White River Energy Corp. - Quarter Report: 2017 June (Form 10-Q)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: June 30, 2017
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from:
Commission file number 333-192060
Mount Tam Biotechnologies, Inc.
(Exact name of registrant as specified in its charter)
Nevada |
| 45-3797537 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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7250 Redwood Boulevard, Suite 300 Novato, California |
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949245 |
(Address of principal executive offices) |
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Issuer’s telephone number: (425) 214-4079
(Former name, former address and former fiscal year, if changed since last report)
Indicate by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ |
| Accelerated filer | ¨ |
| Non-accelerated filer | ¨ |
| Smaller reporting company | x |
| Emerging growth company | ¨ |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. ¨
As of August 10, 2017, the issuer had 48,846,985 shares of its common stock, $0.0001 par value per share, outstanding.
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| PART I - Financial Information |
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| Condensed Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016. | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
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| Part II - Other Information |
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PART I: FINANCIAL INFORMATION
Mount TAM Biotechnologies, Inc. | ||
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| June 30, | December 31, |
Assets | 2017 | 2016 |
Assets | (Unaudited) |
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Cash and cash equivalents | $89,241 | $375,498 |
Prepaid expense | 14,667 | 4,171 |
Total Current Assets | 103,908 | 379,669 |
Other Assets |
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Deposit | 1,637 | - |
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Total Assets | $105,545 | $379,669 |
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Liabilities and Stockholders’ Deficit |
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Current Liabilities: |
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Accounts payable and accrued liabilities | $735,272 | $593,421 |
Accounts payable and accrued liabilities- related parties | 74,612 | 9,308 |
Notes payable | 28,045 | 17,501 |
Convertible debenture, net of unamortized debt discount | 593,154 | - |
Total Current Liabilities | 1,431,083 | 620,230 |
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Long Term Debt: |
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Convertible debenture, non-current, net of unamortized debt discount | - | 553,640 |
Total Long Term Debt | - | 553,640 |
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Total Liabilities | 1,431,083 | 1,173,870 |
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Stockholders’ Deficit |
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Common stock, $0.0001 par value; 100,000,000 shares authorized; 48,846,985 and 47,846,984 shares issued and outstanding | 4,884 | 4,784 |
Stock subscription payable | (45) | (45) |
Stock to be issued | 73,685 | 57,895 |
Additional paid in capital | 4,456,173 | 3,676,871 |
Accumulated deficit | (5,860,235) | (4,533,706) |
Total Stockholders’ Deficit | (1,325,538) | (794,201) |
Total Liabilities and Stockholders’ Deficit | $105,545 | $379,669 |
See accompanying notes to these unaudited condensed consolidated financial statements.
F-1
See accompanying notes to these unaudited condensed consolidated financial statements.
F-2
Mount TAM Biotechnologies, Inc. |
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(Unaudited) |
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| Six Months Ended | Six Months Ended |
| June 30, | June 30, |
| 2017 | 2016 |
Cash Flows from Operating Activities |
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Net loss | $(1,326,529) | $(964,310) |
Adjustment to reconcile net loss to net cash used in operating activities: |
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Fair value of options | 486,902 | 159,058 |
Stock based compensation | 15,790 | - |
Amortization of debt discount | 39,514 | 45,399 |
Expenses paid by the note holder | - | 12,313 |
Amortization of prepaid expenses | 15,565 | 5,622 |
Changes in operating assets and liabilities: |
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Prepaid expense | (8,458) | (25,025) |
Deposits | (1,637) | - |
Accounts payable and accrued liabilities | 207,154 | 359,237 |
Net cash used in operating activities | (571,699) | (407,706) |
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Cash Flows from Investing Activities: | - | - |
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Cash Flows from Financing Activities |
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Proceed from loans | - | 407,000 |
Payment of loans | (7,058) | - |
Proceeds from issuance of common stock | 292,500 | - |
Net cash provided by financing activities | 285,442 | 407,000 |
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Net decrease in cash | (286,257) | (706) |
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Cash, beginning of period | 375,498 | 5,447 |
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Cash, end of period | $89,241 | $4,741 |
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Supplemental disclosures: |
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Interest paid | $- | $- |
Income tax paid | $- | $- |
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Non-cash investing and financing activities: |
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Waiver of payable-related parties transferred to additional paid incapital | $- | $274,247 |
Debt discount due to beneficial conversion featute on note | $- | $101,750 |
Loan received shown as prepaid expenses | $17,575 | $- |
See accompanying notes to these unaudited condensed consolidated financial statements.
F-3
Mount TAM Biotechnologies, Inc.
Unaudited Condensed Consolidated Financial Statements
For the six months ended June 30, 2017
Note 1 – Nature of the Business
The terms "we," "us," "our," "registrant," and the "Company" refer to Mount Tam Biotechnologies, Inc., a Nevada corporation, and, where applicable, Mount Tam Biotechnologies, Inc., a Delaware corporation and our wholly-owned subsidiary ("Mount Tam"). The Company is an early-stage life sciences and technology company pursuing the development of bio-pharmaceuticals to treat serious diseases, including autoimmune diseases. The Company intends to optimize and bring to market a portfolio of products focused on improving the health and wellbeing of individuals afflicted with serious diseases, with a lead product targeting systemic lupus erythematosus (SLE) and a strategy to bring to market novel therapeutics across a range of serious disease areas. The Company is headquartered in the San Francisco Bay Area.
On August 13, 2015, Mount Tam entered into a Share Exchange and Conversion Agreement (the "Exchange Agreement") with the Company and certain other persons party thereto. Immediately following the effective time of the Exchange Agreement, Mount Tam's stockholders (as of immediately prior to the transactions contemplated by the Exchange Agreement (such transactions, the "Share Exchange")) owned approximately 57.14% of the Company's outstanding common stock and the Company's stockholders (as of immediately prior to the Share Exchange) owned approximately 42.86% of the Company's outstanding common stock. Additionally, following the Share Exchange, the business conducted by Mount Tam became the primary the business conducted by the Company.
As a result of the Share Exchange, Mount Tam became a wholly-owned subsidiary of the Company. However, the former stockholders of Mount Tam acquired a majority of the outstanding shares of the Company's common stock. In connection with the Share Exchange, a former shareholder of the Company agreed to surrender all of his shares of the Company's common stock in exchange for $30,000, and all of the issued and outstanding shares of Epicurean Cigars, Inc., which at the time was a wholly-owned subsidiary of the Company which had a nominal remaining net liability. The shares were returned to the Company, and the $30,000 due to the shareholder has been accrued as of March 31, 2016.
Effective on August 31, 2015, the Company changed its name from TabacaleraYsidron, Inc. to Mount TAM Biotechnologies, Inc. The name change was effected through a parent/subsidiary short-form merger of Mount TAM Biotechnologies, Inc., our wholly-owned Nevada subsidiary which we formed solely for the purpose of the name change, with and into the Company, with the Company as the surviving corporation. With the exception of the name change, there were no changes to the Company's Articles of Incorporation or Bylaws. There will be no mandatory exchange of stock certificates. The Company's trading symbol on the OTC Markets (OTC Pink) marketplace was changed to "MNTM" from "TQBY".
Mount Tam Biotechnologies, Inc., the Company's wholly-owned legal subsidiary, was the "accounting acquirer," and for accounting purposes, the TYI was deemed as having been "acquired" in the Merger. The board of directors and officers that managed and operated Mount Tam immediately prior to the effective time of the Merger became the Company's board of directors and officers.
