Retrieve Medical Holdings, Inc. 10-Q

ITEM 1 Financial Statements 3         Condensed Consolidated Balance Sheets as of December 31, 2016 (unaudited) and September 30, 2016 3         Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2016 and 2015 (unaudited) 4         Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2016 and 2015 (unaudited) 5         Notes to Condensed Consolidated Financial Statements (unaudited) 7       ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 10       ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 14       ITEM 4. Controls and Procedures 14       PART II. OTHER INFORMATION         ITEM 1. Legal Proceedings 15       ITEM 1A. Risk Factors 15       ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 16       ITEM 3. Defaults Upon Senior Securities 16       ITEM 4. Mine Safety Disclosures 16       ITEM 5. Other Information 16       ITEM 6. Exhibits 17       SIGNATURES 18     2     PART I – UNAUDITED FINANCIAL INFORMATION   ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS   PEAK PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)       December 31,     September 30,       2016       2016         (Unaudited)     (Audited)   Assets             Current assets:                Cash   $ 1,179     $ 1,304   Total current assets     1,179       1,304                     Total Assets   $ 1,179     $ 1,304                     Liabilities and stockholders' deficit                 Liabilities                    Accounts payable   $ 111,283     $ 82,526      Accounts payable - related parties     20,877       47,877      Accrued liabilities     12,360       12,360   Total current liabilities     144,520       142,762   Total Liabilities     144,520       142,762                     Stockholders’ Deficit                 Preferred stock, $.00001 par value, 25,000,000 authorized, none issued or outstanding     -       -   Common stock, $0.0001 par value, 325,000,000 shares authorized, 78,363,562 shares issued and outstanding, as of December 31, 2016 and September 30, 2015     7,836       7,836   Additional paid in capital     4,855,566       4,855,566   Accumulated deficit     (5,006,743 )     (5,004,860 ) Total Stockholders’ Deficit     (143,341 )     (141,458 ) Total Liabilities and Stockholders’ Deficit   $ 1,179     $ 1,304                       The accompanying footnotes are an integral part of these condensed consolidated financial statements.           3     PEAK PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)         For the Three Months Ended       December 31,             2016       2015     Operating expenses (income):             General and administrative   $ 1,883     $ 101,659   Depreciation and amortization     -       3,346   Equity based compensation     -       280,053   Total operating expenses     1,883       385,058                     Operating loss     (1,883 )     (385,058 )                   Loss from continuing operations     (1,883 )     (385,058 )                   Income from operations of discontinued Canna-Pet component     -       71,099                     Net loss   $ (1,883 )   $ (313,959 )                   Per share information:                    Basic weighted average shares outstanding     78,363,562       78,363,562      Diluted weighted average shares outstanding     78,363,562       78,363,562                     Continuing operations:                    Net loss per share - basic and diluted   $ (0.00 )   $ (0.00 )                   Discontinued operations:                    Net loss per share - basic and diluted   $ (0.00 )   $ 0.00     The accompanying footnotes are an integral part of these condensed consolidated financial statements.               4     PEAK PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)         2016       2015     Cash flows from operating activities:             Net income (loss)   $ (1,883 )   $ (313,959 )   Adjustment to reconcile net loss to net cash used in operating activities:              Stock based compensation     -       280,053      Other general and administration     -       50,132      Depreciation and amortization     -       3,346   Change in operating assets and liabilities:                    Accounts payable and accrued liabilities     1,757       (159,120 ) Net cash used in operating activities     (126 )   $ (139,548 )                   Net change in cash     (126 )     (139,548 ) Cash, beginning of period     1,304       201,656   Cash, end of period   $ 1,179     $ 62,108                     Supplemental disclosure of cash flow information                 Cash paid for interest   $ -     $ -   Cash paid for income taxes   $ -     $ -     The accompanying footnotes are an integral part of these condensed consolidated financial statements.                                   5     PEAK PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)   NOTE 1 – NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   The Company was incorporated in Nevada on December 18, 2007. After a number of name changes, we again changed our name to Peak Pharmaceuticals, Inc. on December 23, 2014. This name was consistent with our business operations and plans relating to development, manufacturing and marketing of hemp-based nutraceutical and supplement products for the human and animal health markets. On October 1, 2015, we discontinued certain operations of the Company.   Throughout this report, the terms “our,” “we,” “us,” and the “Company” refer to Peak Pharmaceuticals, Inc. and its subsidiary, Peak BioPharma Corp .   Basis of Presentation   The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial statements, instructions to Form 10-Q, and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended September 30, 2016. In management's opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation to make our financial statements not misleading have been included. