Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information,
including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions
upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements generally are identified by the words “believes,” “project,” “expects,”
“anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,”
“will,” “would,” “will be,” “will continue,” “will likely result,” and similar
expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those
safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks
and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results
or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect
on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory
changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties
should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We
undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events
or otherwise. Further information concerning our business, including additional factors that could materially affect our financial
results, is included herein and in our other filings with the SEC.
Overview
Recent Developments
On August 26, 2022, we entered into a letter of intent
(the “LOI”) dated August 25, 2022 with Bright Green Corporation (“Bright Green”), a Delaware corporation, with
a binding provision for Bright Green to acquire a 25% interest (the “Share Purchase”) in our company from existing shareholders
in exchange for $4,000,000 (the “Purchase Price”). The LOI also has a non-binding option for Bright Green to acquire all of
our outstanding capital stock.
The Share Purchase was subject to a Share Purchase
Agreement which was executed on October 03, 2022.
The Purchase Price was divided equally among the following
shareholder companies for their shares, controlled by affiliates of our company namely: Phyotherapeutix Holdings Ltd (Colin Stott), Equipped4
Holdings Limited (Dominic Schiller) and TPR Global Limited (Timothy Rogers).
These shareholder affiliates, through their respective
companies, have committed to enter into loan agreements with our company to provide up to $4,000,000 USD of working capital.
With
respect to the non-binding option for Bright Green to acquire all of our shares, we and Bright Green have agreed to work in good faith
and in a reasonable time-frame to reach a binding agreement to be executed in a final set of definitive documents (“Definitive Agreement”)
governing the option for a price equal to $0.06 per share.
As part of the strategic partnership and pursuant
to the terms and subject to the conditions of the arrangement, we plan to gain access to Bright Green’s planned cannabis and cannabis
extracts, derivatives, products and research services, and Bright Green will in turn benefit from our established industry relationships
and sector expertise. The parties believe a successful collaboration will create a strong pathway to secure, provide and supply cannabis
and derivative products to the pharmaceutical industry.
On October 7, 2022, we appointed David Hitchcock as
our CEO, and Terry Rafih as a member of our board of directors.
Our
Business
Our goal is to provide better medicines for patients
around the world. We believe in harnessing the therapeutic potential of cannabinoids and cannabinoid- like compounds, which can be developed
into valuable treatments to seriously ill patients. Rather than just focusing on one method of identifying, researching and developing
such medicines, we are interested in developing new medicines from all sources including botanical, traditional chemical synthesis and
biosynthetic methodologies.
On May 28, 2021, we acquired ABTI Pharma Limited,
a company registered in England and Wales (“ABTI Pharma”), with the purchase of all of its capital stock in exchange for 600,000,000
shares of our common stock pro rata to the ABTI Pharma shareholders.
As a result of the acquisition, we are a pharmaceutical
company working with cannabinoid and cannabinoid like molecules. We have three areas of focus:
| |
1) |
Development of regulated pharmaceuticals (human and animal health) and regulated food products. This has been achieved via the strategic acquisition of Phytotherapeutix Ltd.; |
| |
2) |
Production of low cost of goods Active Pharmaceutical Ingredient (API) and food-grade ingredients (supported by the strategic acquisition of Ferven Ltd); and |
| |
3) |
Formulation, and drug delivery, providing improved bioavailability, solubility and stability (supported by the exclusive licensing of IP and technology from Nano4M Ltd). |
Phytotherapeutix Ltd, a subsidiary of ABTI Pharma
Ltd, has generated a number of molecules with patents pending, some of which have demonstrable pharmacological activity, similar to that
of CBD. This means that some of these molecules are anticipated to have a similar market potential to CBD across a range of therapeutic
areas.
Ferven Ltd, another subsidiary of ABTI Pharma Ltd,
is looking to produce cannabinoids by fermentation. The exclusively licensed organism has the potential to be genetically modified to
produce multiple cannabinoids at an anticipated very low cost of goods. It is anticipated that the selected genetically modified organisms
will grow very quickly, which in turn, reduces the cost of production.
Nano4M Ltd is a company which has exclusively licensed
its nano-formulation patents and know-how to ABTI Pharma Ltd.
As a result of the acquisition of assets and intellectual
property from C2 Wellness Corp. on December 2, 2021, Alterola now has the following assets and intellectual property:
- Novel cannabinoid molecules and their associated
intellectual property;
- Novel cannabinoid pro-drugs, and their associated
intellectual property;
- Novel proprietary cannabinoid formulations, designed
to target lymphatic delivery, and their associated intellectual property;
- Novel proprietary nano-encapsulated cannabinoid formulations,
in self-dissolving polymers, and their associated intellectual property; and
- Cannabinoids and cannabinoid pro-drug formulations
for topical ocular delivery, and their associated intellectual property.
Additionally, we may consider entering into Joint
Venture Partnerships, or acquire companies with complimentary portfolios or enter into Licensing Agreements to enhance the product portfolio.
These are strategies the Company may implement and any such opportunities will be assessed on a case by case basis and on their merit
at the time.
At
present, the Company is waiting to hear whether Bright Green Corporation will exercise its option to acquire the remaining 75% of the
Company’s common stock.
Alterola and ABTI Pharma Ltd management have extensive
experience, know-how and connections in the cannabinoid medicines sector, and are looking to utilize this knowledge and experience for
the development of such medicines from existing cannabinoids and cannabinoid-like molecules.
