Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
The Company’s securities are highly speculative
and involve a high degree of risk, including among other items the risk factors described below. The below risk factors are
intended to generally describe certain risks that could materially affect the Company and its current business operations and activities.
You should carefully consider the risks
described below and elsewhere herein in connection with any decision whether to acquire, hold or sell the Company’s securities.
If any of the contingencies discussed in the following paragraphs or other materially adverse events actually occur, the business,
financial condition and results of operations could be materially and adversely affected. In such case, the trading price
of our common stock could decline, and you could lose all or a significant part of your investment.
Our Company has a lack of operating history
and lack of revenues from operations. Our Company has no revenues and very limited operating history. As of
the date of this Annual Report, our most significant assets are cash and our intellectual property. Our ability to successfully
generate revenues from our intellectual property is dependent on a number of factors, including availability of funds to complete
development efforts, to adequately test and refine our products, and to commercialize our products. There can be no assurance
that we will not encounter setbacks with our products, or that funding will be sufficient to bring our products to the point of
commercialization.
We are dependent on our key personnel,
and the loss of such personnel could adversely affect our business. We depend on the continued performance of the
members of our management team and our Business and Scientific Advisory Board who have contributed to the expertise of our team
and the position of our business. If we lose the services of members of our management teams, and are unable to locate a
suitable replacement in a timely manner, it could have a material adverse effect on our business. We do not expect to obtain
key man life insurance for any members of management in the foreseeable future.
We may experience difficulty implementing
our business plan. Our business plan is to continue with the development of the Company’s intellectual property
and to develop a product for sale commercially. We may require additional capital in order to develop our products for sale
commercially. There can be no assurance that we would be able to obtain additional capital on reasonable terms, or at all.
We have been and expect to be significantly
dependent on our collaborative agreements for the research, development and testing of AAGP ® , which exposes us to
the risk of reliance on the performance of third parties. In conducting our research and development activities,
we currently rely, and expect to continue to rely, on numerous collaborative agreements with third parties such as contract research
organizations, commercial partners, universities, governmental agencies and not-for-profit organizations for both strategic and
financial resources. The loss of, or failure to perform by us or our partners (who are subject to regulatory, competitive
and other risks) under any applicable agreements or arrangements, or our failure to secure additional agreements for our product
candidates, would substantially disrupt or delay our research and development and commercialization activities. Any such
loss would likely increase our expenses and materially harm our business, financial condition and results of operations.
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We may have difficulty raising any needed
additional capital. We may have difficulty raising needed capital in the future as a result of, among other factors,
our lack of revenues from operations, as well as the inherent business risks associated with our Company and present and future
market conditions. Our business currently generates no revenue from operations. We will likely require additional funds
to conduct research and development, establish and conduct non-clinical and clinical trials, secure clinical and commercial-scale
manufacturing arrangements and provide for marketing and distribution. If adequate funds are unavailable, we may be required
to delay, reduce the scope of or eliminate one or more of our research, development or commercialization programs, product launches
or marketing efforts, any of which may materially harm our business, financial condition and results of operations.
We are a research and product development
stage company that has not yet developed or sold any products. To date, we have not yet developed
nor marketed a product. Ongoing testing of the AAGP ® molecule with three amino acids joined to a monosaccharide
by a gemdiflouride bond continues to show that there is significant promise in the field of medicine of preserving cells, tissue
and organs from various stresses. Tests have confirmed that the AAGP ® molecule improves the harvest of cells
from cryopreservation by 30% to 120%. We believe there is a market for AAGP ® to preserve cells, particularly various
stem cells, and we will continue testing with potential customers. At the same time, we are taking steps to improve the manufacturing
process to reduce costs and improve purity and biochemical activity.
Even if we develop product candidates
which obtain regulatory approval they may never achieve market acceptance or commercial success. Even if we develop
products and obtain FDA or other regulatory approvals, our products may not achieve market acceptance among physicians, patients
and third party payors and, ultimately, may not be commercially successful. Market acceptance of our product candidates for
which we receive approval depends on a number of factors. Any failure by our product candidates that obtain regulatory approval
to achieve market acceptance or commercial success would adversely affect our financial results.
The potential widespread acceptance of therapies
that are alternatives to ours may limit market acceptance of our formulations or products, even if commercialized. Many of
our targeted diseases and conditions can also be treated by other medication or technologies. These treatments may be widely
accepted in medical communities and have a longer history of use. The established use of these competitive drugs may limit
the potential for our technologies, formulations and products to receive widespread acceptance if commercialized.
