Attached files
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549 FORM 10-Q
(Mark
One)
☒ QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended June 30, 2017 OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF1934
|
Commission File
Number 000-55055
Hoverink
Biotechnologies, Inc.
(Exact
name of registrant as specified in its charter)
|
|
Delaware
|
2834
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46-3590875
|
State
or other jurisdiction
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Primary
Standard Industrial
|
(I.R.S.
Employer
|
incorporation or
organization
|
Classification Code
Number)
|
Identification
Number)
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|
Hoverink
Biotechnologies, Inc. 1801 Century Park East.,
24th
Floor
Los
Angeles, California 90067
|
|
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(866)
443-4666
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|
Indicate by check
mark whether the registrant (1) has 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 ☐ 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 (Section 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
☒ Yes ☐ No
Indicate by check
mark 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", "non-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 ☒
(do not
check if smaller reporting company)
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
☐ Yes ☒ No
Indicate the number
of shares outstanding of each of the registrant's classes of common
stock as of the latest practicable date.
Class
|
Outstanding at June 30.
2017
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Common stock par
value $0.0001
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13,872,000
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1
HOVERINK BIOTECHNOLOGIES, INC.
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FORMERLLY KNOWN AS
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||||||
HOVERINK INTERNATIONAL HOLDINGS, INC.
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||||||
Balance Sheets
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(Unaudited)
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(Audited)
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For The
Three
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For
The
|
|
|
Months
Ended
|
Year
Ended
|
|
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June
30,
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December
31,
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2017
|
2016
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|
|
|
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ASSETS
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|||
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|
|
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Current
Assets
|
|
|
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Cash and cash
equivalents
|
|
$-
|
$-
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Funds held in
trust
|
|
-
|
-
|
|
|
|
|
Total
Current assets
|
|
-
|
-
|
|
|
|
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Note
receivable
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50
|
50
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$50
|
$50
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|
|
|
|
|
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LIABILITIES
AND STOCKHOLDERS' DEFICIT
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|||
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Current
Liabilities
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|
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Accounts
payable
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$119,026
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$118,515
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Note
payable
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154,653
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154,653
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|
|
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Total
Liabilities
|
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273,680
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273,169
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|
|
|
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Shareholders'
Deficit
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|
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Additional
paid in capital
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1,407
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1,407
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Discount
on Common Stock
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(1,387)
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(1,387)
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Common
Stock $0.0001 par value,
100,000,000 shares
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1,387
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1,387
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authorized,
13,872,000 issued and outstanding
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||
at
March 31, 2017, and 13,872,000 issued and
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||
outstanding at
December 31, 2016
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Accumulated
deficit
|
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(275,037)
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(274,526)
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|
|
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Total
Stockholders' deficit
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(273,630)
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(273,119)
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|
|
|
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Total
Liabilities and Partner Deficit
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$50
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$50
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The
accompanying notes are an integral part of these condensed
financial statements
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2
HOVERINK BIOTECHNOLOGIES, INC.
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FORMERLLY KNOWN AS
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HOVERINK INTERNATIONAL HOLDINGS, INC.
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||||
Statements of Operation
|
|
(Unaudited)
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(Unaudited)
|
|
For The
Three
|
For The
Three
|
|
Months
Ended
|
Months
Ended
|
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June
30,
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June
30,
|
|
2017
|
2016
|
|
|
|
Revenue
|
|
|
Services
|
$-
|
$-
|
|
|
|
|
|
|
Total
Revenue
|
-
|
-
|
|
|
|
Cost
of Goods sold
|
-
|
-
|
|
|
|
Gross
profit
|
-
|
-
|
|
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Operating
Expenses
|
|
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General and
administrative
|
511
|
116,379
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5,952
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Total Operating
Expenses
|
511
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122,331
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Income
from operations
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(511)
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(122,331)
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|
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Other
income (expense)
|
|
|
Interest
expense
|
-
|
-
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Other
income
|
|
|
Total
other income (expense)
|
-
|
-
|
|
|
|
Net
Income
|
$(511)
|
$(122,331)
|
|
|
|
Basic
and diluted net loss per share
|
$-
|
$(0.01)
|
|
|
|
Basic
and diluted weighted average common shares
|
|
|
outstanding
used in computing net loss per share
|
13,872,000
|
13,872,000
|
|
|
|
The
accompanying notes are an integral part of these condensed
financial statements
|
3
HOVERINK BIOTECHNOLOGIES, INC.
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FORMERLLY KNOWN AS
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HOVERINK INTERNATIONAL HOLDINGS, INC.
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Statements
of Cash Flow
|
|
(Unaudited)
|
(Unaudited)
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|
For The
Three
|
For The
Three
|
|
Months
Ended
|
Months
Ended
|
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June
30,
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June
30,
|
|
2017
|
2016
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
Net
income
|
$(511)
|
$(122,331)
|
Adjustments to
reconcile net income to net cash used by
|
|
|
operating
activities:
|
|
|
Changes in
operating assets and liabilities:
|
|
|
Note
receivable
|
-
|
(50)
|
Accounts
payable
|
511
|
88,020
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Net
cash provided by (used in) operating activities
|
-
|
(34,361)
|
|
|
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Investing
Activites:
|
|
|
|
|
|
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-
|
-
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Net
cash used in investing activites
|
-
|
-
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
Notes
Payable
|
-
|
34,366
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Net
cash provided by (used in) financing activities
|
-
|
34,366
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
-
|
5
|
|
|
|
Cash
at beginning of period
|
-
|
(3)
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Cash
at end of period
|
$-
|
$2
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash paid for
interest
|
$-
|
$-
|
Cash paid for
taxes
|
|
|
|
|
|
Supplemental
non-cash investing and financing activites:
|
|
|
Disposal of
property to related party
|
$-
|
$-
|
Non--cash
dividends
|
$-
|
$-
|
The
accompanying notes are an integral part of these condensed
financial statements
4
Notes
to Unaudited Condensed Financial Statements
NOTE
1 – NATURE OF OPERATIONS AND BASIS OF
PRESENTATION
We are
an innovative preclinical biopharmaceutical company committed to
the discovery development, manufacturing and commercializing
LADAVRU® and biosimilars. Our product candidate LADAVRU®
focuses on Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and chronic
pain, nausea and discomfort associated with chemotherapy; our goals
consist of primarily serving readily identifiable patient
populations suffering from Cancer, Cirrhosis, Cirrhosis ascites,
AIDS, and chronic pain, nausea and discomfort associated with
chemotherapy particularly for patients using anthracyclines with
the intention of targeting the treatment of relapsed or refractory
AML. Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung
cancers
Corporate Information
On
September 8th, 2017, “Hoverink Biotechnologies, Inc., a
Delaware corporation, (the “ Company ”), with the
approval of its board of directors and shareholders owning a
majority of the Company’s issued and outstanding shares by
written consent in lieu of a meeting, filed a Certificate of Change
(the “ Certificate of Change ”) with the Secretary of
State of Delaware.
As a result
of the Certificate of Change, the Company will be changing its name
to “Hoverink Biotechnologies, Inc.” , effective as of
September 11, 2017.
In
February 2015, the Company implemented a change of control by
issuing shares to new shareholders, redeeming shares of existing
shareholders, electing new officers and directors and accepting the
resignations of its then existing officers and directors. In
connection with the change of control, the shareholders of the
Company and its board of directors unanimously approved the change
of the Company’s name from Sky Run Acquisition Corporation to
Hoverink Biotechnologies, Inc. Prior to this the company was a
shell as defined in Rule 405.
We were
incorporated in Delaware in July 2013 as Skyrun Acquistion
Corporation. Our principal executive offices are located at 1801
Century Park E., 24th Floor Los Angeles, California
90067:866-443-4666
Our
website address is in beta at www.hoverinkbiotech.yolosite.com. We
do not incorporate the information on or accessible through our
website into this prospectus, and you should not consider any
information contained in, or that can be accessed through, our
website as part of this prospectus. ‘
Going
Concern
The
Company’s 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 satisfaction of liabilities in the normal course of
business. The Company has not yet established a stable ongoing
source of revenues sufficient to cover its operating costs and
allow it to continue as a going concern. The continuation of the
Company as a going concern is dependent upon the continued
financial support from its shareholders, the ability of the Company
to obtain necessary financing to sustain operations and the
attainment of profitable operations. The Company had an accumulated
deficit of $275,037 as of June 30, 2017. These factors, among
others, raise substantial doubt as to its ability to continue as a
going concern.
In
order to continue as a going concern, the Company needs to develop
a reliable source of revenues, and achieve a profitable level of
operations. During the six months ended June 30, 2017 and 2016 and
the year ended December 31, 2016, the Company has been involved
primarily with development of operations and applying to trade in
the public market. The Company has continued to organize and
structure to meet the needs of shareholders and attract suitable
financing.
To fund
operations for the next twelve months, the Company projects a need
for $5,000,000 that will have to be raised through debt or
equity.
If the
Company is unable to obtain adequate capital, it could be forced to
cease operations. Accordingly, the accompanying financial
statements are accounted for as if the Company is a going concern
and do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or the amount and
classification of liabilities or other adjustments that might be
necessary should the Company be unable to continue as a going
concern.
5
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America and the rules and
regulations of the United States Securities and Exchange Commission
for interim financial information and with the instructions to Form
10Q and Article of Regulation S-X. Accordingly, they do not include
all the information and footnotes necessary for a comprehensive
presentation of financial position, results of operations, or cash
flows. It is management's opinion however, that all material
adjustments (consisting of normal recurring adjustments) have been
made which are necessary for a fair financial statement
presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the full
year.
Cash
The
Company considers highly liquid financial instruments purchased
with a maturity of six months or less to be cash equivalents. As of
June 30, 2017 and December 31, 2016, there were no cash and cash
equivalents for the company.
Segmented
Reporting
FASB
ASC 280, “Disclosure about Segments of an Enterprise and
Related Information”, changed the way public companies report
information about segments of their business in their quarterly
reports issued to shareholders. It also requires entity-wide
disclosures about the products and services the entity provides,
the material countries in which it holds assets and reports
revenues and its major customers.
Comprehensive
Loss
“Reporting
Comprehensive Income,” establishes standards for the
reporting and display of comprehensive loss and its components in
the financial statements. As at June 30, 2017, the Company had no
items that represented a comprehensive loss and, therefore, did not
include a schedule of comprehensive loss in the financial
statements.
Use
of Estimates and Assumptions
The
preparation of the financial statements in conformity with United
States generally accepted accounting principles requires management
to make estimates and judgments that affect the amounts reported in
our financial statements and the accompanying notes.
The
actual results that we experience may differ materially from our
estimates.
Financial
Instruments
All
significant financial assets, financial liabilities and equity
instruments of the Company are either recognized or disclosed in
the financial statements together with other information relevant
for making a reasonable assessment of future cash flows, interest
rate risk and credit risk. Where practical the fair values of
financial assets and financial liabilities have been determined and
disclosed; otherwise only available information pertinent to fair
value has been disclosed.
Loss
per Common Share
The
basic earnings (loss) per share is calculated by dividing the
Company’s net income available to common shareholders by the
weighted average number of common shares during the period. The
diluted earnings (loss) per share is calculated by dividing the
Company’s net income (loss) available to common shareholders
by the diluted weighted average number of shares outstanding during
the period. The diluted weighted average number of shares
outstanding is the basic weighted number of shares adjusted for any
potentially dilutive debt or equity. Diluted earnings (loss) per
share are the same as basic earnings (loss) per share due to the
lack of dilutive items in the Company.
Income
Taxes
The
Company follows the liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax balances
and tax loss carry- forwards. Deferred tax assets and liabilities
are measured using enacted or substantially enacted tax rates
expected to apply to the taxable income in the years in which those
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of
enactment or substantive enactment.
6
Stock-based
Compensation
The
Company follows ASC 718-10, "Stock Compensation", which addresses
the accounting for transactions in which an entity exchanges its
equity instruments for goods or services, with a primary focus on
transactions in which an entity obtains employee services in
share-based payment transactions. ASC 718-10 is a revision to SFAS
No. 123, "Accounting for Stock-Based Compensation," and supersedes
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees," and its related implementation
guidance. ASC 718-10 requires measurement of the cost of employee
services received in exchange for an award of equity instruments
based on the grant-date fair value of the award (with limited
exceptions). Incremental compensation costs arising from subsequent
modifications of awards after the grant date must be recognized.
The Company has not adopted a stock option plan and has not granted
any stock options. As at June 30, 2017 the Company had not adopted
a stock option plan nor had it granted any stock options.
Accordingly no stock-based compensation has been recorded to
date.
Recent
Accounting Pronouncements
In June
2014, the FASB issued ASU 2014-10, Development Stage Entities
(Topic 915): Elimination of Certain Financial Reporting
Requirements. ASU 2014-10 eliminates the distinction of a
development stage entity and certain related disclosure
requirements, including the elimination of inception-to-date
information on the statements of operations, cash flows and
stockholders' equity. The amendments in ASU 2014-10 will be
effective prospectively for annual reporting periods beginning
after December 15, 2014, and interim periods within those annual
periods, however early adoption is permitted. The Company adopted
ASU 2014-10 during the quarter ended September 30, 2014, thereby no
longer presenting or disclosing any information required by Topic
915.
The
FASB issued ASU 2014-15 on August 27, 2014, providing guidance on
determining when and how to disclose going-concern uncertainties in
the financial statements. The new standard requires management to
perform interim and annual assessments of an entity’s ability
to continue as a going concern within one year of the date the
financial statements are issued. An entity must provide certain
disclosures if “conditions or events raise substantial doubt
about [the] entity’s ability to continue as a going
concern.” The ASU applies to all entities and is effective
for annual periods ending after December 15, 2016, and interim
periods thereafter, with early adoption permitted.
NOTE
3 – CAPITAL STOCK
The
Company’s capitalization is 100,000,000 shares of common
stock with a par value of $0.0001 per share. No preferred shares
have been authorized or
issued.
On
February 15, 2015, the Company redeemed an aggregate of 19,500,000
of its outstanding stock at a redemption price of $0.0001 for an
aggregate redemption price of $1,950.
On
February 16, 2015, the company issued 13,372,000 shares of its
common stock at par to shareholders.
NOTE
4 – RELATED PARTY TRANSACTIONS
On
March 31 2015 the company entered into a loan for $150,000 with
Cyrus Sajna, a related party. This loan matures on March 31, 2019,
bears no interest, and can be paid in full at any time before the
penalty deadline.
NOTE
5 – INCOME TAXES
Income
taxes are provided in accordance with ASC 740 Income Taxes. A
deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating
loss carry forwards. Deferred tax expense (benefit) results from
the net change during the year of deferred tax asset and
liabilities.
Deferred tax assets
are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment. No provision was made for
Federal Income Tax.
The
Company did not provide any current or deferred U.S. federal income
tax provision or benefit for any of the periods presented because
we have experienced operating losses since inception. The Company
provided a full valuation allowance on the net deferred tax asset,
consisting of net operating loss carry forwards, because management
has determined that it is more likely than not that we will not
earn income sufficient to realize the deferred tax assets during
the carry forward period.
7
NOTE 6 – SUBSEQUENT EVENTS
On
September 8th, 2017, “Hoverink Biotechnologies, Inc., a
Delaware corporation, (the “ Company ”), with the
approval of its board of directors and shareholders owning a
majority of the Company’s issued and outstanding shares by
written consent in lieu of a meeting, filed a Certificate of Change
(the “ Certificate of Change ”) with the Secretary of
State of Delaware.
As a result
of the Certificate of Change, the Company will be changing its name
to “Hoverink Biotechnologies, Inc.” , effective as of
September 11, 2017.
8
SUMMARY
This summary highlights information contained elsewhere in this
prospectus. This summary does not contain all of the information
that you should consider before deciding to invest in our common
stock. You should read this entire prospectus carefully, including
the “Risk Factors” section, our historical financial
statements and the notes thereto, and unaudited pro forma financial
information, each included elsewhere in this prospectus. The terms
“Hoverink Biotech”, “the Company”,
“our”, or “we” refer to Hoverink
Biotechnologies, Inc.
Overview
We are
an innovative preclinical biopharmaceutical company committed to
the discovery development, manufacturing and commercializing
LADAVRU® and biosimilars. The liver is a vital organ that
plays an extremely important role in human metabolism and other key
physiologic functions. Rare disorders like Cirrhosis, Cirrhosis
ascites are associated with the liver, many of which have severe or
even fatal consequences for patients, and collectively represent a
significant unmet medical need. Our product candidate LADAVRU®
focuses on Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and chronic
pain, nausea and discomfort associated with chemotherapy; our goals
consist of primarily serving readily identifiable patient
populations suffering from Cancer, Cirrhosis, Cirrhosis ascites,
AIDS, and chronic pain, nausea and discomfort associated with
chemotherapy particularly for patients using anthracyclines with
the intention of targeting the treatment of relapsed or refractory
AML. Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung cancers. The
nature of these diseases permits us to leverage highly predictive
preclinical models and well-described, and often clinically
validated, biomarkers to shorten time to clinical proof of
concept.
We
intend to submit patent applications for formulation, synthetic
process and reconstitution related to our LADAVRU® drug
product candidate, although there is no assurance that we will be
successful in obtaining such patent protection. Independently from
potential patent protection, we believe LADAVRU® will qualify
for Orphan Drug status, which could entitle us to market
exclusivity of up to 7 and 10 years from the date of approval of a
New Drug Application (NDA) and Marketing Authorization (MA), in the
US and the European Union (EU), respectively. However, there can be
no assurance that such status will be granted. Separately, the FDA
may also grant market exclusivity of up to five years for newly
approved new chemical entities (of which LADAVRU® would be
one), but there can be no assurance that such exclusivity will be
granted or, if granted, for how long.
Our Drug Candidates
LADAVRU®
Our
lead product candidate is LADAVRU®, We are an innovative
preclinical biopharmaceutical company committed to the discovery
development, manufacturing and commercializing LADAVRU® and
biosimilars. Our product candidate LADAVRU® focuses on Cancer,
Cirrhosis, Cirrhosis ascites, AIDS, and chronic pain, nausea and
discomfort associated with chemotherapy; our goals consist of
primarily serving readily identifiable patient populations
suffering from Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and
chronic pain, nausea and discomfort associated with chemotherapy
particularly for patients using anthracyclines with the intention
of targeting the treatment of relapsed or refractory AML.
Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung
cancers.
LADAVRU®
focuses on treating chronic pain, nausea and discomfort associated
with chemotherapy particularly for patients using anthracyclines
with the intention of targeting the treatment of relapsed or
refractory AML and chronic pain, nausea and discomfort associated
with Cancer, Cirrhosis, Cirrhosis ascites, AIDS.
We also
intend to pursue Orphan Drug status for LADAVRU®. The
prevalence ceiling for qualifying rare diseases under the US Orphan
Drug Act is 200,000 patients and proportionally similar guidelines
exist in the EU.
The
most recently published prevalence statistics from the National
Cancer Institute reported that the number of people living beyond a
cancer diagnosis reached nearly 14.5 million in 2014 and is
expected to rise to almost 19 million by 2024. In 2016, an
estimated 1,685,210 new cases of cancer will be diagnosed in the
United States and 595,690 people will die from the disease. The
number of new cases of cancer (cancer incidence) is 454.8 per
100,000 men and women per year (based on 2008-2012 cases). The
trend data since that publication would indicate that the
prevalence today should still be well below the 200,000 patient
limitation for Orphan Drugs, which would permit LADAVRU® for
the treatment of chronic pain, nausea and discomfort associated
with chemotherapy particularly for patients using anthracyclines
with the intention of targeting the treatment of relapsed or
refractory AML to qualify for Orphan Drug status. However, we can
provide no assurance that we will be successful in obtaining Orphan
Drug status for LADAVRU®.
9
Our Strategy
Our
mission is to improve the lives of patients who suffer from rare
diseases for which there are limited or no available treatments,
with an initial therapeutic focus on Cirrhosis ascites, patients
suffering from AIDS, Cancer and chronic pain, nausea and discomfort
associated with chemotherapy and neuropathy. Rare disorders like
Cirrhosis, Cirrhosis ascites are associated with the liver, many of
which have severe or even fatal consequences for patients, and
collectively represent a significant unmet medical need. Our
product candidate LADAVRU® focuses on Cancer, Cirrhosis,
Cirrhosis ascites, AIDS, and chronic pain, nausea and discomfort
associated with chemotherapy; our goals consist of primarily
serving readily identifiable patient populations suffering from
Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and chronic pain,
nausea and discomfort associated with chemotherapy particularly for
patients using anthracyclines with the intention of targeting the
treatment of relapsed or refractory AML. Anthracyclines are a class
of chemotherapy drugs designed to disrupt the DNA of, and
eventually destroy, targeted cancer cells. They are the most
effective anticancer drugs developed and are used to treat a range
of cancers, including leukemias, lymphomas, and breast, stomach,
uterine, ovarian, bladder, and lung cancers. The nature of these
diseases permits us to leverage highly predictive preclinical
models and well-described, and often clinically validated,
biomarkers to shorten time to clinical proof of
concept.
Risk Associated with Our Business
As a
preclinical stage pharmaceutical company, our business and ability
to execute our business strategy are subject to a number of risks
of which you should be aware before you decide to buy our
securities. In particular, you should consider the following risks,
which are discussed more fully in the section entitled
“Risk
Factors”:
●
we currently do not
have regulatory approval for our lead drug candidate,
LADAVRU®, or any other product candidates, in the United
States or elsewhere, although we plan to conduct clinical
trials in the United States for LADAVRU® and other drug
candidates in the future, there is no assurance that we will be
successful in our clinical trials or receive regulatory approval in
a timely manner, or at all. Our lead drug candidate, LADAVRU®,
is not the subject of any patent protection, and, although we
intend to apply for formulation and method-of-use patents for
LADAVRU®, there is no assurance that we will be successful in
obtaining such patents
●
unforeseen side
effects from any of our product candidate LADAVRU® could arise
either during clinical development.
●
we do not currently
carry product liability insurance covering any of our drug
candidates and, although we intend to obtain product liability
insurance for future clinical trial liability that we may incur,
there can be no assurance that we will secure adequate coverage or
that, even if we do so, any such coverage will be sufficient to
prevent the exposure of our operations to significant potential
liability in the future;
●
We have incurred
significant losses since our inception and anticipate that we will
continue to incur significant losses for the foreseeable future. We
may never achieve or maintain profitability.
●
We depend almost
entirely on the success of our lead product candidate,
LADAVRU®, which is still in early pre-clinical development. We
cannot be certain that we will be able to initiate clinical
trials for, successfully complete the clinical development of,
obtain regulatory approval for, or successfully commercialize
LADAVRU®
●
We will require
additional capital to fund our operations. Failure to obtain
additional capital may force us to delay, reduce or eliminate our
product development efforts or require us to enter into
unfavorable financing or licensing terms.
●
Our independent
registered public accounting firm has included an explanatory
paragraph relating to our ability to continue as a going concern in
its report on our audited financial statements included
in this prospectus.
●
Our lead product
candidate, LADAVRU®, is designed to be administered with other
therapies, which may result in unforeseen side effects or failures
in our clinical trials. Additionally, if
the other therapies are limited in their commercial availability or
removed from the market, we may be unable to successfully complete
development and commercialization of our product
candidates.
●
We may rely on a
number of collaborations with third parties, and if they do not
adequately perform their obligations, we may not realize the
commercial benefits of these arrangements and
our results of operations may be materially harmed.
●
The pre-clinical
and commercial landscape for Cancer is highly competitive and
subject to rapid and significant technological change. Competitive
products for treatment of Cancer, Cirrhosis,
Cirrhosis ascites, AIDS, and chronic pain, nausea and discomfort
associated with chemotherapy particularly for patients using
anthracyclines with the intention of targeting the treatment of
relapsed or refractory AML may reduce or eliminate the commercial
opportunity for our product candidates. If our competitors develop
technologies or product candidates more rapidly than we do or their
technologies are more effective, our ability to develop and
successfully commercialize our products may be adversely
affected.
●
we have never
commercialized any of our drug candidates, including LADAVRU®,
and, even if approved, our drug candidates may not be accepted by
healthcare providers or healthcare payors;
and
●
we may be unable to
maintain and protect our intellectual property assets, which could
impair the advancement of our pipeline and commercial
opportunities.
●
third parties may
claim that the manufacture, use or sale of our technologies
infringe their intellectual property rights. As with any litigation
where such claims may be asserted, we may have to seek
licenses, defend infringement actions or challenge the validity of
those patents in the patent office or the courts. If these are not
resolved favorably, we may not be able to continue to develop and
commercialize our product candidates. We may not have identified,
or be able to identify in the future, U.S. or foreign patents that
pose a risk of potential infringement claims;
10
●
We are dependent on
the principal members of our board and management and will need to
recruit a significant number of additional personnel in order to
achieve our operating goals. If we are unable to
retain and motivate our current executives and advisors or attract
and recruit additional personnel, our ability to develop and
successfully commercialize our product may be adversely
affected.
●
our short-to-medium
term prospects depend largely on our ability to develop and
commercialize one drug candidate, LADAVRU®, and our ability to
generate revenues in the future will depend heavily
on the successful development and commercialization of
LADAVRU®;
●
If we are unable to
obtain or protect intellectual property rights related to our
product candidates, we may not be able to compete effectively in
our markets.
Corporate Information
On
September 8th, 2017, “Hoverink Biotechnologies, Inc., a
Delaware corporation, (the “ Company ”), with the
approval of its board of directors and shareholders owning a
majority of the Company’s issued and outstanding shares by
written consent in lieu of a meeting, filed a Certificate of Change
(the “ Certificate of Change ”) with the Secretary of
State of Delaware.
As a
result of the Certificate of Change, the Company will be changing
its name to “Hoverink Biotechnologies, Inc.” ,
effective as of September 11, 2017.
