Forward-Looking Statements
This section of the Form 10-Q includes a number of forward-looking statements
that reflect our current views with respect to future events and financial
performance. Forward-looking statements are often identified by words like
believe, expect, estimate, anticipate, intend, project and similar expressions,
or words which, by their nature, refer to future events. You should not place
undue certainty on these forward-looking statements. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from our predictions.
Company History Overview
Pharmagreen Biotech Inc. ("the Company") was incorporated under the laws of
Nevada, U.S. on November 26, 2007 under the name Azure International, Inc. On
October 30, 2008 and effective as of the same date, the Company filed Articles
of Merger with the Secretary of the State of Nevada, to effect a merger by and
between Air Transport Group Holdings, Inc., a Nevada corporation incorporated on
October 16, 2008, and Azure International, Inc. As a result of the merger, the
Company changed its name to Air Transport Group Holdings, Inc.
On April 12, 2018, the Company entered into a share exchange agreement with WFS
Pharmagreen Inc., a private company incorporated under the laws of British
Columbia, Canada, whereby the Company acquired all of the issued and outstanding
shares of WFS Pharmagreen Inc. in exchange for 37,704,500 shares of common stock
of the Company. Upon completion of this transaction, the shareholders of WFS
Pharmagreen hold 95.5% of voting control of the Company.
Immediately prior to closing of the Agreement, the majority shareholder of the
Company was also the majority shareholder of WFS. As a result of the common
ownership upon closing of the transaction, the acquisition was considered a
common-control transaction and was outside the scope of the business combination
guidance in ASC 805-50. The entities are deemed to be under common control as of
February 27, 2018, which was the date that the majority shareholder acquired
control of the Company and, therefore, held control over both companies. On May
2, 2018, the Share Exchange Agreement was effected. In connection with this
transaction, the Company changed its name on May 8, 2018 to Pharmagreen Biotech
Inc. and changed its year end from April 30th to September 30th.
Our principal executive offices are temporarily located at 2987 Blackbear Court,
Coquitlam, British Columbia, Canada. Our telephone number is (702-803-9404). Our
internet address is www.pharmagreen.ca.
On August 7, 2020, our company (including our subsidiaries) filed voluntary
petitions under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Nevada, Case No. 20-13886.
On October 9, 2020, a stay order was lifted by a United States District Judge of
the United States District Court for the Southern District of New York, on an
action filed by a lender. This effectively removed the Company from its Chapter
11 bankruptcy proceedings and protection.
We expect to continue to incur losses for at least the next 12 months. We do not
expect to generate revenue that is sufficient to cover our expenses, and we do
not have sufficient cash and cash equivalents to execute our plan of operations
for at least the next twelve months. We will need to obtain additional
financing, through equity security sales, debt instruments and private
financing, to conduct our day-to-day operations, and to fully execute our
business plan. We plan to raise the capital necessary to fund our business
through the sale of equity securities, debt instruments or private financing.
These factors raise substantial doubt upon the Company's ability to continue as
a going concern. This report does not reflect all the adjustments that may be
necessary if the Company is unable to continue as a going concern.
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Our Current Business
Pharmagreen Biotech Inc. (the "Company") was incorporated under the laws of the
State of Nevada on November 26, 2007. The Company is headquartered in Coquitlam,
British Columbia. The Company's mission is to advance the technology of tissue
culture science and to provide the highest quality 100% germ free, disease free
and all genetically the same plantlets of high CBD hemp and other flora and
offering full spectrum DNA testing for plant identification, live genetics
preservation using low temperature storage for various cannabis and horticulture
plants; extraction of botanical oils mainly CBD oil, and to deliver laboratory
based services to the North American high CBD hemp, Cannabis and agriculture
sectors.
Management cannot provide assurance that the Company will ultimately achieve
profitable operations or become cash flow positive, or raise additional debt
and/or equity capital. However, if the Company is unable to raise additional
capital in the near future, due to the Company's liquidity problems, management
expects that the Company will need to curtail operations, liquidate assets, seek
additional capital on less favourable terms and/or pursue other remedial
measures. The condensed consolidated financial statements do not include any
adjustments related to the recoverability and classification of assets or the
amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
The Company has decided that immediate business development in the hemp and
cannabis industries provides a much greater opportunity in the United States.
The project at Deroche has been placed on hold while the Company moves forward
to build out a similar infrastructure planned for Deroche within the United
States.
On July 25, 2021, the Company entered into a Memorandum of Understanding to
acquire all the assets and cannabis business operation (includes 12 acres
property, structure and cannabis licenses, existing sales channels and
distribution networks) from a private company situated in Northern California.