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year, or any other period.   Basis of Consolidation   The condensed consolidated financial statements include the financial statements of the Company and our wholly owned subsidiary Peak BioPharma Corp. All inter-company balances and transactions among the companies have been eliminated upon consolidation.   Use of Estimates   The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses during the periods reported. Actual results may differ from these estimates.   Financial Instruments   Our financial instruments consist of cash, and accounts payable. The carrying values of these instruments approximate fair value due to the short-term maturities of these instruments.   Fair Value Measurements   Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC)” Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:     6     Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange.   Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.   Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.   Long-lived Assets   On a periodic basis, management assesses whether there are any indicators that the value of our long-lived assets may be impaired. An asset’s value may be impaired only if management’s estimate of the aggregate future cash flows, on an undiscounted basis, to be generated by the asset are less than the carrying value of the asset.   If impairment has occurred, the loss is measured as the excess of the carrying amount of the asset over its fair value. Our estimates of aggregate future cash flows expected to be generated by our long-lived asset are based on a number of assumptions that are subject to economic and market uncertainties. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in their impairment analyses may not be achieved.   Loss Per Share   We calculate net loss per share in accordance with ASC Topic 260, Earnings per Share . Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, and diluted earnings per share is computed by including common stock equivalents outstanding for the period in the denominator. At December 31, 2016 and 2015, any equivalents would have been anti-dilutive as we had losses for the periods then ended.   Recent Pronouncements   From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective may have an impact on our results of operations and financial position.   ASU Update 2014-09, Revenue from Contracts with Customers (Topic 606) issued May 28, 2014 by the FASB and the IASB converged guidance on recognizing revenue in contracts with customers on an effective date after December 31, 2017 will be evaluated as to impact and implemented accordingly.   ASU Update 2014-15, Presentation of Financial Statements-Going Concern (Sub Topic 205-40) issued August 27, 2014 by FASB defines management’s responsibility to evaluate whether there is a substantial doubt about an organizations ability to continue as a going concern. The additional disclosure required is effective after December 31, 2015 and will be evaluated as to impact and implemented accordingly.   In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Cost . The guidance requires an entity to present debt issuance costs in the balance sheet as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts, rather than as an asset. Amortization of debt issuance costs will continue to be reported as interest expense. Debt issuance costs related to revolving credit arrangements, however, will continue to be presented as an asset and amortized ratably over the term of the arrangement. ASU 2015-03 is effective for reporting periods beginning after December 15, 2015 including interim periods within those annual periods. Early application is permitted, and upon adoption, ASU 2015-03 should be applied on a retrospective basis. We have adopted ASU 2015-03 and it has not had a material impact on our Consolidated Financial Statements.     7     In July 2015, the FASB issued ASU 2015-11, Inventory , which simplifies the measurement principle of inventories valued under the First-In, First-Out (“FIFO”) or weighted average methods from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 is effective for reporting periods beginning after December 15, 2016 including interim periods within those annual periods. We do not expect the standard to have a material impact on our Consolidated Financial Statements.   In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes , which requires that deferred tax assets and liabilities be classified as noncurrent on the consolidated balance sheet. ASU 2015-17 is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. Early adoption is permitted as of the beginning of an interim or annual reporting period. Upon adoption, ASU 2015-17 may be applied either prospectively or retrospectively. We do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements.   In February 2016, the FASB issued ASU No. 2016-02, Leases , to improve financial reporting about leasing transactions. This ASU will require organizations that lease assets (“lessees”) to recognize a lease liability and a right-of-use asset on its balance sheet for all leases with terms of more than twelve months. A lease liability is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and a right-of-use asset represents the lessee’s right to use, or control use of, a specified asset for the lease term. The amendments in this ASU simplify the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. This ASU leaves the accounting for the organizations that own the assets leased to the lessee (“lessor”) largely unchanged except for targeted improvements to align it with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. We do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements.   