In
February 2015, the Company implemented a change of control by
issuing shares to new shareholders, redeeming shares of existing
shareholders, electing new officers and directors and accepting the
resignations of its then existing officers and directors. In
connection with the change of control, the shareholders of the
Company and its board of directors unanimously approved the change
of the Company’s name from Sky Run Acquisition Corporation to
Hoverink Biotechnologies, Inc. Prior to this the company was a
shell as defined in Rule 405. The company ceased being a shell as
of Feb 15th 2016.
We were
incorporated in Delaware in July 2013 as Skyrun Acquistion
Corporation. Our principal executive offices are located at 1801
Century Park E., 24th Floor Los Angeles, California
90067:866-443-4666. Our website address is www.hoverinkbiotech.com.
We do not incorporate the information on or accessible through our
website into this prospectus, and you should not consider any
information contained in, or that can be accessed through, our
website as part of this prospectus.
This
prospectus contains references to our trademarks and to trademarks
belonging to other entities. Solely for convenience, trademarks and
trade names referred to in this prospectus, including logos,
artwork, and other visual displays, may appear without the ®
or ™ symbols, but such references are not intended to
indicate, in any way, that we will not assert, to the fullest
extent under applicable law, our rights or the rights of the
applicable licensor to these trademarks and trade names. We do not
intend our use or display of other companies’ trade names or
trademarks to imply a relationship with, or endorsement or
sponsorship of us by, any other companies. Except where the context
requires otherwise, in this prospectus “Company,”
“Hoverink,” “HRBH” “we,”
“us” and “our” refer to “Hoverink
Biotechnologies, Inc.”
Implications of Being an Emerging Growth Company
We
qualify as an “emerging growth company,” as defined in
the Jumpstart Our Business Startups Act, or the JOBS Act, enacted
in April 2012. As such, we may take advantage of reduced reporting
requirements that are otherwise applicable to public companies.
These provisions include, but are not limited to:
●
being permitted to
present only two years of audited financial statements, in addition
to any required unaudited interim financial statements, with
correspondingly reduced Management’s
Discussion and Analysis of Financial Condition and Results of
Operations disclosure in this prospectus;
●
not being required
to comply with the auditor attestation requirements of Section 404
of the Sarbanes-Oxley Act of 2002, as amended;
●
reduced disclosure
obligations regarding executive compensation in our periodic
reports, proxy statements and registration statements;
and
●
exemptions from the
requirements of holding a non-binding advisory vote on executive
compensation and stockholder approval of any golden parachute
payments not previously approved.
We may
use these provisions until the last day of our fiscal year
following the fifth anniversary of the closing of this offering.
However, if certain events occur prior to such date, including if
we become a “large accelerated filer,” our annual gross
revenue exceeds $1.0 billion or we issue more than $1.0 billion of
non-convertible debt in any three-year period, we will cease to be
an emerging growth company prior to the end of such
period.
We have
elected to take advantage of certain reduced disclosure obligations
in the registration statement of which this prospectus is a part
and may elect to take advantage of other reduced reporting
requirements in future filings. As a result, the information that
we provide to our stockholders may be different than you might
receive from other public reporting companies in which you hold
equity interests
11
The
JOBS Act provides that an emerging growth company can take
advantage of an extended transition period for complying with new
or revised accounting standards. We have irrevocably elected not to
avail ourselves of this exemption and, therefore, we will be
subject to the same new or revised accounting standards as other
public companies that are not emerging growth
companies.
RISK
FACTORS
A
Fast Track Designation by FDA may not actually lead to a faster
development or regulatory review or approval process.
We seek
to receive Fast Track Designation for LADAVRU and we may seek Fast
Track Designation for some of our other product candidates. If a
drug is intended for the treatment of a serious or life-threatening
condition and the drug demonstrates the potential to address unmet
medical needs for this condition, the drug sponsor may apply for
Fast Track Designation. FDA has broad discretion whether or not to
grant this designation, so even if we believe a particular product
candidate is eligible for this designation, we cannot assure you
that FDA would decide to grant it.
We
may never obtain FDA approval for any of our product candidates in
the United States, and even if we do, we may never obtain approval
for or commercialize any of our product candidates in any other
jurisdiction, which would limit our ability to realize their full
market potential.
In
order to eventually market any of our product candidates in any
particular foreign jurisdiction, we must establish and comply with
numerous and varying regulatory requirements on a
jurisdiction-by-jurisdiction basis regarding safety and efficacy.
Approval by FDA in the United States, if obtained, does not ensure
approval by regulatory authorities in other countries or
jurisdictions. In addition, clinical trials conducted in one
country may not be accepted by regulatory authorities in other
countries, and regulatory approval in one country does not
guarantee regulatory approval in any other country. Approval
processes vary among countries and can involve additional product
testing and validation and additional administrative review
periods. Seeking foreign regulatory approval could result in
difficulties and costs for us and require additional preclinical
studies or clinical trials which could be costly and
time-consuming. Regulatory requirements can vary widely from
country to country and could delay or prevent the introduction of
our products in those countries. The foreign regulatory approval
process involves all of the risks associated with FDA approval. We
do not have any product candidates approved for sale in any
jurisdiction, including international markets, and we do not have
experience in obtaining regulatory approval in international
markets. If we fail to comply with regulatory requirements in
international markets or to obtain and maintain required approvals,
or if regulatory approvals in international markets are delayed,
our target market will be reduced and our ability to realize the
full market potential of our products will be
unrealized.
A
purchase of any Shares is an investment in the Company’s
common stock and involves a high degree of risk. Investors should
consider carefully the following information about these risks,
together with the other information contained in this prospectus,
before the purchase of the Shares. If any of the following risks
actually occur, the business, financial condition or results of
operations of the Company would likely suffer. In this case, the
market price of the common stock could decline, and investors may
lose all or part of the money they paid to buy the
Shares.
Risks Related To Our Business
The Company has no revenues to date
.
The
Company has generated no revenues to date. To date, most of
management’s time, and the Company’s limited resources
have been spent in developing its business strategy, researching
potential opportunities, contacting partners, exploring marketing
contacts, establishing operations and management personnel and
resources, preparing its business plan and model, selecting
professional advisors and consultants and seeking capital for the
Company.
The
Company’s independent auditors have issued a report raising a
substantial doubt of the Company’s ability to continue as a
going concern.
In
their audited financial report, the Company’s independent
auditors have issued a comment that unless the Company is able to
generate sufficient cash flows from operations and/or obtain
additional financing, there is a substantial doubt as to its
ability to continue as a going concern.
The
Company is a development-stage company with no operating history of
its own and as such any prospective investor cannot assess the
Company’s profitability or performance.
Because
the Company is a development-stage company with no operating
history, it is impossible for an investor to assess the performance
of the Company or to determine whether the Company will meet its
projected business plan. The Company has limited financial results
upon which an investor may judge its potential. As a company
emerging from the development- stage, the Company may in the future
experience under- capitalization, shortages, setbacks and many of
the problems, delays and expenses encountered by any early stage
business. An investor will be required to make an investment
decision based solely on the Company management’s history and
its projected operations in light of the risks, expenses and
uncertainties that may be encountered by engaging in the
Company’s industry.
12
The
Company is a development stage company and has a correspondingly
small financial and accounting organization. Being a public company
may strain the Company's resources, divert management’s
attention and affect its ability to attract and retain qualified
officers and directors.
The
Company is a development stage company with no developed finance
and accounting organization and the rigorous demands of being a
public company require a structured and developed finance and
accounting group. As a reporting company, the Company is already
subject to the reporting requirements of the Securities Exchange
Act of 1934. However, the requirements of these laws and the rules
and regulations promulgated thereunder entail significant
accounting, legal and financial compliance costs which may be
prohibitive to the Company as it develops its business plan,
services and scope. These costs have made, and will continue to
make, some activities more difficult, time consuming or costly and
may place significant strain on its personnel, systems and
resources.
The
Securities Exchange Act requires, among other things, that
companies maintain effective disclosure controls and procedures and
internal control over financial reporting. In order to maintain the
requisite disclosure controls and procedures and internal control
over financial reporting, significant resources and management
oversight are required. As a result, management’s attention
may be diverted from other business concerns, which could have a
material adverse effect on the development of the Company's
business, financial condition and results of
operations.
These
rules and regulations may also make it difficult and expensive for
the Company to obtain director and officer liability insurance. If
the Company is unable to obtain adequate director and officer
insurance, its ability to recruit and retain qualified officers and
directors, especially those directors who may be deemed
independent, will be significantly curtailed.
We
are an “emerging growth company” and we cannot be
certain if the reduced disclosure requirements applicable to
emerging growth companies will make our common stock less
attractive to investors.
We are
an “emerging growth company,” as defined in the
Jumpstart our Business Startups Act of 2012, and we may take
advantage of certain exemptions from various reporting requirements
that are applicable to other public companies, including, but not
limited to, not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act,
reduced disclosure obligations regarding executive compensation in
our periodic reports and proxy statements, and exemptions from the
requirements of holding a nonbinding advisory vote on executive
compensation and shareholder approval of any golden parachute
payments not previously approved. We cannot predict if investors
will find our common stock less attractive because we will rely on
these exemptions. If some investors find our common stock less
attractive as a result, there may be a less active trading market
for our common stock and our stock price may be more volatile.
Under the Jumpstart Our Business Startups Act, “emerging
growth companies” can delay adopting new or revised
accounting standards until such time as those standards apply to
private companies. We have irrevocably elected not to avail
ourselves to this exemption from new or revised accounting
standards and, therefore, we will be subject to the same new or
revised accounting standards as other public companies that are not
“emerging growth companies.” The Company has engaged
outside accounting and finance advisors to assist the Company in
better implementing effective disclosure controls and
procedures.
The
Company could be adversely affected by a decline in discretionary
consumer spending or consumer confidence.
The
Company’s success depends in great part on discretionary
consumer spending. Discretionary consumer spending is significantly
influenced by general economic conditions and the availability of
discretionary income. The recent economic downturn, coupled with
high volatility and uncertainty as to the future global economic
landscape, has had and may continue to have a negative effect on
consumers’ discretionary income and consumer confidence.
Difficult economic conditions and recessionary periods may
adversely impact attendance figures, the frequency with which
guests choose to visit and spend at the Company’s
recreational centers. These factors could also affect our
suppliers, vendors, insurance carriers and other contractual
counterparties. Such factors could include, but are not limited
to:
●
war, terrorist
activities or threats and heightened travel security measures
instituted in response to these events;
●
outbreaks of
pandemic or contagious diseases or consumers’ concerns
relating to potential exposure to contagious diseases;
●
natural disasters,
such as hurricanes, fires, earthquakes, tsunamis, tornados, floods
and volcanic eruptions and man-made disasters such as the oil spill
in the Gulf of Mexico, which may deter travelers from scheduling
vacations or cause them to cancel travel or vacation
plans;
●
low consumer
confidence;
●
oil prices and
travel costs and the financial condition of the airline, automotive
and other transportation-related industries, any travel- related
disruptions or incidents and their impact on travel;
and
actions
or statements by U.S. and foreign governmental officials related to
travel and corporate travel-related activities (including changes
to the U.S. visa rules) and the resulting public perception of such
travel and activities.
13
Any of
these factors could adversely affect attendance and spending at the
Company’s recreational centers, which could have a material
adverse effect on the Company’s business, financial condition
and results of operations.
Risks Related To Ownership of Our Shares
As
there is no minimum for our Primary Offering, if only a few persons
purchase Shares, they may lose their investment as we may be unable
to make a significant attempt to implement our business
plan.
Since
there is no minimum amount of Shares that must be sold directly
under this Primary Offering, if a limited number of Shares are
sold, we may not have enough capital to fully implement our plan of
operations. As such, we may not be able to meet the objectives we
state in this prospectus, or eliminate the “going
concern” modification in the reports of our auditors as to
uncertainty with respect to our ability to continue as a going
concern. If we fail to raise sufficient capital, we would expect to
have insufficient funds for our ongoing operating expenses. Any
significant lack of funds will curtail the growth of our business
and may cause our business to fail. If our business fails,
investors will lose their entire investment.
We
are selling shares in the Primary Offering without an underwriter
and may be unable to sell any Shares.
This
Primary Offering is self-underwritten, that is, we are not going to
engage the services of an underwriter to sell the Shares. We intend
to sell our Shares through our President who will receive no
commissions or other remuneration from any sales made hereunder.
They will offer the Shares to friends, family members, and business
associates; however, there is no guarantee that they will be able
to sell any of the Shares. Unless they are successful in selling
all of the Shares and we receive the maximum amount of proceeds
from this Primary Offering, we may have to seek alternative
financing to implement our plan of operations.
We
may have difficulty selling shares under our Primary Offering
because the selling shareholders are concurrently offering their
shares under the Secondary Offering.
We may
have difficulty selling shares under our Primary Offering because
we may be competing with the selling security holders who are
concurrently offering their shares under the Secondary Offering. In
the event that our common shares are quoted on the OTC Bulletin
Board or OTCQB, the selling security holders will not be required
to sell their shares at a fixed price of $ per share. Accordingly,
the selling security holders may reduce the price of their shares
which may hinder our ability to sell any shares under the Primary
Offering.
Risks Related to Our Management and Control Persons
Because
Cyrus Sajna and Davidra Sajna currently has 45% of our outstanding
Common Stock, investors may find that corporate decisions
influenced by Cyrus Sajna and Davidra Sajna are inconsistent with
the best interests of other stockholders .
Cyrus
Sajna and Davidra Sajna currently has 45% of the outstanding shares
of our Common Stock. Accordingly, Cyrus Sajna and Davidra Sajna
will have a significant influence in determining the outcome of all
corporate transactions or other matters, including mergers,
consolidations and the sale of all or substantially all of our
assets, and also the power to prevent or cause a change in control.
While we have no current plans with regard to any takeover, merger,
consolidation or sale of substantially all of our assets, the
interests of Cyrus Sajna and Davidra Sajna may still differ from
the interests of the other stockholders.
The
loss of key management personnel could adversely affect our ability
to continue operations.
We are
entirely dependent on the efforts of our CEO, and Chief Financial
Officer because of the time and effort that she devotes to us. She
is in charge of overseeing all development strategies, supervising
any/all future personnel, including any consultants or contractors
that we will engage to assist in developing our business model, and
the establishment of our future sales team. Their loss, or other
key personnel in the future, could have a material adverse effect
on our business, financial condition and results of operations. We
do not maintain “key person” life insurance on our
officers, directors or key employees. Our success will depend on
the performance of Ms. Debbie Carter and our ability to attract and
motivate other key personnel.
14
The
lack of Public Company experience of our officers and directors
could adversely impact our ability to comply with the reporting
requirements of U.S. Securities laws.
Our
officers and directors, including Ms. Debbie Carter, has no
experience managing a public company, which could adversely impact
our ability to comply with legal, regulatory, and reporting
requirements of U.S. Securities laws. Our management may not be
able to implement programs and policies in an effective and timely
manner to adequately respond to such legal, regulatory and
reporting requirements, including the establishment and maintenance
of internal controls over financial reporting. Any such
deficiencies, weaknesses or lack of compliance could have a
materially adverse effect on our ability to comply with the
reporting requirements of the Securities Exchange Act of 1934,
which are necessary to maintain public company status. If we were
to fail to fulfill those obligations, our ability to operate as a
U.S. public company would be in jeopardy in which event you could
lose your entire investment in our company. Our ability to operate
successfully may depend on our ability to attract and retain
qualified personnel with appropriate experience in the management
of a public company. Our ability to find and retain qualified
personnel on our terms and budget may be very limited
We
will likely conduct further offerings of our equity securities in
the future, in which case your proportionate interest may become
diluted.
Since
our inception, we have relied on sales of our common shares to fund
our operations. We will likely be required to conduct additional
equity offerings in the future to finance our current projects or
to finance subsequent projects that we decide to undertake. If
common shares are issued in return for additional funds, the price
per share could be lower than that paid by our current
shareholders. We anticipate continuing to rely on equity sales of
our common shares in order to fund our business operations. If we
issue additional shares, your percentage interest in us could
become diluted.
The
Company’s board of directors beneficially own and will
continue to own a majority of the Company’s common stock and,
as a result, can exercise control over stockholder and corporate
actions.
The
Company anticipates that its executive officers and directors will,
in the aggregate, beneficially own approximately 64 % of its issued
and outstanding capital stock following the completion of this
offering, assuming the sale of all Shares hereby offered.
Accordingly, the present shareholders, by virtue of their
percentage share ownership and certain procedures established by
the certificate of incorporation and by- laws of the Company for
the election of its directors, may effectively control the board of
directors and the policies of the Company. As a result, these
stockholders will retain substantial control over matters requiring
approval by the Company’s stockholders, such as (without
limitation) the election of directors and approval of significant
corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control,
which in turn could have a material adverse effect on the market
price of the Company’s common stock or prevent stockholders
from realizing a premium over the market price for their
Shares.
The
Company depends on its management team to manage its business
effectively.
The
Company's future success is dependent in large part upon its
ability to understand and develop the business plan and to attract
and retain highly skilled management, operational and executive
personnel. In particular, due to the relatively early stage of the
Company's business, its future success is highly dependent on its
officers, to provide the necessary experience and background to
execute the Company's business plan. The loss of any
officer’s services could impede, particularly initially as
the Company builds a record and reputation, its ability to develop
its objectives, particularly in its ability to operate hotels and
retail stores and as such would negatively impact the Company's
possible overall development.
The
time devoted by Company management may not be
full-time.
It is
not anticipated that key officers would devote themselves full-time
to the business of the Company at the present time. Once the
Company obtains additional financing or generates sufficient
revenues and profits, officers may then become employed in a
full-time capacity.
Government
regulation could negatively impact the business.
The
Company’s business segments may be subject to various
government regulations in the jurisdictions in which they operate.
Due to the potential wide scope of the Company’s operations,
the Company could be subject to regulation by various political and
regulatory entities, including various local and municipal agencies
and government sub-divisions. The Company may incur increased costs
necessary to comply with existing and newly adopted laws and
regulations or penalties for any failure to comply. The
Company’s operations could be adversely affected, directly or
indirectly, by existing or future laws and regulations relating to
its business or industry.
15
There
has been no prior public market for the Company’s securities
and the lack of such a market may make resale of the stock
difficult.
No
prior public market has existed for the Company’s securities
and the Company cannot assure any investor that a market will
develop subsequent to this offering. An investor must be fully
aware of the long-term nature of an investment in the Company. The
Company intends to apply for quotation of its common stock on the
OTC Bulletin Board as soon as possible which may be while this
offering is still in process. However, the Company does not know if
it will be successful in such application, how long such
application will take, or, that if successful, that a market for
the common stock will ever develop or continue on the OTC Bulletin
Board. If for any reason the common stock is not listed on the OTC
Bulletin Board or a public trading market does not otherwise
develop, investors in the offering may have difficulty selling
their common stock should they desire to do so. If the Company is
not successful in its application for quotation on the OTC Bulletin
Board, it will apply to have its securities quoted by the Pink OTC
Markets, Inc., real-time quotation service for over-the-counter
equities.
The
Company does not project paying dividends during its development
stage and during the early stages of growth and anticipates that it
will retain future earnings for funding the Company’s growth
and development. Therefore, investors should not expect the Company
to pay dividends in the foreseeable future. As a result, investors
may not receive any return on their investment prior to selling
their Shares in the Company, if and when a market for such Shares
develops. Furthermore, even if a market for the Company’s
securities does develop, there is no guarantee that the market
price for the shares would be equal to or more than the initial per
share investment price paid by any investor. There is a possibility
that the Shares could lose all or a significant portion of their
value from the initial price paid in this offering.
The
Company’s stock may be considered a penny stock and any
investment in the Company’s stock will be considered a high-
risk investment and subject to restrictions on
marketability.
If the
Shares commence trading, the trading price of the Company's common
stock may be below $5.00 per share. If the price of the common
stock is below such level, trading in its common stock would be
subject to the requirements of certain rules promulgated under the
Securities Exchange Act of 1934, as amended. These rules require
additional disclosure by broker-dealers in connection with any
trades generally involving any non-NASDAQ equity security that has
a market price of less than $5.00 per share, subject to certain
exceptions. Such rules require the delivery, before any penny stock
transaction, of a disclosure schedule explaining the penny stock
market and the risks associated therewith, and impose various sales
practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors
(generally institutions). For these types of transactions, the
broker-dealer must determine the suitability of the penny stock for
the purchaser and receive the purchaser’s written consent to
the transactions before sale. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers
from effecting transactions in the Company’s common stock
which could impact the liquidity of the Company’s common
stock.
The
Company is subject to the potential factors of market and customer
changes.
The
business of the Company is susceptible to rapidly changing
preferences of the marketplace and its customers. The needs of
customers are subject to constant change. Although the Company
intends to carry out its plan of developing recreational centers to
satisfy changing customer demands in the marketplace, there can be
no assurance that funds for such expenditures will be available or
that the Company's competition will not develop similar or superior
capabilities or that the Company will be successful in its internal
efforts. The future success of the Company will depend in part on
its ability to respond effectively to rapidly changing trends,
industry standards and customer requirements by adapting its
visions of entertainment and leisure centers and the experience
offered by products and services.
Product
liability claims could adversely affect the Company.
The
Company may be subject to product liability claims from customers
or fines from regulatory agencies relating to products that are
recalled, defective or harmful. Such claims could arise from
factors beyond the Company’s control. The Company generally
seeks contractual indemnification and insurance coverage from its
suppliers. However, without adequate insurance or contractual
indemnification available, such claims could have a material
adverse effect on the Company’s business, financial condition
and results of operation. Litigation expenses could increase as
well, which may have a materially negative impact on results of
operations, regardless of the outcome of the claim. Furthermore,
such claims may cause significant damage the Company’s
reputation and diminish customer confidence in its
products.
The
Company has authorized the issuance of preferred stock with certain
preferences.
The
board of directors of the Company is authorized to issue up to
100,000,000 shares of $0.0001 par value preferred stock. The board
of directors has the power to establish the dividend rates,
liquidation preferences, and voting rights of any series of
preferred stock, and these rights may be superior to the rights of
holders of the Shares. The board of directors may also establish
redemption and conversion terms and privileges with respect to any
shares of preferred stock. Any such preferences may operate to the
detriment of the rights of the holders of the Shares, and further,
could be used by the board of directors as a device to prevent a
change in control of the Company. No such preferred shares or
preferences have been issued to date, but such shares or
preferences may be issued at a later time, subject to the sole
discretion of the board of directors.
16
The
Company does not maintain certain insurance, including errors and
omissions and indemnification insurance.
The
Company has limited capital and, therefore, does not currently have
a policy of insurance against liabilities arising out of the
negligence of its officers and directors and/or deficiencies in any
of its business operations. Even assuming that the Company obtained
insurance, there is no assurance that such insurance coverage would
be adequate to satisfy any potential claims made against the
Company, its officers and directors, or its business operations.
Any such liability which might arise could be substantial and may
exceed the assets of the Company. The certificate of incorporation
and by-laws of the Company provide for indemnification of officers
and directors to the fullest extent permitted under Delaware law.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons, it is the opinion of the Securities and
Exchange Commission that such indemnification is against public
policy, as expressed in the Act, and is therefore,
unenforceable.
Intellectual
property and/or trade secret protection may be
inadequate.
The
Company has applied for certain intellectual property and trade
secret protection on certain aspects of its business. However,
there can be no assurance that the Company can obtain effective
protection against unauthorized duplication or the introduction of
substantially similar solutions and services.
The
offering price of the Shares has been arbitrarily determined by the
Company and such offering should not be used by an investor as an
indicator of the fair market value of the Shares.
Currently there is
no public market for the Company’s common stock. The offering
price for the Shares has been arbitrarily determined by the Company
and does not necessarily bear any direct relationship to the
assets, operations, book or other established criteria of value of
the Company. Thus an investor should be aware that the offering
price does not reflect the fair market price of the
Shares.
The
Company has included the selling stockholders in the secondary
public offering (or private placement) for Shares in parallel with
this offering.
The
Company is conducting a primary public offering (or private
placement) for Shares to raise proceeds for the Company. Such an
offering may be conducted in parallel with or immediately following
this offering. Sales of additional Shares [in the current or any
future Primary Offering] will dilute the percentage ownership of
shareholders in the Company.
Risks
Related to Our Common Stock
17
The
offering price of our common stock has been determined
arbitrarily.
The
price of our common stock in this offering has not been determined
by any independent financial evaluation, market mechanism or by our
auditors, and is therefore, to a large extent, arbitrary. Our audit
firm has not reviewed management's valuation and, therefore,
expresses no opinion as to the fairness of the offering price as
determined by our management. As a result, the price of the common
stock in this offering may not reflect the value perceived by the
market. There can be no assurance that the shares offered hereby
are worth the price for which they are offered and investors may,
therefore, lose a portion or all of their investment.
Risks Related To Ownership of Our Shares
The
interests of shareholders may be hurt because we can issue shares
of our common stock to individuals or entities that support
existing management with such issuances serving to enhance existing
management’s ability to maintain control of our
company.
Our
board of directors has authority, without action or vote of the
shareholders, to issue all or part of the authorized but unissued
common shares. Such issuances may be issued to parties or entities
committed to supporting existing management and the interests of
existing management which may not be the same as the interests of
other shareholders. Our ability to issue shares without shareholder
approval serves to enhance existing management’s ability to
maintain control of our company.
Our
articles of incorporation provide for indemnification of officers
and directors at our expense and limit their liability that may
result in a major cost to us and hurt the interests of our
shareholders because corporate resources may be expended for the
benefit of officers and/or directors.
