GLOBAL WHOLEHEALTH PARTNERS CORPORATION The following Management's Discussion and Analysis ("MD&A") is intended to help
the reader understand the consolidated results of operations and financial
condition of Global WholeHealth Partners Corporation . The MD&A is provided as a
supplement to, and should be read in conjunction with financial statements and
the accompanying notes to the financial statements included in this Form 10-K.
Our discussion and analysis of our financial condition and results of operations
is based on our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America .
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities and expenses
and related disclosure of contingent assets and liabilities. Management bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
Overview
Global WholeHealth Partners Corporation develops and markets in-vitro diagnostic
tests for over-the-counter, or consumer-use and point-of-care which includes
hospitals, physicians' offices and medical clinics, including those within penal
systems throughout the US and abroad. The Company currently markets a range of
diagnostic test kits for consumer use through OTC sales, and for use by health
care professionals, generally located at medical clinics, physician offices and
hospitals known POC, in the United States . These test kits are known as in-vitro
diagnostic test kits or IVD products.
The Company's consolidated 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. 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.
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As of June 30, 2022 , we had negative working capital of $1,575,766 , and a cash
balance of $0 . Management recognizes that in order for us to meet our capital
requirements, and continue to operate, additional financing will be necessary.
During July 2022 , the Company sold $239,675 face value of promissory notes from
which the Company received $206,250 in proceeds. We expect to raise additional
funds through private or public equity investment in order to expand the range
and scope of our business operations. We will seek access to private or public
equity but there is no assurance that such additional funds will be available
for us to finance our operations on acceptable terms, if at all. If we are
unable to raise additional capital or generate positive cash flow, it is
unlikely that we will be able to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Results of Operations
Year ended
Year Ended
June 30,
2022 2021 Change
Revenue $ 7,375 $ 40,196 $ (32,821 )
Cost of revenue 119,681 201,495 (81,814 )
Gross profit (112,306 ) (161,299 ) 48,993
Operating expenses
Professional fees 176,174 83,790 92,384
Research and development 1,372,697 481,740 890,957Selling, general and administrative 782,650
317,062 465,588 Stock compensation 1,741,800 2,544,000 (802,200 ) Total operating expenses 4,073,321 3,426,592 646,729 Loss from operations (4,185,627 ) (3,587,891 ) (597,736 ) Other income (expense) Interest expense (281,866 ) (64,732 ) (217,134 )
Interest recorded on compensatory warrants - (737,569 ) 737,569 Amortization of debt discount (687,460 ) (163,931 ) (523,529 ) Loss on related party transfer of intangible assets - (4,480,000 ) 4,480,000 Total other income (expense) (969,326 ) (5,446,232 ) 4,476,906 Net loss$ (5,154,953 ) $ (9,034,123 ) $ 3,879,170 Revenue and Cost of Revenue
During fiscal 2022, the Company's sales included a$7,000 sale to a related party. Sales decreased due to the Company's inability to secure and market test items. The cost of revenue in 2022 and 2021 included inventory adjustments of$115,681 and 171,811, respectively, due to shelf-life expiration of our products Professional Fees Professional fees relate to expenditures incurred primarily for legal, accounting and financing services. During fiscal 2022 professional fees increased primarily due to higher legal fees incurred related to theFebruary 17, 2022 Securities and Exchange Commission lawsuit filed in the federal district court for theSouthern District ofCalifornia , for additional information see the notes to our financial statements, "NOTE 9 - Commitments and Contingencies".
Research and Product Development
Research and Product Development ("R&D") costs represent costs incurred to
develop our tests and are incurred pursuant to certain internal R&D cost
allocations, when applicable, and agreements with third-party providers, but
primarily with Pan Probe Biotech, owned by Dr. Shujie Cui , our Chief Science
Officer. R&D costs are expensed when incurred. During fiscal 2022 compared to
fiscal 2021, R&D costs increased due to the development of a COVID antigen
test.
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Selling, General and Administrative
Selling, general and administrative ("SG&A") costs include all expenditures
related to personnel, rent, travel, public company costs, utilities, marketing
and other office related costs. SG&A costs increased during fiscal 2022 compared
to fiscal 2021 due increases in personnel costs of $127,500 , travel and meals of
$38,020 , rent of $84,427 , utilities of $31,363 , impairment charges of $26,418 ,
marketing costs of $155,672 and other SG&A costs of $2,188 .
Stock Compensation
Stock compensation represents the expense associated with the issuance of stock
in exchange for services and is non-cash in nature. Stock compensation is based
on our stock price at the measurement date and can fluctuate significantly as a
result. Stock compensation expense in fiscal 2022 consisted of the issuance of
16,000,000 shares of restricted common stock at a weighted average price of
$0.11 per share compared to the fiscal 2021 issuance of 2,950,000 shares of
restricted common stock at a weighted average price of $0.86 per share. All
shares were issued free of obligation.