To meet its business objectives, the Company formed a strategic partnership with the Buck Institute for Research on Aging ("Buck Institute"), an independent research facility focused on understanding the connection between aging and chronic disease. As part of the partnership, the Company signed an exclusive worldwide licensing and collaboration agreement with the Buck Institute that includes many of the Buck Institute's intangible research and development assets in the area of autoimmune disorders. This collaboration has since been expanded to include all therapeutic and diagnostic uses of certain compounds in the human or veterinary fields. The Company's research and development efforts are currently focused on a pre-clinical stage compound for the treatment of SLE with potential to treat other serious diseases as well. The Company has not produced any revenues from the intangible research and development assets it acquired from Buck Institute and it has not commenced its planned principal operations.
The production and marketing of the Company's products and its ongoing research and development activities will be subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any drug developed by the Company must undergo additional rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the Food and Drug Administration under the Food, Drug and Cosmetic Act. In addition, the Company's success will depend in part on its ability to obtain and maintain patents, exploit its product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries.
The following reflects the Company's current, post-merger corporate structure (State of Incorporation):
Mount Tam Biotechnologies, Inc., formerly TabacaleraYsidron, Inc. (Nevada)
Mount Tam Biotechnologies, Inc. (Delaware)
F-4
The Company is a publicly-traded biotechnology company dedicated to speeding the delivery of new treatment options to patients affected by serious diseases through the development and application of highly specialized drug discovery and development platforms and formulation expertise. The Company focuses on areas of serious medical need where it can have the greatest potential impact.
The Company is subject to a number of risks, including: the need to raise capital through equity and/or debt financings; the uncertainty whether the Company’s research and development efforts will result in successful commercial products; competition from larger organizations; reliance on licensing proprietary technology of others; dependence on key personnel; uncertain patent protection; and dependence on corporate partners and collaborators. See the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K.
History
The Company was established in November 2011 under the name TabacaleraYsidron. Mount Tam was incorporated on August 13, 2014 (date of inception). On August 13, 2014, Mount Tam issued 9,000,000 shares of common stock, $0.0001 par value, for $900.
On August 13, 2015, Mount Tam and the Company entered into the Exchange Agreement as described above.
The Share Exchange was treated as a reverse acquisition of the Company, a public shell company at the time, by Mount Tam for financial accounting and reporting purposes. As such, Mount Tam was treated as the acquirer for accounting and financial reporting purposes while the Company is treated as the acquired entity for accounting and financial reporting purposes. As a result of the Share Exchange, $50,048 account payable and $17,500 note payable of the Company was brought forward at their book values and no goodwill has been recognized. Prior to the Share Exchange, the Company was a non-operating public shell company with nominal operations and nominal assets.
Note 2 – Summary of Significant Accounting Policies
The significant accounting policies applied in the annual consolidated financial statements of the Company as of June 30, 2017 are applied consistently in these interim consolidated condensed financial statements.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements as of June 30, 2017 have been prepared in accordance with the U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s financial position as of June 30, 2017, the Company’s results of operation and the cash flows for the three and six months ended June 30, 2017. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Form 10-K filed on March 31, 2017. The December 31, 2016 condensed consolidated balance sheet data was derived from the audited financial statements included in the Form 10-K filed on March 31, 2017. The financial statements and notes are representations of the Company's management ("Management") and its board of directors (the "Board of Directors"), who are responsible for their integrity and objectivity.
Results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ended December 31, 2017 or any other future period.
Use of Estimates
The preparation of the 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 liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Management makes estimates that affect certain accounts including deferred income tax assets, accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies. Any adjustments applied to estimates are recognized in the period in which such adjustments are determined.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of those investments approximates their fair market value due to their short maturity and liquidity. Cash and cash equivalents include cash on hand and amount on deposit with financial institutions, which amounts may at times exceed federally insured limits. The Company has not experienced any losses on such accounts and it does not believe it is exposed to any significant credit risk. As of June 30, 2017 and December 31, 2016 the Company had cash and cash equivalents of $89,241 and $375,498, respectively.
F-5
Fair Value of Financial Instruments
The carrying amounts of certain of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable, accrued liabilities and note payable approximate fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
Research and Development costs
The Company follows Accounting Standards Codification Subtopic (“ASC”) 730-10, “Research and Development,” in which research and development costs are charged to the statement of operations as incurred. During the three months ended June 30, 2017 and 2016 the Company incurred $136,559 and $66,042, respectively of expenses related to research and development costs. During the six months ended June 30, 2017 and 2016 the Company incurred $304,059 and $141,042, respectively of expenses related to research and development costs.
Net Earnings (Loss) Per Common Share
The Company computes earnings per share under ASC 260-10, “Earnings Per Share”. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted loss per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive. There were no potentially dilutive shares for the six months ended June 30, 2017.
Accounts Payable
Accounts payable and accrued expenses include the following as of June 30, 2017 and December 31, 2016:
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Accounts payable |
| $ | 591,264 |
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| $ | 335,249 |
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Accounts payable to related parties |
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| 74,612 |
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| 9,308 |
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Accrued legal fees |
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| 145,279 |
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Accrued interest |
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| 29,195 |
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| 19,897 |
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Accrued salary |
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| 92,630 |
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| 92,996 |
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Other current liabilities |
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| 22,182 |
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Total accounts payable and accrued expenses |
| $ | 809,883 |
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| $ | 602,729 |
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Fair Value Measurements
The Company measures and discloses the fair value of assets and liabilities required to be carried at fair value in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure.
ASC 825 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices for identical assets or liabilities in active markets to which we have access at the measurement date.
Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 - Unobservable inputs for the asset or liability.
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
F-6
For the six months ended June 30, 2017 the Company has determined that there we no assets or liabilities measured at fair value on a recurring basis.
The Company believes the carrying amounts of cash and cash equivalents, other current assets, accounts payable, accrued expenses salaries, wages and payroll taxes, and other accrued expenses are a reasonable approximation of the fair value of those financial instruments because of the nature of the underlying transactions and the short-term maturities involved.
Going Concern
The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has no significant operating history and had a cumulative net loss from inception (August 13, 2014) to June 30, 2017 of $5,860,235. The Company has a working capital deficit of $1,327,538 as of June 30, 2017. Since inception, the Company has been funded through debt and equity financings. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern. The accompanying financial statements for the period ended June 30, 2017, have been prepared assuming the Company will continue as a going concern. The Company believes its cash resources are insufficient to meet its anticipated needs during the next twelve months. The Company will require additional financing to fund its future planned operations, including research and development and clinical trials and commercialization of its product candidates. In addition, the Company will require additional financing in order to seek to license or acquire new assets, research and develop any potential patents and the related compounds, and obtain any further intellectual property that the Company may seek to acquire.
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 establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through borrowing and sales of common stock. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be forced to delay or scale down some or all of its development activities or perhaps even cease the operation of its business. Since its inception, the Company has funded its operations primarily through debt financings and equity financings, and it expects that it will continue to fund its operations through a mix of equity and debt financings. If the Company secures additional financing by issuing equity securities, its existing stockholders’ ownership will be diluted. The Company also expects to pursue non-dilutive financing sources. However, obtaining such financing would require significant efforts by the Company’s management team, and such financing may not be available, and if available, could take a long period of time to obtain. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investment owners and distributions to owners. For the periods presented, comprehensive loss did not differ from net loss.
Collaborative Arrangements
The Company and its collaborative partners are active participants in the collaborative arrangements and both parties are exposed to significant risks and rewards depending on the commercial success of the activity. The Company records all expenses related to collaborative arrangements as research and development expense in the consolidated statements of operations as incurred.