Our
Articles of Incorporation at Article X provide for indemnification
as follows: "No director or officer of the Corporation shall be
personally liable to the Corporation or any of its stockholders for
damages for breach of fiduciary duty as a director or officer;
provided, however, that the foregoing provision shall not eliminate
or limit the liability of a director or officer: (I) for acts or
omissions which involve intentional misconduct, fraud or knowing
violation of law. Any repeal or modification of an Article by the
stockholders of the Corporation shall be prospective only, and
shall not adversely affect any limitation of the personal liability
of a director or officer of the Corporation for acts or omissions
prior to such repeal or modification. In the opinion of the SEC,
indemnification for liabilities arising under federal securities
laws is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim
for indemnification for liabilities arising under federal
securities laws, other than the payment by us of expenses incurred
or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding, is asserted
by a director, officer or controlling person in connection with our
activities, we will (unless in the opinion of our counsel, the
matter has been settled by controlling precedent) submit to a court
of appropriate jurisdiction, the question whether indemnification
by us is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue. The
legal process relating to this matter if it were to occur is likely
to be very costly and may result in us receiving negative
publicity, either of which factors is likely to materially reduce
the market and price for our shares, if such a market ever
develops.
Currently,
there is no established public market for our securities, and there
can be no assurances that any established public market will ever
develop or that our common stock will be quoted for trading and,
even if quoted, it is likely to be subject to significant price
fluctuations.
Prior
to the date of this prospectus, there has not been any established
trading market for our common stock, and there is currently no
established public market whatsoever for our securities. We have
not found a market maker. There can be no assurance that we will
find a market maker willing to file an application with FINRA on
our behalf and if we neither do that the market maker’s
application will be accepted by FINRA nor can we estimate as to the
time period that the application will require. We are not permitted
to file such application on our own behalf. If the application is
accepted, there can be no assurances as to whether
(I) any market for
our shares will develop;
)The
prices at which our common stock will trade; or
i)
The extent to which investor interest in us will lead to the
development of an active, liquid trading market. Active trading
markets generally result in lower price volatility and
more
efficient execution
of buy and sell orders for investors.
18
If we
become able to have our shares of common stock quoted on the OTCQB
and/or OTCBB, we will then try, through a broker-dealer and its
clearing firm, to become eligible with the Depository Trust Company
("DTC") to permit our shares to trade electronically. If an issuer
is not “DTC- eligible,” then its shares cannot be
electronically transferred between brokerage accounts, which, based
on the realities of the marketplace as it exists today (especially
the OTCQB/OTCBB), means that shares of a company will not be traded
(technically the shares can be traded manually between accounts,
but this takes days and is not a realistic option for companies
relying on broker dealers for stock Transactions - Like all
companies on the OTCQB and OTCBB. What this boils down to is that
while DTC-eligibility is not a requirement to trade on the OTCQB or
OTCBB, it is a necessity to process trades on the OTCBB if a
company’s stock is going to trade with any volume. There are
no assurances that our shares will ever become DTC-eligible or, if
they do, how long it will take. In addition, our common stock is
unlikely to be followed by any market analysts, and there may be
few institutions acting as market makers for our common stock.
Either of these factors could adversely affect the liquidity and
trading price of our common stock. Until our common stock is fully
distributed and an orderly market develops in our common stock, if
ever, the price at which it trades is likely to fluctuate
significantly. Prices for our common stock will be determined in
the marketplace and may be influenced by many factors, including
the depth and liquidity of the market for shares of our common
stock, developments affecting our business, including the impact of
the factors referred to elsewhere in these Risk Factors, investor
perception of the Company and general economic and market
conditions. No assurances can be given that an orderly or liquid
market will ever develop for the shares of our common stock.
Because of the anticipated low price of the securities being
registered, many brokerage firms may not be willing to effect
transactions in these securities. Purchasers of our securities
should be aware that any market that develops in our stock will be
subject to the penny stock restrictions. See “Plan of
Distribution” and Risk Factors below.
Any
market that develops in shares of our common stock will be subject
to the penny stock regulations and restrictions pertaining to low
priced stocks that create a lack of liquidity and make trading
difficult or impossible.
The
trading of our securities, if any, will be in the over-the-counter
market which is commonly referred to as the OTCBB as maintained by
FINRA. As a result, an investor may find it difficult to dispose
of, or to obtain accurate quotations as to the price of our
securities. Rule 3a51- 1 of the Exchange Act establishes the
definition of a "penny stock," for purposes relevant to us, as any
equity security that has a minimum bid price of less than $5.00 per
share or with an exercise price of less than $5.00 per share,
subject to a limited number of exceptions which are not available
to us. It is likely that our shares will be considered to be penny
stocks for the immediately foreseeable future. This classification
severely and adversely affects any market liquidity for our common
stock. For any transaction involving a penny stock, unless exempt,
the penny stock rules require that a broker or dealer approve a
person's account for transactions in penny stocks and the broker or
dealer receive from the investor a written agreement to the
transaction setting forth the identity and quantity of the penny
stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must obtain
financial information and investment experience and objectives of
the person and make a reasonable determination that the
transactions in penny stocks are suitable for that person and that
that person has sufficient knowledge and experience in financial
matters to be capable of evaluating the risks of transactions in
penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prepared by the SEC relating to
the penny stock market, which, in highlight form, sets
forth:
–
The basis on which
the broker or dealer made the suitability determination,
and
–
That the broker or
dealer received a signed, written agreement from the investor prior
to the transaction
Disclosure also has
to be made about the risks of investing in penny stock in both
public offerings and in secondary trading and commission’s
payable to both the broker-dealer and the registered
representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in
penny stock transactions. Additionally, monthly statements have to
be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny
stocks. Because of these regulations, broker-dealers may not wish
to engage in the above-referenced necessary paperwork and
disclosures and/or may encounter difficulties in their attempt to
sell shares of our common stock, which may affect the ability of
selling shareholders or other holders to sell their shares in any
secondary market and have the effect of reducing the level of
trading activity in any secondary market. These additional sales
practice and disclosure requirements could impede the sale of our
securities, if and when our securities become publicly traded. In
addition, the liquidity for our securities may decrease, with a
corresponding decrease in the price of our securities. Our shares,
in all probability, will be subject to such penny stock rules for
the foreseeable future and our shareholders will, in all
likelihood, find it difficult to sell their
securities.
The
market for penny stocks has experienced numerous frauds and abuses
that could adversely impact investors in our stock.
Company
management believes that the market for penny stocks has suffered
from patterns of fraud and abuse. Such patterns include: Control of
the market for the security by one or a few broker-dealers that are
often related to the promoter or issuer;
–
Manipulation of
prices through prearranged matching of purchases and sales and
false and misleading press releases;
–
"Boiler room"
practices involving high pressure sales tactics and unrealistic
price projections by sales persons;
–
Excessive and
undisclosed bid-ask differentials and markups by selling
broker-dealers; and
–
Wholesale dumping
of the same securities by promoters and broker-dealers after prices
have been manipulated to a desired level, along with the inevitable
collapse of those prices with consequent investor
losses.
19
Any
trading market that may develop may be restricted by virtue of
state securities “Blue Sky” laws that prohibit trading
absent compliance with individual state laws. These restrictions
may make it difficult or impossible to sell shares in those
states.
There
is currently no established public market for our common stock, and
there can be no assurance that any established public market will
develop in the foreseeable future. Transfer of our common stock may
also be restricted under the securities or securities regulations
laws promulgated by various states and foreign jurisdictions,
commonly referred to as “Blue Sky” laws. Absent
compliance with such individual state laws, our common stock may
not be traded in such jurisdictions. Because the securities
registered hereunder have not been registered for resale under the
blue sky laws of any state, the holders of such shares and persons
who desire to purchase them in any trading market that might
develop in the future, should be aware that there may be
significant state blue sky law restrictions upon the ability of
investors to sell the securities and of purchasers to purchase the
securities. These restrictions prohibit the secondary trading of
our common stock. We currently do not intend to and may not be able
to qualify securities for resale in at least 17 states which do not
offer manual exemptions (or may offer manual exemptions but may not
to offer one to us if we are considered to be a shell company at
the time of application) and require shares to be qualified before
they can be resold by our shareholders. Accordingly, investors
should consider the secondary market for our securities to be a
limited one. See also “Plan of Distribution-State
Securities-Blue Sky Laws.”
Because
we are not subject to compliance with rules requiring the adoption
of certain corporate governance measures, our stockholders have
limited protection against interested director transactions,
conflicts of interest and similar matters.
The
Sarbanes-Oxley Act of 2002, as well as rule changes proposed and
enacted by the SEC, the New York and American Stock Exchanges and
the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the
implementation of various measures relating to corporate
governance. These measures are designed to enhance the integrity of
corporate management and the securities markets and apply to
securities that are listed on those exchanges or the Nasdaq Stock
Market. Because we are not presently required to comply with many
of the corporate governance provisions and because we chose to
avoid incurring the substantial additional costs associated with
such compliance any sooner than legally required, we have not yet
adopted these measures. Because none of our directors (currently
three persons) are independent directors, we do not currently have
independent audit or compensation committees. As a result, these
directors have the ability, among other things, to determine their
own level of compensation. Until we comply with such corporate
governance measures, regardless of whether such compliance is
required, the absence of such standards of corporate governance may
leave our stockholders without protections against interested
director transactions, conflicts of interest, if any, and similar
matters and investors may be reluctant to provide us with funds
necessary to expand our operations. We intend to comply with all
corporate governance measures relating to director independence as
and when required. However, we may find it very difficult or be
unable to attract and retain qualified officers, directors and
members of board committees required to provide for our effective
management as a result of Sarbanes-Oxley Act of 2002. The enactment
of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules
and regulations by the SEC that increase responsibilities and
liabilities of directors and executive officers. The perceived
increased personal risk associated with these recent changes may
make it more costly or deter qualified individuals from accepting
these roles.
You
may have limited access to information regarding our business
because our obligations to file periodic reports with the SEC could
be automatically suspended under certain
circumstances.
As of
the effective date of our registration statement of which this
prospectus is a part, we will become subject to certain
informational requirements of the Exchange Act, as amended and we
will be required to file periodic reports (i.e., annual, quarterly
and material events) with the SEC which will be immediately
available to the public for inspection and copying. In the event
during the year that our registration statement becomes effective,
these reporting obligations may be automatically suspended under
Section 15(d) of the Exchange Act if we have less than 300
shareholders and do not file a registration statement on Form 8-A.
If this occurs after the year in which our registration statement
becomes effective, we will no longer be obligated to file such
periodic reports with the SEC and access to our business
information would then be even more restricted. After this
registration statement on Form S-1 becomes effective, we may be
required to deliver periodic reports to security holders as
proscribed by the Exchange Act, as amended. However, we will not be
required to furnish proxy statements to security holders and our
directors, officers and principal beneficial owners will not be
required to report their beneficial ownership of securities to the
SEC pursuant to Section 16 of the Exchange Act until we have both
500 or more security holders and greater than $10 million in
assets. This means that access to information regarding our
business and operations will be limited. However, we plan to
voluntarily continue reporting in the absence of an SEC reporting
obligation.
20
Our
reporting obligations under section 15(d) of the securities
exchange act of 1934, as amended, may be suspended automatically if
we have fewer than 300 shareholders of record on the first day of
our fiscal year.
We will
not register our common stock under Section 12(g) of the Securities
Exchange Act of 1934. Therefore, we will not be subject to the
Commission’s proxy, tender offer, and short swing insider
trading rules for Section 12 registrants and our obligation to file
reports under Section 15(d) of the Exchange Act will be
automatically suspended if, on the first day of any fiscal year
(other than a fiscal year in which a registration statement under
the Securities Act has gone effective), we have fewer than 300
shareholders of record. This suspension is automatic and does not
require any filing with the SEC. In such an event, we would only be
required to file an annual report for the twelve months after this
prospectus is declared effective by the SEC. Accordingly, we may
cease providing periodic reports and current or periodic
information, including operational and financial information, may
not be available with respect to our results of operations. If our
obligation to file reports under Section 15(d) is suspended it may
decrease our common stock’s liquidity, if any, affecting your
ability to resell our common stock.
For all of the foregoing reasons and others set forth herein, an
investment in our securities in any market that may develop in the
future involves a high degree of risk.
Risk
Factors You should carefully read “Risk
Factors” beginning on page and other information included in
this prospectus for a discussion of factors that you should
consider before deciding to invest
in shares of our common stock.
Risks Relating to Our Business
We have
incurred significant losses since our inception. We anticipate that
we will continue to incur significant losses for the foreseeable
future, and we may never achieve or maintain
profitability.
We are
a drug development company focused primarily on developing our lead
product candidate, LADAVRU® for the treatment of Cancer and
critically ill sufferers of Cirrhosis, Cirrhosis ascites, patients
suffering from AIDS, various other Cancers and chronic pain, nausea
and discomfort associated with chemotherapy and Rare disorders like
Cirrhosis, Cirrhosis ascites are associated with the liver, many of
which have severe or even fatal consequences for patients, and
collectively represent a significant unmet medical need. Our
product candidate LADAVRU® focuses on Cancer, Cirrhosis,
Cirrhosis ascites, AIDS, and chronic pain, nausea and discomfort
associated with chemotherapy; our goals consist of primarily
serving readily identifiable patient populations suffering from
Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and chronic pain,
nausea and discomfort associated with chemotherapy particularly for
patients using anthracyclines with the intention of targeting the
treatment of relapsed or refractory AML. Anthracyclines are a class
of chemotherapy drugs designed to disrupt the DNA of, and
eventually destroy, targeted cancer cells. They are the most
effective anticancer drugs developed and are used to treat a range
of cancers, including leukemias, lymphomas, and breast, stomach,
uterine, ovarian, bladder, and lung cancers. The nature of these
diseases permits us to leverage highly predictive preclinical
models and well-described, and often clinically validated,
biomarkers to shorten time to clinical proof of
concept.
To
date, we have financed our operations primarily through the sale of
equity securities and debt financings. We have devoted most of our
financial resources to research and development, including our
preclinical development activities. We have not completed the
development of any of our product candidates. We expect to continue
to incur significant and increasing losses and negative cash flows
for the foreseeable future. The size of our losses will depend, in
part, on the rate of future expenditures and our ability to
generate revenues. In particular, we expect to incur substantial
and increased expenses as we:
●
initiate the
clinical development of our lead product candidate, LADAVRU®
for the treatment of AIDS, various other Cancers and chronic
pain,
nausea and discomfort associated with chemotherapy and
neuropathy;
●
seek to obtain
regulatory approvals for LADAVRU®
●
prepare for the
clinical trials and potential commercialization of
LADAVRU®
●
scale up contracted
manufacturing processes and quantities to prepare for clinical
trials and the commercialization of LADAVRU®
for any
indications for which we receive regulatory approval;
●
establish
outsourcing of the commercial manufacturing of LADAVRU® for
any indications for which we may receive regulatory
approval;
●
establish an
infrastructure for the sales, marketing and distribution of
LADAVRU® for any indications for which we may receive
regulatory approval;
●
continue
preclinical development of our product candidate LADAVRU® for
the treatment of pain;
●
expand our research
and development activities and advance the discovery and
development programs for other product candidates,
including novel
combination solutions comprised of our own amplifiers, correctors
and potentiators;
●
maintain, expand
and protect our intellectual property portfolio;
●
continue our
research and development efforts and seek to discover additional
product candidates; and
●
add operational,
financial and management information systems and personnel,
including personnel to support our clinical development and
commercialization efforts and operations as a public
company.
21
To
become and remain profitable, we must succeed in developing and
eventually commercializing products with significant market
potential. This will require us to be successful in a range of
challenging activities, including discovering product candidates,
completing preclinical testing and clinical trials of our product
candidates, obtaining and maintaining regulatory approval for these
product candidates, and manufacturing, marketing and selling those
products. We are only in the preliminary stages of these
activities.
None of
our product candidates have been approved or commercialized. We may
never succeed in obtaining regulatory approval for or
commercializing any of our product candidates. If our product
candidates are not approved or commercialized, if any products that
do receive regulatory approvals later show unanticipated properties
(for example, unexpected safety issues), or if revenues from any
products that do receive regulatory approvals are insufficient, we
will not achieve profitability and our business may
fail.
Even if
we do achieve profitability, we may not be able to sustain or
increase profitability on a quarterly or annual basis. Our failure
to become and remain profitable would depress the value of our
company and could impair our ability to raise capital, expand our
business, diversify our product offerings or continue our
operations. A decline in the value of our company could cause you
to lose all or part of your investment. terms, or at
all.
We have never been profitable, we have no products approved for
commercial sale, and to date we have not generated any revenue from
product sales. As a result, our ability to reduce our losses and reach
profitability is unproven, and we may never achieve or sustain
profitability.
We have
never been profitable and do not expect to be profitable in the
foreseeable future. We have not yet submitted any drug candidates
for approval by regulatory authorities in the United States or
elsewhere. To date, we have devoted most of our financial resources
to our corporate overhead and research and development, including
our drug discovery research, preclinical development activities and
intended clinical trials. We have not generated any revenues from
product sales. We expect to continue to incur losses for the
foreseeable future, and we expect these losses to increase as we
continue our development of, and seek regulatory approvals for
LADAVRU® prepare for and begin the commercialization of any
approved products, and add infrastructure and personnel to support
our continuing product development efforts. We anticipate that any
such losses could be significant for the next several years. If
LADAVRU® or any of our other drug candidates fails in clinical
trials or does not gain regulatory approval, or if our drug
candidates do not achieve market acceptance, we may never become
profitable. As a result of the foregoing, we expect to continue to
experience net losses and negative cash flows for the foreseeable
future. These net losses and negative cash flows have had, and will
continue to have, an adverse effect on our stockholders' equity and
working capital. Because of the numerous risks and uncertainties
associated with pharmaceutical product development, we are unable
to accurately predict the timing or amount of increased expenses or
when, or if, we will be able to achieve profitability. In addition,
our expenses could increase if we are required by the FDA to
perform studies or trials in addition to those currently expected,
or if there are any delays in completing our clinical trials or the
development of any of our drug candidates. The amount of future net
losses will depend, in part, on the rate of future growth of our
expenses and our ability to generate revenues.
We
cannot be certain that LADAVRU® will receive regulatory
approval, and without regulatory approval we will not be able to
market LADAVRU®. Our business currently depends largely on the
successful development and commercialization of LADAVRU®. Our
ability to generate revenue related to product sales, if ever, will
depend on the successful development and regulatory approval of
LADAVRU® for the treatment of those suffering from Cancer,
Cirrhosis, Cirrhosis ascites, AIDS, and chronic pain, nausea and
discomfort associated with chemotherapy particularly for patients
using anthracyclines with the intention of targeting the treatment
of relapsed or refractory AML.
We
currently have no products approved for sale and we cannot
guarantee that we will ever have marketable products. The
development of a product candidate and issues relating to its
approval and marketing are subject to extensive regulation by the
FDA in the United States and regulatory authorities in other
countries, with regulations differing from country to country. We
are not permitted to market our product candidates in the United
States until we receive approval of a NDA from the
FDA.
22
We have not submitted any marketing applications for any of our
product candidates particularly LADAVRU® Failure to continue
improving our accounting systems and controls could impair our ability to comply
with the financial reporting and internal controls requirements for
publicly traded companies.
As a
public company, we operate in an increasingly demanding regulatory
environment, which requires us to comply with the Sarbanes-Oxley
Act of 2002, and the related rules and regulations of the SEC.
Company responsibilities required by the Sarbanes-Oxley Act include
establishing corporate oversight and adequate internal control over
financial reporting and disclosure controls and procedures.
Effective internal controls are necessary for us to produce
reliable financial reports and are important to help prevent
financial fraud. We have implemented a system of internal controls
over financial reporting and are preparing the documentation
necessary to perform the evaluation needed to comply with Section
404(a) of the Sarbanes-Oxley Act. However, we may need to retain
additional finance capabilities and build our financial
infrastructure as a public company. Section 404(a) of the
Sarbanes-Oxley Act requires annual management assessments of the
effectiveness of our internal control over financial reporting,
starting with the second annual report that we would expect to file
with the SEC. However, for as long as we remain an “emerging
growth company” as defined in the JOBS Act, we have and
intend to continue to take advantage of certain exemptions from
various reporting requirements that are applicable to other public
companies that are not “emerging growth companies”
including, but not limited to, not being required to comply with
the auditor attestation requirements of Section 404(b) of the
Sarbanes-Oxley Act. We may continue to take advantage of these
reporting exemptions until we are no longer an “emerging
growth company.” If we cannot provide reliable financial
reports or prevent fraud, our business and results of operations
could be harmed and investors could lose confidence in our reported
financial information.
The protection provided by
the federal securities laws relating to forward-looking statements
does not apply to us. The lack of this protection could harm us in
the event of an adverse outcome in a legal proceeding relating
to forward-looking statements made by us.
Although federal
securities laws provide a safe harbor for forward-looking
statements made by a public company that files reports under the
federal securities laws, this safe harbor is not available to
certain issuers, including issuers that do not have their equity
traded on a recognized national securities exchange. Our common
stock does not trade on any recognized national securities
exchange. As a result, we will not have the benefit of this safe
harbor protection in the event of any legal action based upon a
claim that the material provided by us contained a material
misstatement of fact or was misleading in any material respect
because of our failure to include any statements necessary to make
the statements not misleading. The lack of this protection in a
contested proceeding could harm our financial
condition.
As
an “emerging growth company” under the Jumpstart Our
Business Startups Act, or JOBS Act, we are permitted to, and intend
to, rely on exemptions from certain disclosure
requirements.
As
an “emerging growth company” under the JOBS Act, we are
permitted to, and intend to, rely on exemptions from certain
disclosure requirements. We are an emerging growth company until
the earliest of:
●
the
last day of the fiscal year during which we have total annual gross
revenues of $1 billion or more;
●
the
last day of the fiscal year following the fifth anniversary of this
offering;
●
the
date on which we have, during the previous 3-year period, issued
more than $1 billion in non-convertible debt; or
●
the
date on which we are deemed a “large accelerated
issuer” as defined under the federal securities
laws.
For
so long as we remain an emerging growth company, we will not be
required to:
●
have
an auditor report on our internal control over financial reporting
pursuant to the Sarbanes-Oxley Act of 2002;
●
comply
with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation
or a supplement to the auditor’s
report providing additional information about the audit and the
financial statements (auditor discussion and
analysis);
●
submit
certain executive compensation matters to shareholders advisory
votes pursuant to the “say on frequency” and “say
on pay” provisions (requiring a non-binding
shareholder
vote to approve compensation of certain executive officers) and the
“say on golden parachute” provisions (requiring a
non-binding shareholder vote to approve golden parachute
arrangements for certain executive officers in connection with
mergers and certain other business combinations) of the Dodd-Frank
Wall Street Reform and Consumer Protection Act of
2010;
●
include
detailed compensation discussion and analysis in our filings under
the Securities Exchange Act of 1934, as amended, and instead may
provide a reduced level
of disclosure concerning executive compensation;
23
●
may
present only two years of audited financial statements and only two
years of related Management’s Discussion and Analysis of
Financial Condition and Results
of Operations, or MD&A; and
●
are
eligible to claim longer phase-in periods for the adoption of new
or revised financial accounting standards under §107 of the
JOBS Act.
We
intend to take advantage of all of these reduced reporting
requirements and exemptions, including the longer phase-in periods
for the adoption of new or revised financial accounting standards
under §107 of the JOBS Act. Our election to use the phase-in
periods may make it difficult to compare our financial statements
to those of non- emerging growth companies and other emerging
growth companies that have opted out of the phase-in periods under
§107 of the JOBS Act.
Certain
of these reduced reporting requirements and exemptions were already
available to us due to the fact that we also qualify as a
“smaller reporting company” under SEC rules. For
instance, smaller reporting companies are not required to obtain an
auditor attestation and report regarding management’s
assessment of internal control over financial reporting; are not
required to provide a compensation discussion and analysis; are not
required to provide a pay-for- performance graph or CEO pay ratio
disclosure; and may present only two years of audited financial
statements and related MD&A disclosure.
Under
the JOBS Act, we may take advantage of the above-described reduced
reporting requirements and exemptions for up to five years after
our initial sale of common equity pursuant to a registration
statement declared effective under the Securities Act of 1933, or
such earlier time that we no longer meet the definition of an
emerging growth company. In this regard, the JOBS Act provides that
we would cease to be an “emerging growth company” if we
have more than
$1.0
billion in annual revenues, have more than $700 million in market
value of our common stock held by non-affiliates, or issue more
than $1.0 billion in principal amount of non-convertible debt over
a three-year period. Further, under current SEC rules, we will
continue to qualify as a “smaller reporting company”
for so long as we have a public float (i.e., the market value of
common equity held by non-affiliates) of less than $75 million as
of the last business day of our most recently completed second
fiscal quarter.
We
cannot predict if investors will find our securities less
attractive due to our reliance on these exemptions. If investors
were to find our common stock less attractive as a result of our
election, we may have difficulty raising all of the proceeds we
seek in this offering.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
We
make forward-looking statements under the “Summary,”
“Risk Factors,” “Business,”
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and in other sections of
this prospectus. In some cases, you can identify these statements
by forward-looking words such as “may,”
“might,” “should,” “would,”
“could,” “expect,” “plan,”
“anticipate,” “intend,”
“believe,” “estimate,”
“predict,” “potential” or
“continue,” and the negative of these terms and other
comparable terminology. These forward-looking statements, which are
subject to known and unknown risks, uncertainties and assumptions
about us, may include projections of our future financial
performance based on our growth strategies and anticipated trends
in our business. These statements are only predictions based on our
current expectations and projections about future events. There are
important factors that could cause our actual results, level of
activity, performance or achievements to differ materially from the
results, level of activity, performance or achievements expressed
or implied by the forward-looking statements. In particular, you
should consider the numerous risks and uncertainties described
under “Risk Factors.”
While
we believe we have identified material risks, these risks and
uncertainties are not exhaustive. Other sections of this prospectus
describe additional factors that could adversely impact our
business and financial performance. Moreover, we operate in a very
competitive and rapidly changing environment. New risks and
uncertainties emerge from time to time, and it is not possible to
predict all risks and uncertainties, nor can we assess the impact
of all factors on our business or the extent to which any factor,
or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking
statements.