Reclassifications   Certain amounts from prior periods have been reclassified for consistency with the presentation of the three-month period ended December 31, 2016. These reclassifications had no effect on the reported results of operations.   NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS   Financial statements prepared in conformity with GAAP contemplate a company’s continuation as a going concern. We have incurred net losses since inception and have an accumulated deficit of $5,006,743 as of December 31, 2016. This condition raises substantial doubt as to our ability to continue as a going concern. Although the expenses of our operations have been significantly reduced, we need to still evaluate raising additional capital through the sale of equity securities, through an offering of debt securities or through borrowings from financial institutions or individuals. There can be no assurance that such a plan will be successful.   Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.   NOTE 3 – RELATED PARTY TRANSACTIONS   Parties, which can be corporations or individuals, are considered to be related if we have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.   Accounts payable – related parties are the amounts payable to officers and directors of the Company for reimbursement of expenses they incurred on behalf of the Company as well as Directors’ fees and salaries.     8     NOTE 4 – STOCKHOLDERS’ EQUITY   We had no preferred or common stock transactions during the three-month period ended December 31, 2016 and 2015   NOTE 5 – OPTIONS   The following is a summary of outstanding stock options issued to employees and directors as of December 31, 2016:     Number of Options   Exercise Price per Share   Average Remaining Term in Years   Aggregate Intrinsic Value at Date of Grant                 Outstanding October 1, 2015 7,416,000    $0.0067 - $0.20       -   Cancelled (4,500,000)           -   Outstanding December 31, 2016 and September 30, 2016 2,916,000    $0.0067 - $0.20       -   Exercisable 2,916,000       $0.0067   7.20   -     The following is a summary of outstanding stock options issued to non-employees, excluding directors, as of December 31, 2016:     Number of Options   Exercise Price per Share   Average Remaining Term in Years   Aggregate Intrinsic Value at Date of Grant                 Outstanding December 31, 2016, September 30, 2016 and October 1, 2015 375,000    $0.0067   6.79   -   Exercisable 375,000    $0.0067   6.79   -         Total equity based compensation for the three months ended December 31, 2016 and 2015 was $0 and $280,053, respectively.   NOTE 6 - SUBSEQUENT EVENTS   Management has evaluated all activity and concluded that no subsequent events have occurred that would require recognition in these financial statements or disclosure in the notes to these financial statements.           9     ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Forward-Looking Statements   This report contains forward-looking statements. The following discussion should be read in conjunction with the financial statements and related notes contained in our Annual Report on Form 10-K, as filed with the Securities & Exchange Commission on September 12, 2017. Certain statements made in this discussion are "forward-looking statements" within the meaning of The Private Securities Litigation Reform Act of 1995. Forward-looking statements are projections in respect of future events or financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology.   These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” set forth in our Annual Report on Form 10-K for the year ended September 30, 2016, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks may cause the Company’s or its industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.   Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity or performance. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The Company is under no duty to update any forward-looking statements after the date of this report to conform these statements to actual results.   As used in this quarterly report and unless otherwise indicated, the terms “we,” “us,” “our,” “Peak,” or the “Company” refer to Peak Pharmaceuticals, Inc, including our wholly-owned subsidiary Peak BioPharma Corp (“Peak BioPharma”). Unless otherwise specified, all dollar amounts are expressed in United States dollars.   Corporate Overview   We were incorporated as Surf A Movie Solutions Inc. in Nevada on December 18, 2007 to engage in the business of the development, sales and marketing of online video stores. We were not successful in our efforts and have ceased this line of business.   On October 10, 2013, we entered into a joint venture agreement with Produced Water Solutions, Inc., a Colorado corporation, that was in the business of providing economically and environmentally sound solutions for the treatment and recycling of wastewater resulting principally from oil and gas exploration and production activities. As a result of our research of this business opportunity, on December 31, 2013, we determined not to move forward with this line of business.   In early March 2014, we entered into the business of developing, manufacturing and marketing pharmaceutical level products containing phytocannabinoids, an abundant and pharmaceutically active component of industrial hemp, for the prevention and alleviation of various conditions and diseases. In connection therewith, on March 17, 2014 we changed our name to Cannabis Therapy Corp. On December 23, 2014, we changed our name to Peak Pharmaceuticals, Inc. All of our business operations are carried on through our wholly-owned subsidiary, Peak BioPharma Corp., a Colorado corporation.   