The following Management's Discussion and Analysis ("MD&A") is intended to help
the reader understand the consolidated results of operations and financial
condition of Global WholeHealth Partners Corporation. The MD&A is provided as a
supplement to, and should be read in conjunction with financial statements and
the accompanying notes to the financial statements included in this Form 10-K.
Our discussion and analysis of our financial condition and results of operations
is based on our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities and expenses
and related disclosure of contingent assets and liabilities. Management bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
Overview
We sell and develop in-vitro diagnostic products, including rapid diagnostic
tests, such as the COVID-19 test, 6-minute rapid whole blood Ebola test,
6-minute whole blood Zika test, 8-minute whole blood rapid TB test and over 75
other tests more than 40 which are FDA approved.
The Company was founded to develop and market in-vitro diagnostic ("IVD") tests
for over-the-counter ("OTC" or consumer), or consumer-use and point-of-care
("POC" or professional) which includes hospitals, physicians' offices and
medical clinics, including those within penal systems throughout the US and
abroad. The Company currently markets a range of diagnostic test kits for
consumer use through OTC sales, and for use by health care professionals,
generally located at medical clinics, physician offices and hospitals known POC,
in the United States. These test kits are known as in-vitro diagnostic test kits
or IVD products.
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All of the products we sell are manufactured in a U.S. Food and Drug
Administration ("FDA") Approved Facility in the USA. An FDA Approved facility is
a facility that meets Good Manufacturing Practices ("GMP") with the FDA.
We sell products internationally which are not FDA approved to sell in the US.
These products include an FDA Certificate of Exportability and include tests
such as Ebola, ZIKA, Dengue, Malaria, Influenza, Tuberculosis, Corona Viruses,
and other vector borne diseases.
The Company's consolidated financial statements are prepared using generally
accepted accounting principles in the United States of America applicable to a
going concern which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating
costs to allow it to continue as a going concern.
The ability of the Company to continue as a going concern is dependent on the
Company obtaining adequate capital to fund operating losses until it becomes
profitable. If the Company is unable to obtain adequate capital, it could be
forced to cease operations.
As of June 30, 2021, we had negative working capital of $104,534, a cash balance
of $74,702 and inventory balance of $29,681. Management recognizes that in order
for us to meet our capital requirements, and continue to operate, additional
financing will be necessary. We expect to raise additional funds through private
or public equity investment in order to expand the range and scope of our
business operations. We will seek access to private or public equity but there
is no assurance that such additional funds will be available for us to finance
our operations on acceptable terms, if at all. If we are unable to raise
additional capital or generate positive cash flow, it is unlikely that we will
be able to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
COVID-19
In late 2019, COVID-19 was reported to have surfaced in Wuhan, China, which has
since spread globally. In March 2020, the World Health Organization declared
COVID-19 a global pandemic. The COVID-19 outbreak has resulted in government
authorities in the United States and around the world implementing numerous
measures to try to reduce the spread of COVID-19, such as travel bans and
restrictions, social distancing, quarantines, shelter in place or total
lock-down orders and business limitations and shutdowns. While some of these
measures were relaxed or rolled back, we continue to monitor the situation as
various government authorities have begun to pause the relaxation of
restrictions or re-implement or modify certain restrictive measures.