Our address is 47 Hamilton Square Birkenhead Merseyside
CH41 5AR United Kingdom. Our telephone number is +44 151 601 9477. Our website is www.alterolabio.com. The company has a fully operational
US$ and a £ sterling bank account in the United Kingdom with the HSBC Group.
We do not incorporate the information on or accessible
through our websites into this Quarterly Report, and you should not consider any information on, or that can be accessed through, our
websites a part of this Quarterly Report.
Results of Operations for the Three and Nine Months
Ended December 31, 2022 and 2021
We
have generated no revenues since inception and we do not anticipate earning revenues until such time that we are able to market and sell
our ingredients and / or products / medicines.
We incurred operating expenses of $540,621 for the
three months ended December 31, 2022, as compared with $2,800,677 for the same period ended 2021. We incurred operating expenses of $1,823,992
for the nine months ended December 31, 2022, as compared with $3,213,315 for the same period ended 2021.
Our operating expenses for the nine months ended December
31, 2022 were mainly the result of $546,571 in directors fees and expenses, $481,429 in consulting fees, $363,193 in professional fees,
$101,238 in salaries and wages, $86,816 in accounting and audit fees and $41,086 in research and development. By contrast, our operating
expenses for the nine months ended December 31, 2021 were mainly the result of $2,545,963 in consulting fees, $322,324 in research and
development, $92,525 in accounting and audit fees and $91,083 in salaries and wages.
Our operating expenses in 2022 increased as a result
of human resource expenditures for employees, consultants and directors, as well as expenditures for information technology support, intellectual
property submissions and maintenance, transfer agent services legal fees and accounting and audit fees. With more staff and the lack of
financing, we have not been able to ramp up research and development activities for the nine months ended December 31, 2022, with only
$41,086 spent as compared to $124,034 spent for the same period in 2021.
If we are able to obtain financing, we expect
that our operational expenses will increase significantly for the balance of the fiscal year ended March 31, 2023 and beyond. This would
be the result of increased research and development expenses associated with our product candidates, the development of those candidates
in compliance with regulatory processes, laws and regulations, increased payroll as we take on more help, as well as the expenses associated
with our reporting obligations with the Securities and Exchange Commission.
We recorded a net loss of $534,789 for the three months
ended December 31, 2022, as compared with $2,800,677 for the same period ended 2021. We recorded a net loss of $1,722,691 for the nine
months ended December 31, 2022, as compared with $3,213,315 for the same period ended 2021.
As a relatively recently formed pharmaceutical company,
the company has limited operations to date, and expects to have reoccurring losses, as is typical with companies in the pharmaceutical
industry, for the foreseeable future. As explained above, the company intends to raise capital and ramp up its efforts to bring its product
candidates to market. This will require significant capital, product development to continue and complete and momentum on those product
candidates through the regulatory process. There are no assurances that we will be able to generate revenues and achieve profitable operations.
Liquidity and Capital Resources
As of December 31, 2022, we had $192,011 in current
assets, consisting mostly of a deferred tax credit, and current liabilities of $1,822,696. We had a working capital deficit of $1,630,685
as of December 31, 2022, compared with a working capital deficit of $1,187,515 as of September 30, 2022.
We used cash for operating activities of $1,156,498
for the nine months ended December 31, 2022, as compared with cash used of $2,596,081 for the same period ended 2021. Our negative operating
cash flow for 2022 was mainly the result of a net loss, net changes in operating assets and liabilities and deferred tax credit offset
by shares issued for services. Our negative operating cash flow for 2021 was the result of our net loss, offset by net changes in operating
assets and liabilities.
We used cash for investing activities of $18,147 for
the nine months ended December 31, 2022, as compared with $12,000,000 used in investing activities for the same period ended 2021 for
investments in intellectual property from C2 Wellness Corp. on December 2, 2021.
Financing activities provided $1,093,405 for the nine
months ended December 31, 2022, as a result of related party notes, as compared with $14,625,352 provided for the same period ended 2021,
as a result of proceeds from share issuances and convertible notes.
On August 1, 2022, we entered into loan agreements
for a total of US $75,000.. We issued 2,250,000 shares to note holders in connection with the loan agreements. The sum of 75,000 was repaid
fully by December 23, 2022.
As
part of the SPA, executed on October 03, 2022, the shareholder affiliates, through their respective companies, have committed to enter
into loan agreements with our company to provide up to $4,000,000 USD of working capital.
Based
upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next 12 months.
We intend to fund operations through short-term or long-term debt and/or equity financing arrangements, however this may be insufficient
to fund expenditures or other cash requirements. If Bright Green exercises its option, we will have sufficient cash from the exercise
price and proceeds therefrom. Without it, we plan to seek additional financing in a private equity offering to secure funding for operations.
There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the
implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us
on acceptable terms or at all.
Off Balance Sheet Arrangements
As of December 31, 2022, we had no off-balance sheet
arrangements.
Going Concern
Our
financial statements were prepared assuming we will continue as a going concern which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. We have negative working capital of $1,630,685
as of December 31, 2022, and have incurred losses since inception
of $9,556,419. We expect to incur further losses in the development of our business and have been dependent on funding operations from
inception. These conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans include
continuing to finance operations through the private or public placement of debt and/or equity securities and the reduction of expenditures.
At present, the Company is waiting to hear whether Bright Green Corporation will exercise its option to acquire the remaining 75% of the
Company’s common stock. However,
no assurance can be given at this time as to whether we will be able to achieve these objectives. The financial statements do not include
any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities
that might be necessary should we be unable to continue as a going concern.