Although
we believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
level of activity, performance or achievements. Moreover, neither
we nor any other person assumes responsibility for the accuracy or
completeness of any of these forward-looking statements. You should
not rely upon forward-looking statements as predictions of future
events. We are under no duty to update any of these forward-looking
statements after the date of this prospectus to conform our prior
statements to actual results or revised expectations, and we do not
intend to do so.
24
Forward-looking
statements include, but are not limited to, statements
about:
●
our
ability to obtain additional funding to develop our product
candidate LADAVRU;
●
the
need to obtain regulatory approval of our product candidate
LADAVRU;
●
the
success of our clinical trials through all phases of clinical
development of LADAVRU;
●
compliance
with obligations under intellectual property licenses with third
parties;
●
any
delays in regulatory review and approval of product candidate
LADAVRU in clinical development;
●
our
ability to commercialize our product candidate
LADAVRU;
●
market
acceptance of our product candidate LADAVRU;
●
competition
from existing products or new products that may
emerge;
●
potential
product liability claims;
●
our
dependency on third-party manufacturers to supply or manufacture
our product LADAVRU;
●
our
ability to establish or maintain collaborations, licensing or other
arrangements;
●
our
ability and third parties’ abilities to protect intellectual
property rights;
●
our
ability to adequately support future growth; and
●
our
ability to attract and retain key personnel to manage our business
effectively.
We caution you not to place undue reliance on
the forward-looking statements, which speak only as of the date of
this prospectus in the case of forward- looking statements
contained in this prospectus .
DIVIDEND POLICY
We have
never declared or paid any cash dividends on our capital stock. We
currently intend to retain earnings, if any, to finance the growth
and development of our business. We do not expect to pay any cash
dividends on our common stock in the foreseeable future. Payment of
future dividends, if any, will be at the discretion of our board of
directors and will depend on our financial condition, results of
operations, capital requirements, restrictions contained in any
financing instruments, provisions of applicable law and other
factors the board deems relevant.
Government Regulation
Government
authorities in the United States at the federal, state and local
levels, and in other countries, extensively regulate, among other
things, the research, development, testing, manufacture, quality
control, approval, labeling, packaging, storage, record-keeping,
promotion, advertising, distribution, marketing, export and import
of products such as those we are developing.
A
number of different regulatory agencies may be involved, depending
on the product at issue, and the type and stage of activity. These
include the FDA, the Drug Enforcement Administration, or DEA, the
Centers for Medicare and Medicaid Services, or CMS, other federal
agencies, state boards of pharmacy, state controlled substance
agencies and more.
U.S. Government Regulation Drug Development Process
In the
United States, the FDA is a primary regulator of drugs under the
Federal Food, Drug, and Cosmetic Act, or the FDCA, and implementing
regulations. The process of obtaining regulatory approvals and
other compliance with applicable federal, state, local and foreign
statutes and regulations require the expenditure of substantial
time and financial resources. Failure to comply with applicable
requirements at any time during the drug development process,
approval process, or after approval, may subject us to adverse
consequences and administrative or judicial sanctions, any of which
could have a material adverse effect on us. These sanctions could
include refusal to approve pending applications; withdrawal or
restriction of an approval; imposition of a clinical hold or other
limitation on research; Warning Letters; product seizures; total or
partial suspension of development, production, or distribution; or
injunctions, fines, disgorgement, or civil or criminal payments or
penalty.
25
The process
required before a drug may be marketed in the United States
generally involves the following :
● completion
of preclinical laboratory tests, animal trials and formulation
trials conducted according to Good Laboratory Practice, or GLP,
requirements, animal welfare laws and other applicable regulations;
● submission to the FDA of an investigational new drug
application, or IND, which must become effective before clinical
trials, meaning trials in human subjects, may begin in the United
States, obtaining similar authorizations in other jurisdictions
where clinical research will be conducted and maintaining these
authorizations on a continuing basis throughout the time that
trials are performed and new data are collected; ●
performance of adequate and well-controlled clinical trials
according to Good Clinical Practices, or GCP, requirements to
demonstrate whether a proposed drug is safe and effective for its
intended use; ● preparation and submission to the FDA of a
marketing authorization application, such as a new drug
application, or NDA, and submitting similar marketing authorization
applications in other jurisdictions where commercialization will be
pursued; ● satisfactory completion of an FDA inspection of
the manufacturing facility or facilities at which the product will
be produced to assess compliance with current good manufacturing
practices, or cGMP, requirements to assure that the facilities,
methods and controls are adequate to preserve the product’s
identity, strength, quality and purity;
●
FDA review and
approval of the NDA or other marketing authorization application;
and
●
The development,
testing and approval process requires substantial time, effort and
financial resources and bears significant inherent risk that the
individual products will not exhibit the relevant safety,
effectiveness, or quality characteristics. We cannot be certain
that any approvals for our product candidates will be granted on a
timely basis, or with the specific terms that we desire, if at
all.
Clinical trials
typically are conducted in three sequential phases that may overlap
or be combined :
●
Phase 1.
The
drug initially is introduced into a small number of patients or
human volunteers and information is collected pertaining to the
drug’s safety, dosage tolerance, absorption, metabolism,
distribution and elimination. These trials are designed to
determine the metabolism and pharmacologic actions, side effects
with increasing doses and if possible, early evidence of
effectiveness.
●
Phase 2.
Clinical trials
include controlled clinical studies initiated in a limited patient
population to identify possible adverse effects and safety risks,
to preliminarily evaluate the effectiveness of the drug candidate
for a particular indication in patients with the disease or
condition under study, and to determine common short-term side
effects and risks associated with the drug.
●
Phase 3.
Clinical trials are
expanded and controlled trials undertaken to further evaluate
dosage, clinical efficacy and safety in an expanded patient
population at geographically dispersed clinical trial sites. These
clinical trials are intended to gather additional information about
effectiveness and safety that is needed to evaluate the overall
benefit-risk profile of the drug candidate and provide an adequate
basis for physician labeling and regulatory approval.
Progress reports r
safety reports must be submitted to the FDA and to investigators
for serious and unexpected suspected adverse events, and certain
other purposes. Phase 1, Phase 2 and Phase 3 testing may not be
completed successfully within a specified period, if at all. The
FDA or the sponsor may suspend a clinical trial at any time for a
variety of reasons, including a finding that the healthy volunteers
or patients are being exposed to an unacceptable health risk or
that the investigational product apparently lacks efficacy.
Similarly, an institutional review board can suspend or terminate
approval of a clinical trial at its institution if the clinical
trial is not being conducted in accordance with applicable
requirements or if the drug candidate has been associated with
unexpected serious harm to healthy volunteers or
patients.
We
estimate that it generally takes 15 to 17 years, or possibly
longer, to discover, develop and bring to market a new
pharmaceutical product in the United States. Several years may be
needed to complete each phase, including discovery, preclinical,
Phase 1, 2 or 3, or marketing authorization. At times during the
development of a new drug product, sponsors are given opportunities
to meet with the FDA. This commonly occurs prior to submission of
an IND, at the end of Phase 2 testing, and before an NDA is
submitted. Meetings at other times may also be requested. These
meetings provide an opportunity for the sponsor to share
information about the data gathered to date, for the FDA to provide
advice, and for the sponsor and the FDA to reach agreement on the
next phase of development. A plan for pediatric assessment also
must be discussed at the end of the Phase 2 meeting. Concurrent
with clinical trials, companies usually complete additional animal
trials and develop additional information about the chemistry and
physical characteristics of the drug candidate and finalize a
process for manufacturing the product in commercial quantities in
accordance with cGMP requirements. The manufacturing process must
be capable of consistently producing quality batches of the drug
candidate, and the manufacturer must develop methods for confirming
the identity, quality, purity, and potency of the final products.
Additionally, appropriate packaging must be selected and tested and
stability trials must be conducted to demonstrate that the drug
candidate does not undergo unacceptable deterioration over its
shelf-life and distribution pathway.
26
Disclosure of Clinical Trial Information
Sponsors of
clinical trials (other than Phase 1 trials) of FDA-regulated
products, including drugs, are required to register and disclose
certain clinical trial information. Information related to the
product, comparator, patient population, phase of investigation,
trial sites and investigators and other aspects of the clinical
trial is made public as part of the registration. Sponsors are also
obligated to disclose the results of their clinical trials after
completion. Disclosure of the results of certain trials may be
delayed until the new product or new indication being studied has
been approved. However, there are evolving rules and increasing
requirements for publication of trial-related information, and it
is possible that data and other information from trials involving
drugs that never garner approval could in the future be required to
be disclosed. In addition, publication policies of major medical
journals mandate certain registration and disclosures as a
precondition for potential publication, even when this is not
presently mandated as a matter of law. Competitors may use this
publicly available information to gain knowledge regarding the
progress of development programs.
New Drug Application Review and Approval Processes
The
results of drug candidate development, preclinical trials and
clinical trials, along with descriptions of the manufacturing
process, analytical tests conducted on the drug candidate, proposed
labeling and other relevant information are submitted to the FDA as
part of a new drug application, or NDA, requesting approval to
market the drug candidate. The submission of an NDA is subject to
the payment of a substantial user fee, and the sponsor of an
approved NDA is also subject to annual product and establishment
user fees; a waiver of fees may be obtained under limited
circumstances.
The
cost of preparing and submitting an NDA is substantial. Under
federal law, NDAs are subject to substantial application user fees
and the sponsor of an approved NDA is also subject to annual
product and establishment user fees. Under PDUFA, each NDA must be
accompanied by a user fee. The FDA adjusts the PDUFA user fees on
an annual basis. According to the FDA’s fee schedule,
effective through September 30, 2016, the user fee for each NDA
application requiring clinical data is $2,374,200. PDUFA also
imposes an annual product fee for drugs ($114,450), and an annual
establishment fee ($585,200) on facilities used to manufacture
prescription drugs. Fee waivers or reductions are available in
certain circumstances, including a waiver of the application fee
for the first application filed by a small business. Additionally,
no user fees are assessed on NDAs for products designated as orphan
drugs, unless the product also includes a non-orphan
indication.
The FDA
reviews each NDA to ensure that it is sufficiently complete for
substantive review before it may be filed. Once the submission is
accepted for filing, the FDA begins an in-depth review. The FDA
reviews an NDA to determine, among other things, whether a drug
candidate is safe and effective for its intended use and indication
for use, including use of a drug as a combination therapy, and
whether its manufacturing is cGMP-compliant to assure and preserve
the drug candidate’s identity, strength, quality and purity.
The FDA may refer the NDA to an advisory committee consisting of a
panel of external experts for review and recommendation as to
whether the NDA should be approved and under what conditions.
Before approving an NDA, the FDA will typically inspect the
facility or facilities where the active ingredient and the
formulated drug candidate are manufactured and tested.
The
approval process is lengthy and difficult and the FDA may refuse to
approve an NDA if the applicable criteria are not satisfied, or it
may require additional clinical or other data. Even if such data
are submitted, the FDA may ultimately decide that the NDA does not
satisfy the criteria for approval. Data obtained from clinical
trials are not always conclusive and the FDA may interpret data
differently than we interpret the same data. The FDA will issue a
Complete Response Letter if the agency decides not to approve the
NDA in its present form. The deficiencies identified may be minor,
for example, requiring labeling changes, or major, for example,
requiring additional clinical trials. Additionally, the Complete
Response Letter may include recommended actions that the applicant
might take to place the application in a condition for approval. If
a product receives regulatory approval, the approval may be limited
to specific diseases, dosages, or indications for use, which could
restrict the commercial value of the product. Further, the FDA may
require that certain contraindications, warnings or precautions be
included in the product labeling. In addition, the FDA may require
post-approval trials, including Phase 4 clinical trials, to further
assess a drug’s safety and effectiveness after NDA approval
and may require testing and surveillance programs to monitor the
safety of approved products that have been
commercialized.
Expedited Development and Review Programs
The FDA
has various programs, including fast track, priority review,
accelerated approval, and breakthrough therapy designation, that
are intended to increase agency interactions, expedite or
facilitate the process for reviewing drug candidates, and/or
provide for initial approval on the basis of surrogate endpoints.
We believe that LADAVRU® may qualify for some of these
expedited development and review programs. Even if a drug candidate
qualifies for one or more of these programs, the FDA may later
decide that the drug candidate no longer meets the conditions for
qualification. The Fast Track program is intended to expedite or
facilitate the process for reviewing new drugs that meet certain
criteria. Specifically, new drugs are eligible for Fast Track
designation if they are intended to treat a serious or
life-threatening condition and demonstrate the potential to address
unmet medical needs for the condition. Fast Track designation
applies to the combination of the product and the specific
indication for which it is being studied. The sponsor of a new drug
may request the FDA to designate the drug as a Fast Track product
at any time during the clinical development of the product. Unique
to a Fast Track product, the FDA may consider for review sections
of the marketing application on a rolling basis before the complete
application is submitted, if the sponsor provides a schedule for
the submission of the sections of the application, the FDA agrees
to accept sections of the application and determines that the
schedule is acceptable, and the sponsor pays any required user fees
upon submission of the first section of the
application.
27
Any
product submitted to the FDA for marketing, including under a Fast
Track program, may be eligible for other types of FDA programs
intended to expedite development and review, such as priority
review and accelerated approval. Any product is eligible for
priority review if it has the potential to provide safe and
effective therapy where no satisfactory alternative therapy exists
or a significant improvement in the treatment, diagnosis or
prevention of a disease compared to marketed products. The FDA will
attempt to direct additional resources to the evaluation of an
application for a new drug designated for priority review in an
effort to facilitate the review. Additionally, a product may be
eligible for accelerated approval. Drug candidates studied for
their safety and effectiveness in treating serious or
life-threatening illnesses and that provide meaningful therapeutic
benefit over existing treatments may receive accelerated approval,
which means that they may be approved on the basis of adequate and
well-controlled clinical trials establishing that the product has
an effect on a surrogate endpoint that is reasonably likely to
predict a clinical benefit, or on the basis of an effect on a
clinical endpoint other than survival or irreversible
morbidity.
As a
condition of approval, the FDA may require that a sponsor of a drug
receiving accelerated approval perform adequate and well-controlled
postmarketing clinical studies. Failure to conduct required
post-approval trials, or the inability to confirm a clinical
benefit during post-marketing trials, may allow the FDA to withdraw
the drug from the market on an expedited basis. In addition, the
FDA presently requires as a condition for accelerated approval
pre-approval of promotional materials, which could adversely impact
the timing of the commercial launch of the product. Fast Track
designation, priority review and accelerated approval do not change
the standards for approval but may expedite the development or
approval process. The Food and Drug Administration Safety and
Innovation Act of 2012 also amended the FDCA to require FDA to
expedite the development and review of a breakthrough therapy. A
drug can be designated as a breakthrough therapy if it is intended
to treat a serious or life-threatening disease or condition and
preliminary clinical evidence indicates that it may demonstrate
substantial improvement over existing therapies on one or more
clinically significant endpoints. A sponsor may request that a drug
be designated as a breakthrough therapy at any time during the
clinical development of the product. If so designated, FDA shall
act to expedite the development and review of the product’s
marketing application, including by meeting with the sponsor
throughout the product’s development, providing timely advice
to the sponsor to ensure that the development program to gather
nonclinical and clinical data is as efficient as practicable,
involving senior managers and experienced review staff in a
cross-disciplinary review, assigning a cross-disciplinary project
lead for the FDA review team to facilitate an efficient review of
the development program and to serve as a scientific liaison
between the review team and the sponsor, and taking steps to ensure
that the design of the clinical trials is as efficient as
practicable.
Post-Approval Requirements
Any
products for which we may receive future FDA approval are subject
to continuing regulation by the FDA, including, among other things,
recordkeeping requirements, reporting and analysis of adverse
experiences with the product, providing the FDA with updated
safety, efficacy and quality information, product sampling and
distribution requirements, maintaining up-to- date labels,
warnings, and contraindications, and complying with promotion and
advertising requirements. Products may be promoted only for the
approved indications and in accordance with the approved label;
products cannot be promoted for unapproved, or off-label, uses,
although physicians may prescribe drugs for off-label uses in
accordance with the practice of medicine. Manufacturers must
continue to comply with cGMP requirements, which are extensive and
require considerable time, resources and ongoing investment to
ensure compliance. In addition, changes to manufacturing processes
often require prior FDA approval before being implemented and other
types of changes to the approved product, such as adding new
indications and additional labeling claims, are also subject to
further FDA review and approval. In addition, the FDA may require
testing and surveillance programs to monitor the effect of approved
products that have been commercialized, and the FDA has the power
to prevent or limit further marketing of a product based on the
results of these post-marketing programs. Manufacturers and other
entities involved in the manufacturing and distribution of approved
products are required to register their establishments with the FDA
and certain state agencies, and are subject to periodic inspections
for compliance with cGMPs and other laws. FDA and state inspections
may identify compliance issues at manufacturing that may disrupt
production or distribution or may require substantial resources to
correct.
Once an
approval is granted, the FDA may withdraw the approval if
compliance with regulatory standards is not maintained or if
problems occur after the product reaches the market, such as
adverse events, the existence or severity of which was unknown when
the product was approved. Later discovery of previously unknown
problems with a product may result in restrictions on the product
or complete withdrawal from the market.
Further, the
failure to maintain compliance with regulatory requirements may
result in administrative or judicial actions, such as fines,
warning letters, holds on clinical trials, product recalls or
seizures,product detention or refusal to permit the import or
export of products,
refusal
to approve pending applications or supplements, restrictions on
marketing or manufacturing, injunctions or civil or criminal
payments or penalties. From time to time, new legislation is
enacted that changes the statutory provisions governing the
approval, manufacturing, and marketing of products regulated by the
FDA. In addition, FDA regulations and guidance may be revised or
reinterpreted by the agency in ways that may significantly affect
our business and our products. It is impossible to predict whether
further legislative or regulatory or policy changes will occur or
be implemented and what the impact of such changes, if any, may
be.
28
Patent Term Restoration and Marketing Exclusivity
Depending upon the
timing, duration, and specifics of FDA approval of the use of our
drug candidates, some of our U.S. patents, if issued, may be
eligible for limited patent term extension under the Drug Price
Competition and Patent Term Restoration Act of 1984, referred to as
the Hatch-Waxman Act. The HatchWaxman Act permits a patent term to
be extended up to five years as compensation for patent term
effectively lost due to the FDA’s pre-market approval
requirements. However, patent term restoration cannot extend the
remaining term of a patent beyond a total of 14 years from the
product’s approval date. The patent term restoration period
is generally one-half the time between the effective date of an IND
and the submission date of an NDA, plus the time between the
submission date of an NDA and the approval of that application,
except that the review period is reduced by any time during which
the applicant failed to exercise due diligence. Only one patent
applicable to an approved drug is eligible for the extension.
Extensions are not granted as a matter of right and the extension
must be applied for prior to expiration of the patent and within a
60 day period from the date the product is first approved for
commercial marketing. The U.S. Patent and Trademark Office, in
consultation with the FDA, reviews and approves the application for
any patent term extension or restoration. Where a product contains
multiple active ingredients, if any one active ingredient has not
been previously approved, it can form the basis of an extension of
patent term provided the patent claims that ingredient or the
combination.
In the
future, we may apply for patent term restoration for some of our
presently owned patents to add patent life beyond their current
expiration date, depending on the expected length of clinical
trials and other factors involved in the submission of the relevant
NDA; however, there can be no assurance that any such extension
will be granted to us.
Market
exclusivity provisions under the FDCA also can delay the submission
or the approval of certain applications. The specific scope varies,
but fundamentally the FDCA provides a five-year period of
non-patent marketing exclusivity within the United States to the
first applicant to gain approval of an NDA for a new chemical
entity never previously approved by the FDA either alone or in
combination. For a new chemical entity that was issued orphan drug
designation, the FDCA provides marketing exclusivity for the
“same drug” and “same indication” for a
period of seven years. A drug is a new chemical entity if the FDA
has not previously approved any other new drug containing the same
active moiety, which is the compound responsible for the action of
the drug substance. During the exclusivity period, the FDA may not
accept for review an abbreviated new drug application, or ANDA, or
a 505(b)(2) NDA submitted by another company for another version of
such drug where the applicant does not own or have a legal right of
reference to all the data required for approval. However, an
application may be submitted after four years if it contains a
certification of patent invalidity or non-infringement. The FDCA
also provides three years of marketing exclusivity for an NDA,
505(b)(2) NDA, or supplement to an existing NDA if new clinical
investigations, other than bioavailability trials, that were
conducted or sponsored by the applicant are deemed by the FDA to be
essential to the approval of the application, for example, for new
indications, dosages, or strengths of an existing drug. This
three-year exclusivity covers only the conditions associated with
the new clinical investigations and does not prohibit the FDA from
approving ANDAs for drugs containing the original active agent.
Five-year and three-year exclusivity will not delay the submission
or approval of a full NDA. However, an applicant submitting a full
NDA would be required to conduct or obtain a right of reference to
all of the preclinical trials and adequate and well controlled
clinical trials necessary to demonstrate safety and
effectiveness.
Pediatric Information and Exclusivity
Under
the FDCA, NDAs and certain supplements to NDAs must contain data
adequate to assess the safety and effectiveness of the drug for the
claimed indications in all relevant pediatric subpopulations and to
support dosing and administration for each pediatric subpopulation
for which the drug is safe and effective. Recently, the Food and
Drug Administration Safety and Innovation Act, or FDASIA, which was
signed into law on July 9, 2012, amended the FDCA. FDASIA requires
that a sponsor who is planning to submit a marketing application
for a drug or biological product that includes a new active
ingredient, new indication, new dosage form, new dosing regimen or
new route of administration submit an initial Pediatric Study Plan,
or PSP, within 60 days of an end-of-phase 2 meeting or as may be
agreed between the sponsor and the FDA. The initial PSP must
include an outline of the pediatric study or studies that the
sponsor plans to conduct, including study objectives and design,
age groups, relevant endpoints and statistical approach, or a
justification for not including such detailed information, and any
request for a deferral of pediatric assessments or a full or
partial waiver of the requirement to provide data from pediatric
studies along with supporting information. The FDA and the sponsor
must reach agreement on the PSP. A sponsor can submit amendments to
an agreed-upon initial PSP at any time if changes to the pediatric
plan need to be considered based on data collected from nonclinical
studies, early phase clinical trials, and/or other clinical
development programs.
Orphan Drug Designation
Under
the Orphan Drug Act, the FDA may grant orphan drug designation to
drug candidates intended to treat a rare disease or condition,
which is generally a disease or condition that affects fewer than
200,000 individuals in the United States, or more than 200,000
individuals in the United States and for which there is no
reasonable expectation that cost of research and development of the
drug for the indication can be recovered by sales of the drug in
the United States. Orphan drug designation must be requested before
submitting an NDA. After the FDA grants orphan drug designation,
the identity of the therapeutic agent and its potential orphan use
are disclosed publicly by the FDA. Although there may be some
increased communication opportunities, orphan drug designation does
not convey any advantage in or shorten the duration of the
regulatory review and approval process.
29
If a
drug candidate that has orphan drug designation subsequently
receives the first FDA approval for the disease for which it has
such designation, the product is entitled to orphan drug
exclusivity, which means that the FDA may not approve any other
applications to market the same drug for the same indication for
seven years, except in very limited circumstances, such as if the
second applicant demonstrates the clinical superiority of its
product. Orphan drug exclusivity does not prevent the FDA from
approving a different drug for the same disease or condition, or
the same drug for a different disease or condition. Among the other
benefits of orphan drug designation are tax credits for certain
research and a waiver of the NDA application user fee. Orphan drug
exclusivity could block the approval of our drug candidates for
seven years if a competitor obtains approval of the same product as
defined by the FDA or if our drug candidate is determined to be
contained within the competitor’s product for the same
indication or disease.
The
Orphan Products Grants Program in the FDA’s Office of Orphan
Products Development, with an annual budget of approximately $14.0
million, supports clinical development of products including drugs,
biologics, medical devices and medical foods for use in rare
diseases and conditions where no therapy exists or where the
proposed product will be superior to the existing therapy. This
program provides grants for clinical studies on safety and/or
effectiveness that will either result in, or substantially
contribute to, market approval of these products.
From
time to time, legislation is drafted and introduced in Congress
that could significantly change the statutory provisions governing
the approval, manufacturing and marketing of drug products. In
addition, FDA regulations and guidance are often revised or
reinterpreted by the agency or reviewing courts in ways that may
significantly affect our business and development of our product
candidates and any products that we may commercialize. It is
impossible to predict whether additional legislative changes will
be enacted, or FDA regulations, guidance or interpretations
changed, or what the impact of any such changes may be. Federal
budget uncertainties or spending reductions may reduce the
capabilities of the FDA, extend the duration of required regulatory
reviews, and reduce the availability of clinical research
grants.
As in
the United States, we may apply for designation of a drug candidate
as an orphan drug for the treatment of a specific indication in the
European Union before the application for marketing authorization
is made. Orphan drugs in the European Union enjoy economic and
marketing benefits, including up to 10 years of market exclusivity
for the approved indication unless another applicant can show that
its product is safer, more effective or otherwise clinically
superior to the orphan designated product.
The FDA
and foreign regulators expect holders of exclusivity for orphan
drugs to assure the availability of sufficient quantities of their
orphan drugs to meet the needs of patients. Failure to do so could
result in the withdrawal of marketing exclusivity for the orphan
drug.
Pharmaceutical Coverage, Pricing, and Reimbursement
United States
Even if
the FDA approves NDAs for our drug candidates, sales of our
products will depend, in part, on the availability of coverage and
reimbursement by third-party payors, such as government health
programs, commercial or private insurance, and managed care
organizations. The process for determining whether a payor will
provide coverage for a drug product may be separate from the
process for setting the reimbursement rate that the payor will pay
for the drug product. Third-party payors may limit coverage to
specific drug products on an approved list, or formulary, which
might not include all of the FDA-approved drugs for a particular
indication. Moreover, a payor’s decision to provide coverage
for a drug product does not imply that an adequate reimbursement
rate will be approved. Adequate third-party reimbursement may not
be available to enable us to maintain price levels sufficient to
realize an appropriate return on our investment in product
development.
