end is September 30. On October 4, 2019, the Company filed Articles of Continuance with the Secretary of State of Wyoming to continue its business in the state of Wyoming. As part of these Articles of Continuance, effective October 4, 2019, the Company has no limit on the authorized shares of common stock that can be issued. The Company filed its Certificate of Dissolution with the Secretary of State of Nevada on October 21, 2019 because it is no longer a Nevada corporation.
We changed our name to GlobeStar Therapeutics Corporation on April 27, 2021 to better reflect our expanded platform of products that include addition of treatment for Multiple Sclerosis and other neurodegenerative diseases.
GlobeStar Therapeutics Corporation, based in Richland Washington, is a clinical stage Pharmaceutical Company introducing a patented formulation of previously approved drugs for the treatment of Multiple Sclerosis. GlobeStar Therapeutics owns the exclusive global license from the inventors, who are based in Italy. GlobeStar Therapeutics is initiating discussions with the FDA on clinical trial design in preparation for FDA submission and approval pathway.
Prior to the Company’s current business plan, the Company was a wellness company dedicated to bringing innovative, effective and high-quality supplement products to the medical, wellness and adult-use markets through our marketing subsidiary, SomaCeuticalsTM.
Professional Team
We have adopted a Medical Advisory Board and appointed medical doctors and medical professionals that have extensive education and hands on experience with pharmaceutical and nutraceutical solution for prevention and treatment of disease.
Management’s Plan to Attract Capital
In the near term, management will utilize equity and debt financing to complete assembling the professional and management team to commence the process for clinical trials in compliance with FDA protocol. plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.
In the midterm, management will enhance its capital position with a public offering of equity securities to finance clinical trials and the necessary actions to obtain approval of worldwide marketing of our MS treatment.
In the long term, marketing the Company’s pharmaceutical and nutraceutical products will provide the necessary cash flow to support future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of capital to support near term and midterm business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to support its operations.
Corporate Governance
We have adopted codes and committees for governance of the corporation that include: (i) audit committee charter, (ii) written acknowledgement of code of ethics for directors and senior officers, (iii) compensation committee charter, (iv) confidential information policy, iv) corporate governance guidelines, (vi) executive committee charter, and (vii) nominating committee charter.
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 consolidated financial statements are prepared. We regularly review our accounting policies, and how they are applied and disclosed in our consolidated financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
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Results of Operations
Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022
Revenue. We had no revenue for the three months ended June 30, 2023 and 2022.
Cost of goods sold. We had no cost of goods sold for the three months ended June 30, 2023 and 2022.
General and administrative expense. We recognized general and administrative expense of $1,279,283 for the three months ended June 30, 2023 compared to $136,618 for the comparable period of 2022. The increase in general and administrative expense was primarily related to $360,000 of stock-based compensation to a consultant, $714,097 related to options awarded to officers, and $51,761 related to the common stock warrant repricing in the three months ended June 30, 2023.
Interest expense. We recognized interest expense of $9,970 for the three months ended June 30, 2023 compared to $10,664 for the comparable period of 2022, including amortization of the discount on Series G Preferred Stock liability of $7,315 and $8,629 during the three months ended June 30, 2023 and 2022, respectively.
Gain/Loss on settlement of liabilities. We recognized a gain of $6,724 on the settlement of liabilities during the nine months ended June 30, 2023 related to shares issued for the settlement of royalty payable balance with 7 to Stand and the settlement of accrued compensation with the Company’s CEO.
Net loss. For the reasons above, we recognized a net loss of $1,282,529 for the three months ended June 30, 2023 compared to $158,103 for the three months ended June 30, 2022.
Nine Months Ended June 30, 2023 Compared to the Nine Months Ended June 30, 2022
Revenue. We had no revenue for the nine months ended June 30, 2023 and 2022.
Cost of goods sold. We had no cost of goods sold for the nine months ended June 30, 2023 and 2022.
General and administrative expense. We recognized general and administrative expense of $1,576,583 for the nine months ended June 30, 2023 compared to $965,222 for the comparable period of 2022. The increase in general and administrative expense was primarily related to an increase in stock -based compensation associated with common stock issued to a consultant of $360,000, new option awards to officers in the current period with expense of $696,294 and $51,761 related to the common stock warrant repricing, partially offset by a decrease in legal fees of $76,620.
Gain/Loss on settlement of liabilities. We recognized a gain of $6,724 and a loss of $146,460 on the settlement of liabilities during the nine months ended June 30, 2023 and 2022. In the current period, the shares related to the settlement of royalty payable balance with 7 to Stand and the settlement of accrued compensation with the Company’s CEO. In 2022, the loss was related to shares issued to settle $15,000 of advances.