The market for our product candidates
is rapidly changing and competitive, and new technologies treatments which may be developed by others could impair our ability
to maintain and grow our business and remain competitive. The pharmaceutical and biotechnology industries are subject
to rapid and substantial technological change. Developments by others may render our technologies and our product candidates
noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market factors. Technological
competition from pharmaceutical and biotechnology companies, universities, governmental entities and others now existing or diversifying
into the field is intense and is expected to increase. Many of these entities have significantly greater research and development
capabilities, human resources and budgets than we do, as well as substantially more marketing, manufacturing, financial and managerial
resources. These entities represent significant competition for us.
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Risks Related to Product Development and
Regulation
Our ability to generate revenues will
be dependent on our ability to develop a product that complies with legal requirements. Although the laws and regulations
of the various jurisdictions in which we may operate vary in their technical requirements and are subject to amendment from time
to time, virtually all of these jurisdictions require licenses, permits, and other forms of approval. We will have to apply
for, and obtain, all requisite government licenses, registrations, findings of suitability, permits and approvals necessary for
us to do business in these new markets. We cannot offer any assurance that we will be able to obtain all necessary licenses,
registrations, findings of suitability, permits, or approvals.
Our failure to obtain costly government
approvals, including required FDA approvals, or to comply with ongoing governmental regulations relating to our technologies and
product candidates could delay or limit introduction of our products and result in failure to achieve revenues or maintain our
ongoing business. Our research and development activities and the manufacture and marketing of our product candidates
are subject to extensive regulation for safety, efficacy and quality by numerous government authorities in the United States and
abroad. Before receiving FDA or foreign regulatory clearance to market our proposed formulations and products, we will have
to demonstrate that our formulations and products are safe and effective in the population. Clinical trials, manufacturing
and marketing of drugs are subject to the rigorous testing and approval process of the FDA and equivalent foreign regulatory authorities.
The Federal Food, Drug and Cosmetic Act and other federal, state and foreign statutes and regulations govern and influence the
testing, manufacture, labeling, advertising, distribution and promotion of drugs and medical devices. As a result, regulatory
approvals can take a number of years or longer to accomplish and require the expenditure of substantial financial, managerial and
other resources.
Conducting and completing the clinical
trials necessary for FDA and/or Health Canada approval is costly and subject to intense regulatory scrutiny as well as the risk
of failing to meet the primary endpoint of such trials. We will not be able to commercialize and sell our proposed
products and formulations without completing such trials. In order to conduct clinical trials that are necessary to obtain
approval by the FDA and/or Health Canada to market a formulation or product, it is necessary to receive clearance from the FDA
and/or Health Canada to conduct such clinical trials. The FDA and/or Health Canada can halt clinical trials at any time for
safety reasons or because we or our clinical investigators did not follow the FDA’s and/or Health Canada requirements for
conducting clinical trials. If we are unable to receive clearance to conduct clinical trials or the trials are permanently
halted by the FDA and/or Health Canada, we would not be able to achieve any revenue from such product as it is illegal to sell
any drug or medical device for human consumption or use without FDA and/or Health Canada approval.
We could be exposed to significant drug
product liability claims which could be time consuming and costly to defend, divert management attention and adversely impact our
ability to obtain and maintain insurance coverage. The testing, manufacturing, marketing and sale of our proposed
products involve an inherent risk that product liability claims will be asserted against us. Product liability insurance
may prove inadequate to cover claims and/or litigation costs. Product liability claims or other claims related to our products,
regardless of their outcome, could require us to spend significant time and money in litigation or to pay significant settlement
amounts or judgments. Any successful product liability or other claim may prevent us from obtaining adequate liability insurance
in the future on commercially desirable or reasonable terms. An inability to obtain sufficient insurance coverage at an acceptable
cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our products
and product candidates. A product liability claim could also significantly harm our reputation and delay market acceptance
of our proposed formulations and products.
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Risk Factors Related to Intellectual Property
and Obsolescence
We rely on patents and other intellectual
property to protect our business interests. We have attempted to protect our products and will attempt to protect other
products through a combination of trade secrets, confidentiality agreements, patents and other contractual provisions. Patents
only provide a limited protection against infringement, and patent infringement suits are complex, expensive, and not always successful.