Recent Accounting Pronouncements
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Going Concern ("ASU 2014-15"). ASU 2014-15 provides GAAP guidance on management's responsibility in evaluating whether there is substantial doubt about a company's ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company's ability to continue as a going concern within one year from the date the financial statements are issued. The standard will be effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The adoption of this standard did not have a material impact on the Company's financial statements.
F-7
Recent Accounting Pronouncements Issued But Not Adopted as of June 30, 2017
In March 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-08, “Receivables—Nonrefundable Fees and Other Costs”. The Board is issuing this update to amend the amortization period for certain purchased callable debt securities held at a premium, the Board is shortening the amortization period for the premium to the earliest call date. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of adopting this guidance.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not anticipate the adoption of ASU 2017-04 will have a material impact on its consolidated financial statements.
In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Clarifying the Definition of a Business ("ASU 2017-01"). The standard clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Under ASU 2017-01, to be considered a business, the assets in the transaction need to include an input and a substantive process that together significantly contribute to the ability to create outputs. Prior to the adoption of the new guidance, an acquisition or disposition would be considered a business if there were inputs, as well as processes that when applied to those inputs had the ability to create outputs. Early adoption is permitted for certain transactions. Adoption of ASU 2017-01 may have a material impact on the Company's consolidated financial statements if it enters into future business combinations.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Restricted Cash (a consensus of the FASB Emerging Issue Task Force) ("ASU 2016-18"). This new standard addresses the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within the year of adoption, with early adoption permitted. The Company does not expect that the adoption of ASU 2016-18 will have a material impact on its consolidated financial statements
In August, 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) ("ASU 2016-15"). The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, Statement of Cash Flows. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas of simplification apply only to nonpublic entities. For public business entities, the amendments in ASU 2016-09 are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 addresses the financial reporting of leasing transactions. Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the agreement as a capital lease, are met. This update will require the recognition of a right-of-use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of operations and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. This guidance is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements.
In January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily
F-8
affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.
In August 2014, the FASB issued ASU 2014-15, "Presentation of Financial Statements – Going Concern (Subtopic 205-40), effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This standard provides guidance about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The guidance is effective for annual reporting periods ending after December 15, 2016, and early adoption is permitted. The Company expects to adopt this guidance on January 1, 2017. The Company had no impact, by the adoption of ASU 2014-15
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," on revenue recognition. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The original effective date of this guidance was for interim and annual reporting periods beginning after December 15, 2016, early adoption is not permitted, and the guidance must be applied retrospectively or modified retrospectively. In July 2015, the FASB approved an optional one-year deferral of the effective date. As a result, we expect to adopt this guidance on January 1, 2018. The Company has not yet determined its approach to adoption or the impact the adoption of this guidance will have on its financial position, results of operations or cash flows, if any.
In the second quarter of 2014, the FASB issued guidance applicable to revenue recognition that will be effective for the Company for the year ending December 31, 2018. The new guidance must be adopted using either a full retrospective approach for all periods presented or a modified retrospective approach. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new guidance applies a more principles-based approach to recognizing revenue. The Company expects to adopt this new guidance in the first quarter of 2018 using the modified retrospective method. The adoption may have a material effect on the Company's financial statements. The Company's revenues are derived primarily from license and collaboration agreements. The consideration the Company is eligible to receive under these agreements includes upfront payments, research and development funding, milestone payments, and royalties. Each collaboration agreement is unique and will need to be assessed separately under the five-step process under the new standard. The new guidance differs from the current accounting standard in many respects, such as in the accounting for variable consideration, including milestone payments. Under the current accounting policy, the Company recognizes milestone revenue using the milestone method specified in ASC 605-28, which generally results in the recognition of the milestone payment as revenue in the period that the milestone is achieved. However, under the new accounting standard, it is possible to start to recognize milestone revenue before the milestone is achieved, subject to management's assessment of whether it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.
F-9
Note 3 – Loans
In 2014, the Company executed an agreement with a third-party investor whereby the Company issued $53,209 in a convertible promissory note. This convertible note bears an interest rate of 8% per year and was set to mature on November 26, 2015. The Company subsequently received an advance of $50,000 from the same party. The proceeds from these loans were used for working capital purposes. During the year ended December 31, 2015, both of these loans were consolidated into a new convertible note (see Note 4).
As a result of the Share Exchange, the Company assumed an obligation to a former note holder in the amount of $17,500. The unsecured promissory note in the amount of $15,000 is to an unrelated party. Pursuant to the terms of the note, the note is interest bearing at 3.5% and is due on demand. As of June 30, 2017, the Company has accrued interest of $2,000. Another unsecured promissory note is of $2,500 to an unrelated party. Pursuant to the terms of the note, the note is non-interest bearing and is due on demand. The Company is currently assessing how to revise the terms of this note.
Note 4 – Convertible Notes
On January 2, 2015, the Company issued a convertible promissory note in the principal amount of $400,000 to a third party investor, which included $53,209 in principal amount for a previously issued note (see Note 3) at a conversion price of $0.50. Such note bears an interest rate of 1% per year and matures on September 2, 2015. On August 13, 2015, this note was fully converted into 800,000 shares of common stock.
On March 19, 2015, the Company issued a convertible promissory note in the principal amount of $600,000 at a conversion price of $0.50. This note bears an interest rate of 1% per year and matures on December 31, 2015. On August 13, 2015, this note was fully converted into 1,200,000 shares of common stock.
In connection with the above convertible note, the Company accrued $60,000 for finance fees to be amortized over the life of the note. As of December 31, 2015, $60,000 of the finance fees was expensed.
During the year ended December 31, 2015, the Company in total borrowed $141,004 from 0851229 BC Ltd. (the "Lender") through a convertible note bearing 3% interest with a maturity date of March 18, 2017. The Lender is deemed a related party as a result of owning more than 10% of the Company's common stock.
During the year ended December 31, 2016, the Company borrowed $477,000 from 0851229 BC Ltd. (the "Lender") through a convertible note bearing 3% interest with a maturity date of March 18, 2017. The Lender is deemed a related party as a result of owning more than 10% of the Company's common stock.
The initial fair value of the beneficial conversion feature of the note on the date of issuance was determined to be $154,501. Out of this amount, $119,250 pertains to the notes issued during the twelve months ended December 31, 2016. The value of beneficial conversion feature is being amortized over the life of the loan. For the three months ended June 30, 2017 and 2016, the Company amortized debt discount of $19,866 and $35,735, respectively. For the six months ended June 30, 2017 and 2016, the Company amortized debt discount of $39,514 and $45,399, respectively. The unamortized debt discount as of June 30, 2017 and December 31, 2016, is $24,851 and $64,365, respectively.
On March 23, 2016, all of the previous loans provided by the Lender were consolidated into the Secured Note (defined below) which amends, restates and modifies the terms of the previous loans to the terms set forth in the Secured Note and contains other terms and conditions as described in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 31, 2016.
On June 13, 2016, the Company and the Lender entered into an amended agreement regarding the aggregate principal amount of indebtedness and maturity date, which may be outstanding pursuant to that certain Secured Convertible Promissory Note issued by the Lender to the Company effective as of November 9, 2015 (the "Secured Note"). On June 13, 2016 the Secured Note was amended, as described in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 15, 2016.
The Lender is deemed a related party as a result of owning more than 10% of the Company's common stock. The Lender and the Company agreed that the aggregate principal amount of all outstanding loans made under the Secured Note shall not exceed $5,000,000 at any time, and the maturity was extended to March 18, 2018. Terms of the Secured Note include the obligation to convert the loan at a financing with gross proceeds to the Company (if such financing is led by an institutional investor or contains commercially reasonable terms and conditions for an early stage biopharmaceutical company) of at least $2,000,000 at a conversion price equal to 80% of the price per share in the financing.
