NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 –Basis of Presentation, Organization, Going Concern and Recent Accounting Pronouncements
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Nunzia Pharmaceutical Company (the “Company”) as of September 30, 2021, and for the three and nine months ended September 30, 2021 and 2020 have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”), for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting periods. Actual results may differ from those estimates. The interim financial statements should be read in conjunction with the unaudited financial statements and notes thereto included in the Company’s Annual Report for the year ended December 31, 2020. In the opinion of management, the accompanying unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments (including normal recurring adjustments) necessary for the fair presentation of the Company’s financial position as of September 30, 2021, results of operations for the three and nine months ended September 30, 2021 and 2020, stockholders equity for the three and nine months ended September 30, 2021 and 2020, and cash flows for the nine months ended September 30, 2021 and 2020. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.
Organization
Our Company’s name is Nunzia Pharmaceutical Company. The Company was incorporated on November 12, 1986. On February 1, 2018, the Company amended its Articles of Incorporation to change its name to Nunzia Pharmaceutical Corporation.
On October 22, 2017, the Company and Cal-Biotech, Inc. (“Cal-Biotech”) entered into a Merger and Consolidation Agreement (the “MCA”). In anticipation of closing on the MCA, on February 1, 2018, the Board authorized a 7,000:1 reverse stock split, which took effect on December 4, 2019, and amended its articles changing its name to Nunzia Pharmaceutical Company. On December 13, 2020, the Company agreed to issue 284,500,000 shares pursuant to MCA (the “MCA Shares”). Of the shares issued, 1) 248,270,000 were to be issued to LionsGate Funding Group LLC (“LionsGate”) (majority owner of Cal-Biotech) in exchange for the all the issued and outstanding stock in Cal-Biotech and to settle $156,657 of advances from Cal-Biotech to the Company that were originally funded by LionsGate; and 2) 36,230,000 were issued to settle $144,570 of debt and advances recorded as liabilities to related and non-related parties. 31,650,000 MCA Shares due to LionsGate have not been issued as of the date of this report.
Prior to the close of the MCA, LionsGate held a majority beneficial ownership interest in the Company and Cal-Biotech. Thus, due to the common control of the Company and Cal-Biotech, pursuant to ASC 805-50-25, “Transactions Between Entities Under Common Control”, the MCA was accounted for as a transfer of the carrying amounts of assets and liabilities under the predecessor value method of accounting. The predecessor values method of accounting requires the receiving entity (i.e., the Company) to report the results of operations as if both entities had been combined as of the beginning of the periods presented. The consolidated financial statements above include both entities’ full results, including the financial statements of Cal-Biotech since inception on February 7, 2018.
7
Going Concern
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs to allow it to continue as a going concern. As of June 30, 2021, the Company had an accumulated deficit of $9,407,163 The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In view of these conditions, the ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. Historically, the Company has relied upon internally generated funds and funds from the sale of shares of stock, issuance of promissory notes and loans from its shareholders and private investors to finance its operations and growth. Management is planning to raise necessary additional funds for working capital through loans and/or additional sales of its common stock. However, there is no assurance that the Company will be successful in raising additional capital or that such additional funds will be available on acceptable terms, if at all. Should the Company be unable to raise this amount of capital its operating plans will be limited to the amount of capital that it can access. These financial statements do not give effect to any adjustments which will be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.
Recent accounting pronouncements not yet adopted
None.
Recently adopted accounting pronouncements
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The guidance removes certain exceptions for recognizing deferred taxes for equity method investments, performing intra period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group, among others. This guidance is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.
The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable, the Company has not identified any standards that the Company believes merit further discussion. The Company believes that none of the new standards will have a significant impact on the consolidated financial statements.
NOTE 2 – Preferred and Common Stock
Preferred Stock
The Company has Preferred stock: $1.00 par value; 50,000,000 shares authorized with no shares issued and outstanding.
8
Common Stock
The Company has 51,000 shares of Class B Common Stock issued and outstanding as of September 30, 2021. The Class B shares are the only shares eligible to vote for Directors. LionsGate holds all Class B common shares.
The Company has 1,000,000,000 shares of Class A Common Stock authorized of which 261,119,578 and 244,369,578 shares are issued and outstanding as of September 30, 2021 and December 31, 2020, respectively. 31,650,000 MCA Shares due to LionsGate have not been issued as of September 30, 2021.
On July 8, 2021, the Company issued 3,000,000 shares to Michael Mitsunaga, our President, pursuant to an exclusive licensing agreement Dated December 21, 2020 for use of an IV blood warming system.
On April 26, 2021, the Company issued 17,750,000 MCA Shares and on June 7, 2021, 9,000,000 MCA Shares originally issued in error on August 16, 2020, were returned to the Company bringing the total unissued MCA Shares to 31,650,000.
On April 12, 2021, the Company and Global Whole Health Partners Corp. (“Global”) entered into a Mutual Sales and Marketing Agreement (the “MSMA”). Pursuant to the terms of the MSMA, each company has mutual abilities to share their products for sale under nonexclusive but favorable conditions and prices. The duration of the agreement is for an initial period of five years commencing on April 12, 2021. As consideration for the MSMA, the Company agreed to issue 5,000,000 shares of its restricted common stock to Global and Global agreed to issue 5,000,000 shares of its restricted common stock to the Company. The Company received the Global shares on April 22, 2021. Due to the related party nature of the MSMA, the Company recorded the issuance of its shares at par value and the receipt of shares from Global at par value or $5,000 and reflected the balance as a non-current asset under the account “Investment in related party.”
NOTE 3 – Commitments and Contingencies
COVID-19 Pandemic and the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic may have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2021.
The pandemic may adversely affect our operations, our employees and our employee productivity. It may also impact the ability of our subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in costs, delays or disruptions in performance. Our employees are working remotely and using various technologies to perform their functions. In reaction to the spread of COVID-19 in the United States, many businesses have instituted social distancing policies, including the closure of offices and worksites and deferring planned business activity. The disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital. Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, we may experience a material adverse effect on our business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.
9
On March 27, 2020, then President Trump signed into law the CARES Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also appropriated funds for the SBA Paycheck Protection Program loans that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19.
NOTE 4 – Transactions with Related Persons
Mr. Michael Mitsunaga, our President and Director, made non-interest-bearing advances to the Company totaling $44,763 and $0 during the three months ended September 30, 2021 and 2020, respectively. Mr. Mitsunaga made non-interest-bearing advances totaling $80,817 and $4,394 during the nine months ended September 30, 2021 and 2020, respectively. Mr. Mitsunaga, received reimbursements totaling $10,001 during the nine months ended September 30, 2021. As of September 30, 2021, the balance owing to Mr. Mitsunaga was $75,210.
On April 12, 2021, the Company agreed to issued 5,000,000 shares to Global pursuant to the MSMA. The companies are considered related parties as they share the same CEO and significant shareholder, LionsGate. For additional information see “NOTE 2 – Preferred and Common Stock” above.
LionsGate made non-interest-bearing advances to the Company totaling $5,000 and $5,000 during the three and nine months ended September 30, 2020 and 2020, respectively. As of September 30, 2021, the balance owing to LionsGate was $11,242.
NOTE 5 – Subsequent Events
Management has reviewed material events subsequent of the period ended September 30, 2021 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.
10