Item 1A. Risk Factors
ITEM 1A.
RISK FACTORS
You should carefully consider the risks
described below together with all of the other information included in this prospectus before making an investment decision with
regard to our securities. The risks set forth below are not the only risks facing us. Additional risks and uncertainties may exist
that could also adversely affect our business, prospects or operations. If any of the following risks actually occurs, our business,
financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline,
and you may lose all or a significant part of your investment.
Because of a lack of funds, we have
suspended our product development operations.
Our business is the development of transdermal systems for the
delivery of pharmaceuticals. The development of pharmaceutical products is highly cash intensive, and many early stage drug development
companies are unable to raise sufficient cash to complete the development and testing of their products and obtain regulatory approval,
with the result that they either obtain funding on very unfavorable terms, cease to conduct business or sell or license their intellectual
property on unfavorable terms. As of October 31, 2020, we had $193,392 in cash and cash equivalents and a working capital deficiency
of $2,230,240, as compared with cash and cash equivalents of $10,181 and working capital deficiency of $1,979,141 as of January
31, 2020. Because of the absence of any significant financing, we have suspended our development activities relating to our transdermal
pharmaceutical products. Because of the anticipated lack of revenues until we have an approved product that we can market and the
time required to obtain FDA approval, which can take many years, we must rely on our ability to raise money in the private or public
equity market or enter into a joint venture relationship with a company that has the funds, the willingness and the ability to
fund or obtain funds for the project that is the subject of the joint venture. In March 2020, we withdrew a registration statement
relating to a proposed public offering. If we are able to raise funds or enter into a joint venture, it is likely that the term
will not be favorable to us. We cannot assure you that we will be able to raise funds in a public or private financing or a joint
venture, and, if we are unable to do so, we may cease operations.
We are dependent on obtaining additional
financing to enable us to pay off debt and to resume our product development operations.
Our continued operations are substantially
dependent on our ability to obtain additional financing to pay off substantial debt incurred in our August 31, 2020 acquisition
of Pocono Coated Products, LLC and to provide us with the ability to resume product development operations and continue to finance
our current operations and generate growth in our revenues.
Our business is impacted by the following
additional key risks :
●
Our business could be adversely affected by the effects of health pandemics or epidemics, including the recent outbreak of COVID-19, which was declared by the World Health Organization as a global pandemic, and is resulting in travel and other restrictions to reduce the spread of the disease, including state and local orders across the country, which, among other things, direct individuals to shelter at their places of residence, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, and order cessation of non-essential travel. The effects of these orders, government-imposed quarantines and measures we would take, such as work-from-home policies, may negatively impact productivity, disrupt our business and could delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition. Further, quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which could disrupt our supply chain.
●
The FDA regulatory process may take longer and be more expensive than we anticipate without any assurance that we will obtain FDA approval.
●
If we are not able to obtain FDA approval for our lead product, we may not have the resources to develop any other product, and we may not be able to continue in business.
●
We may not be able to launch any products for which we receive FDA marketing approval.
●
We may not be able to establish a distribution network for the marketing and sale of any products for which we receive FDA approval.
●
We may not be able to establish manufacturing facilities in compliance with FDA good manufacturing practices or to enter into manufacturing agreements for the manufacture of our products in an FDA approved manufacturing facility.
●
It may be necessary to us to enter into a joint venture or other strategic relationship in order to develop, perform clinical testing for, manufacture or market any of our proposed products. We may not be able to enter into such a relationship, and any relationship may not be successful, and the other party may have business interests and priorities that are different from ours.
24
●
We are party to a settlement agreement with the SEC resulting from statements in our SEC filings that did not accurately reflect the FDA’s jurisdiction over our consumer products and did not disclose that we could not legally market these products in the United States. The settlement included a cease-and-desist order against violating the provisions of the Securities Exchange Act which require us to file accurate registration statements and annual reports with the SEC. Our failure to comply with our obligations under the settlement agreement could result in enforcement proceedings against us or our officers.
●
We may not be able to protect our rights in our intellectual property, and we may be subject to intellectual property litigation which would be expensive and disruptive of our operations even if we eventually prevail on the merits.
●
Unanticipated side effects or other adverse events resulting from the use of our product could require a recall of our products and, even if no recall is required, our reputation could be impaired by side effects.
●
We may not be able to evaluate potential acquisition candidates, with the result that we may not be able to benefit from the acquisition or integrate the acquired business with our business. We have recently incurred an impairment charge as a result of an acquisition when the intellectual property assets of the acquired company were not as represented. We cannot assure you that we will not incur similar or other problems with any future acquisitions.
●
We may fail to comply with all applicable laws and regulations relating to our product. We may have to change or adapt our operations in the event of changes in national, regional and local government regulations, taxation, controls and political and economic developments that affect our products and the market for our products;
●
We may be unable to accurately estimate anticipated expenses, capital requirements and needs for additional financing;
●
Best Choice or any other international distributor of our products may fail to comply with applicable laws;
●
Best Choice or any other international distributor of our products may not be able to obtain any necessary regulatory approval necessary to market our product or, if they are able to obtain regulatory approval, they may not be successful in marketing our products;
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
25
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.