As of December 31, 2016, the Company had principal outstanding on this Secured Note of $618,004 and accrued interest of $13,723. Total interest expenses for the twelve months ended December 31, 2016 was $13,297.
F-10
As of June 30, 2017, the Company had principal outstanding on this Secured Note of $618,004 and accrued interest of $27,195. For the three months ended June 30, 2017 and 2016, the Company had interest expenses of $4,701 and $2,916, respectively. Total interest expenses for the three months ended June 30, 2017 and 2016 was $4,869 and $3,080, respectively. Total interest expenses for the six months ended June 30, 2017 and 2016 was $9,266 and $4,232, respectively.
Note 5 – Capital Stock
Common Stock
The Company has authority to issue up to 100,000,000 shares, par value $0.0001 per share. As of June 30, 2017, there were 48,846,985 shares of the Company’s common stock outstanding.
Mount Tam has an agreement with The Buck Institute as further detailed in Note 7 to maintain a certain common stock equity interest in the Company. As of June 30, 2017 and December 31, 2016 the Company owed to the Buck Institute 245,615 and 192,983 shares respectively, as a result of the Share Exchange and subsequent issuances of common stock. For the six months ended June 30, 2017 the Company needs to issue 52,632 shares which were treated as issuable for services and valued at $15,790.
During the year ended December 31, 2016, the Company issued 1,009,016 shares of common stock to The Buck Institute for stock to be issued which were accounted for in a prior period.
Private Placement
On February 27, 2017, the Company entered into a Securities Purchase Agreement with an investor for such investor to purchase from the Company 833,334 shares of the Company's common stock for an aggregate purchase price of $250,000. On February 28, 2017, the Company entered into a Securities Purchase Agreement with an investor for such investor to purchase from the Company 83,333 shares of the Company's common stock for an aggregate purchase price of $25,000. On March 3, 2017, the Company entered into a Securities Purchase Agreement with an investor for such investor to purchase from the Company 83,333 shares of the Company's common stock for an aggregate purchase price of $25,000.
Pursuant to an agreement with the placement agent (see Note 7), in connection with the above sales of shares the Company paid a cash fees of 2.5% i.e. $7,500 since it was not directly introduced by the placement agent. Also the offering of $5,000,000 was not completed hence the Company is not liable to issue any warrants to the placement agent.
Note 6 – Stock Options
Stock Options
The Company's Board of Directors approved the adoption of the Mount Tam 2016 Stock-Based Compensation Plan (the "2016 Plan") on May 12, 2016. A majority of the stockholders approved the 2016 Plan by written consent on June 27, 2016. A copy of the 2016 Plan is included as Exhibit A to the Company's Information Statement filed with the SEC on July 11, 2016.
On May 2, 2016, the Company granted options to purchase up to 6,330,000 shares of Common Stock under the Plan in the aggregate, with an exercise price of $0.59 per share. Options will vest as per below table
Name | Number of Stock Options | Vesting Schedule |
Richard Marshak (CEO) | 4,200,000 | Options vesting over 4 years, 25% (1,050,000 options) per year |
Tim Powers (CSO) | 1,120,000 | Options vesting over 3 years. 33.33% (373,333 options) per year |
Jim Stapleton (CFO) | 750,000 | Options vesting over 4 years, 25% (187,500 options) per year |
Brian Kennedy (Chairman) | 250,000 | Options vesting over 4 years, 25% (62,500) per year |
Juniper Pennypacker (consultant - assistant to Brian Kennedy) | 10,000 | Options vesting over 4 years, 25% (2,500 options) per year |
On October 2, 2016, the Company granted options to purchase up to 135,000 shares of Common Stock under the Plan in the aggregate, with an exercise price of $0.40 per share. Options will vest as per below table
Name | Number of Stock Options | Vesting Schedule |
Bryan Cox (consultant) | 100,000 | Options Vesting over 4 years, 25% (25,000 options) per year |
Jim Stolzenbach (consultant) | 35,000 | Options vesting over 4 years, 25% (8,750) per year |
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Stock-based compensation expense related to vested options was $244,797 and $486,903 for the three and six months ended June 30, 2017, respectively.
The Company determined the value of share-based compensation using the Black-Scholes fair value option-pricing model using the following weighted average assumptions for options granted during the year ended December 31, 2016.
|
| Date of Grant |
| |
Expected term (years) |
|
| 10 |
|
Expected volatility |
|
| 131%-153 | % |
Risk-free interest rate |
|
| 1.26%-1.32 | % |
Dividend yield |
|
| 0 | % |
As summary of option activity under the 2016 Plan as of June 30, 2017, and changes during the period then ended is presented below:
Options |
| Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding at December 31, 2016 |
|
| 6,465,000 |
|
| $ | 0.59 |
|
|
| 9.35 |
|
| $ | - |
|
Granted |
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited or expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Outstanding at June 30, 2017 |
|
| 6,465,000 |
|
| $ | 0.59 |
|
|
| 8.85 |
|
| $ | - |
|
Exercisable at June 30, 2017 |
|
| 1,675,833 |
|
| $ | 0.59 |
|
|
| 8.84 |
|
| $ | - |
|
As of June 30, 2017, there was $2,578,626 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 2.6 years.
Note 7 – Commitments & Contingencies
From time to time Mount Tam may become a party to litigation in the normal course of business. Management believes that there are no current legal matters that would have a material effect on the Company's financial position or results of operations.
Buck Institute
On August 17, 2014, the Company entered into an agreement with Buck Institute for licenses of certain patents held by Buck Institute (the "License Agreement"). In connection with this agreement, Mount Tam agreed to pay Buck Institute for research and development activities. Mount Tam will pay Buck Institute in eight equal installments of $75,000 each for conducting research and development. In March 2015, the payment terms were revised so that Mount Tam still pays the Research Funding amount in eight (8) equal installments of seventy-five thousand dollars ($75,000) each and the installments shall be payable as follows: the first, second and third installments (together $225,000) shall all be payable by April 1, 2015, and each subsequent installment shall be payable three (3) months after the date on which the prior installments was payable, with the fourth installment payable July 1, 2015, three (3) months after the first three payments were made, and the final installments payable fifteen (15) months after the first through third installments were made.
In addition, the Company issued to Buck Institute that number of shares equal to 5% of the Company's total outstanding shares. Buck Institute's equity interest in the Company will not be reduced below 5% of the total aggregate shares of Common Stock until such time that the Company has raised and received a total of $5,000,000 of investment in equity, debt, grants, contributions, or donations. As of June 30, 2017, the Company has issued 2,209,016 shares of the Company's Common Stock to Buck Institute and committed to issue 245,615 shares of the Company Common stock as additional shares.
Additionally, the Company agreed to pay one-time milestone payments upon the first occurrence of the corresponding milestone events as set forth in the table below.
Milestone Event |
| Milestone |
| |
Filing of an IND |
| $ | 50,000 |
|
Completion of the first Phase I Clinical Trial of a Licensed Product |
| $ | 250,000 |
|
Completion of the first Phase II Clinical Trial of a Licensed Product |
| $ | 500,000 |
|
Completion of the first Phase III Clinical Trial of a Licensed Product |
| $ | 1,000,000 |
|
As of June 30, 2017 none of the milestone events had yet been achieved.