The
marketability of any products for which we receive regulatory
approval for commercial sale may suffer if the government and
third-party payors fail to provide adequate coverage and
reimbursement. In addition, an increasing emphasis on cost
containment measures in the United States has increased and we
expect will continue to increase the pressure on pharmaceutical
pricing. Coverage policies and third-party reimbursement rates may
change at any time. Even if favorable coverage and reimbursement
status is attained for one or more products for which we receive
regulatory approval, less favorable coverage policies and
reimbursement rates may be implemented in the future.
European Union
In
Europe and many other foreign countries, the success of our drug
candidates we may develop depends largely on obtaining and
maintaining government reimbursement, because in many foreign
countries patients are unlikely to use prescription pharmaceutical
products that are not reimbursed by their governments. Negotiating
reimbursement rates in foreign countries can delay the
commercialization of a pharmaceutical product and generally results
in a reimbursement rate that is lower than the net price that
companies can obtain for the same product in the United
States.
30
In some
countries, such as Germany, commercial sales of a product can begin
while the reimbursement rate that a company will receive in future
periods is under discussion. In other countries, a company must
complete the reimbursement discussions prior to the commencement of
commercial sales of the pharmaceutical product. The requirements
governing drug pricing vary widely from country to country. For
example, the European Union provides options for its member states
to restrict the range of drugs for which their national health
insurance systems provide reimbursement and to control the prices
of drugs for human use. A member state may approve a specific price
for the drug or it may instead adopt a system of direct or indirect
controls on the profitability of the company placing the drug on
the market. Recently, many countries in the European Union have
increased the amount of discounts required on pharmaceuticals and
these efforts could continue as countries attempt to manage
healthcare expenditures, especially in light of the severe fiscal
and debt crises experienced by many countries in the European
Union. There can be no assurance that any country that has price
controls or reimbursement limitations for pharmaceutical products
will allow favorable reimbursement and pricing arrangements for any
of our products, if approved in those countries.
Other U.S. Healthcare Laws and Compliance Requirements
Pharmaceutical
companies also are subject to various federal and state laws
pertaining to healthcare fraud and abuse, including anti-kickback
laws and false claims laws, and the reporting of payments to
physicians and teaching hospitals. In addition, we may be subject
to patient privacy regulation by both the federal government and
the states in which we conduct our business. In March 2010, the
Patient Protection and Affordable Health Care Act, as amended by
the Health Care and Education Reconciliation Act of 2010,
collectively, PPACA, was enacted, which includes measures that have
or will significantly change the way healthcare is financed by both
governmental and private insurers. Among the provisions of PPACA of
greatest importance to the biopharmaceutical industry are the
following:
●
The Medicaid Drug
Rebate Program requires pharmaceutical manufacturers to enter into
and have in effect a national rebate agreement with the Secretary
of the Department of Health and Human Services, a condition for
states to receive federal matching funds for the
manufacturer’s outpatient drugs furnished to Medicaid
patients. Effective in 2010, PPACA made several changes to the
Medicaid Drug Rebate Program, including increasing pharmaceutical
manufacturers’ rebate liability by raising the minimum basic
Medicaid rebate on most branded prescription drugs and biologic
agents from 15.1% of average manufacturer price, or AMP, to 23.1%
of AMP and adding a new rebate calculation for “line
extensions” (i.e., new formulations, such as extended release
formulations) of solid oral dosage forms of branded products, as
well as potentially impacting their rebate liability by modifying
the statutory definition of AMP. PPACA also expanded the universe
of Medicaid utilization subject to drug rebates by requiring
pharmaceutical manufacturers to pay rebates on Medicaid managed
care utilization as of 2010 and by expanding the population
potentially eligible for Medicaid drug benefits, to be phased-in by
2014. The Centers for Medicare and Medicaid Services, or CMS, have
proposed to expand Medicaid rebate liability to the territories of
the United States as well. In addition, PPACA provides for the
public availability of retail survey prices and certain weighted
average AMPs under the Medicaid program. The implementation of this
requirement by the CMS may also provide for the public availability
of pharmacy acquisition of cost data, which could negatively impact
our sales.
●
In order for a
pharmaceutical product to receive federal reimbursement under the
Medicare Part B and Medicaid programs or to be sold directly to
U.S. government agencies, the manufacturer must extend discounts to
entities eligible to participate in the 340B drug pricing program.
The required 340B discount on a given product is calculated based
on the AMP and Medicaid rebate amounts reported by the
manufacturer. Effective in 2010, PPACA expanded the types of
entities eligible to receive discounted 340B pricing, although,
under the present state of the law, with the exception of
children’s hospitals, these newly eligible entities will not
be eligible to receive discounted 340B pricing on orphan drugs when
used for the orphan indication. In addition, as 340B drug pricing
is determined based on AMP and Medicaid rebate data, the revisions
to the Medicaid rebate formula and AMP definition described above
could cause the required 340B discount to increase.
●
Effective in 2011,
PPACA imposed a requirement on manufacturers of branded drugs and
biologic agents to provide a 50% discount off the negotiated price
of branded drugs dispensed to Medicare Part D patients in the
coverage gap ( i.e. , “donut hole”).
●
Effective in 2011,
PPACA imposed an annual, nondeductible fee on any entity that
manufactures or imports certain branded prescription drugs and
biologic agents, apportioned among these entities according to
their market share in certain government healthcare programs,
although this fee would not apply to sales of certain products
approved exclusively for orphan indications.
●
As part of efforts
to further transparency of payments made by pharmaceutical
companies to physicians, PPACA required manufacturers to track
certain financial arrangements with physicians and teaching
hospitals, including any “transfer of value” made or
distributed to such entities, as well as any investment interests
held by physicians and their immediate family members.
Manufacturers were required to begin reporting this information to
CMS beginning in 2014. Annual reporting is required and records of
payments are publicly available for review on the CMS
website.
●
As of 2010, a new
Patient-Centered Outcomes Research Institute was established
pursuant to PPACA to oversee, identify priorities in, and conduct
comparative clinical effectiveness research, along with funding for
such research. The research conducted by the Patient-Centered
Outcomes Research Institute may affect the market for certain
pharmaceutical products.
●
PPACA created the
Independent Payment Advisory Board, or IPAB, which has authority to
recommend certain changes to the Medicare program to reduce
expenditures by the program that could result in reduced payments
for prescription drugs. However, the IPAB implementation has been
not been clearly defined. PPACA provided that under certain
circumstances, IPAB recommendations will become law unless Congress
enacts legislation that will achieve the same or greater Medicare
cost savings.
●
PPACA established
the Center for Medicare and Medicaid Innovation within CMS to test
innovative payment and service delivery models to lower Medicare
and Medicaid spending, potentially including prescription drug
spending. Funding has been allocated to support the mission of the
Center for Medicare and Medicaid Innovation from 2011 to
2019.
31
Anti-kickback Laws
U.S.
federal laws, including the federal Anti-Kickback Statute, prohibit
fraud and abuse involving state and federal healthcare programs,
such as Medicare and Medicaid. These laws are interpreted broadly
and enforced aggressively by various federal agencies, including
CMS, the Department of Justice, and the Office of Inspector General
for the U.S. Department of Health and Human Services, or HHS, and
various state agencies. These anti-kickback laws prohibit, among
other things, knowingly and willfully offering, paying, soliciting,
receiving, or providing remuneration, directly or indirectly, in
exchange for or to induce either the referral of an individual, or
the furnishing, arranging for, or recommending of an item or
service that is reimbursable, in whole or in part, by a federal
healthcare program. Remuneration is broadly defined to include
anything of value, such as cash payments, gifts or gift
certificates, discounts, or the furnishing of services, supplies,
or equipment. The anti-kickback laws are broad and prohibit many
arrangements and practices that are lawful in businesses outside of
the healthcare and biopharmaceutical industry. A person or entity
need not have actual knowledge of the federal Anti-Kickback Statute
or specific intent to violate it in order to have committed a
violation.
The
penalties for violating the anti-kickback laws can be severe. The
sanctions include criminal and civil penalties, and possible
exclusion from the federal healthcare programs. Many states have
adopted laws similar to the federal anti-kickback laws, and some
apply to items and services reimbursable by any payor, including
third-party payors.
Federal and State Prohibitions on False Claims
The
federal False Claims Act imposes liability on any person or entity
that, among other things, knowingly presents, or causes to be
presented, a false or fraudulent claim for payment under federal
programs (including Medicare and Medicaid). Under the False Claims
Act, a person acts knowingly if he has actual knowledge of the
information or acts in deliberate ignorance or in reckless
disregard of the truth or falsity of the information. Although we
would not submit claims directly to government payors,
manufacturers can be held liable under the False Claims Act if they
are deemed to “cause” the submission of false or
fraudulent claims by, for example, providing inaccurate billing or
coding information to customers or promoting a product off-label.
In addition, our future activities relating to the reporting of
wholesaler or estimated retail prices for our products, the
reporting of prices used to calculate Medicaid rebate information
and other information affecting federal, state, and third-party
reimbursement for our products, and the sale and marketing of our
products, are subject to scrutiny under this law.
Provisions of the
False Claims Act allow a private individual to bring an action on
behalf of the federal government and to share in any amounts paid
by the defendant to the government in connection with the action.
The number of filings under these provisions has increased
significantly in recent years. Conduct that violates the False
Claims Act may also lead to exclusion from the federal healthcare
programs. In addition, various states have enacted similar laws
modeled after the False Claims Act that apply to items and services
reimbursed under Medicaid and other state healthcare programs, and,
in several states, such laws apply to claims submitted to all
payers.
Federal Prohibitions on Healthcare Fraud and False Statements
Related to Healthcare Matters
There
are numerous federal and state laws protecting the privacy and
security of protected health information. Additionally, a number of
related crimes can be prosecuted related to healthcare fraud, false
statements relating to healthcare matters, theft or embezzlement in
connection with a health benefit program, and obstruction of
criminal investigation of healthcare offenses. The healthcare fraud
statute prohibits knowingly and willfully executing a scheme to
defraud any healthcare benefit program, including a private
insurer. Violation of any of these laws is a felony and may result
in fines or exclusion from the federal healthcare
programs.
Physician Payment Sunshine Act
The
Physician Payment Sunshine Act requires most pharmaceutical
manufacturers to report annually to the Secretary of HHS any and
all financial arrangements, payments, or other transfers of value
made by that entity to physicians and teaching hospitals. The
payment information is made publicly available in a searchable
format on a CMS website. Over the next several years, we will need
to dedicate significant resources to establish and maintain systems
and processes in order to comply with these regulations. Failure to
comply with the reporting requirements can result in significant
civil monetary penalties. Similar laws have been enacted or are
under consideration in foreign jurisdictions, including France
which has adopted the Loi Bertrand , or French Sunshine Act, which
became effective in 2013.
The Foreign Corrupt Practices Act
The
Foreign Corrupt Practices Act prohibits U.S. companies and their
representatives from offering, promising, authorizing, or making
payments to foreign officials for the purpose of obtaining or
retaining business abroad. In many countries, the healthcare
professionals we regularly interact with may meet the definition of
a foreign government official for purposes of the Foreign Corrupt
Practices Act.
32
Other Regulations
In
addition to the statutes and regulations described above, we also
are subject to regulation in the United States under the
Occupational Safety and Health Act, the Environmental Protection
Act, the Toxic Substances Control Act, the Resource Conservation
and Recovery Act, and other federal, state, local and foreign
statutes and regulations, now or hereafter in effect.
Foreign Regulation
In
addition to regulations in the United States, we are subject to a
variety of foreign regulations governing clinical trials,
distribution, and future commercial sales of our products. Whether
or not we obtain FDA approval for a drug candidate, we must obtain
approval by the comparable regulatory authorities of foreign
countries or economic areas, such as the European Union, before we
can commence clinical trials or market products in those countries
or areas. The approval process and requirements governing the
conduct of clinical trials, product licensing, pricing and
reimbursement vary greatly from place to place, and the time may be
longer or shorter than that required for FDA approval.
Under
European Union regulatory systems, a company may submit marketing
authorization applications either under a centralized or
decentralized procedure. The centralized procedure, which is
compulsory for medicines produced by biotechnology or those
medicines intended to treat AIDS, cancer, neurodegeneration, or
diabetes and optional for those medicines that are highly
innovative, provides for the grant of a single marketing
authorization that is valid for all European Union member states.
The decentralized procedure provides for approval by one or more
“concerned” member states based on an assessment of an
application performed by one member state, known as the
“reference” member state. Under the decentralized
approval procedure, an applicant submits an application, or
dossier, and related materials to the reference member state and
concerned member states. The reference member state prepares a
draft assessment and drafts of the related materials within 120
days after receipt of a valid application. Within 90 days of
receiving the reference member state’s assessment report,
each concerned member state must decide whether or not to approve
the assessment report and related materials. If a member state does
not recognize the marketing authorization, the disputed points are
eventually referred to the European Commission, whose decision is
binding on all member states.
Employees
As of
Sept 13, 2017, we employed 3 employees. We have never had a work
stoppage, and none of our employees is represented by a labor
organization or under any collective-bargaining arrangements. We
consider our employee relations to be good.
The
Company
History
On
September 8th, 2017, “Hoverink Biotechnologies, Inc., a
Delaware corporation, (the “ Company ”), with the
approval of its board of directors and shareholders owning a
majority of the Company’s issued and outstanding shares by
written consent in lieu of a meeting, filed a Certificate of Change
(the “ Certificate of Change ”) with the Secretary of
State of Delaware. As a result of the Certificate of Change, the
Company will be changing its name to “Hoverink
Biotechnologies, Inc.” , effective as of September 11, 2017.
In February 2015, the Company implemented a change of control by
issuing shares to new shareholders, redeeming shares of existing
shareholders, electing new officers and directors and accepting the
resignations of its then existing officers and directors. In
connection with the change of control, the shareholders of the
Company and its board of directors unanimously approved the change
of the Company’s name from Sky Run Acquisition Corporation to
Hoverink International Holdings, Inc. Prior to this the company was
a shell as defined in Rule 405. The company ceased being a shell as
of Feb 15th 2016. We were incorporated in Delaware in July 2013 as
Skyrun Acquistion Corporation. Our principal executive offices are
located at 1801 Century Park E., 24th Floor Los Angeles, California
90067:866-443-4666 Our website address is in beta at
https://hoverinkbiotech.yolasite.com/
We do
not incorporate the information on or accessible through our
website into this prospectus, and you should not consider any
information contained in, or that can be accessed through, our
website as part of this prospectus.
This
prospectus contains references to our trademarks and to trademarks
belonging to other entities. Solely for convenience, trademarks and
trade names referred to in this prospectus, including logos,
artwork, and other visual displays, may appear without the ®
or ™ symbols, but such references are not intended to
indicate, in any way, that we will not assert, to the fullest
extent under applicable law, our rights or the rights of the
applicable licensor to these trademarks and trade names. We do not
intend our use or display of other companies’ trade names or
trademarks to imply a relationship with, or endorsement or
sponsorship of us by, any other companies. Except where the context
requires otherwise, in this prospectus “Company,”
“Hoverink,” “HRBH” “we,”
“us” and “our” refer to “Hoverink
Biotechnologies, Inc.”
The
Company is located at Hoverink Biotechnologies, Inc. 1801 Century
Park E., 24th Floor Los Angeles, California 90067
888-443-4666.
33
About
Us
We are
an innovative preclinical biopharmaceutical company committed to
the discovery development, manufacturing and commercializing
LADAVRU® and biosimilars. The liver is a vital organ that
plays an extremely important role in human metabolism and other key
physiologic functions. Rare disorders like Cirrhosis, Cirrhosis
ascites are associated with the liver, many of which have severe or
even fatal consequences for patients, and collectively represent a
significant unmet medical need. Our product candidate LADAVRU®
focuses on Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and chronic
pain, nausea and discomfort associated with chemotherapy; our goals
consist of primarily serving readily identifiable patient
populations suffering from Cancer, Cirrhosis, Cirrhosis ascites,
AIDS, and chronic pain, nausea and discomfort associated with
chemotherapy particularly for patients using anthracyclines with
the intention of targeting the treatment of relapsed or refractory
AML. Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung cancers. The
nature of these diseases permits us to leverage highly predictive
preclinical models and well-described, and often clinically
validated, biomarkers to shorten time to clinical proof of
concept.
We
intend to submit patent applications for formulation, synthetic
process and reconstitution related to our LADAVRU® drug
product candidate, although there is no assurance that we will be
successful in obtaining such patent protection. Independently from
potential patent protection, we believe LADAVRU® will qualify
for Orphan Drug status, which could entitle us to market
exclusivity of up to 7 and 10 years from the date of approval of a
New Drug Application (NDA) and Marketing Authorization (MA), in the
US and the European Union (EU), respectively. However, there can be
no assurance that such status will be granted. Separately, the FDA
may also grant market exclusivity of up to five years for newly
approved new chemical entities (of which LADAVRU® would be
one), but there can be no assurance that such exclusivity will be
granted or, if granted, for how long.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CON’T)
This Management’s Discussion and Analysis of Financial
Condition and Results of Operations (“MD&A”)
contains certain forward-looking statements. Historical results may
not indicate future performance. Our forward-looking statements
reflect our current views about future events, are based on
assumptions and are subject to known and unknown risks and
uncertainties that could cause actual results to differ materially
from those contemplated by these statements. Factors that may cause
differences between actual results and those contemplated by
forward-looking statements include, but are not limited to, those
discussed in “Risk Factors.” We undertake no obligation
to publicly update or revise any forward- looking statements,
including any changes that might result from any facts, events, or
circumstances after the date hereof that may bear upon
forward-looking statements. Furthermore, we cannot guarantee future
results, events, levels of activity, performance, or
achievements.
Highlights
Our
Drug Candidate LADAVRU®
Our
lead product candidate is LADAVRU®, We are an innovative
preclinical biopharmaceutical company committed to the discovery
development, manufacturing and commercializing LADAVRU® and
biosimilars. Our product candidate LADAVRU® focuses on Cancer,
Cirrhosis, Cirrhosis ascites, AIDS, and chronic pain, nausea and
discomfort associated with chemotherapy; our goals consist of
primarily serving readily identifiable patient populations
suffering from Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and
chronic pain, nausea and discomfort associated with chemotherapy
particularly for patients using anthracyclines with the intention
of targeting the treatment of relapsed or refractory AML.
Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung
cancers.
LADAVRU®
focuses on treating chronic pain, nausea and discomfort associated
with chemotherapy particularly for patients using anthracyclines
with the intention of targeting the treatment of relapsed or
refractory AML and chronic pain, nausea and discomfort associated
with Cancer, Cirrhosis, Cirrhosis ascites, AIDS. We also intend to
pursue Orphan Drug status for LADAVRU®. The prevalence ceiling
for qualifying rare diseases under the US Orphan Drug Act is
200,000 patients and proportionally similar guidelines exist in the
EU.
The
most recently published prevalence statistics from the National
Cancer Institute reported that the number of people living beyond a
cancer diagnosis reached nearly 14.5 million in 2014 and is
expected to rise to almost 19 million by 2024. In 2016, an
estimated 1,685,210 new cases of cancer will be diagnosed in the
United States and 595,690 people will die from the disease. The
number of new cases of cancer (cancer incidence) is 454.8 per
100,000 men and women per year (based on 2008-2012 cases). The
trend data since that publication would indicate that the
prevalence today should still be well below the 200,000 patient
limitation for Orphan Drugs, which would permit LADAVRU® for
the treatment of chronic pain, nausea and discomfort associated
with chemotherapy particularly for patients using anthracyclines
with the intention of targeting the treatment of relapsed or
refractory AML to qualify for Orphan Drug status. However, we can
provide no assurance that we will be successful in obtaining Orphan
Drug status for LADAVRU®.
34
JOBS
Act and Recent Accounting Pronouncements
The
recently enacted JOBS Act provides that an “emerging growth
company” can take advantage of the extended transition period
provided in Section 7(a)(2)(B) of the Securities Act of 1933, as
amended, for complying with new or revised accounting standards. In
other words, an “emerging growth company” can delay the
adoption of certain accounting standards until those standards
would otherwise apply to private companies. We have irrevocably
elected not to avail ourselves of this extended transition period
and, as a result, we will adopt new or revised accounting standards
on the relevant dates on which adoption of such standards is
required for other public companies.
We have
implemented all new accounting pronouncements that are in effect
and may impact our financial statements and we do not believe that
there are any other new accounting pronouncements that have been
issued that might have a material impact on our financial position
or results of operations.
Critical
Accounting Policies and Significant Judgments and
Estimates
The
financial statements have been prepared in accordance with
generally accepted accounting principles in the United States, or
GAAP. The preparation of these financial statements requires us to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the
reported expenses incurred during the reporting periods. Our
estimates are based on our historical experience and on various
other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.
We
believe that the following accounting policies are the most
critical to aid in fully understanding and evaluating our reported
financial results, and they require our most difficult, subjective
or complex judgments, resulting from the need to make estimates
about the effect of matters that are inherently uncertain
.
Beneficial
Conversion Feature
From
time to time, we may issue convertible notes that have conversion
prices that create an embedded beneficial conversion feature on the
issuance date. A beneficial conversion feature exists on the date a
convertible note is issued when the fair value of the underlying
common stock to which the note is convertible into is in excess of
the remaining unallocated proceeds of the note after first
considering the allocation of a portion of the note proceeds to the
fair value of any attached equity instruments, if any related
equity instruments were granted with the debt. We estimate the fair
value of our common stock using the most recent selling price
available. The intrinsic value of the beneficial conversion feature
is recorded as a debt discount with a corresponding amount to
additional paid-in capital. The debt discount is amortized to
interest expense over the life of the note using the effective
interest method.
Research
and Development Costs
We
shall record accrued expenses for estimated costs of our research
and development activities conducted by third-party service
providers, which include the conduct of pre-clinical studies and
clinical trials and contract manufacturing activities. We shall
record the estimated costs of research and development activities
based upon the estimated amount of services provided but not yet
invoiced, and we include these costs in accrued liabilities in the
balance sheets and within research and development expense in the
statement of operations. We shall record accrued expenses for these
costs based on the estimated amount of work completed and in
accordance with agreements established with these third
parties.
We
estimate the amount of work completed through discussions with
internal personnel and external service providers as to the
progress or stage of completion of the services and the agreed-
upon fee to be paid for such services. We make significant
judgments and estimates in determining the accrued balance in each
reporting period. As actual costs become known, we adjust our
accrued estimates. Although we do not expect our estimates to be
materially different from amounts actually incurred, our
understanding of the status and timing of services performed, the
number of patients enrolled and the rate of patient enrollment may
vary from our estimates and could result in us reporting amounts
that are too high or too low in any particular period. Our accrued
expenses are dependent, in part, upon the receipt of timely and
accurate reporting from clinical research organizations and other
third-party service providers. To date, there have been no material
differences from our accrued expenses to actual
expenses.
Impairment
of Long-Lived Assets
Management reviews
long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
realizable or at a minimum annually during the fourth quarter of
the year. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset are compared to
the asset’s carrying value to determine if an impairment of
such asset is necessary. The effect of any impairment would be to
expense the difference between the fair value of such asset and its
carrying value.
35
Components
of our Results of Operations and Financial Condition
Operating
expenses
We
intend to classify our operating expenses into three categories:
research and development, general and administrative and
depreciation. Research and development. Research and development
expenses consist primarily of:
●
costs incurred to
conduct research, such as the discovery and development of our
product candidates;
●
costs related to
production of clinical supplies, including fees paid to contract
manufacturers;
●
fees paid to
clinical consultants, clinical trial sites and vendors, including
clinical research organizations in conjunction with implementing
and monitoring our clinical trials and acquiring and
evaluating clinical trial data, including all related fees, such as
patient screening fees, laboratory work and statistical compilation
and analysis; and
●
costs related to
compliance with drug development regulatory
requirements.
We
intend to recognize all research and development costs as they are
incurred. Clinical trial costs, contract manufacturing and other
development costs incurred by third parties are expensed as the
contracted work is performed.
We
expect our research and development expenses to increase in the
future as we advance our product candidates into and through
clinical trials and pursue regulatory approval of our product
candidates in the United States and Europe. The process of
conducting the necessary clinical research to obtain regulatory
approval is costly and time-consuming. The actual probability of
success for our product candidates may be affected by a variety of
factors including: the quality of our product candidates, early
clinical data, investment in our clinical program, competition,
manufacturing capability and commercial viability. We may never
succeed in achieving regulatory approval for any of our product
candidates. As a result of the uncertainties discussed above, we
are unable to determine the duration and completion costs of our
research and development projects or when and to what extent we
will generate revenue from the commercialization and sale of our
product candidates.
General and administrative.
General
and administrative expense consists of personnel related costs,
which include salaries, as well as the costs of professional
services, such as accounting and legal, facilities, information
technology and other administrative expenses. We expect our general
and administrative expense to increase following the completion of
this offering due to the anticipated growth of our business and
related infrastructure as well as accounting, insurance, investor
relations and other costs associated with becoming a public
company.
Depreciation.
Depreciation
expense consists of depreciation on our property and equipment. We
depreciate our assets over their estimated useful life. We estimate
machinery and equipment to have a 5-year life and furniture and
fixtures to have a 7-year life.
Other income (expense), net
Other
income (expense), net consists of interest expense associated with
our loans payable and interest income earned on our cash and
investment balances.