Other Income and (Expense)
Other expense includes "interest expense" which relates to the stated interest
and penalties upon default of our outstanding promissory notes, and
"amortization of debt discount" which represents the accretion of the discount
applied to our notes as a result of the issuance of detachable warrants, the
beneficial conversion feature contained certain notes and deductions from the
proceeds of the promissory notes for various related fees. During fiscal 2022,
interest expense included $191,400 of liquidated damages and penalties due to
our default on the Firstfire Notes and $79,200 of interest expense related to
the Firstfire Notes and $90,466 related to our promissory notes.
During fiscal 2021, the company recognized $64,732 of interest expense related
to your outstanding promissory notes and $737,569 related to the July 22, 2020
Common Stock Purchase Agreement with EMC2 Capital, LLC and related Commitment
Warrants valued at $737,569 .
The loss on related party transfer of intangible assets represents value of two separate, exclusive, five-year, license agreements between the Company andCharles Strongo , our former CEO, one for the manufacture of Biodegradable plastic for medical devices under provisional patent 63/054,139 and the second license agreement for the use of the intellectual property described as "a Rapid, Micro-Well or Later flow test for Parkinson's, Dementia, or Alzheimer or ASD" (collectively, the "License Agreements"). The License Agreements were both executed onJanuary 12, 2021 andMarch 30, 2021 . In exchange for entering into the License Agreements, the Company issued a total of 8 million shares of restricted common stock with a market value of$4,480,000 . Due to this being a related party transfer with no available historical cost records, the full value of the stock issued was recorded as a loss.
Liquidity and Capital Resources
As ofJune 30, 2022 , the Company had no cash and a bank overdraft of$1,230 and current liabilities of$1,719,380 . From inception toJune 30, 2022 , we have incurred an accumulated deficit of$18,937,685 . This loss has been incurred through a combination of professional fees, R&D, SG&A and non-cash stock related costs of$13,235,369 to support our plans to develop our business. During fiscal 2022, the Company had negligible revenues and used cash in operations of$1,968,207 . The Company has incurred losses since inception and may not be able to generate sufficient net revenue from its business in the future to achieve or sustain profitability. The Company currently has insufficient funds to operate over the next twelve months. To finance our operations, we have entered into a Common Stock Purchase Agreement withEMC2 Capital LLC , which provided us with$1,476,872 during fiscal 2022. Additionally, we entered into a Securities Purchase Agreement and related 12% senior secured convertible promissory note onJune 18, 2021 andAugust 27, 2021 , under which the Company received net proceeds of$224,500 onJuly 8, 2021 and$313,700 onSeptember 2, 2021 . Subsequent to fiscal 2022, inJuly 2022 , the Company sold$239,675 face value of promissory notes from which the Company received$206,250 in proceeds. We are currently pursuing additional funds through equity or debt financing or a combination thereof. However, aside from the EMC2 SPA, the Company has no commitments to obtain any such financing, and there can be no assurance that financing will be available in amounts or on terms acceptable to the Company, if at all. 7 Summary of Cash Flows
Presented below is a table that summarizes the cash provided or used in our activities and the amount of the respective increases or decreases in cash provided by (used in) those activities between the fiscal periods:
Year Ended
June 30,
2021 2020 Change
Operating activities $ (1,968,207 ) $ (642,802 ) $ (1,325,405 )
Investing activities - (3,505 ) 3,505
Financing activities 1,893,505 706,512 1,186,993
Net increase (decrease) in cash
Operating Activities
Net cash used in operating activities increased primarily due to increases in R&D, professional fees, personnel and other SG&A costs.
Investing Activities
The Company purchased computer equipment totaling
Financing Activities During fiscal 2022, the Company received$1,478,870 upon the sale of 7,856,514 shares of common stock,$2,000 upon the issuance of 2,000,000 shares pursuant to a warrant exercise, and$538,200 from the sale of convertible promissory notes offset by debt payments totaling$123,565 . During fiscal 2021, the Company received$680,051 upon the sale of 1,235,961 shares of common stock,$162,000 from the sale of convertible promissory notes,$75,000 from the sale of promissory notes and$144,576 from the sale of a related party note offset by payments of$73,000 on convertible promissory notes,$15,845 on promissory notes and$266,270 on related party notes. Contractual Obligations None.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our Financial Statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on its historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Due to the level of activity and lack of complex transactions, we believe there are currently no critical accounting policies and estimates that affect the preparation of our financial statements.
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Recently Issued Accounting Pronouncements
See "NOTE 2 - Significant Accounting Policies" to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K.
Related Party Transactions For a discussion of our Related Party Transactions, see "Note 5 - Transactions With Related Parties" to our Financial Statements included under Item 8 in this Annual Report on Form 10-K.
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