On July 29, 2014, through Peak BioPharma, we entered into a license agreement (the “License Agreement”) with Canna-Pet, LLC (“Licensor”), a Washington limited liability company, which owns the brand name “Canna-Pet” and certain related intellectual property including, but not limited to, trademarks and copyrights, formulations, recipes, production processes and systems, websites, domain names, customer lists, supplier lists, trade secrets and know-how, and other related intellectual property (collectively, the “Licensed Intellectual Property”), used by Licensor in the conduct of its business related to the production and sale of medical products made from industrial hemp which are intended exclusively for consumption by pets. Pursuant to the License Agreement, the Licensor granted to us a perpetual, exclusive, world-wide license to use the Licensed Intellectual Property in conjunction with our business and the production and sale of medical products made from industrial hemp as well as the right to sublicense the Licensed Intellectual Property to third parties. The License Agreement gives us the right to produce and sell existing products utilizing the Licensed Intellectual Property and to develop new products, jointly with Licensor or otherwise, based upon the Licensed Intellectual Property. The License Agreement provided us with an immediate revenue source and access to Licensor’s customer base. During the term of the license, all intellectual property rights in and to the Licensed Intellectual Property remained the exclusive property of Licensor.     10     In consideration of the grant of the license, we agreed to pay Licensor license fees in the form of royalty payments calculated on the basis of gross proceeds received by us from sales of products manufactured, marketed or sold by us utilizing the Licensed Intellectual Property or any subsequently developed intellectual property which is jointly owned by us and Licensor. We began selling Canna-Pet products in October 2014.   Based upon recent regulatory activity related to imposition of restrictions and limitations on the sale of hemp-based health products for pets, we elected to terminate our license agreement with the Licensor, effective as of October 1, 2015, and to cease all operations relating to sale of hemp-based products for pets.   On October 12, 2015, we entered into an agreement for the termination (“Termination Agreement”) of the License Agreement, effectively selling the discontinued operations. The Termination Agreement contained the following provisions:   ● Termination of License: The parties agreed to terminate the License Agreement effective as of October 1, 2015. This termination was made by mutual agreement of the parties pursuant to and in accordance with the provisions of the License Agreement.   ● Return of Licensed Intellectual Property: We agreed to return all Licensed Intellectual Property to the Licensor, and our right to use all, or any portion, of the Licensed Intellectual Property ceased effective as of October 1, 2015. Pursuant to the terms of the License Agreement, the Licensed Intellectual Property included the brand name “Canna-Pet” and certain related intellectual property, including, but not limited, trademarks and copyrights, formulations, recipes, production processes and systems, websites, domain names, customer lists, supplier lists trade secrets and know- how, and other related intellectual property.   ● Return of Other Property: In addition to return of the Licensed Intellectual Property, we agreed to transfer to Licensor all product inventory, Colorado hemp with permits and authorization, all production/fulfillment contracts, all e-commerce accounts and processing, all non-disclosure and research agreements and any and all other property in our possession which was used by us in the conduct of our business related to production and sale of medical cannabis products for pets made from hemp and low-THC cannabis plants.   ● Office Space, Equipment and Employees: In conjunction with the execution of the Termination Agreement, we granted the Licensor the right to use our office space, for the three-month period from October 1, 2015 through December 31, 2015, on a rent-free basis.   ● Consideration: As consideration for the cancellation of the License Agreement and the return of other property, as described above, the Licensor agreed to waive payment by us and to release us from liability for payment of any and all unpaid royalties, invoices and other amounts which were otherwise currently due and payable by us to Licensor for sales of Canna-Pet products for all periods through and including September 30, 2015.   ● Collections: On October 15, 2015, we forwarded to the Licensor all payments received by us after September 30, 2015 (net of amounts received by us for taxes, duties, governmental charges, freight or shipping charges, and the like) for Canna- Pet products sold on or after October 1, 2015.   The following is a summary of the net assets sold as initially determined at Septembers 30, 2015 and updated October 15, 2015:       October 15, 2015     September 30, 2015   Inventory   $ 45,436     $ 41,705   Prepaid Expenses     8,821       -   Deposits     8,179       8,678   Total assets   $ 62,436     $ 50,383                     Accounts payable     103,548       124,396   Royalties payable     39,506       39,506   Accrued liabilities     285       15,341   Total liabilities     143,339       179,243   Net assets sold   $ 80,903     $ 128,860       11     Our common stock is currently listed on the OTC Markets, QB Tier, under the symbol “PKPH”.   Recent Corporate Developments   Since the commencement of the year through December 31, 2016, we have not experienced any corporate developments.   Results of Operations   Comparison of the Three Months Ended December 31, 2016   Revenue   There were no revenues for the three months ended December 31, 2016 or 2015.   