Upon reaching a definitive agreement, the Company intends to further develop a
state-of-the-art flowering greenhouse of approximately 12,000 square feet or the
maximum allowed by California State and Regional County. The acquisition price
is $2.4 million to be paid through a combination of cash and shares. The Company
also has an option from the seller to acquire an additional 120 acres or more of
land for business expansion and development. The Company currently lacks funds
with which to consummate the contemplated transaction and has not negotiated a
definitive agreement with respect to the contemplated transaction. Thus, there
is no assurance that the Company will ever enter into, and consummate, a
definitive agreement with respect to the contemplated transaction.
The recent outbreak of the novel coronavirus COVID-19, which was declared a
pandemic by the World Health Organization on March 11, 2020,has led to adverse
impacts on the U.S. and global economies, disruptions of financial markets, and
created uncertainty regarding potential impacts to the Company's supply chain,
operations, and customer demand. The COVID-19 pandemic has impacted and could
further impact the Company's operations and the operations of the Company's
suppliers and vendors as a result of quarantines, facility closures, and travel
and logistics restrictions. The extent to which the COVID-19 pandemic impacts
the Company's business, results of operations and financial condition will
depend on future developments, which are highly uncertain and cannot be
predicted, including, but not limited to the duration, spread, severity, and
impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on the
Company's customers, suppliers, and vendors and the remedial actions and
stimulus measures adopted by local and federal governments, and to what extent
normal economic and operating conditions can resume. The management team is
closely following the progression of COVID-19 and its potential impact on the
Company. Even after the COVID-19 pandemic has subsided, the Company may
experience adverse impacts to its business as a result of any economic recession
or depression that has occurred or may occur in the future. Therefore, the
Company cannot reasonably estimate the impact at this time our business,
liquidity, capital resources and financial results.
Capital Resources and Liquidity
Our auditors have issued a "going concern" opinion, meaning that there is
substantial doubt if we can continue as an on-going business unless we obtain
additional capital. No substantial revenues from our planned business model are
anticipated until we have completed financing the Company. As at December 31,
2021, the Company has a working capital deficit of $1,543,202 and an accumulated
deficit of $11,680,693. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
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We need to seek capital from resources such as the sale of private placements in
the Company's common stock or debt financing, which may not even be available to
the Company. However, if such financing were available, because we are a,
early-stage company with no or limited operations to date, it would likely have
to pay additional costs associated with such financing and in the case of high
risk loans be subject to an above market interest rate. At such time these funds
are required, management would evaluate the terms of such financing. If the
Company cannot raise additional proceeds via such financing, it may be required
to cease business operations.
As of December 31, 2021, we had $10,474 in cash, amounts receivable of $62, and
prepaid expenses and deposits of $347,217, as compared to $25,300 in cash,
amounts receivable of $290 and prepaid expenses and deposits of $347,491 as of
September 30, 2021. As of the date of this Form 10-Q, the current funds
available to the Company will not be sufficient to fund the expenses related to
maintaining our planned operations. We are in the process of seeking additional
equity financing in the form of private placements, loans and registration
statements to fund our intended business operations.
Management believes that if subsequent private placements are successful or we
are successful in raising funds from registered securities, we will generate
sales revenue within twelve months thereof. However, additional equity financing
may not be available to us on acceptable terms or at all, and thus we could fail
to satisfy our future cash requirements.
We do not anticipate researching any further products nor the purchase or sale
of any significant equipment. We also do not expect any significant additions to
the number of employees.
Results of Operations
Three Months Ended December 31, 2021
We had no revenue for the three months ended December 31, 2021 and 2020.
Operating expenses in the three months ended December 31, 2021 were $203,660 as
compared to operating expenses for the three months ended December 31, 2020 of
$101,624. The net increase in expenses during the current period is mainly due
to an increase in consulting fees from $50,140 in 2020 to $139,528 in 2021,
which was mainly related to an infomercial production agreement entered into
with New to the Street Group LLC on May 13, 2021.
We incurred a comprehensive income of $16,261 during the three months ended
December 31, 2021, compared to a comprehensive loss of $459,564 during the three
months ended December 31, 2020. The decrease in comprehensive loss in 2021 was
mainly attributable to a change in fair value of derivative liabilities from a
loss of $674,912 in 2020 to a gain of $234,274 in 2021, as the Company had
significantly more convertible debt in the prior year which resulted in more
fluctuations of the derivative liability due to the floating rates attached to
the conversion rights to the convertible debt.
During the three months ended December 31, 2021 and 2020, we incurred a net
income of $18,724 and a net loss of $417,110 respectively.
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Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect or change on the company's financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors. The term
"off-balance sheet arrangement" generally means any transaction, agreement or
other contractual arrangement to which an entity unconsolidated with the company
is a party, under which the company has (i) any obligation arising under a
guarantee contract, derivative instrument or variable interest; or (ii) a
retained or contingent interest in assets transferred to such entity or similar
arrangement that serves as credit, liquidity or market risk support for such
assets.
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