Mount Tam also agreed to pay Buck Institute non-refundable and non-creditable royalties in the amount of 2% of the annual aggregate
F-12
net sales. For each licensed product for which Mount Tam grants worldwide sublicense rights to a third party, Mount Tam agreed to pay Buck Institute 20% of all sub-license revenues. Please see discussion in Item 1, Business, Intellectual Property and Licenses, for further discussion of recent communication with the Buck Institute regarding our agreement with them.
Within 30 days after the date on which the Company raises and receives a total of $1,000,000 of investment in equity, debt, grants, contributions, or donations, the Company shall reimburse Buck Institute for 100% of the patent expenses for the Product Patents and 50% of the patent expenses for the Program Patents, incurred by Buck Institute as defined in the Licensing Agreement. Per amended agreement dated March 2015, the Company shall reimburse Buck Institute for 100% of the patent expenses for the Product Patents and 50% of the Patent Expenses for the Program Patents, incurred by Buck Institute incurred on or before April 1, 2015.
During the second quarter of 2016 the Company entered into negotiations with the Buck Institute to resolve certain outstanding financial concerns, and to broaden the Research Collaboration and License Agreement beyond the area of autoimmune disease. On July 18, 2016, the Company entered into an amendment (the "Amendment") to the Research Collaboration and License Agreement (the "License Agreement") between the Company and The Buck Institute.
By way of background, and as previously disclosed in the Company's public filings, the Company previously entered into a Research Collaboration and License Agreement (the "Buck Institute License Agreement") with the Buck Institute, which establishes a joint research effort with the Buck Institute to identify and develop compounds from two specific chemical chemotypes identified therein. The Company agreed to provide certain funding for Buck Institute's research efforts performed under the Buck Institute License Agreement. Under the terms of the Buck Institute License Agreement, Buck Institute assigned exclusive, worldwide rights to develop, manufacture and commercialize pharmaceutical products that incorporate a compound from one of two chemical compounds, identified therein, and exclusive rights to practice the drug discovery platform technology as necessary to research, develop and commercialize such pharmaceutical products. (Additional information about the Buck Institute License Agreement, together with prior amendments thereto, may be found in the Company's public filings, including the Company's Annual Report on Form 10-K for the year ended December 31, 2016.)
Pursuant to this Amendment, the Research Collaboration Term of the License Agreement is tolled until the Company can achieve a Qualified Financing (defined as any financing occurring after the date of the Amendment which results in gross proceeds to the Company of at least $2,000,000). Once a Qualified Financing has been achieved, the research collaboration efforts will resume, and will continue for a period of twenty-one months (the "Extended Research Collaboration Term"). The Company and The Buck Institute agreed to work together to determine a new research plan, specifying the research and development activities of both parties during the Extended Research Collaboration Term.
Additionally, pursuant to the Amendment, the parties agreed to settle past research funding amounts owed by the Company to The Buck Institute. The Company agreed to pay $40,000 within ten days of the execution of the Amendment, and The Buck Institute agreed that once this amount is paid, the Company will be deemed to be in full compliance with the terms of the License Agreement, including its payment obligations. On July 19, 2016, the Company made the $40,000 payment to The Buck Institute. In addition to the $40,000 payment, on June 13, 2016, the Company paid to The Buck Institute $11,706 in connection with costs incurred to further the Company's intellectual property position under the License Agreement. Pursuant to the above amendment The Buck Institute waived $274,247 of payable by the Company.
Moreover, the parties agreed that the field of use covered by the License Agreement would be expanded, with the new definition being "the treatment, diagnosis or prevention of any and all conditions or diseases including, without limitation, systemic lupus erythematous and multiple sclerosis for human and/or veterinary use." (Under the original License Agreement, the Company's field of use had been restricted to autoimmune disorders.)
Employment Agreements
On January 2, 2015, the Company entered into an employment agreement with its former Vice President, Research and Development. The employment agreement requires annual base salary payments of $150,000 per year. In addition, the Company has agreed to grant these executive stock options to purchase up to 360,000 shares of common stock. On August 10, 2015, this employee's employment agreement was amended as a result of his appointment to become the Company's Chief Executive Officer, and to change the number of expected to be granted options to 1,160,000 shares of the Company's Common Stock. As of December 31, 2016 these options were issued.
On January 2, 2015, the Company entered into a license and service agreement with Buck Institute. In connection with the agreement, the Company agreed to pay Buck Institute an annual fee of $24,500 to procure access to certain office space in the facility in order to conduct research and facilitate its research and development program. The agreement was amended in September 2015 to reduce an annual fee to $9,500. This agreement was terminated in February 2017. In 2016 The Buck billed the Company $9,875 for office space fees plus a $2,000 administration fee, for a total of $11,875 for office space and administration services. For the fiscal year ended December 31, 2016, the Company paid $13,199 to the Buck for office space, which includes $2,125 of expense from 2015.For the first six months of 2017, The Buck Institute billed the Company $51,467 for intellectual property work reimbursement. For the three and six months ended June 30, 2017 the Company paid $0 to the Buck for office space, however the Company did accrue $1,650 and $1,600 for January and February 2017 rent and costs associated with the foreign patent issuance, respectively. The office space lease with the Buck Institute expired on February 28, 2017 and was not renewed.
F-13
On August 13, 2015, the Company has assumed the employment agreement that Dr. Powers, the previous CEO, had with Mount Tam. Effective February 8, 2016 Dr. Timothy Powers resigned as Chief Executive Officer of Mount Tam Biotechnologies, Inc. (the "Company"). There were no disagreements between Dr. Powers and the Company on any matter relating to the Company's operations, policies or practices that resulted in his resignation. Dr. Powers will remain a member of the Company's Board of Directors.
In May 2016 Mr. Powers became the Company's Chief Scientific Officer.
On March 29, 2016, the Company and Dr. Richard Marshak entered into an Amended and Restated Employment Agreement (the "Marshak Employment Agreement"), which amends and restates the terms of the Employment Agreement dated as of March 22, 2016 by and between the Company and Dr. Marshak, and pursuant to which Dr. Marshak (i) continued his position as the Chief Executive Officer of the Company and (ii) is entitled to be appointed to the Company's Board of Directors promptly thereafter. The initial term of Dr. Marshak's employment expires on March 22, 2019 and thereafter, the Marshak Employment Agreement may be renewed for additional one year terms upon the mutual agreement of the parties, subject in each case to the termination provisions described therein.
The Company will pay Dr. Marshak an aggregate base annual salary of $300,000, payable on a bi-weekly or semi-monthly basis. In addition, Dr. Marshak shall (i) be entitled to three (3) weeks of paid time off, (ii) have the right to participate in the Company's general employee benefit plan(s), (iii) have the right to participate in an executive bonus plan and receive other bonus payments as determined by the Company's Board of Directors and (iv) be entitled to be reimbursed for reasonable business expenses. Subject to the approval of the Board of Directors and the approval of certain other actions, Dr. Marshak received an option to purchase 4,200,000 shares of Common Stock which shall vest and be governed by the terms of the Plan and an award agreement to be entered into by and between the Company and Dr. Marshak. Upon the occurrence of a change of control transaction or the termination of Dr. Marshak's employment by the Company without cause or by Dr. Marshak for good reason, all unvested options or shares of restricted Common Stock shall immediately vest and either be exercisable or no longer subject to any restrictions, as applicable. In addition to other standard and customary payments receivable in connection with the termination of Dr. Marshak's employment, he shall be entitled to receive a severance payment equal to his base salary per month for the lesser of the number of months remaining in the current term of his employment or 18 months.