Although the Company believes its patents will provide significant protection, there can be no assurance that they will be issued
and if they are, that they will provide enough protection.
Because it is difficult and costly to
protect our proprietary rights, we may not be able to ensure their protection. Our commercial success will depend in part
on maintaining patent protection and trade secret protection for our products, as well as successfully defending these patents
against third-party challenges. We will only be able to protect our technologies from unauthorized use by third parties to the
extent that valid and enforceable patents or trade secrets cover them.
The patent positions of pharmaceutical and
biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles
remain unresolved. No consistent policy regarding the breadth of claims allowed in pharmaceutical or biotechnology patents has
emerged to date in the United States. The patent situation outside the United States is even more uncertain. Changes in either
the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual
property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party
patents.
Our competitive position could be harmed
if we are unable to enforce confidentiality agreements. Our proprietary information is critically important to our
competitive position and is a significant aspect of our business plan. We generally enter into confidentiality agreements
with most of our employees and consultants, and control access to, and distribution of, our documentation and other proprietary
information. Despite these precautions, we cannot assure you that these strategies will be adequate to prevent misappropriation
of our proprietary information. Therefore, we could be required to expend significant amounts to defend our rights to proprietary
information in the future if a breach were to occur.
General Corporate Risk Factors
Insiders continue to have substantial
control over the Company. As of February 18, 2020, the Company’s directors and executive officers hold the
current right to vote approximately 36.5% of the Company’s outstanding voting stock; of which 31.4% is owned or controlled,
directly or indirectly by the Company CEO, Clarence Smith. In addition, the Company’s directors and executive officers have
the right to acquire additional shares which could increase their voting percentage significantly. As a result, Mr. Smith acting
alone, and/or many of these individuals acting together, may have the ability to exert significant control over the Company’s
decisions and control the management and affairs of the Company, and also to determine the outcome of matters submitted to stockholders
for approval, including the election and removal of a director, the removal of any officer and any merger, consolidation or sale
of all or substantially all of the Company’s assets. Accordingly, this concentration of ownership may harm a future market
price of the Company’s common stock by:
·
Delaying, deferring or preventing a change in control of the Company;
·
Impeding a merger, consolidation, takeover or other business combination involving the Company; or
·
Discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company .
The Company may not be able to
continue as a going concern. Our independent public accountants noted that our recurring losses from operations
($4,197,897 and $1,216,343 for the years ended December 31, 2019 and 2018, respectively) and negative net operating cash flow ($850,658
and $453,493 for the years ended December 31, 2019 and 2018, respectively) raise substantial doubt about our ability to continue
as a going concern. This may hinder our future ability to obtain financing or may force us to obtain financing on less favorable
terms than would otherwise be available.
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The Company is dependent upon
additional financing which it may not be able to secure in the future. As it has in the past, the Company will likely
continue to require financing to address its working capital needs, continue its development efforts, support business operations,
fund possible continuing operating losses, and respond to unanticipated capital requirements. There can be no assurance that
additional financing or capital will be available and, if available, upon acceptable terms and conditions. To the extent
that any required additional financing is not available on acceptable terms, the Company’s ability to continue in business
may be jeopardized and the Company may need to curtail its operations and implement a plan to extend payables and reduce overhead
until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will
be successful. Such a plan could have a material adverse effect on the Company’s business, financial condition and results
of operations, and ultimately the Company could be forced to discontinue its operations, liquidate and/or seek reorganization in
bankruptcy.
The Company has been delinquent
in filing certain income tax and information reporting returns. The Company was delinquent in filing certain income
tax returns with the U.S. Internal Revenue Service and reports disclosing its interest in foreign bank accounts on form TDF 90-22.1,
“Report of Foreign Bank and Financial Accounts” (“FBARs”). In September 2015, the Company filed the delinquent
income tax returns and has sought waivers of any penalties under the IRS Offshore Voluntary Disclosure Program for late filing
of the returns and FBARs. Under the program, the IRS has indicated that it will not impose a penalty for the failure to file
delinquent income tax returns if there are no underreported tax liabilities. On November 30, 2017, the Company received a
letter from the IRS concluding their review of the Company’s tax returns under the program and accepting the returns as filed.
No penalties have been assessed by the IRS to date, and management does not believe that the Company will incur any penalties relating
to the tax years submitted under the program.