36
Business
Overview
We are
an innovative preclinical biopharmaceutical company committed to
the discovery development, manufacturing and commercializing
LADAVRU® and biosimilars. The liver is a vital organ that
plays an extremely important role in human metabolism and other key
physiologic functions. Rare disorders like Cirrhosis, Cirrhosis
ascites are associated with the liver, many of which have severe or
even fatal consequences for patients, and collectively represent a
significant unmet medical need. Our product candidate LADAVRU®
focuses on Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and chronic
pain, nausea and discomfort associated with chemotherapy; our goals
consist of primarily serving readily identifiable patient
populations suffering from Cancer, Cirrhosis, Cirrhosis ascites,
AIDS, and chronic pain, nausea and discomfort associated with
chemotherapy particularly for patients using anthracyclines with
the intention of targeting the treatment of relapsed or refractory
AML. Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung cancers. The
nature of these diseases permits us to leverage highly predictive
preclinical models and well-described, and often clinically
validated, biomarkers to shorten time to clinical proof of
concept.
We
intend to submit patent applications for formulation, synthetic
process and reconstitution related to our LADAVRU® drug
product candidate, although there is no assurance that we will be
successful in obtaining such patent protection. Independently from
potential patent protection, we believe LADAVRU® will qualify
for Orphan Drug status, which could entitle us to market
exclusivity of up to 7 and 10 years from the date of approval of a
New Drug Application (NDA) and Marketing Authorization (MA), in the
US and the European Union (EU), respectively. However, there can be
no assurance that such status will be granted. Separately, the FDA
may also grant market exclusivity of up to five years for newly
approved new chemical entities (of which LADAVRU® would be
one), but there can be no assurance that such exclusivity will be
granted or, if granted, for how long.
Our Drug Candidate
LADAVRU®
Our
lead product candidate is LADAVRU®, We are an innovative
preclinical biopharmaceutical company committed to the discovery
development, manufacturing and commercializing LADAVRU® and
biosimilars. Our product candidate LADAVRU® focuses on Cancer,
Cirrhosis, Cirrhosis ascites, AIDS, and chronic pain, nausea and
discomfort associated with chemotherapy; our goals consist of
primarily serving readily identifiable patient populations
suffering from Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and
chronic pain, nausea and discomfort associated with chemotherapy
particularly for patients using anthracyclines with the intention
of targeting the treatment of relapsed or refractory AML.
Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung
cancers.
LADAVRU®
focuses on treating chronic pain, nausea and discomfort associated
with chemotherapy particularly for patients using anthracyclines
with the intention of targeting the treatment of relapsed or
refractory AML and chronic pain, nausea and discomfort associated
with Cancer, Cirrhosis, Cirrhosis ascites, AIDS.
We also
intend to pursue Orphan Drug status for LADAVRU®. The
prevalence ceiling for qualifying rare diseases under the US Orphan
Drug Act is 200,000 patients and proportionally similar guidelines
exist in the EU.
About
LADAVRU
LADAVRU
is a proprietary opioid alternative which is deliverable as an IV
injectable, OR solid preparation containing; Mannitol, Citric Acid,
and Dronabinol, a cannabinoid designated chemically as
(6aR-trans)-6a,7,8,10a-tetrahydro-6,6,9-
trimethyl-3-pentyl-6Hdibenzo[b,d]pyran-1-ol or a salt thereof in
the solid preparation an active ingredient, 1) Mannitol and (1) an
alkaline earth metal salt selected from magnesium
aluminometasilicate and calcium silicate. A method of stabilizing
the active ingredient, including adding an alkaline earth metal
salt selected from magnesium aluminometasilicate and calcium
silicate. (2) Citric Acid, Mannitol and Dronabinol, a cannabinoid
designated chemically as (6aR-trans)-6a,7,8,10a-tetrahydro-6,6,9-
trimethyl-3-pentyl-6H-dibenzo[b,d]pyran-1-ol The liver is a vital
organ that plays an extremely important role in human metabolism
and other key physiologic functions. Rare disorders like Cirrhosis,
Cirrhosis ascites are associated with the liver, many of which have
severe or even fatal consequences for patients, and collectively
represent a significant unmet medical need. Our product candidate
LADAVRU® focuses on Cancer, Cirrhosis, Cirrhosis ascites,
AIDS, and chronic pain, nausea and discomfort associated with
chemotherapy; our goals consist of primarily serving readily
identifiable patient populations suffering from Cancer, Cirrhosis,
Cirrhosis ascites, AIDS, and chronic pain, nausea and discomfort
associated with chemotherapy particularly for patients using
anthracyclines with the intention of targeting the treatment of
relapsed or refractory AML. Anthracyclines are a class of
chemotherapy drugs designed to disrupt the DNA of, and eventually
destroy, targeted cancer cells. They are the most effective
anticancer drugs developed and are used to treat a range of
cancers, including leukemias, lymphomas, and breast, stomach,
uterine, ovarian, bladder, and lung cancers. The most recently
published prevalence statistics from the National Cancer Institute
reported that the number of people living beyond a cancer diagnosis
reached nearly 14.5 million in 2014 and is expected to rise to
almost 19 million by 2024. In 2016, an estimated 1,685,210 new
cases of cancer will be diagnosed in the United States and 595,690
people will die from the disease. The number of new cases of cancer
(cancer incidence) is 454.8 per 100,000 men and women per year
(based on 2008-2012 cases). The trend data since that publication
would indicate that the prevalence today should still be well below
the 200,000 patient limitation for Orphan Drugs, which would permit
LADAVRU® for the treatment of chronic pain, nausea and
discomfort associated with chemotherapy particularly for patients
using anthracyclines with the intention of targeting the treatment
of relapsed or refractory AML to qualify for Orphan Drug status.
However, we can provide no assurance that we will be successful in
obtaining Orphan Drug status for LADAVRU®.
The
Orphan Drug Act of 1983 and other legislative initiatives provide
incentives and in some cases, accelerated approval pathways for
companies that pursue the development of treatments for rare
diseases and diseases for which there are few or no acceptable
available treatment alternatives. Over the last 10 years, an
increasing number of companies have begun using these designations
to obtain new drug approvals for drugs where patent coverage has
expired and/or where accelerated approval appears possible. An IMS
Health report estimated that, in 2013, the sale of drugs with full
or partial Orphan Drug status represented approximately $29 billion
in revenue. We consider obtaining Orphan Drug status and
accelerated approval pathways to be an important part of our
development strategy for our drug candidates. Notwithstanding these
potential opportunities, we can provide no assurance that our drugs
will receive Orphan Drug status or any other special designation
that could, among other things, provide for accelerated
approval
37
Risk
Factors
The
purchase of our common stock involves a high degree of risk. The
common stock offered in this prospectus is for investment purposes
only and currently no market for our common stock exists.
Please refer to the sections
entitled "Risk Factors" and "Dilution" before making an investment
in this stock.
Trading
Market
None.
While
we plan to find a market maker to file a Rule 211 application with
the Financial Industry Regulatory Authority (“FINRA”)
in order to apply for the inclusion of our common stock in OTC
Markets (“OTCQB”) or the Over-the-Counter Bulletin
Board (“OTCBB”), such efforts may not be successful and
our shares may never be quoted and owners of our common stock may
not have a market in which to sell the shares. Also, no estimate
may be given as to the time that this application process will
require. Even if Hoverink Biotechnologies, Inc.’s common
stock is quoted or granted a listing, a market for the common
shares may not develop.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve
risks and uncertainties. We use words such as anticipate, believe,
plan, expect, future, intend and similar expressions to identify
such forward-looking statements. The actual results could differ
materially from our forward-looking statements. Our actual results
are most likely to differ materially from those anticipated in
these forward-looking statements for many reasons, including the
risks faced by us described in this Risk Factors section and
elsewhere in this prospectus.
Intellectual
Property
Trademark
applications
On Fri,
8 Sep 2017 we filed trademark applications covering:
HOVERINK BIOTECHNOLOGIES SERIAL NUMBER
'87601475' specifically for conducting early
evaluations in the field of new pharmaceuticals; consulting
services in the fields of biotechnology, pharmaceutical research
and development and genetic science, laboratory testing,
diagnostics, and pharmacogenetics; development of pharmaceutical
preparations and medicines; laboratory research services relating
to pharmaceuticals; pharmaceutical products development; research
and development in the pharmaceutical and biotechnology fields;
research and development of pharmaceuticals for the treatment of
age-related diseases, cancer, infectious diseases, mental
illnesses, neurodegenerative diseases and;
LADAVRU ® SERIAL NUMBER
'87601498' covering Pharmaceutical
preparations for the treatment of gastrointestinal and oncological
diseases and disorders.
We
intend to submit patent applications for formulation, synthetic
process and reconstitution related to our LADAVRU® drug
product candidate, although there is no assurance that we will be
successful in obtaining such patent protection. Independently from
potential patent protection, we believe LADAVRU® will qualify
for Orphan Drug status, which could entitle us to market
exclusivity of up to 7 and 10 years from the date of approval of a
New Drug Application (NDA) and Marketing Authorization (MA), in the
US and the European Union (EU), respectively. However, there can be
no assurance that such status will be granted. Separately, the FDA
may also grant market exclusivity of up to five years for newly
approved new chemical entities (of which LADAVRU® would be
one), but there can be no assurance that such exclusivity will be
granted or, if granted, for how long. We are an innovative
preclinical biopharmaceutical company committed to the discovery
development, manufacturing and commercializing LADAVRU® and
biosimilars. The liver is a vital organ that plays an extremely
important role in human metabolism and other key physiologic
functions. Rare disorders like Cirrhosis, Cirrhosis ascites are
associated with the liver, many of which have severe or even fatal
consequences for patients, and collectively represent a significant
unmet medical need. Our product candidate LADAVRU® focuses on
Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and chronic pain,
nausea and discomfort associated with chemotherapy; our goals
consist of primarily serving readily identifiable patient
populations suffering from Cancer, Cirrhosis, Cirrhosis ascites,
AIDS, and chronic pain, nausea and discomfort associated with
chemotherapy particularly for patients using anthracyclines with
the intention of targeting the treatment of relapsed or refractory
AML. Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung cancers. The
nature of these diseases permits us to leverage highly predictive
preclinical models and well-described, and often clinically
validated, biomarkers to shorten time to clinical proof of
concept.
Competition
We
operate in a highly competitive segment of the pharmaceutical
market, which market is highly competitive as a whole. We face
competition from numerous sources including commercial
pharmaceutical and biotechnology enterprises, academic
institutions, government agencies, and private and public research
institutions. Many of our competitors may have significantly
greater financial, product development, manufacturing and marketing
resources.
Additionally, many
universities and private and public research institutes are active
in cancer research, and some may be in direct competition with us.
We may also compete with these organizations to recruit scientists
and clinical development personnel. Smaller or early-stage
companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and
established companies.
38
The
unmet medical need for more effective pain relief therapies is such
that these and anticancer drugs are, by far, the leading class of
drugs in development.
There
are a number of established therapies that may be considered
competitive for the pain relief indications for which we intend to
develop our lead product LADAVRU® which focuses on Cancer,
Cirrhosis, Cirrhosis ascites, AIDS, and chronic pain, nausea and
discomfort associated with chemotherapy; our goals consist of
primarily serving readily identifiable patient populations
suffering from Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and
chronic pain, nausea and discomfort associated with chemotherapy
particularly for patients using anthracyclines with the intention
of targeting the treatment of relapsed or refractory AML. We can
provide no assurance that such therapies are not in development,
will not receive regulatory approval and will reach market before
our drug candidate LADAVRU®. In addition, any such competing
therapy may be more effective and / or cost-effective than
ours.
Government
Regulation
Government
authorities in the U.S., at the federal, state and local level, and
other countries extensively regulate, among other things, the
research, development, testing, manufacture, quality control,
approval, labeling, packaging, storage, record-keeping, promotion,
advertising, distribution, post-approval monitoring and reporting,
marketing and export and import of products such as those we are
developing. The pharmaceutical drug product candidates that we
develop must be approved by the FDA before they may be legally
marketed.
In the
United States, the FDA regulates pharmaceutical products under the
Federal Food, Drug and Cosmetic Act, and implementing
regulations.
Pharmaceutical
products are also subject to other federal, state and local
statutes and regulations. The process of obtaining regulatory
approvals and the subsequent compliance with appropriate federal,
state, local and foreign statutes and regulations require the
expenditure of substantial time and financial resources. Failure to
comply with the applicable U.S. requirements at any time during the
product development process, approval process or after approval,
may subject an applicant to administrative or judicial sanctions.
FDA sanctions could include refusal to approve pending
applications, withdrawal of an approval, a clinical hold, warning
letters, product recalls, product seizures, total or partial
suspension of production or distribution injunctions, fines,
refusals of government contracts, restitution, disgorgement or
civil or criminal penalties. Any agency or judicial enforcement
action could have a material adverse effect on us. The process
required by the FDA before a non-biological pharmaceutical product
may be marketed in the U.S. generally involves the
following:
●
Completion of
preclinical laboratory tests, animal studies and formulation
studies according to Good Laboratory Practices or other applicable
regulations;
●
Submission to the
FDA of an Investigational New Drug, or IND, which must become
effective before human clinical studies may begin;
●
Performance of
adequate and well-controlled human clinical studies according to
the FDA’s current good clinical practices
(“GCP”), to establish the safety and efficacy of
the proposed
pharmaceutical product for its intended use;
●
Submission to the
FDA of an NDA for a new pharmaceutical product;
●
Satisfactory
completion of an FDA inspection of the manufacturing facility or
facilities where the pharmaceutical product is produced to assess
compliance with the cGMP, to assure that the
facilities, methods and controls are adequate to preserve the
pharmaceutical product’s identity, strength, quality and
purity;
●
Potential FDA audit
of the preclinical and clinical study sites that generated the data
in support of the NDA; and
●
FDA review and
approval of the NDA.
The
lengthy process of seeking required approvals and the continuing
need for compliance with applicable statutes and regulations
require the expenditure of substantial resources and approvals are
inherently uncertain.
39
Before
testing any compounds with potential therapeutic value in humans,
the pharmaceutical product candidate enters the preclinical testing
stage.
Preclinical tests
include laboratory evaluations of product chemistry, toxicity and
formulation, as well as animal studies to assess the potential
safety and activity of the pharmaceutical product candidate. These
early proof-of-principle studies are done using sound scientific
procedures and thorough documentation. The conduct of the single
and repeat dose toxicology and toxicokinetic studies in animals
must comply with federal regulations and requirements including
good laboratory practices. The sponsor must submit the results of
the preclinical tests, together with manufacturing information,
analytical data, any available clinical data or literature and a
proposed clinical protocol, to the FDA as part of the IND. The IND
automatically becomes effective 30 days after receipt by the FDA,
unless the FDA has concerns and notifies the sponsor. In such a
case, the IND sponsor and the FDA must resolve any outstanding
concerns before the clinical study can begin. If resolution cannot
be reached within the 30-day review period, either the FDA places
the IND on clinical hold or the sponsor withdraws the application.
The FDA may also impose clinical holds on a pharmaceutical product
candidate at any time before or during clinical studies due to
safety concerns or non- compliance. Accordingly, we cannot be sure
that submission of an IND will result in the FDA allowing clinical
studies to begin, or that, once begun, issues will not arise that
suspend or terminate such clinical study.
Clinical studies
involve the administration of the pharmaceutical product candidate
to healthy volunteers or patients under the supervision of
qualified investigators, generally physicians not employed by or
under the clinical study sponsor’s control. Clinical studies
are conducted under protocols detailing, among other things, the
objectives of the clinical study, dosing procedures, subject
selection and exclusion criteria, how the results will be analyzed
and presented and the parameters to be used to monitor subject
safety. Each protocol must be submitted to the FDA as part of the
IND. Clinical studies must be conducted in accordance with GCP.
Further, each clinical study must be reviewed and approved by an
independent institutional review board (“IRB”) at, or
servicing, each institution at which the clinical study will be
conducted. An IRB is charged with protecting the welfare and rights
of study participants and considers such items as whether the risks
to individuals participating in the clinical studies are minimized
and are reasonable in relation to anticipated benefits. The IRB
also approves the informed consent form that must be provided to
each clinical study subject or his or her legal representative and
must monitor the clinical study until completed.
Human
clinical studies are typically conducted in three sequential phases
that may overlap or be combined:
●
Phase 1: The
pharmaceutical product is initially introduced into healthy human
subjects and tested for safety, dosage tolerance, absorption,
metabolism, distribution and excretion. In the case of some
products for severe or life-threatening diseases such as cancer,
especially when the product may be too inherently toxic to
ethically administer to healthy volunteers, the initial human
testing is often conducted in patients, with a goal of
characterizing the safety profile of the drug and establishing a
maximum tolerable dose (“MTD”). Our pharmaceutical
products fall into this latter category because its products are
intended to treat cancer and contain cytotoxic agents. Hence, our
Phase 1 studies are conducted in late-stage cancer patients whose
disease has progressed after treatment with other
agents.
●
Phase 2: With the
maximum tolerable dose established in a Phase 1 trial, the
pharmaceutical product is evaluated in a limited patient population
at the MTD to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the product
for specific targeted diseases, to determine dosage tolerance,
optimal dosage and dosing schedule and to identify patient
populations with specific characteristics where the pharmaceutical
product may be more effective.
●
Phase 3: Clinical
studies are undertaken to further evaluate dosage, clinical
efficacy and safety in an expanded patient population at
geographically dispersed clinical study sites. These
clinical studies
are intended to establish the overall risk/benefit ratio of the
product and provide an adequate basis for product labeling. The
studies must be well controlled and usually include a control arm
for comparison. One or two Phase 3 studies are usually required by
the FDA for an NDA approval, depending on the disease severity and
other available treatment options. In some instances, where a
Special Protocol Assessment is granted by the FDA, an NDA approval
may be obtained based on Phase 2 clinical data with the
understanding that the approved drug can be sold subject to a
confirmatory Phase 3 trial to be conducted
post-approval.
Post-approval
studies, or Phase 4 clinical studies, may be conducted after
initial marketing approval. These studies are used to gain
additional experience from the treatment of patients in the
intended therapeutic indication. The FDA also may require
post-marketing testing, known as Phase 4 testing, risk minimization
action plans and surveillance to monitor the effects of an approved
product or place conditions on an approval that could restrict the
distribution or use of the product.
Progress reports
detailing the results of the clinical studies must be submitted at
least annually to the FDA and written IND safety reports must be
submitted to the FDA and the investigators for serious and
unexpected adverse events or any finding from tests in laboratory
animals that suggests a significant risk for human subjects. Phase
1, Phase 2 and Phase 3 clinical studies may not be completed
successfully within any specified period, if at all. The FDA or the
sponsor or its data safety monitoring board may suspend a clinical
study at any time on various grounds, including a finding that the
research subjects or patients are being exposed to an unacceptable
health risk. Similarly, an IRB can suspend or terminate approval of
a clinical study at its institution if the clinical study is not
being conducted in accordance with the IRB’s requirements or
if the pharmaceutical product has been associated with unexpected
serious harm to patients.
40
Concurrent with
clinical studies, companies usually complete additional animal
studies and must also develop additional information about the
chemistry and physical characteristics of the pharmaceutical
product as well as finalize a process for manufacturing the product
in commercial quantities in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing
quality batches of the pharmaceutical product candidate and, among
other things, must develop methods for testing the identity,
strength, quality and purity of the final pharmaceutical product.
Additionally, appropriate packaging must be selected and tested and
stability studies must be conducted to demonstrate that the
pharmaceutical product candidate does not undergo unacceptable
deterioration over its shelf life.
The
results of product development, preclinical studies and clinical
studies, along with descriptions of the manufacturing process,
analytical tests conducted on the chemistry of the pharmaceutical
product, proposed labeling and other relevant information are
submitted to the FDA as part of an NDA requesting approval to
market the product. The submission of an NDA is subject to the
payment of substantial user fees. A waiver of such fees may be
obtained under certain limited circumstances.
The FDA
reviews all NDAs submitted before it accepts them for filing and
may request additional information rather than accepting an NDA for
filing. Once the submission is accepted for filing, the FDA begins
an in-depth review of the NDA. Under the goals and policies agreed
to by the FDA under the Prescription Drug User Fee Act
(“PDUFA”), the FDA has 10 months after the 60-day
filing date in which to complete its initial review of a standard
NDA and respond to the applicant, and six months after the 60-day
filing date for a priority NDA. The FDA does not always meet its
PDUFA goal dates for standard and priority NDAs.
After
the NDA submission is accepted for filing, the FDA reviews the NDA
application to determine, among other things, whether the proposed
product is safe and effective for its intended use, and whether the
product is being manufactured in accordance with cGMP to assure and
preserve the product’s identity, strength, quality and
purity. The FDA may refer applications for novel pharmaceutical
products or pharmaceutical products which present difficult
questions of safety or efficacy to an advisory committee, typically
a panel that includes clinicians and other experts, for review,
evaluation and a recommendation as to whether the application
should be approved and under what conditions. The FDA is not bound
by the recommendations of an advisory committee, but it considers
such recommendations carefully when making decisions. During the
pharmaceutical product approval process, the FDA also will
determine whether a risk evaluation and mitigation strategy
(“REMS”) is necessary to assure the safe use of the
pharmaceutical product. If the FDA concludes that a REMS is needed,
the sponsor of the NDA must submit a proposed REMS; the FDA will
not approve the NDA without a REMS, if required.
Before
approving an NDA, the FDA will inspect the facilities at which the
product is manufactured. The FDA will not approve the product
unless it determines that the manufacturing processes and
facilities are in compliance with cGMP requirements and adequate to
assure consistent production of the product within required
specifications. Additionally, before approving an NDA, the FDA will
typically inspect one or more clinical sites as well as the site
where the pharmaceutical product is manufactured to assure
compliance with GCP and cGMP. If the FDA determines the
application, manufacturing process or manufacturing facilities are
not acceptable, it will outline the deficiencies in the submission
and often will request additional testing or information. In
addition, the FDA will require the review and approval of product
labeling.
The NDA
review and approval process is lengthy and difficult and the FDA
may refuse to approve an NDA if the applicable regulatory criteria
are not satisfied or may require additional clinical data or other
data and information. Even if such data and information is
submitted, the FDA may ultimately decide that the NDA does not
satisfy the criteria for approval. Data obtained from clinical
studies are not always conclusive and the FDA may interpret data
differently than we interpret the same data. The FDA will issue a
complete response letter if the agency decides not to approve the
NDA. The complete response letter usually describes all of the
specific deficiencies in the NDA identified by the FDA. The
deficiencies identified may be minor, for example, requiring
labeling changes, or major, for example, requiring additional
clinical studies. Additionally, the complete response letter may
include recommended actions that the applicant might take to place
the application in a condition for approval. If a complete response
letter is issued, the applicant may either resubmit the NDA,
addressing all of the deficiencies identified in the letter, or
withdraw the application.
If a
product receives regulatory approval, the approval may be
significantly limited to specific diseases and dosages or the
indications for use may otherwise be limited, which could restrict
the commercial value of the product. Further, the FDA may require
that certain contraindications, warnings or precautions be included
in the product labeling. In addition, the FDA may require Phase 4
testing which involves clinical studies designed to further assess
pharmaceutical product safety and effectiveness and may require
testing and surveillance programs to monitor the safety of approved
products that have been commercialized.
Expedited Development and Review Programs
The FDA
has a Fast Track program that is intended to expedite or facilitate
the process for reviewing new pharmaceutical products that meet
certain criteria. Specifically, new pharmaceutical products are
eligible for Fast Track designation if they are intended to treat a
serious or life-threatening condition and demonstrate the potential
to address unmet medical needs for the condition. Fast Track
designation applies to the combination of the product and the
specific indication for which it is being studied. Unique to a Fast
Track product, the FDA may consider for review sections of the NDA
on a rolling basis before the complete application is submitted, if
the sponsor provides a schedule for the submission of the sections
of the NDA, if the FDA determines that the schedule is acceptable
and if the sponsor pays any required user fees upon submission of
the first section of the NDA.
41
Any
product submitted to the FDA for market, including a Fast Track
program, may also be eligible for other FDA programs intended to
expedite development and review, such as priority review and
accelerated approval. Any product is eligible for priority review
if it has the potential to provide safe and effective therapy where
no satisfactory alternative therapy exists or if it offers a
significant improvement in the treatment, diagnosis or prevention
of a disease compared to marketed products. The FDA will attempt to
direct additional resources to the evaluation of an application for
a new pharmaceutical product designated for priority review in an
effort to facilitate the review. Additionally, a product may be
eligible for accelerated approval. Pharmaceutical products studied
for their safety and effectiveness in treating serious or
life-threatening illnesses and that provide meaningful therapeutic
benefit over existing treatments may receive accelerated approval,
which means that the products may be approved on the basis of
adequate and well-controlled clinical studies establishing that the
product has an effect on a surrogate endpoint that is reasonably
likely to predict a clinical benefit, or on the basis of an effect
on a clinical endpoint other than survival or irreversible
morbidity. As a condition of approval, the FDA may require that a
sponsor of a pharmaceutical product receiving accelerated approval
perform adequate and well-controlled post-marketing clinical
studies. In addition, the FDA currently requires as a condition for
accelerated approval pre-approval of promotional materials, which
could impact the timing of the commercial launch of the product.
Fast Track designation, priority review and accelerated approval do
not change the standards for approval but may expedite the
development or approval process.
Post-Approval Requirements
Any
pharmaceutical products for which the Company receives FDA
approvals are subject to continuing regulation by the FDA,
including, among other things, record-keeping requirements,
reporting of adverse experiences with the product, providing the
FDA with updated safety and efficacy information, product sampling
and distribution requirements, complying with certain electronic
records and signature requirements and complying with FDA promotion
and advertising requirements, which include, among others,
standards for direct-to-consumer advertising, prohibitions on
promoting pharmaceutical products for uses or in patient
populations that are not described in the pharmaceutical
product’s approved labeling (known as “off-label
use”), industry-sponsored scientific and educational
activities and promotional activities involving the internet.
Failure to comply with FDA requirements can have negative
consequences, including adverse publicity, enforcement letters from
the FDA, actions by the U.S. Department of Justice and/or U.S.