The Marshak Employment Agreement also prohibits Dr. Marshak from competing with the Company during the term of the Marshak Employment Agreement (with certain limited exceptions) and from soliciting or making known employees of the Company for a period of two (2) years following termination of the Marshak Employment Agreement. The foregoing is qualified in its entirety by reference to the terms of the Marshak Employment Agreement, which is filed as Exhibit 10.4 to our Form 8-K filed with the SEC on March 31, 2016.
On May 2, 2016, the Company entered into an employment agreement with its current Chief Financial Officer, James Stapleton (the "Stapleton Employment Agreement"). The Stapleton Employment Agreement requires annual base salary payments of $175,000 per year. Further, Mr. Stapleton is entitled to a one-time bonus of $40,000 payable upon the Company's achievement of certain financial targets. In addition, the Company granted Mr. Stapleton an option to purchase up to 750,000 shares of Common Stock. The foregoing is qualified in its entirety by reference to the terms of the Stapleton Employment Agreement, which is filed as Exhibit 10.1 to our Form 8-K filed with the SEC on April 26, 2016.
Placement agreement
On August 3, 2016 the Company entered into a Placement Agent Agreement with Colorado Financial Services Corporation ("CFSC") for a best efforts private placement of its common stock to investors. The term of the engagement is 12 months. Either party may terminate the engagement earlier upon 10 days prior written notice. In connection with this engagement, the Company shall pay CFSC a cash fee of ten percent (7.5%) of gross proceeds from sales of Securities placed by CFSC in the Offering and two and half percent (2.5%) of gross proceeds of investors introduced by Company. As additional compensation for services, the Company will, upon consummation of the Offering (i.e. $5,000,000), issue to CFSC warrants to purchase a number of shares of common stock of the Company equal to 500,000 shares at an exercise price of $0.50 per share. The warrants will have a term of three years from the date of issuance and have such other terms and conditions as shall be mutually agreed upon, including a cashless exercise feature. On May 8, 2017 the Company terminated the Placement Agent Agreement.
Lease agreement
On February 10, 2017, the Company entered into an office lease agreement for office space in Novato, CA, for a term of six months, effective March 1, 2017, with a monthly lease payment of $818.40.
F-14
Note 8 – Related Party Transactions
In November 2014, we entered into a consulting agreement with a services firm, Wells Compliance Group, which is owned by our former interim Chief Financial Officer. As compensation for its services, Wells Compliance Group was to be paid $3,500 per month. As of June 30, 2017 and December 31, 2016 our accounts payable to the Wells Compliance Group was $0. During the three months ended June 30, 2017 and 2016, the Company expensed $0 and $9,000, respectively, for the services provided by Wells Compliance Group. During the six months ended June 30, 2017 and 2016, the Company expensed $0 and $19,500, respectively, for the services provided by Wells Compliance Group. As of May 2, 2016, Wells Compliance and the Company terminated the consulting agreement.
Pursuant to our agreements with the Buck Institute and with our Chairman of the Board Brian Kennedy (Professor and Principal Investigator at the Buck Institute), the Buck Institute is deemed a related party. Please see Note 7, Commitments and Contingencies, for discussion of our liabilities and obligations with the Buck Institute. During the six months ended June 30, 2017 and 2016, the Company expensed $63,304 and $18,081, respectively, for the services provided by Buck Institute. For the three months ended June 30, 2017 and 2016, the Company expensed $58,302 and $18,081, respectively, for services provided by the Buck Institute. As of June 30, 2017 the Company owed to the Buck Institute 245,615 shares of its Common Stock, as a result of the Share Exchange transaction and subsequent issuances of common stock. For the six months ended June 30, 2017, the Company did not issue any additional shares. As of June 30, 2017 and December 31, 2016, our accounts payable balance to Buck Institute was $74,612 and $9,308 respectively.
In the year 2016, Buck Institute billed the Company for office space and administration services (Note 7).
See Note 4 for a description of the loans the Company received from 0851229 BC Ltd deemed a related party as a result of owning more than 10% of the Company's common stock.
In December 2015, we entered into an agreement with Lemon Fair Consulting, which is owned by our Chief Executive Officer, Dr. Richard Marshak. The agreement terminated when Dr. Marshak became our CEO on March 29, 2016. As of June 30, 2017 and 2016, the Company expensed $0 and $34,390 respectively, for the services provided by Lemon Fair Consulting, respectively. As June 30, 2017 our accounts payable to the Lemon Fair Consulting was $0.
Note 9 – Subsequent Events
On August 10, 2017, the Company entered into a Securities Purchase Agreement with an investor for such investor to purchase from the Company 3,846,154 shares of the Company's common stock for an aggregate purchase price of $500,000, of which $200,000 has been received, and a promissory note for $300,000 was received from the investor, requiring three $100,000 payments to the Company during a 90 day period which ends on November 12, 2017.
On August 11, 2017 the Company entered into a Securities Purchase Agreement with an investor for such investor to purchase from the Company 192,308 shares of the Company's common stock for an aggregate purchase price of $25,000, of which the Company received on August 11.
The Company incurred $13,125 as cash fee expenses due to the placement agent Colorado Financial Services Corp for both investments, as both investors are investors who participated in an earlier private placement where Colorado Financial Services Corp was the placement agent.
The Company intends to use the proceeds from this investment for general corporate and working capital purposes. The investors received a warrant to purchase an additional 504,808 shares at an exercise price of $0.15 per share, and a warrant to purchase an additional 504,808 shares at an exercise price of $0.20 per share. Both warrants have a call provision when the Company's common stock trades for five consecutive days at a price equal to or greater than 500% of the exercise price of each warrant agreement. Both warrants expire August 10, 2022.
Although Young America Capital, LLC (“YAC”) is a placement agent for the current private placement, the $525,000.02 was received from existing shareholders who participated in a previous private placement where Colorado Financial Services Corp served as the Placement Agent, such that Colorado Financial Services Corp. (“Colorado”) will receive a 2.5% fee pursuant to a "tail agreement” within the previous agreement with Colorado. The agreement with YAC excluded existing investors and any additional investments they might make from fees due to YAC.
Young America Capital, LLC is a Placement Agent for a current private placement, and is entitled to a fee of between 2.0% and 8.0% of the offering price of the common shares they sell to investors. In addition, the Placement Agent will be issued a warrant granting the Placement Agent the right to purchase shares of common stock equal to 8.0% of the number of shares of common stock they sell in the aforementioned offering, which is still ongoing as of the date of this report.
F-15
F-16
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion and analysis of the results of operations and financial condition of Mount Tam Biotechnologies, Inc. for the three and six months ended June 30, 2017, should be read in conjunction with the financial statements of Mount Tam Biotechnologies, Inc., and the notes to those financial statements that are included elsewhere in this Form 10-Q. This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as Mount Tam Biotechnologies plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Business sections in the form 10-K filed on March 31, 2017. Words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements.
We believe that our assumptions are based upon reasonable data derived from and known about our business and operations and the business and operations of the Company. No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions. Factors that could cause differences include, but are not limited to, expected market demand for the Company's products and services and competition.
The Share Exchange was treated as a reverse acquisition for financial accounting and reporting purposes. As such, Mount Tam is treated as the acquirer for accounting and financial reporting purposes while the Company was treated as the acquired entity for accounting and financial reporting purposes. Further, as a result, the historical financial statements that will be reflected in the Company’s future financial statements filed with the SEC will be those of Mount Tam, and the Company’s assets, liabilities and results of operations will be consolidated with the assets, liabilities and results of operations of Mount. Tam. Accordingly, for clarity and continuity, we are presenting the historical financial statements for Mount Tam for the periods presented.