Results of Operations
Year ended June 30, 2021 compared with the year ended June 30, 2020
Year Ended June 30,
Increase /
2021 2020 (Decrease)
Revenue $ 40,196 $ 241,624 $ (201,428 )
Cost of revenue 201,495 150,588 50,907
Gross profit (161,299 ) 91,036 (252,335 )
Operating expenses
Professional fees 83,790 61,550 22,240
Research and development 481,740 513,003 (31,263 )
Selling, general and administrative 317,062 82,078 234,984
Stock compensation 2,544,000 3,700,000 (1,156,000 )
Total operating expenses 3,426,592 4,356,631 (930,039 )
Loss from operations (3,587,891 ) (4,265,595 ) (677,704 )
Other income (expense)
Interest expense (64,732 ) (2,857 ) 61,875
Interest recorded on compensatory
warrants (737,569 ) - 737,569
Amortization of debt discount (163,931 ) (17,075 ) 146,856
Loss on related party transfer of
intangible assets (4,480,000 ) - 4,480,000
Total other income (expense) (5,446,232 ) (19,932 ) 5,426,300
Net loss $ (9,034,123 ) $ (4,285,527 ) $ 4,748,596
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Revenue and Cost of Revenue
During fiscal 2021, the Company's sales decreased $201,428 from $241,624 in
Fiscal 2020 to $40,196 in fiscal 2021. As a result of the COVID pandemic, the
Company became laser focused on developing and selling COVID tests. The decrease
in our revenue was due to our ability to sell unapproved COVID tests in fiscal
2020 compared to decreasing demand for unapproved tests beginning in fiscal
2021. Our attempts to develop our own FDA approved COVID test proved
unsuccessful as was our ability to resell third party COVID tests primarily due
to their high-cost relative to our competitors. The Company is currently in the
process of refocusing its attention on marketing its core FDA OTC approved
products which includes tests for pregnancy, ovulation, colorectal, drugs of
abuse, glucose strips and glucose monitors through various platforms, including
Walmart, Amazon and eBay. The Company estimates sales of non-COVID-19 tests to
begin in fiscal Q2.
Cost of revenue increased in fiscal 2021 resulting in negative gross profit due
primarily to fair value adjustments to inventory totaling $171,811 as a result
of shelf-life expiration for some products.
Professional Fees
Professional fees relate to expenditures incurred primarily for legal,
accounting and financing services. During fiscal 2021 professional fees
increased $22,240 due to an $18,000 increase in accounting costs $12,240
increase in financing costs offset by an $8,000 decrease in legal fees.
Research and Product Development
Research and Product Development ("R&D") costs represent costs incurred to
develop our tests and are incurred pursuant to certain internal R&D cost
allocations, when applicable, and agreements with third-party providers, but
primarily with Pan Probe Biotech, owned by Dr. Shujie Cui, our Chief Science
Officer. R&D costs are expensed when incurred. During fiscal 2021, R&D costs
decreased $31,263 to $481,740 compared to $513,003 in fiscal 2020 primarily due
to the timing of costs incurred related to COVID-19 test development.
Selling, General and Administrative
Selling, general and administrative ("SG&A") costs include all expenditures
related to personnel, travel and entertainment, public company compliance and
communication costs, sales related costs, insurance and other office related
costs. SG&A costs increased by $234,984 to $311,062 during fiscal 2021 compared
to $82,078 during fiscal 2020. The increase is due to an increase in personnel
costs ($162,500), public company related costs ($21,446), rent ($38,639), and
marketing ($28,053) offset by a decrease in sales commissions ($13,920) and
other G&A costs ($1,734).
Stock Compensation
Stock compensation represents the expense associated with the issuance of stock
in exchange for services and is non-cash in nature. Stock compensation is based
on our stock price at the measurement date and can fluctuate significantly as a
result. Stock compensation expense in fiscal 2021 consisted of the issuance of
2,950,000 shares of restricted common stock at a weighted average price of $0.86
per share compared to the fiscal 2020 issuance of 1,850,000 shares of restricted
common stock at a weighted average price of $2.00 per share. All shares were
issued free of obligation and are valued at the close price of our common stock
on the date of grant.
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Other Income and (Expense)
Other expense includes "interest expense" relates to the stated interest of our
outstanding promissory notes, "interest recorded on compensatory warrants"
relates to the relative value of warrants issued in conjunction with common
stock as an inducement to enter into a stock purchase agreement with EMC2
Capital, "amortization of debt discount" represents the accretion of the
discount applied to our notes as a result of the issuance and modification of
detachable warrants and the beneficial conversion feature contained certain
notes.