Operating Expenses   Our expenses for the three months ended December 31, 2016 are summarized as follows in comparison to our expenses for the three months ended December 31, 2015:       Three Months Ended December 31,       2016     2015           General and administrative   $ 1,883     $ 101,659   Depreciation and amortization     -       3,346   Stock based compensation     -       280,053   Total operating expenses   $ 1,883     $ 385,058     General and administrative expense decreased by $99,776 for the three months ended December 31, 2016 from the comparative period of 2015. The decrease is due to the termination of the license agreement with Canna-Pet, LLC and the overall reduction in operating expenses related to the operation of that business. Depreciation and amortization expense decreased by $3,346 and stock based compensation decreased by $280,053 due to the reduction in operations of the business.   Discontinued Operations   Our Canna-Pet business segment began operations in October 2014. As a result of recent regulatory activity related to imposition of restrictions and limitations on the sale of hemp-based health products for pets, on October 1, 2015, we elected to terminate our license agreement with Canna-Pet, LLC and to cease all operations relating to sale of hemp-based products for pets.   The income (loss) from discontinued operations presented in the statements of operations consists of the following for the three-month period ended December 31, 2016 and 2015:       2016     2015   Revenues   $ -     $ -   Cost of goods sold     -       -   General and administrative expenses     -       (9,804 ) Gain on disposal of discontinued operations     -       80,903       $ -     $ 71,099       12     Liquidity and Financial Condition   Working Capital Deficiency       December 31, 2016     September 30, 2016   Current assets   $ 1,179     $ 1,304   Current liabilities     144,520       142,762   Working capital deficiency   $ (143,341 )   $ (141,458 )   The decrease in current assets is due to bank fees of $126 during the quarter. The increase in current liabilities is due primarily to late fees being incurred on the open accounts payable during the three months ended December 31, 2016.   Cash Flows       Three Months Ended December 31,       2016     2015   Net loss   $ (1,883 )   $ (313,959 ) Net cash used in operating activities     (126 )     (139,548 ) Net cash used in investing activities     -       -   Net cash provided by financing activities     -       -   Increase (decrease) in cash   $ (126 )   $ (139,548 )   As of December 31, 2016, our cash balance was $1,179. The Company does not expect its current cash and operating income to be sufficient to meet its financial needs for continuing operations over the next twelve months.   Net cash used in operations for the three months ended December 31, 2016 was $126 mainly due to bank fees on our checking account.   We need to raise additional operating capital on an immediate basis. Although the expenses of our operations have been significantly reduced due to the termination of the license agreement as outline in Note 3 of the financial statements, we need to still evaluate raising additional capital through the sale of equity securities, through an offering of debt securities or through borrowings from individuals. There can be no assurance that such a plan will be successful.   As of the date of this filing, we do not have enough sufficient cash on hand to cover our operating expenses through the next quarter. In the absence of any ongoing commercial operations, we need enough cash to pay certain outside professionals to maintain our compliance under the Securities Act of 1934. Management anticipates that it will require an additional $30,000 over the next twelve months to cover such costs.   Going Concern   The unaudited condensed consolidated financial statements contained in this report have been prepared assuming that the Company will continue as a going concern. The Company has cumulative net losses through December 31, 2016 of approximately $5 million. The Company's cash and cash equivalents balance as of December 31, 2016 is $1,179. These factors raise substantial doubt about the Company's ability to continue as a going concern.   While we will actively seek to identify sources of liquidity, there are no assurances that such additional sources of liquidity can be obtained on terms acceptable to us on a commercially reasonable basis, or at all. These factors raise substantial doubt about our ability to continue as a going concern. Furthermore, our “going concern” and lack of commercial operations may make it more difficult for us to raise funds.     13     The unaudited condensed consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability. If the Company raises additional funds through the issuance of equity, the percentage ownership of current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to its common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict its future plans for developing its business and achieving commercial revenues. If the Company is unable to obtain the necessary capital, the Company may have to cease operations.   Off-Balance Sheet Arrangements   We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.   Effects of Inflation   We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.   Critical Accounting Policies and Estimates   Our significant accounting policies are more fully described in the notes to our financial statements included herein for the three months ended December 31, 2016.   Newly Issued Accounting Pronouncements   See Note 1 to our financial statements included herein for the three months ended December 31, 2016 for a discussion of Recently Issued Accounting Pronouncements.   ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   Not applicable.