Overview
We are an early stage company primarily engaged in the development of bio-pharmaceuticals to treat a range of disease areas with high unmet need. Our lead program is focused on SLE, and we intend to optimize and bring to market a portfolio of leading products focused on improving the health and well-being of millions of people who have been affected by a range of serious disease conditions. To that end, we have formed a strategic partnership with the Buck Institute, an independent research facility focused on understanding the connection between aging and chronic disease. As part of the partnership, we have signed the License Agreement that includes many of the Buck Institute's intangible research and development assets. The initial focus of our research and development efforts will be a preclinical stage compound for the treatment of SLE, a serious form of lupus.
Plan of Operations
As shown in the accompanying consolidated financial statements, the Company incurred net losses of $651,030 and $1,326,529 for the three and six months ended June 30, 2017, respectively and has an accumulated deficit of $5,860,235 as of June 30, 2017.
Liquidity and Capital Resources
Our principal sources of cash have been proceeds from private placements of common stock and incurrence of debt. As of June 30, 2017, the Company had working capital deficit of $1,327,175 with cash balance of $89,241. Our cash decreased by $286,257 during the six months ended June 30, 2017.
During the second quarter of 2016 the Company entered into negotiations with the Buck Institute to resolve certain outstanding financial concerns, and to broaden the Research Collaboration and License Agreement beyond the area of autoimmune disease. On July 18, 2016, Mount Tam Biotechnologies, Inc. (the "Company"), entered into an amendment (the "Amendment") to the Research Collaboration and License Agreement (the "License Agreement") between the Company and The Buck Institute for Research on Aging ("The Buck Institute").
Pursuant to this Amendment, the Research Collaboration Term of the License Agreement is tolled until the Company can achieve a Qualified Financing (defined as any financing occurring after the date of the Amendment which results in gross proceeds to the Company of at least $2,000,000). Once a Qualified Financing has been achieved, the research collaboration efforts will resume, and will continue for a period of twenty-one months (the "Extended Research Collaboration Term"). The Company and The Buck Institute agreed to work together to determine a new research plan, specifying the research and development activities of both parties during the Extended Research Collaboration Term.
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Additionally, pursuant to the Amendment, the parties agreed to settle past research funding amounts owed by the Company to The Buck Institute. The Company agreed to pay $40,000 within ten days of the execution of the Amendment, and The Buck Institute agreed that once this amount is paid, the Company will be deemed to be in full compliance with the terms of the License Agreement, including its payment obligations. On July 19, 2016, the Company made the $40,000 payment to The Buck Institute. In addition to the $40,000 payment, on June 13, 2016, the Company paid to The Buck Institute $11,706 in connection with costs incurred to further the Company's intellectual property position under the License Agreement. Pursuant to the above amendment The Buck Institute waived $274,247 of payable by the Company. In addition, the Company issued to Buck Institute 1,009,016 shares of common stock, which was the number of shares required to equal to 5% of the Company's total outstanding shares. Pursuant to the original License Agreement, and the Amendment, The Buck Institute's equity interest in the Company will not be reduced below 5% of the total aggregate shares of common stock until such time that the Company has raised and received a total of $5,000,000 of investment in equity, debt, grants, contributions, or donations. As of June 30, 2017, the Company has issued 2,209,016 shares of the Company's common stock to The Buck Institute and committed to issue 245,615 shares of the Company's common stock as additional shares.
Moreover, the parties agreed that the field of use covered by the License Agreement would be expanded, with the new definition being "the treatment, diagnosis or prevention of any and all conditions or diseases including, without limitation, systemic lupus erythematous and multiple sclerosis for human and/or veterinary use." (Under the original License Agreement, the Company's field of use had been restricted to autoimmune disorders). The foregoing is qualified in its entirety to the terms of the Amendment, a copy of which was filed as Exhibit 99.1 to our Form 8-K filed on July 21, 2016.
Negative Operating Cash Flow
We reported negative cash flow from operations for the six months ended June 30, 2017 and 2016. It is anticipated that we will continue to report negative operating cash flow in future periods, likely until one or more of our products are placed into production and released to our customers.
Our cash balance of $89,241 may not be sufficient to fund our operations for at least the next 12 months. Additionally, if we are unable to generate sufficient revenues to pay our expenses, we will need to raise additional funds to continue our operations. We have historically financed our operations through private equity and debt financings. Recent economic turmoil and lack of liquidity in the debt capital markets together with high volatility in prices in the equity capital markets have severely and adversely affected capital raising opportunities. We do not have any commitments for financing at this time, and financing may not be available to us on favorable terms, if at all. If we are unable to obtain debt or equity financing in amounts sufficient to fund our operations, if necessary, we will be forced to suspend or curtail our operations. In that event, current stockholders would likely experience a loss of most or all of their investment. Additional funding that we do obtain may be dilutive to the interests of existing stockholders.
Results of Operations
For the three months ended June 30, 2017 compared with the three months ended June 30, 2016
Revenue
We had no revenues for the three months ended June 30, 2017 and 2016. We are in the research and development stage.
Operating Expenses
We incurred operating expenses of $626,295 and $592,777 during the three months ended June 30, 2017 and 2016, respectively. Our operating expenses included research and development expenses in the amount of $136,559 and $66,042, and general and administrative expenses in the amount of $489,736 and $526,735 for three months ended June 30, 2017 and 2016, respectively.
Other Expense
Other expense totaled $24,735 and $38,815 during the three months ended June 30, 2017, and 2016, respectively. The decrease is due to lower amortization of debt discount associated with our convertible note. Other expenses included interest expense in the amount of $4,869 and $3,080, and amortization of debt discount in the amount of $19,866 and $35,735 for three months ended June 30, 2017 and 2016, respectively.
Net Loss
As a result of the foregoing, during the three months ended June 30, 2017 and 2016, we recorded a net loss of $651,030 and $631,592, respectively.
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For the six months ended June 30, 2017 compared with the six months ended June 30, 2016
Revenue
We had no revenues for the six months ended June 30, 2017 and 2016. We are in the research and development stage.
Operating Expenses
We incurred operating expenses of $1,278,027 and $914,367 during the six months ended June 30, 2017 and 2016, respectively. Our operating expenses included research and development expenses in the amount of $304,059 and $141,042, and general and administrative expenses in the amount of $973,968 and $773,325 for six months ended June 30, 2017 and 2016, respectively.
Other Expense
Other expense totaled $48,502 and $49,943 during the six months ended June 30, 2017, and 2016, respectively. The decrease is due to lower amortization of debt discount associated with our convertible note. Other expenses included interest expense in the amount of $9,522 and $4,544, and amortization of debt discount in the amount of $39,514 and $45,399 for six months ended June 30, 2017 and 2016, respectively.
Net Loss
As a result of the foregoing, during the six months ended June 30, 2017 and 2016, we recorded a net loss of $1,326,529 and $964,310 respectively.
Liquidity and Capital Resources
We had cash and equivalents of $89,241 at June 30, 2017.
Operating Activities
During the six months ended June 30, 2017, we used $571,699 of cash in operating activities, compared to $407,706 for the six months ended June 30, 2016. Non-cash adjustments included $486,902 and $159,058 related to options, $15,565 and $5,622 in amortization of prepaid expenses, $15,790 and $0 in stock based compensation for the shares issued to Buck, $39,514 and $45,399 in amortization of debt discount and net change in accounts payable and accrued liabilities of $207,154 and $359,237 during the six months ended June 30, 2017 and 2016, respectively.