Our management is relatively inexperienced
with running a public company and could create a risk of non-compliance. Management’s inexperience may cause
us to fall out of compliance with applicable regulatory requirements, which could lead to enforcement action against us and a negative
impact on our stock price.
Compliance with changing regulation
of corporate governance and public disclosure may result in additional expenses and could create a risk of non-compliance.
Changing laws, regulations and standards relating to corporate governance and public disclosure have created uncertainty
for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting.
These corporate governance standards are the product of many sources, including, without limitation, public market perception,
stock exchange regulations and SEC disclosure requirements. Our management team expects to invest significant management time and
financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general
and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.
Management’s inexperience may cause us to fall out of compliance with applicable regulatory requirements, which could lead
to enforcement action against us and a negative impact on our stock price.
As a company with a class of securities
registered pursuant to the Exchange Act the Company has significant obligations under the Exchange Act. Having a class
of securities registered under the Exchange Act is a time consuming and expensive process and subjects the Company to increased
regulatory scrutiny and extensive and complex regulation. Complying with these regulations is expensive and requires
a significant amount of management’s time. For example, public companies are obligated to institute and maintain
financial accounting controls and for the accuracy and completeness of their books and records. These requirements could
necessitate additional corporate spending on procedures and personnel requiring us to reallocate funds from other business objectives.
Risk Factors Related to Our Common Stock
The Company will face significant
regulation by the SEC and state securities administrators. The holders of shares of the Company’s common stock
and preferred stock may not offer or sell the shares in private transactions or (should a public market develop, of which there
can be no assurance) public transactions without compliance with regulations imposed by the SEC and various state securities administrators.
To the extent that any holder desires to offer or sell any such shares, the holder must prove to the reasonable satisfaction of
the Company that he has complied with all applicable securities regulations, and the Company may require an opinion of the holder’s
legal counsel to that effect. Thus, there can be no assurance that the holder will be able to resell the shares or any interest
therein when the holder desires to do so.
Our existing shareholders could
experience further dilution if we elect to raise equity capital to meet our liquidity needs or finance a strategic transaction.
As part of our growth strategy we may desire to raise capital and or utilize our common stock to effect strategic business
transactions. Either such action will likely require that we issue equity (or debt) securities which would result in dilution
to our existing stockholders. Although we will attempt to minimize the dilutive impact of any future capital-raising activities
or business transactions, we cannot offer any assurance that we will be able to do so. If we are successful in raising additional
working capital, we may have to issue additional shares of our common stock at prices at a discount from the then-current market
price of our common stock.
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Because we have no plans to pay dividends
on our common stock, investors must look solely to stock appreciation for a return on their investment in us. We
do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain
all future earnings to fund the development and growth of our business. Any payment of future dividends will be at the discretion
of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level
of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that the
board of directors deems relevant. Investors must rely on sales of their common stock after price appreciation, which may
never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase
our common stock.
As our stock is not listed on a national
securities exchange, trading in our shares will be subject to rules governing “penny stocks,” which will impair trading
activity in our shares. Our stock is not on a national securities exchange. Therefore, our stock is subject to rules
adopted by the SEC regulating broker dealer practices in connection with transactions in “penny stocks.” Those disclosure
rules applicable to “penny stocks” require a broker dealer, prior to a transaction in a “penny stock” not
otherwise exempt from the rules, to deliver a standardized list disclosure document prepared by the SEC. That disclosure document
advises an investor that investment in “penny stocks” can be very risky and that the investor’s salesperson or
broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor
to exercise caution in connection with an investment in “penny stocks,” to independently investigate the security,
as well as the salesperson with whom the investor is working and to understand the risky nature of an investment in this security.
The broker dealer must also provide the customer with certain other information and must make a special written determination that
the “penny stock” is a suitable investment for the purchaser and receive the purchaser’s written agreement to
the transaction. Further, the rules require that, following the proposed transaction, the broker provide the customer with monthly
account statements containing market information about the prices of the securities.
The over-the-counter market for stock
such as ours is subject to extreme price and volume fluctuations. You may not be able to resell your shares at or above
the public sale price. The securities of companies such as ours have historically experienced extreme price and volume fluctuations
during certain periods. These broad market fluctuations and other factors, such as new product developments and trends in the industry
and in the investment markets generally, as well as economic conditions and quarterly variations in our operational results, may
have a negative effect on the market price of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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.