Interest expense. We recognized interest expense of $28,816 for the nine months ended June 30, 2023 compared to $56,999 for the comparable period of 2023. The decrease was due primarily to the amortization of the discount on convertible notes payable and Series G Preferred Stock during the current period in the amount of $23,777 compared to $44,046 during the comparable period of the prior year.
Net loss. For the reasons above, we recognized a net loss of $1,598,675 for the nine months ended June 30, 2023 compared to $1,179,502 for the nine months ended March 31, 2022.
Liquidity and Capital Resources
At June 30, 2023, we had cash on hand of $0. The Company has negative working capital of $1,277,133. Net cash used in operating activities for the nine months ended June 30, 2023 was $133,065. Cash on hand is not adequate to fund our operations for less than twelve months. 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, 2023.
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During the nine months ended June 30, 2023 the net loss of $1,598,675 was offset by the following non-cash operating expenses: stock compensation of $411,761, stock based compensation with related parties of $749,703, amortization of discount of $23,777 resulting in cash flows used in operating activities of $133,065. The Company had cash flows from financing activities of $126,700, primarily due to $73,000 from the proceeds of sale of Series G Preferred Stock, $40,500 in proceeds from the common stock subscribed and $3,700 of related party advances.
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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
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, 2023. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2023, 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.
1. | As of June 30, 2023, 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. |
2. | As of June 30, 2023, 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. |
Our management, including our principal executive officer and principal financial officer do 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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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
ITEM 1A. RISK FACTORS
Not applicable to a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Set forth below is information regarding the securities sold during the quarter ended June 30, 2023 that were not registered under the Securities Act:
Date of Sale | Title of Security |
Number Sold |
Consideration Received and Description of Underwriting or Other Discounts to Market Price or Convertible Security, Afforded to Purchasers |
Exemption from Registration Claimed |
If Option, Warrant or Convertible Security, terms of exercise or conversion | |||||
April 6, 2023 | Common Stock | 50,000,000 | Stock for services | Section 3(a)(9) of the Securities Act | — | |||||
April 6, 2023 | Common Stock | 7,422,535 | Settlement of liabilities | Section 3(a)(9) of the Securities Act | — | |||||
April 25, 2023 | Common Stock | 7,261,087 | Settlement of liabilities | Section 3(a)(9) of the Securities Act | — | |||||
May 22, 2023 | Common Stock | 1,515,152 | Cash subscription | Section 3(a)(9) of the Securities Act | — | |||||
May 22, 2023 | Common Stock | 1,428,571 | Cash subscription | Section 3(a)(9) of the Securities Act | — | |||||
May 22, 2023 | Common Stock | 7,500,000 | Cash subscription | Section 3(a)(9) of the Securities Act | — | |||||
June 20, 2023 | Common Stock | 8,000,000 | Conversion of Series G Preferred Stock | Section 3(a)(9) of the Securities Act | $0.0026 | |||||
June 22, 2023 | Common Stock | 8,714,815 | Conversion of Series G Preferred Stock | Section 3(a)(9) of the Securities Act | $0.0027 |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has not defaulted upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
This item is not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
3.1 | Articles of Incorporation (1) |
3.2 | Bylaws (2) |
14.1 | Code of Ethics (3) |
31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer (4) |
31.2 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial officer (4) |
32.1 | Section 1350 Certification of principal executive officer (4) |
32.2 | Section 1350 Certification of principal financial officer (4) |
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. (5) |
101.SCH | Inline XBRL Taxonomy Extension Schema Document (5) |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (5) |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (5) |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (5) |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) (5) |
__________
(1) | Incorporated by reference to our Definitive Proxy Statement on Schedule 14A filed on April 8, 2015. |
(2) | Incorporated by reference to our Form 10-K/A Amendment No. 1 for the year ended September 30, 2015 filed on January 22, 2016. |
(3) | Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on November 3, 2010. |
(4) | Filed or furnished herewith. |
(5) | In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.” |
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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.
GlobeStar Therapeutics Corporation | |
Date: August 17, 2023 | By: /s/ James C. Katzaroff |
James C. Katzaroff | |
Chief Executive Officer, President, Secretary, Principal Executive Officer and Director | |
Date: August 17, 2023 | By: /s/ Robert Chicoski |
Robert Chicoski | |
Chief Financial Officer, Treasurer, Principal Financial and Accounting Officer |
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