Financing Activities
Financing activities provided $285,442 to us during the six months ended June 30, 2017 compared to $407,000 for the six months ended June 30, 2016. We received $0 in net proceeds from loans for the six months ended June 30, 2017 compared to $407,000 during the six ended June 30, 2016. In addition, we received $292,500 in net proceeds from issuance of common stock for the six months ended June 30, 2017, compared to $0 during the six months ended June 30, 2016. Also we paid $7,058 toward repayment of loans during the six months ended June 30, 2017.
Sources of Liquidity and Capital
During the six months ended June 30, 2017, we received net proceeds from issuance of common stock in the amount of $292,500. During the six months ended June 30, 2016, we received net proceeds from issuance of debt in the amount of $407,000. The capital raised has been used primarily to support our operations. As of June 30, 2017, the Company had remaining cash of $89,241 with net working capital deficit of $1,327,175. As a result of the Company’s significant operating expenditures and the lack of any significant product sales revenue, we expect to incur losses from operations for the near future.
We reported negative cash flow from operations for the period ended June 30, 2017 and 2016. It is anticipated that we will continue to report negative operating cash flow in future periods, likely until one or more of our products are placed into production and released to our customers.
Our cash balance of $89,241 may not be sufficient to fund our operations for at least the next 12 months. Additionally, if we are unable to generate sufficient revenues to pay our expenses, we will need to raise additional funds to continue our operations. We have historically financed our operations through private equity and debt financings. Recent economic turmoil and lack of liquidity in the debt capital markets together with volatility in the equity capital markets have severely and adversely affected capital raising opportunities. We do
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not have any commitments for financing at this time, and financing may not be available to us on favorable terms, if at all. If we are unable to obtain debt or equity financing in amounts sufficient to fund our operations, if necessary, we will be forced to suspend or curtail our operations. In that event, current stockholders would likely experience a loss of most or all of their investment. Additional funding that we do obtain may be dilutive to the interests of existing stockholders.
To the extent we raise additional capital by issuing equity securities or obtaining borrowings convertible into equity, ownership dilution to existing stockholders will result and future investors may be granted rights superior to those of existing stockholders. The incurrence of indebtedness or debt financing would result in increased fixed obligations and could also result in covenants that would restrict our operations. Our ability to obtain additional capital may depend on prevailing economic conditions and financial, business and other factors beyond our control. Economic crisis and disruptions in the U.S. and global financial markets may adversely impact the availability and cost of credit, as well as our ability to raise money in the capital markets. Instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business. The Company cannot provide any assurances that it will be able to raise the additional capital needed to fund its operations, or if the Company is able to raise such additional capital, that any such financing will be on terms which are beneficial to the existing shareholders.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon the Company’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, the Company evaluates its critical accounting policies and estimates. The Company bases its estimates on historical experience and on various other assumptions that it believes 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. The Company’s critical accounting policies and estimates are discussed on the footnote Note 2.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, the Company is not required to provide this disclosure.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
We are required to maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and our Chief Financial Officer, have concluded that our disclosure controls and procedures were not effective to ensure that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of material weaknesses in our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
| ● | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
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| ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls. Based on this assessment, our management has concluded that as of June 30, 2017, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles as a result of material weaknesses.
We have identified the following factors that have led management to determine that material weaknesses exist in our internal control over financial reporting as of June 30, 2017:
| 1. | We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. |
| 2. | We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. |
These factors represent material weaknesses in our internal controls over financial reporting. Although we believe the possibility of errors in our financial statements is remote, until such time as we expand our staff with additional qualified personnel, we expect to continue to report material weaknesses in our internal control over financial reporting.
Changes in Internal Control over Financial Reporting.
There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
As of the date of this filing, there have been no material changes to the Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on March 31, 2017 (the “2016 Form 10-K”). The Risk Factors set forth in the 2016 Form 10-K should be read carefully in connection with evaluating our business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described in the 2016 Form 10-K could materially adversely affect our business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On August 10, 2017, the Company entered into a Subscription Agreement with certain investors, pursuant to which investors purchased from the Company 4,038,462 shares of the Company’s common stock for an aggregate purchase price of $525,000.02. In connection with such transaction, the Company issued warrants to such investors entitling such investors to purchase up to 1,009,616 shares of the Company’s common stock, 504,808 of which are to be purchased at the purchase price of $0.15 per share if such warrant is exercised, and the other 504,808 shares to be purchased at the purchase price of $0.20 per share if such warrant is exercised. Such warrants expire on August 31, 2022. Such securities were offered to the investors in reliance upon an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506(b) of Regulation D promulgated thereunder. The proceeds from such sale will be used for general corporate purposes. Young America Capital, LLC acted as the Placement Agent for such transaction and is entitled to a fee of between 2.0% and 8.0% of the offering price of the common shares sold to investors. In addition, the Placement Agent was issued a warrant granting the Placement Agent the right to purchase shares of common stock equal to 8.0% of the number of shares of common stock issued by the Company in the aforementioned offering, which is still ongoing as of the date of this report.
Our reliance on Regulation D under the Securities Act was based in part upon written representations made by the investor that: (a) the investor is acquiring the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, (b) the investor agrees not to sell or otherwise transfer the securities unless they are registered under the Securities Act and any applicable state securities laws, or an exemption from such registration is available, (c) the investor has knowledge and experience in financial and business matters such that he, she or it is capable of evaluating the merits and risks of an investment in the Company, (d) the investor had access to all of our documents, records, and books pertaining to the investment and was provided the opportunity to ask questions and receive answers regarding the terms and conditions of the offering or issuance and to obtain any additional information which we possessed or were able to acquire without unreasonable effort and expense, and (e) the investor has no need for liquidity in its investment and could afford the complete loss of such investment. In our reliance upon Rule 506(b) of Regulation D promulgated under the Securities Act, management made the determination, based upon written representations, that such investor was an “accredited investor” as defined in Rule 501 of Regulation D. In addition, there was no general solicitation or advertising for securities issued in reliance upon Regulation D.
Our reliance upon Section 4(a)(2) of the Securities Act of 1933 was based in part upon the following factors: (a) the issuance of the securities was in connection with isolated private transactions which did not involve any public offering; (b) there were a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities by us; (d) the securities were not broken down into smaller denominations; and (e) the negotiations for the sale of the securities took place directly between the offeree and the Company.
None.
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No. |
| Description |
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31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002† |
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31.2 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002† |
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32.1 |
| Certification of Chief Executive Officer pursuant to Section 906 Certifications under Sarbanes-Oxley Act of 2002+ |
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32.2 |
| Certification of Chief Financial Officer pursuant to Section 906 Certifications under Sarbanes-Oxley Act of 2002+ |
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101.INS* |
| XBRL Instance Document |
101.SCH* |
| XBRL Taxonomy Extension Schema |
101.CAL* |
| XBRL Taxonomy Extension Calculation Linkbase |
101.DEF* |
| XBRL Taxonomy Extension Definition Linkbase |
101.LAB* |
| XBRL Taxonomy Extension Label Linkbase |
101.PRE* |
| XBRL Taxonomy Extension Presentation Linkbase |
†Filed herewith.
+Furnished herewith. In accordance with Item 601(b)(32)(ii) of Regulation S-K, this exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
* Pursuant to Rule 406T of Regulation S-T, this XBRL information will not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section, nor will it be deemed filed or made a part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, or otherwise subject to liability under those sections.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MOUNT TAM BIOTECHNOLOGIES, INC. | |||
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Dated: August 14, 2017 | By: | /s/ Richard Marshak | ||
| Name: | Richard Marshak | ||
| Title: | Chief Executive Officer (Principal Executive Officer) | ||
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Dated: August 14, 2017 | By: | /s/ James P. Stapleton | ||
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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