The loss on related party transfer of intangible assets represents value of two
separate, exclusive, five-year, license agreements between the Company and
Charles Strongo, our CEO, one for the manufacture of Biodegradable plastic for
medical devices under provisional patent 63/054,139 and the second license
agreement for the use of the intellectual property described as "a Rapid,
Micro-Well or Later flow test for Parkinson's, Dementia, or Alzheimer or ASD"
(collectively, the "License Agreements"). The License Agreements were both
executed on January 12, 2021 and March 30, 2021. In exchange for entering into
the License Agreements, the Company issued a total of 8 million shares of
restricted common stock with a market value of $4,480,000. Due to this being a
related party transfer with no available historical cost records, the full value
of the stock issued was recorded as a loss.
Liquidity and Capital Resources
As of June 30, 2021, our cash totaled $74,702, compared to current liabilities
of $508,649. From inception to June 30, 2021, we have incurred an accumulated
deficit of $13,782,732. This loss has been incurred through a combination of
professional fees, R&D, SG&A and non-cash stock related costs of $11,493,569 to
support our plans to develop our business. During fiscal 2021, the Company had
revenue of $40,196, gross profit of negative $161,299 and used cash in
operations of $642,802. The Company has incurred losses since inception and may
not be able to generate sufficient net revenue from its business in the future
to achieve or sustain profitability. The Company currently has insufficient
funds to operate over the next twelve months. To finance our operations, we have
entered into a Common Stock Purchase Agreement with EMC2 Capital LLC, which
provided us with $250,000 (upon the sale of 721,663 shares of common stock)
during the fourth quarter of fiscal 2021 and $800,000 (upon the sale of
2,343,986 shares of common stock) thus far in fiscal 2022. Additionally, we
entered into a Securities Purchase Agreement and related 12% senior secured
convertible promissory note on June 18, 2021, under which the Company received
funding of $224,500 on July 8, 2021.We are currently pursuing additional funds
through equity or debt financing or a combination thereof. However, aside from
the EMC2 SPA, the Company has no commitments to obtain any such financing, and
there can be no assurance that financing will be available in amounts or on
terms acceptable to the Company, if at all.
Summary of Cash Flows
Presented below is a table that summarizes the cash provided or used in our
activities and the amount of the respective increases or decreases in cash
provided by (used in) those activities between the fiscal periods:
Year Ended June 30, Increase / (Decrease)
2021 2020
Operating activities $ (642,802 ) $ (685,136 ) $ 42,334
Investing activities (3,505 ) - (3,505 )
Financing activities 706,512 679,715 26,797
Net increase (decrease) in cash $ 60,205 $ (5,421 ) $ 65,626
Operating Activities
Net cash used in operating activities increased $42,334 or 6% during fiscal 2021
compared to fiscal 2020.
Investing Activities
The Company purchased computer equipment totaling $3,505 in fiscal 2021.
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Financing Activities
During fiscal 2021, the Company financed its operations from the sale of
common stock ($680,051) and net issuance of promissory notes ($26,461). During
fiscal 2020, the Company received 1) $20,000 upon the sale of 2,000,000 shares
of common stock to LionsGate for $0.01 per share; 2) $564,715 from related party
notes and advances; and 3) 95,000 from the sale of convertible promissory notes.
Contractual Obligations
None.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations
are based upon our Financial Statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America
("GAAP"). The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues, and expenses, and the related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates based on its
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Due to the level of activity and lack of complex transactions, we believe there
are currently no critical accounting policies and estimates that affect the
preparation of our financial statements.
Recently Issued Accounting Pronouncements
For a discussion of new accounting pronouncements see Note 2, Summary of
Significant Accounting Policies, of the consolidated financial statements
appearing elsewhere in this Form 10-K.
Related Party Transactions
For a discussion of our Related Party Transactions, see "Note 5 - Transactions
With Related Persons" to our Financial Statements included under Item 8 in this
Annual Report on Form 10-K.
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