Department of Health and Human Services’ Office of Inspector
General, mandated corrective advertising or communications with
doctors, and civil or criminal penalties. Although physicians may
prescribe legally available pharmaceutical products for off-label
uses, manufacturers may not directly or indirectly market or
promote such off-label uses.
We
intend to rely on third parties for the production of clinical and
commercial quantities of our products. Manufacturers of our
products are required to comply with applicable FDA manufacturing
requirements contained in the FDA’s cGMP regulations. cGMP
regulations require, among other things, quality control and
quality assurance, as well as the corresponding maintenance of
records and documentation. Pharmaceutical product manufacturers and
other entities involved in the manufacture and distribution of
approved pharmaceutical products are required to register their
establishments with the FDA and certain state agencies, and are
subject to periodic unannounced inspections by the FDA and certain
state agencies for compliance with cGMP and other laws.
Accordingly, manufacturers must continue to expend time, money and
effort in the area of production and quality control to maintain
cGMP compliance. Discovery of problems with a product after
approval may result in restrictions on a product, manufacturer or
holder of an approved NDA, including withdrawal of the product from
the market. In addition, changes to the manufacturing process
generally require prior FDA approval before being implemented and
other types of changes to the approved product, such as adding new
indications and additional labeling claims, are also subject to
further FDA review and approval.
Patent Term Restoration and Marketing Exclusivity
Depending upon the
timing, duration and specifics of the FDA approval of the use of
our pharmaceutical product candidates, some of our products covered
by U.S. patents may be eligible for limited patent term extension
under the Drug Price Competition and Patent Term Restoration Act of
1984, commonly referred to as the Hatch-Waxman Amendments. The
Hatch-Waxman Amendments permit a patent restoration term of up to
five years as compensation for patent term lost during product
development and the FDA regulatory review process. However, patent
term restoration cannot extend the remaining term of a patent
beyond a total of 14 years from the product’s approval date.
The patent term restoration period is generally one-half the time
between the effective date of an IND and the submission date of an
NDA plus the time between the submission date of an NDA and the
approval of that application. Only one patent applicable to an
approved pharmaceutical product is eligible for the extension and
the application for the extension must be submitted prior to the
expiration of the patent unless an extension is obtained.
The 21.19.
Patent and
Trademark Office, in consultation with the FDA, reviews and renders
a decision on the application for any patent term extension or
restoration. In the future, we may be able to apply for extension
of patent term for one of our currently licensed patents or any
future owned patents to add patent life beyond its current
expiration date, depending upon the expected length of the clinical
studies and other factors involved in the filing of the relevant
NDA.
Market
exclusivity provisions under the U.S. Food, Drug, and Cosmetic Act
can also delay the submission or the approval of certain
applications of other companies seeking to reference another
company’s NDA. Currently seven years of reference product
exclusivity are available to pharmaceutical products designated as
Orphan Drugs, during which the FDA may not approve generic products
relying upon the reference product’s data. Pediatric
exclusivity is another type of regulatory market exclusivity in the
U.S. Pediatric exclusivity, if granted, adds six months to existing
exclusivity periods and patent terms. This six-month exclusivity,
which runs from the end of other exclusivity protection or patent
term, may be granted based on the voluntary completion of pediatric
clinical studies in accordance with an FDA-issued “Written
Request” for such a clinical study.
42
Pharmaceutical Coverage, Pricing and Reimbursement
Significant
uncertainty exists as to the coverage and reimbursement status of
any pharmaceutical product candidates for which we obtain
regulatory approval. In the United States and in markets in other
countries, sales of any products for which we receive regulatory
approval for commercial sale will depend in part upon the
availability of reimbursement from third-party payors. Third- party
payors include government payors such as Medicare and Medicaid,
managed care providers, private health insurers and other
organizations. The process for determining whether a payor will
provide coverage for a pharmaceutical product may be separate from
the process for setting the price or reimbursement rate that the
payor will pay for the pharmaceutical product. Third- party payors
may limit coverage to specific pharmaceutical products on an
approved list, or formulary, which might not, and frequently does
not, include all of the FDA-approved pharmaceutical products for a
particular indication. Third-party payors are increasingly
challenging the price and examining the medical necessity and
cost-effectiveness of medical products and services, in addition to
their safety and efficacy. A payor’s decision to provide
coverage for a pharmaceutical product does not imply that an
adequate reimbursement rate will be approved. Adequate third-party
reimbursement may not be available to enable us to maintain price
levels sufficient to realize an appropriate return on our
investment in product development. In addition, in the United
States there is a growing emphasis on comparative effectiveness
research, both by private payors and by government agencies. We may
need to conduct expensive pharmaco- economic studies in order to
demonstrate the medical necessity and cost-effectiveness of
LADAVRU®, in addition to the costs required to obtain the FDA
approvals. Our pharmaceutical product candidate LADAVRU® may
not be considered medically necessary or cost-effective. To the
extent other drugs or therapies are found to be more effective than
our product LADAVRU®, payors may elect to cover such therapies
in lieu of our products and/or reimburse our products at a lower
rate.
Different pricing
and reimbursement schemes exist in other countries. In the European
Community, governments influence the price of pharmaceutical
products through their pricing and reimbursement rules and control
of national healthcare systems that fund a large part of the cost
of those products to consumers. Some jurisdictions operate positive
and negative list systems under which products may only be marketed
once a reimbursement price has been agreed upon. To obtain
reimbursement or pricing approval, some of these countries may
require the completion of clinical studies that compare the
cost-effectiveness of a particular pharmaceutical product candidate
to currently available therapies. Other member states allow
companies to fix their own prices for medicines, but monitor and
control company profits. The downward pressure on healthcare costs
in general, particularly prescription drugs, has become very
intense. As a result, increasingly high barriers are being erected
to the entry of new products. In addition, in some countries,
cross-border imports from low-priced markets exert a commercial
pressure on pricing within a country.
The
marketability of any pharmaceutical product candidates for which we
receive regulatory approval for commercial sale may suffer if the
government and third-party payors fail to provide adequate coverage
and reimbursement. In addition, emphasis on managed care in the
United States has increased and we expect this will continue to
increase the pressure on pharmaceutical pricing. Coverage policies
and third-party reimbursement rates may change at any time. Even if
favorable coverage and reimbursement status is attained for one or
more products for which we receive regulatory approval, less
favorable coverage policies and reimbursement rates may be
implemented in the future.
International Regulation
In
addition to regulations in the United States, there are a variety
of foreign regulations governing clinical studies and commercial
sales and distribution of our current and future product
candidates. Whether or not FDA approval is obtained for a product,
approval of a product must be obtained by the comparable regulatory
authorities of foreign countries, or jurisdictions such as the EU,
before clinical studies or marketing of the product can commence in
those countries.
The
approval process varies from country to country, and the time may
be longer or shorter than that required for FDA approval. The
requirements governing the conduct of clinical studies, product
licensing, pricing and reimbursement vary greatly from country to
country. In addition, certain regulatory authorities may require us
to repeat previously conducted preclinical and/or clinical studies
under specific criteria for approval in their respective country or
jurisdictions, which may delay and/or increase the cost of approval
in certain markets targeted for approval by us.
Policies and Procedures for Related Party Transactions
Our
board of directors will be responsible for reviewing and approving
in advance any related party transaction. This will cover, with
certain exceptions set forth in Item 404 of Regulation S- K under
the Securities Act, any transaction, arrangement or relationship,
or any series of similar transactions, arrangements or
relationships in which we were or are to be a participant, where
the amount involved exceeds $420,000 and a related person had or
will have a direct or indirect material interest, including,
without limitation, purchases of goods or services by or from the
related person or entities in which the related person has a
material interest, indebtedness, guarantees of indebtedness and
employment by us of a related person.
43
DESCRIPTION
OF CAPITAL STOCK
Introduction
The
Company is authorized to issue 100,000,000 shares of common stock,
par value $0.0001, of which 36,772,000 Shares are outstanding as of
the date of the registration statement, of which this prospectus is
a part. The Company is also authorized to issue 20,000,000 share of
preferred stock, par value $0.0001, of which no shares were
outstanding as of the date of the registration statement, of which
this prospectus is a part.
Preferred
Stock
None.
We presently do not have plans to issue any shares of preferred
stock. However, preferred stock could be used to dilute a potential
hostile acquirer. Accordingly, any future issuance of preferred
stock or any rights to purchase preferred shares may have the
effect of making it more difficult for a third party to acquire
control of us. This may delay, defer or prevent a change of control
in our Company or an unsolicited acquisition proposal. The issuance
of preferred stock also could decrease the amount of earnings
attributable to, and assets available for distribution to, the
holders of our common stock and could adversely affect the rights
and powers, including voting rights, of the holders of our common
stock.
Common
Stock
Our
certificate of incorporation authorizes the issuance of 100,000,000
shares of common stock. There are 36,772,000 shares of our common
stock issued and outstanding at Sept 22, 2017 that is held by 38
shareholders. The holders of our common stock:
–
have equal ratable
rights to dividends from funds legally available for payment of
dividends when, as and if declared by the board of
directors;
–
are entitled to
share ratably in all of the assets available for distribution to
holders of common stock upon liquidation, dissolution or winding up
of our affairs;
–
do not have
preemptive, subscription or conversion rights, or redemption or
access to any sinking fund; and
–
are entitled to one
non-cumulative vote per share on all matters submitted to
stockholders for a vote at any meeting of stockholders
See
also Plan of Distribution regarding negative implications of being
classified as a “Penny Stock.”
Authorized
but Un-issued Capital Stock
Delaware law
requires stockholder approval for any issuance of authorized
shares. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise
additional capital or to facilitate corporate
acquisitions.
One of
the effects of the existence of un-issued and unreserved common
stock (and/or preferred stock) may be to enable our board of
directors to issue shares to persons friendly to current
management, which issuance could render more difficult or
discourage an attempt to obtain control of our board by means of a
merger, tender offer, proxy contest or otherwise, and thereby
protect the continuity of our management and possibly deprive the
stockholders of opportunities to sell their shares of our common
stock at prices higher than prevailing market prices.
Shareholder
Matters
As an
issuer of "penny stock" the protection provided by the federal
securities laws relating to forward looking statements does not
apply to us if our shares are considered to be penny stocks which
they currently are and probably will be for the foreseeable future.
Although the federal securities law provide a safe harbor for
forward-looking statements made by a public company that files
reports under the federal securities laws, this safe harbor is not
available to issuers of penny stocks. As a result, we will not have
the benefit of this safe harbor protection in the event of any
claim that the material provided by us, including this prospectus,
contained a material misstatement of fact or was misleading in any
material respect because of our failure to include any statements
necessary to make the statements not misleading.
Certain
provisions of Delaware law described below create rights that might
be deemed material to our shareholders. Other provisions might
delay or make more difficult acquisitions of our stock or changes
in our control or might also have the effect of preventing changes
in our management or might make it more difficult to accomplish
transactions that some of our shareholders may believe to be in
their best interests.
Amendments to Bylaws - Our articles of incorporation provide
that the power to adopt, alter, amend, or repeal our bylaws is
vested exclusively with the board of directors. In exercising this
discretion, our board of directors could conceivably alter our
bylaws in ways that would affect the rights of our shareholders and
the ability of any shareholder or group to effect a change in our
control; however, the board would not have the right to do so in a
way that would violate law or the applicable terms of our articles
of incorporation.
44
Transfer
Agent
The
Transfer Agent for our common stock is Direct Transfer, LLC. 500
Perimeter Park Dr, Suite D Morrisville, NC 27560. Its telephone
number is 919-481-4000
MANAGEMENT
Debbie Mae Carter
Ms.
Debbie Mae Carter serves as the Chief Executive Officer, Treasurer
and a director of the Company. Ms. Carter currently works as
Managing member of Hoverink Opportunities Fund, LP a Delaware
Private Equity Fund. Debbie Mae Carter is the Managing Director and
Chief Investment Officer of the General Partner of Hoverink Capital
Management. Ms. Carter has 15 years of experience in the financial
services and investment banking industries. Ms. Carter currently
works with Equinox Securities, an advisory firm founded in 2008, as
an account manager. She holds the Series 7, the Series 63 and
insurance licenses. In the financial services industry, Ms. Carter
has a strong focus on managing assets and has advised and managed
small business portfolios as well as teaching financial continuing
education classes at local universities. Ms. Carter has a Bachelor
of Science from TSU. In addition, Ms. Carter completed four years
education at Westbrook University and two years internship to
become a licensed Naturopathic Doctor.
Davidra Sajna
Ms.
Davidra Sajna serves as a Chairman of the Board of Directors. She
attended Texas State University at San Marcos, Texas and Austin
Community College and received her Associates of Science Degree in
Business Administration. Mrs. Sajna has worked with Hoverink, the
private company since its founding.
Cyrus Sajna
Cyrus
Sajna is Founder of Hoverink. Mr. Cyrus Sajna is a managing member
and Chief Operating Officer of Hoverink Opportunities Fund, LP a
Delaware Private Equity Fund and is a Managing Member of Hoverink
Capital Management. He attended Chicago State University 2000-2004
as a biology Pre Medical matriculate with interest in cardiology.
He also has experienced trading seminars on the Floor of the
Chicago Mercantile Exchange. This CME open outcry training
opportunity changed his life. The privately held firm located
within the Chicago Mercantile Exchange taught him Open Outcry
trading of the S&P 500 which did in fact open the proverbial
eyes of his true capabilities.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
No
expert or counsel named in this prospectus as having prepared or
certified any part of this prospectus or having given an opinion
upon the validity of the securities being registered or upon other
legal matters in connection with the registration or offering of
the common stock was employed on a contingency basis, or had, or is
to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant or any of its
parents or subsidiaries. Nor was any such person connected with the
registrant or any of its parents or subsidiaries as a promoter,
managing or principal underwriter, voting trustee, director,
officer, or employee.
DETERMINATION
OF OFFERING PRICE
The
offering price of the common stock has been arbitrarily determined
and bears no relationship to any objective criterion of value. The
price does not bear any relationship to our assets, book value, any
historical earnings or net worth. In determining the offering
price, management considered such factors as the prospects, if any,
for similar companies, anticipated results of operations, present
financial resources and the likelihood of acceptance of this
offering. No valuation or appraisal has been prepared for our
business. We cannot assure you that a public market for our
securities will develop or continue or that the securities will
ever trade at a price higher than the offering price.
DIVIDEND
POLICY
We have
never paid cash or any other form of dividend on our common stock,
and we do not anticipate paying cash dividends in the foreseeable
future. Moreover, any future credit facilities might contain
restrictions on our ability to declare and pay dividends on our
common stock. We plan to retain all earnings, if any, for the
foreseeable future for use in the operation of our business and to
fund the pursuit of future growth. Future dividends, if any, will
depend on, among other things, our results of operations, capital
requirements and on such other factors as our board of directors,
in its discretion, may consider relevant.
45
MARKET
FOR SECURITIES
There
is no established public market for our common stock, and a public
market may never develop. No market maker has agreed to file an
application with FINRA. There can be no assurance as to whether
such a market maker will agree to file an application or the market
maker’s application will be accepted by FINRA nor can we
estimate the time period that will be required for the application
process. Even if our common stock were quoted in a market, there
may never be substantial activity in such market. If there is
substantial activity, such activity may not be maintained, and no
prediction can be made as to what prices may prevail in such
market.
If we
become able to have our shares of common stock quoted on the OTCQB
and/or OTCBB, we will then try, through a broker-dealer and
its’ clearing firm, to become eligible with the DTC to permit
our shares to be traded electronically. If an issuer is not
“DTC-eligible,” its shares cannot be electronically
transferred between brokerage accounts, which, based on the
realities of the marketplace as it exists today (especially the
OTCQB and OTCBB), means that shares of an issuer will not be able
to be traded (technically the shares can be traded manually between
accounts, but this may take days and is not a realistic option for
issuers relying on broker-dealers for stock transactions - like all
the companies on the OTCQB and OTCBB). What this boils down to is
that while DTC-eligibility is not a requirement to trade on the
OTCBB, it is however a necessity to efficiently process trades on
the OTCQB or OTCBB if a company’s stock is going to trade
with any volume. There are no assurances that our shares will ever
become DTC-eligible or, if they do, how long it may
take.
We do
not have common stock or equity subject to outstanding options or
warrants to purchase or securities convertible into our common
stock or equity. Also, 64% of our outstanding common stock is held
by our board of directors
Name
|
Number
of Shares of Common Stock
|
Percent
of Class before Offering (1)
|
Percent
of Class After Offering (2)
|
Debbie
Mae Carter
|
9,440,000
|
19%
|
17%
|
Cyrus
Sajna & Davidra Nicole Sajna Trust (1) (2)
|
3,480,000
|
25%
|
23%
|
Davidra
Nicole Sajna
|
9,740,000
|
20%
|
18%
|
William
Neil Gallagher
|
2,960,000
|
14%
|
7%
|
Victor
Sapphire
|
740,000
|
5.3%
|
0%
|
James
Mckillop
|
250,000
|
1.8%
|
0%
|
James
Cassidy
|
250,000
|
1.8%
|
0%
|
Save
our Children
|
200,000
|
1.5%
|
0%
|
Health
and Charity Outreach*
|
25,000
|
0.17%
|
0%
|
Cyrus
Sajna
|
8,200,000
|
17%
|
17%
|
All
Officers and directors as a group (3 persons)
|
35,285,000
|
86.9%
|
86.9%
|
Ms.
Debbie Carter, our chief executive officer (9,440,000). In general,
under Rule 144, a holder of restricted common shares who is an
affiliate at the time of the sale or any time during the three
months preceding the sale can resell shares, subject to the
restrictions described below.
(1)
Cyrus Sajna and
Davidra Sajna are both trustees and beneficiaries and are deemed
the beneficial indirect owners of shares held by
The
Cyrus Sajna and Davidra Sajna Revocable Living Trust (2012) under
Rule 13d-3;
(2)
Item 403 of
Regulation S-K under Rule 13d-3; we disclose that the beneficial
owner of the shares held by The Cyrus Sajna and Davidra Sajna
Revocable Living Trust (2012) are both Cyrus Sajna and Davidra
Sajna
(3)
* Means less than
(1) percent
(4)
Debbie Mae Carter
is beneficial owner of Save our Children
(5)
William Neil
Gallagher is beneficial owner of Health and Charity
Outreach
If we
become a public reporting company under the Exchange Act for at
least 90 days immediately before the sale, then at least six months
must have elapsed since those shares were acquired from us or an
affiliate, and we must remain current in our filings for an
additional period of six months; in all other cases, at least one
year must have elapsed since the shares were acquired from us or an
affiliate.
46
The
number of shares sold by such person within any three-month period
cannot exceed the greater of:
–
1% of the total
number of our common shares then outstanding; or
–
The average weekly
trading volume of our common shares during the four calendar weeks
preceding the date on which notice on Form 144 with respect to the
sale is filed with the SEC (or, if Form 144 is not required to be
filed, then four calendar weeks preceding the date the selling
broker receives the sell order) (This condition is not currently
available to the Company because its securities do not trade on a
recognized exchange).
Conditions relating
to the manner of sale, notice requirements (filing of Form 144 with
the SEC) and the availability of public information about us must
also be satisfied.
All of
the presently outstanding shares of our common stock are
"restricted securities" as defined under Rule 144 promulgated under
the Securities Act and may only be sold pursuant to an effective
registration statement or an exemption from registration, if
available. The SEC has adopted final rules amending Rule 144 which
have become effective on August 15, 2008. Pursuant to the new Rule
144, one year must elapse from the time a “shell
company,” as defined in Rule 405 of the Securities Act and
Rule 12b-2 of the Exchange Act, ceases to be a “shell
company” and files a Form 8-K addressing Item 5.06 with such
information as may be required in a Form 10 Registration Statement
with the SEC, before a restricted shareholder can resell their
holdings in reliance on Rule 144. The Form 10 information or
disclosure is equivalent to the information that a company would be
required to file if it were registering a class of securities on
Form 10 under the Exchange Act. Under amended Rule 144, restricted
or unrestricted securities that were initially issued by a
reporting or non-reporting shell company or a company that was at
any time previously a reporting or non-reporting shell company can
only be resold in reliance on Rule 144 if the following conditions
are met:
1)
the
issuer of the securities that was formerly a reporting or
non-reporting shell company has ceased to be a shell
company;
2)
the
issuer of the securities is subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act;
3)
the
issuer of the securities has filed all reports and material
required to be filed under Section 13 or 15(d) of the Exchange Act,
as applicable, during the preceding twelve months (or shorter
period that the Issuer was required to file such reports and
materials), other than Form 8-K reports; and
4)
at
least one year has elapsed from the time the issuer filed the
current Form 10 type information with the SEC reflecting its status
as an entity that is not a shell company.
At the
present time, we are an emerging growth company as defined in
Section 2(a) (19) of the Securities Act. Pursuant to Section 107 of
the Jumpstart Our Business Startups Act, we may take advantage of
the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act for complying with new or revised accounting
standards, meaning that we can delay the adoption of certain
accounting standards until those standards would otherwise apply to
private companies. We have chosen to take advantage of the extended
transition period for complying with new or revised accounting
standards applicable to public companies to delay adoption of such
standards until such standards are made applicable to private
companies. Accordingly, our financial statements may not be
comparable to the financial statements of public companies that
comply with such new or revised accounting standards.
Current Public Information
In
general, for sales by affiliates and non-affiliates, the
satisfaction of the current public information requirement depends
on whether we are a public reporting company under the Exchange
Act:
–
If we have been a
public reporting company for at least 90 days immediately before
the sale, then the current public information requirement is
satisfied if we have filed all periodic reports (other than Form
8-K) required to be filed under the Exchange Act during the 12
months immediately before the sale (or such shorter period as we
have been required to file those reports).
–
If we have not been
a public reporting company for at least 90 days immediately before
the sale, then the requirement is satisfied if specified types of
basic information about us (including our business, management and
our financial condition and results of operations) are publicly
available.
47
ever,
no assurance can be given as to:
–
the likelihood of a
market for our common shares developing,
–
the liquidity of
any such market,
–
the ability of the
shareholders to sell the shares, or
–
The prices that
shareholders may obtain for any of the shares.
No
prediction can be made as to the effect, if any, that future sales
of shares or the availability of shares for future sale will have
on the market price prevailing from time to time.
Sales
of substantial amounts of our common shares, or the perception that
such sales could occur, may adversely affect prevailing market
prices of the common shares.
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
Certain
matters discussed herein are forward-looking statements. Such
forward-looking statements contained in this prospectus which is a
part of our registration statement involve risks and uncertainties,
including statements as to:
–
our future
operating results;
–
our business
prospects;
–
any contractual
arrangements and relationships with third parties;
–
the dependence of
our future success on the general economy;
–
any possible
financings; and
–
The adequacy of our
cash resources and working capital.
These
forward-looking statements can generally be identified as such
because the context of the statement will include words such as us
“believe," “anticipate,” “expect,”
“estimate” or words of similar meaning. Similarly,
statements that describe our future plans, objectives or goals are
also forward-looking statements. Such forward-looking statements
are subject to certain risks and uncertainties which are described
in close proximity to such statements and which could cause actual
results to differ materially from those anticipated as of the date
of this prospectus. Shareholders, potential investors and other
readers are urged to consider these factors in evaluating the
forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking
statements included herein are only made as of the date of this
prospectus, and we undertake no obligation to publicly update such
forward-looking statements to reflect subsequent events or
circumstances.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
As
required by Item 10l(a)(2) of Regulation S-K we have added
additional disclosures regarding our plan below. These may be
deemed Forward Looking Statements. In this section we provide
details regarding the Management's Discussion and Analysis section
regarding the remainder of the fiscal year and the first six months
of the next fiscal year as required by Item 10l(a)(2) of Regulation
S-K and we further discuss our specific plan of operations and
milestones.
Our
anticipated time from for beginning and completing each of our
milestones are listed as the following;
Our
LADAVRU® milestones occur when we: (1) When our LADAVRU®
qualifies for Orphan Drug status, which could entitle us to market
exclusivity of up to 7 and 10 years from the date of approval of a
New Drug Application (NDA) and Marketing Authorization (MA), in the
US and the European Union (EU), respectively. ascertain funding for
Structural Engineering and architectural phase. (2 ascertain
funding to begin the construction of Hoverink. We must ascertain a
suitable amount of capital and believe being publicly traded will
greatly assist us in either future debt or equity offerings. Our
anticipated expenditures and the expected sources of such funding
which all consist of raising funds via the sale of equity or debt.
Separately, the FDA may also grant market exclusivity of up to five
years for newly approved new chemical entities (of which
LADAVRU® would be one), but there can be no assurance that
such exclusivity will be granted or, if granted, for how
long
48
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CON’T)
This Management’s Discussion and Analysis of Financial
Condition and Results of Operations (“MD&A”)
contains certain forward-looking statements. Historical results may
not indicate future performance. Our forward-looking statements
reflect our current views about future events, are based on
assumptions and are subject to known and unknown risks and
uncertainties that could cause actual results to differ materially
from those contemplated by these statements. Factors that may cause
differences between actual results and those contemplated by
forward-looking statements include, but are not limited to, those
discussed in “Risk Factors.” We undertake no obligation
to publicly update or revise any forward- looking statements,
including any changes that might result from any facts, events, or
circumstances after the date hereof that may bear upon
forward-looking statements. Furthermore, we cannot guarantee future
results, events, levels of activity, performance, or
achievements.
Highlights
Our
Drug Candidate LADAVRU®
Our
lead product candidate is LADAVRU®, We are an innovative
preclinical biopharmaceutical company committed to the discovery
development, manufacturing and commercializing LADAVRU® and
biosimilars. Our product candidate LADAVRU® focuses on Cancer,
Cirrhosis, Cirrhosis ascites, AIDS, and chronic pain, nausea and
discomfort associated with chemotherapy; our goals consist of
primarily serving readily identifiable patient populations
suffering from Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and
chronic pain, nausea and discomfort associated with chemotherapy
particularly for patients using anthracyclines with the intention
of targeting the treatment of relapsed or refractory AML.
Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung
cancers.
LADAVRU®
focuses on treating chronic pain, nausea and discomfort associated
with chemotherapy particularly for patients using anthracyclines
with the intention of targeting the treatment of relapsed or
refractory AML and chronic pain, nausea and discomfort associated
with Cancer, Cirrhosis, Cirrhosis ascites, AIDS. We also intend to
pursue Orphan Drug status for LADAVRU®. The prevalence ceiling
for qualifying rare diseases under the US Orphan Drug Act is
200,000 patients and proportionally similar guidelines exist in the
EU.
The
most recently published prevalence statistics from the National
Cancer Institute reported that the number of people living beyond a
cancer diagnosis reached nearly 14.5 million in 2014 and is
expected to rise to almost 19 million by 2024. In 2016, an
estimated 1,685,210 new cases of cancer will be diagnosed in the
United States and 595,690 people will die from the disease. The
number of new cases of cancer (cancer incidence) is 454.8 per
100,000 men and women per year (based on 2008-2012 cases). The
trend data since that publication would indicate that the
prevalence today should still be well below the 200,000 patient
limitation for Orphan Drugs, which would permit LADAVRU® for
the treatment of chronic pain, nausea and discomfort associated
with chemotherapy particularly for patients using anthracyclines
with the intention of targeting the treatment of relapsed or
refractory AML to qualify for Orphan Drug status. However, we can
provide no assurance that we will be successful in obtaining Orphan
Drug status for LADAVRU®.
JOBS
Act and Recent Accounting Pronouncements
The
recently enacted JOBS Act provides that an “emerging growth
company” can take advantage of the extended transition period
provided in Section 7(a)(2)(B) of the Securities Act of 1933, as
amended, for complying with new or revised accounting standards. In
other words, an “emerging growth company” can delay the
adoption of certain accounting standards until those standards
would otherwise apply to private companies. We have irrevocably
elected not to avail ourselves of this extended transition period
and, as a result, we will adopt new or revised accounting standards
on the relevant dates on which adoption of such standards is
required for other public companies.
We have
implemented all new accounting pronouncements that are in effect
and may impact our financial statements and we do not believe that
there are any other new accounting pronouncements that have been
issued that might have a material impact on our financial position
or results of operations.
Critical
Accounting Policies and Significant Judgments and
Estimates
The
financial statements have been prepared in accordance with
generally accepted accounting principles in the United States, or
GAAP. The preparation of these financial statements requires us to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the
reported expenses incurred during the reporting periods. Our
estimates are based on our historical experience and on various
other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.
49
We
believe that the following accounting policies are the most
critical to aid in fully understanding and evaluating our reported
financial results, and they require our most difficult, subjective
or complex judgments, resulting from the need to make estimates
about the effect of matters that are inherently uncertain
.
Beneficial
Conversion Feature
From
time to time, we may issue convertible notes that have conversion
prices that create an embedded beneficial conversion feature on the
issuance date. A beneficial conversion feature exists on the date a
convertible note is issued when the fair value of the underlying
common stock to which the note is convertible into is in excess of
the remaining unallocated proceeds of the note after first
considering the allocation of a portion of the note proceeds to the
fair value of any attached equity instruments, if any related
equity instruments were granted with the debt. We estimate the fair
value of our common stock using the most recent selling price
available. The intrinsic value of the beneficial conversion feature
is recorded as a debt discount with a corresponding amount to
additional paid-in capital. The debt discount is amortized to
interest expense over the life of the note using the effective
interest method.
Research
and Development Costs
We
shall record accrued expenses for estimated costs of our research
and development activities conducted by third-party service
providers, which include the conduct of pre-clinical studies and
clinical trials and contract manufacturing activities. We shall
record the estimated costs of research and development activities
based upon the estimated amount of services provided but not yet
invoiced, and we include these costs in accrued liabilities in the
balance sheets and within research and development expense in the
statement of operations. We shall record accrued expenses for these
costs based on the estimated amount of work completed and in
accordance with agreements established with these third
parties.
We
estimate the amount of work completed through discussions with
internal personnel and external service providers as to the
progress or stage of completion of the services and the agreed-
upon fee to be paid for such services. We make significant
judgments and estimates in determining the accrued balance in each
reporting period. As actual costs become known, we adjust our
accrued estimates. Although we do not expect our estimates to be
materially different from amounts actually incurred, our
understanding of the status and timing of services performed, the
number of patients enrolled and the rate of patient enrollment may
vary from our estimates and could result in us reporting amounts
that are too high or too low in any particular period. Our accrued
expenses are dependent, in part, upon the receipt of timely and
accurate reporting from clinical research organizations and other
third-party service providers. To date, there have been no material
differences from our accrued expenses to actual
expenses.
Impairment
of Long-Lived Assets
Management reviews
long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
realizable or at a minimum annually during the fourth quarter of
the year. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset are compared to
the asset’s carrying value to determine if an impairment of
such asset is necessary. The effect of any impairment would be to
expense the difference between the fair value of such asset and its
carrying value.
Components
of our Results of Operations and Financial Condition
Operating
expenses
We
intend to classify our operating expenses into three categories:
research and development, general and administrative and
depreciation. Research and development . Research and development
expenses consist primarily of:
●
costs incurred to
conduct research, such as the discovery and development of our
product candidates;
●
costs related to
production of clinical supplies, including fees paid to contract
manufacturers;
●
fees paid to
clinical consultants, clinical trial sites and vendors, including
clinical research organizations in conjunction with implementing
and monitoring our clinical trials and acquiring and
evaluating clinical trial data, including all related fees, such as
patient screening fees, laboratory work and statistical compilation
and analysis; and
●
costs related to
compliance with drug development regulatory
requirements.
We
intend to recognize all research and development costs as they are
incurred. Clinical trial costs, contract manufacturing and other
development costs incurred by third parties are expensed as the
contracted work is performed.
We
expect our research and development expenses to increase in the
future as we advance our product candidates into and through
clinical trials and pursue regulatory approval of our product
candidates in the United States and Europe. The process of
conducting the necessary clinical research to obtain regulatory
approval is costly and time-consuming. The actual probability of
success for our product candidates may be affected by a variety of
factors including: the quality of our product candidates, early
clinical data, investment in our clinical program, competition,
manufacturing capability and commercial viability. We may never
succeed in achieving regulatory approval for any of our product
candidates. As a result of the uncertainties discussed above, we
are unable to determine the duration and completion costs of our
research and development projects or when and to what extent we
will generate revenue from the commercialization and sale of our
product candidates.
50
General and administrative.
General
and administrative expense consists of personnel related costs,
which include salaries, as well as the costs of professional
services, such as accounting and legal, facilities, information
technology and other administrative expenses. We expect our general
and administrative expense to increase following the completion of
this offering due to the anticipated growth of our business and
related infrastructure as well as accounting, insurance, investor
relations and other costs associated with becoming a public
company.
Depreciation.
Depreciation
expense consists of depreciation on our property and equipment. We
depreciate our assets over their estimated useful life. We estimate
machinery and equipment to have a 5-year life and furniture and
fixtures to have a 7-year life.
Other income (expense), net
Other
income (expense), net consists of interest expense associated with
our loans payable and interest income earned on our cash and
investment balances.
We are
an emerging growth company as defined in Section 2(a) (19) of the
Securities Act. We will continue to be an emerging growth company
until: (I) the last day of our fiscal year during which we had
total annual gross revenues of $1,000,000,000 or more; (ii) the
last day of our fiscal year following the fifth anniversary of the
date of the first sale of our common stock pursuant to an effective
registration statement under the Securities Act; (iii) the date on
which we have, during the previous 3-year period, issued more than
$1,000,000,000 in non- convertible debt; or (iv) the date on which
we are deemed to be a large accelerated filer, as defined in
Section 12b-2 of the Exchange Act.
As an
emerging growth company, we are exempt from:
–
Sections 14A(a) and
(b) of the Exchange Act, which require companies to hold
stockholder advisory votes on executive compensation and golden
parachute compensation;
–
The requirement to
provide, in any registration statement, periodic report or other
report to be filed with the Securities and Exchange Commission (the
“Commission” or “SEC”), certain modified
executive compensation disclosure under Item 402 of Regulation S-K
or selected financial data under Item 301 of Regulation S-K for any
period before the earliest audited period presented in our initial
registration statement;
–
Compliance with new
or revised accounting standards until those standards are
applicable to private companies;
–
The requirement
under Section 404(b) of the Sarbanes-Oxley Act of 2002 to provide
auditor attestation of our internal controls and procedures;
and
–
Any Public Company
Accounting Oversight Board (“PCAOB”) rules regarding
mandatory audit firm rotation or an expanded auditor report, and
any other PCAOB rules subsequently adopted unless the Commission
determines the new rules are necessary for protecting the
public.
We have
elected to use the extended transition period for complying with
new or revised accounting standards under Section 102(b)(1) of the
Jumpstart Our Business Startups
Act.
We are
also a smaller reporting company as defined in Rule 12b-2 of the
Exchange Act. As a smaller reporting company, we are not required
to provide selected financial data pursuant to Item 301 of
Regulation S-K, nor are we required to comply with the auditor
attestation requirements of Section 404(b) of the Sarbanes-Oxley
Act of 2002. We are also permitted to provide certain modified
executive compensation disclosure under Item 402 of Regulation
S-K.
a This summary highlights information contained elsewhere in this
prospectus. This summary does not contain all of the information
that you should consider before deciding to invest in our common
stock. You should read this entire prospectus carefully, including
the “Risk Factors” section, our historical financial
statements and the notes thereto, and unaudited pro forma financial
information, each included elsewhere in this prospectus. The terms
“Hoverink Biotech”, “the Company”,
“our”, or “we” refer to Hoverink
Biotechnologies, Inc.
51
Overview
We are
an innovative preclinical biopharmaceutical company committed to
the discovery development, manufacturing and commercializing
LADAVRU® and biosimilars. The liver is a vital organ that
plays an extremely important role in human metabolism and other key
physiologic functions. Rare disorders like Cirrhosis, Cirrhosis
ascites are associated with the liver, many of which have severe or
even fatal consequences for patients, and collectively represent a
significant unmet medical need. Our product candidate LADAVRU®
focuses on Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and chronic
pain, nausea and discomfort associated with chemotherapy; our goals
consist of primarily serving readily identifiable patient
populations suffering from Cancer, Cirrhosis, Cirrhosis ascites,
AIDS, and chronic pain, nausea and discomfort associated with
chemotherapy particularly for patients using anthracyclines with
the intention of targeting the treatment of relapsed or refractory
AML. Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung cancers. The
nature of these diseases permits us to leverage highly predictive
preclinical models and well-described, and often clinically
validated, biomarkers to shorten time to clinical proof of
concept.
We
intend to submit patent applications for formulation, synthetic
process and reconstitution related to our LADAVRU® drug
product candidate, although there is no assurance that we will be
successful in obtaining such patent protection. Independently from
potential patent protection, we believe LADAVRU® will qualify
for Orphan Drug status, which could entitle us to market
exclusivity of up to 7 and 10 years from the date of approval of a
New Drug Application (NDA) and Marketing Authorization (MA), in the
US and the European Union (EU), respectively. However, there can be
no assurance that such status will be granted. Separately, the FDA
may also grant market exclusivity of up to five years for newly
approved new chemical entities (of which LADAVRU® would be
one), but there can be no assurance that such exclusivity will be
granted or, if granted, for how long.
Our
Drug Candidates LADAVRU®
Our
lead product candidate is LADAVRU®, We are an innovative
preclinical biopharmaceutical company committed to the discovery
development, manufacturing and commercializing LADAVRU® and
biosimilars. Our product candidate LADAVRU® focuses on Cancer,
Cirrhosis, Cirrhosis ascites, AIDS, and chronic pain, nausea and
discomfort associated with chemotherapy; our goals consist of
primarily serving readily identifiable patient populations
suffering from Cancer, Cirrhosis, Cirrhosis ascites, AIDS, and
chronic pain, nausea and discomfort associated with chemotherapy
particularly for patients using anthracyclines with the intention
of targeting the treatment of relapsed or refractory AML.
Anthracyclines are a class of chemotherapy drugs designed to
disrupt the DNA of, and eventually destroy, targeted cancer cells.
They are the most effective anticancer drugs developed and are used
to treat a range of cancers, including leukemias, lymphomas, and
breast, stomach, uterine, ovarian, bladder, and lung
cancers.
LADAVRU®
focuses on treating chronic pain, nausea and discomfort associated
with chemotherapy particularly for patients using anthracyclines
with the intention of targeting the treatment of relapsed or
refractory AML and chronic pain, nausea and discomfort associated
with Cancer, Cirrhosis, Cirrhosis ascites, AIDS.
We also
intend to pursue Orphan Drug status for LADAVRU®. The
prevalence ceiling for qualifying rare diseases under the US Orphan
Drug Act is 200,000 patients and proportionally similar guidelines
exist in the EU.
The
most recently published prevalence statistics from the National
Cancer Institute reported that the number of people living beyond a
cancer diagnosis reached nearly 14.5 million in 2014 and is
expected to rise to almost 19 million by 2024. In 2016, an
estimated 1,685,210 new cases of cancer will be diagnosed in the
United States and 595,690 people will die from the disease. The
number of new cases of cancer (cancer incidence) is 454.8 per
100,000 men and women per year (based on 2008-2012 cases). The
trend data since that publication would indicate that the
prevalence today should still be well below the 200,000 patient
limitation for Orphan Drugs, which would permit LADAVRU® for
the treatment of chronic pain, nausea and discomfort associated
with chemotherapy particularly for patients using anthracyclines
with the intention of targeting the treatment of relapsed or
refractory AML to qualify for Orphan Drug status. However, we can
provide no assurance that we will be successful in obtaining Orphan
Drug status for LADAVRU®.
52
We
currently have no additional sources of financing and no
commitments for financing. There are no assurances that we will
obtain sufficient financing or the necessary resources to enter
into contractual agreements with outside developers or
sales/marketing firms. If we do not receive any funding or
financing, our business is likely to be maintained with limited
operations for at least the next 12 months because our Chief
executive officer, will continue providing her professional
services without current compensation. We currently have a formal
agreement in place with our president and chief executive officer
covering this period; however, our president and chief executive
officer’s current plan is to do substantially all
administrative and planning work as well as basic programming and
marketing work on her own without cash compensation while she seeks
other sources of funding for the Company.
As a
corporate policy, we will not incur any cash obligations that we
cannot satisfy with known resources, of which there are currently
none except as described in “Liquidity” below and/or
elsewhere in this prospectus. We believe that the perception that
many people have of a public company makes it more likely that they
will accept restricted securities from a public company as
consideration for indebtedness to them than they would from a
private company. We have not performed any studies of this matter.
Our conclusion is based on our own observations. However, there can
be no assurances that we will be successful in any of those efforts
even if we become a public entity. Additionally, the issuance of
restricted shares will dilute the percentage of ownership interest
of our stockholders.
Liquidity
We will
pay all costs relating to this offering estimated at $115,060. This
amount will be paid as and when necessary and required or otherwise
accrued on the books and records of Hoverink Biotechnologies, Inc.
until we are able to pay the full amount due either from revenues
or loans from a related or unrelated third party. Absent sufficient
revenues to pay these amounts within six months from the date of
this prospectus, we will seek financial assistance from our
shareholders or a third party who may agree to loan us the funds to
cover the balance of outstanding professional and related fees
relating to our prospectus to the extent that such liabilities
cannot be extended or satisfied in other ways and our professionals
insist upon payment. If and when loaned, the loans will be
evidenced by a noninterest-bearing unsecured corporate note to be
treated as a loan until repaid, if and when Hoverink
Biotechnologies, Inc. has the financial resources to do so. No
formal written arrangement exists with respect to anyone’s
commitment to loan funds for this purpose.
We have
limited our cash use and our cash can sustain our current
operations for approximately 12 months.
If a
market for our shares ever develops, of which there can be no
assurances, we may use restricted shares of our common stock to
compensate employees/consultants and independent contractors
wherever possible. We cannot predict the likelihood or source of
raising capital or funds that may be needed to complete the
development of our business plan and its stages as outlined
above.
We have
embarked upon an effort to become a public company and, by doing
so, have incurred and will continue to incur additional significant
expenses for legal, accounting and related services. Once we become
a public entity, subject to the reporting requirements of the
Exchange Act of 1934, we will incur ongoing expenses associated
with professional fees for accounting, legal and a host of other
expenses including annual reports and proxy statements, if
required. We estimate that these costs will range up to $50,000 per
year over the next few years and may be significantly higher if our
business volume and transactional activity increases but should be
lower during our first year of being public because our overall
business volume (and financial transactions) will be lower, and we
will not yet be subject to the requirements of Section 404(b) of
the Sarbanes-Oxley Act of 2002 relating to having our independent
registered public accounting firm attest to, and report on,
management’s assessment of its internal controls until we
exceed $75 million in market capitalization (if ever).
These
obligations will certainly reduce our ability and resources to
expand our business plan and activities. We hope to be able to use
our status as a public company to increase our ability to use
noncash means of settling outstanding obligations (i.e. issuance of
restricted shares of our common stock) and compensate independent
contractors who provide professional services to us, although there
can be no assurances that we will be successful in any of these
efforts.
We will
also reduce compensation levels paid to management (if we attract
or retain outside personnel to perform this function) if there is
insufficient cash generated from operations to satisfy these
costs.
We do
not have any current plans to raise funds through the sale of
securities except as set forth herein. We hope to be able to use
our status as a public company to enable us to use non-cash means
of settling obligations and compensate persons and/or firms
providing services to us, although there can be no assurances that
we will be successful in any of those efforts. However, these
actions, if successful, will result in dilution of the ownership
interests of existing shareholders, may further dilute common stock
book value, and that dilution may be material. Such issuances may
also serve to enhance existing management’s ability to
maintain control of Hoverink because the shares may be issued to
parties or entities committed to supporting existing
management.
53
Hoverink
Biotechnologies, Inc.may offer shares of its common stock to settle
a portion of the professional fees incurred in connection with its
registration statement. No negotiations have taken place with any
professional and no assurances can be made as to the likelihood
that any professional will accept shares in settlement of
obligations due them
On
March 19th of 2015 the company entered into a loan for $138,000.00
This loan matures in March 31st 2019 and can be paid in full at any
time before without prepayment penalty.
The
Company’s 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 satisfaction of liabilities in the normal course of
business. The Company has not yet established a stable ongoing
source of revenues sufficient to cover its operating costs and
allow it to continue as a going concern. The continuation of the
Company as a going concern is dependent upon the continued
financial support from its shareholders, the ability of the Company
to obtain necessary financing to sustain operations and the
attainment of profitable operations. The Company had an accumulated
deficit of approximately $13,461 as of March 31, 2015. In addition
the Company has total shareholders’ deficit of approximately
$14,868 as of March 31, 2015. These factors, among others, raise
substantial doubt as to its ability to continue as a going
concern.
In
order to continue as a going concern, the Company needs to develop
a reliable source of revenues, and achieve a profitable level of
operations. During the Three months ended March 31, 2015 and 2014
and the year ended December 31, 2014, the Company has been involved
primarily with development of operations and applying to trade in
the public market. The Company has continued to organize and
structure to meet the needs of shareholders and attract suitable
financing.
To fund
operations for the next 36 months, the Company projects a need for
$122,000,000 that will have to be raised through debt or
equity.
If the
Company is unable to obtain adequate capital, it could be forced to
cease operations. Accordingly, the accompanying financial
statements are accounted for as if the Company is a going concern
and do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or the amount and
classification of liabilities or other adjustments that might be
necessary should be Company be unable to continue as a going
concern
Recently
Issued Accounting Pronouncements
The
Company has implemented all new accounting pronouncements that are
in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that
have been issued that might have a material impact on its financial
position or results of operations.
Critical
Accounting Policies
The
preparation of financial statements and related notes requires us
to make judgments, estimates, and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. An
accounting policy is considered to be critical if it requires an
accounting estimate to be made based on assumptions about matters
that are highly uncertain at the time the estimate is made, and if
different estimates that reasonably could have been used, or
changes in the accounting estimates that are reasonably likely to
occur periodically, could materially impact the financial
statements. Financial Reporting Release No. 60 requires all
companies to include a discussion of critical accounting policies
or methods used in the preparation of financial statements. There
are no critical policies or decisions that rely on judgments that
are based on assumptions about matters that are highly uncertain at
the time the estimate is made. See notes to the financial
statements, included elsewhere in this prospectus, includes a
summary of the significant accounting policies and methods used in
the preparation of our financial statements
Seasonality
We have
not noted a significant seasonal impact in our business (or
businesses like ours) although having just commenced operations it
is too early to tell.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii)
of Regulation S-K, obligations under any guarantee contracts or
contingent obligations. We also have no other commitments, other
than the costs of being a public company that will increase our
operating costs or cash requirements in the future.
54
Marketing
Strategy
The
Company has conducted limited advertising and marketing to date as
the primary focus of the Company since inception has been to
concentrate on beginning its construction and development efforts.
The Company has, however, given substantial attention to
constructing the marketing strategy and plans that it will use once
its project enters the marketplace. We expect that our initial
target market will be individual’s adults & families with
children ranging in ages from children to adults that live within a
convenient driving distance from our Hoverink.
We
expect to utilize common multi-targeted marketing approaches used
in the entertainment field, including:
●
Participation at
trade shows and conferences to increase awareness
●
Television
campaigns (National)
●
Direct mail
campaigns to our online subscribers
●
Testimonials from
Hover Air Boarders
●
Trade
publications
●
Transit
Shelters
●
Bus
●
Malls
●
Airports
●
Specta-color
●
Space Watch
Satellite
Cash
Flows
Our
primary uses of cash are to fund our operations as we continue to
grow our business. We expect to continue to incur operating losses
in future periods as our operating expenses increase to support the
growth of our business. We expect that our research and
development, and selling, general and administrative expenses will
continue to increase as we expand our marketing efforts. We expect
that we will use a substantial portion of the net proceeds of this
offering, in combination with our existing cash and cash
equivalents, for these purposes and for the increased expenses
associated with being a public company. Cash used to fund operating
expenses is impacted by the timing of when we pay
expenses.
Based
on our current business plan, we believe that our existing cash and
cash equivalents, and our anticipated cash from operations will not
be sufficient to meet our anticipated cash requirements for at
least the next 12 months. Management may elect, however, to finance
operations by selling additional equity securities. If additional
funding is required or desired, there can be no assurance that
additional funds will be available to us on acceptable terms on a
timely basis, if at all, or that we will generate sufficient cash
from operations to adequately fund our operating needs or achieve
or sustain profitability. If we are unable to raise additional
capital or generate sufficient cash from operations to adequately
fund our operations, we will need to curtail planned activities to
reduce costs. Doing so will likely have an unfavorable effect on
our ability to execute on our business plan. If we cannot expand
our operations or otherwise capitalize on our business
opportunities because we lack sufficient capital, our business,
financial condition, and results of operations could be adversely
affected.
Property
Our
office and mailing address is Hoverink Biotechnologies, Inc. 1801
Century Park E., 24th Floor Los Angeles, California 90067
888-443-4666 email: info@hoverink.net. The space is provided to us
by Cyrus Sajna. He incurs no incremental costs as a result of our
using the space. Therefore, he does not charge us for its use.
There is no written lease agreement.
Litigation
We are
not party to any pending, or to our knowledge, threatened
litigation of any type.
Quantitative
and Qualitative Disclosures about Market Risk
Our
operations are currently conducted primarily in the United States.
As we expand internationally, our results of operations and cash
flows may become subject to fluctuations due to changes in foreign
currency exchange rates. In periods when the U.S. dollar declines
in value as compared to the foreign currencies in which we incur
expenses, our foreign-currency based expenses will increase when
translated into U.S. dollars. In addition, future fluctuations in
the value of the U.S. dollar may affect the price at which we sell
our tests outside the United States. To date, our foreign currency
risk has been minimal and we have not historically hedged our
foreign currency risk; however, we may consider doing so in the
future.
55
Code
of Conduct
Effective as of the
completion of this offering, our board of directors has adopted a
code of conduct. The code of conduct will apply to all of our
employees, officers and directors. Upon the completion of this
offering, the full text of our code of conduct will be posted on
our website. We intend to disclose future amendments to, or waiver
of, our code of ethics at the same location on our website
identified above and also in public filings. Information contained
on our website is not incorporated by reference into this
prospectus, and you should not consider information contained on
our website to be part of this prospectus or in deciding whether to
purchase shares of our common stock.
Indemnification
Agreements
Prior
to the closing of this offering, we plan to enter into
indemnification agreements with our directors and officers. The
indemnification agreements and our amended and restated certificate
of incorporation and amended and restated bylaws require us to
indemnify these individuals to the fullest extent permitted by
Delaware law.
Delaware
Law
We are
subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. Section 203
prohibits a Delaware corporation, under certain circumstances, from
engaging in a business combination with any interested stockholder
for a period of three years after the date that such stockholder
became an interested stockholder, unless:
●
before such date,
the board of directors of the corporation approved either the
business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
●
upon the closing of
the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time
the transaction began, excluding for purposes of determining the
voting stock outstanding (but not the outstanding voting stock
owned by the interested stockholder) those shares owned by (i)
persons who are directors and also officers and (ii) employee stock
plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer; or
●
on or after such
date, the business combination is approved by the board of
directors and authorized at an annual or special meeting of the
stockholders by at least two-thirds of the outstanding voting stock
which is not owned by the interested stockholder.
In general, Section
203 defines business combination to include:
●
any merger or
consolidation involving the corporation and the interested
stockholder;
●
any sale, transfer,
pledge or other disposition of 10% or more of the assets of the
subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder;
●
any transaction
involving the corporation that has the effect of increasing the
proportionate share of the stock or any class or series of the
corporation beneficially owned by the interested stockholder;
or
●
the receipt by the
interested stockholder of the benefit of any loss, advances,
guarantees, pledges or other financial benefits by or through the
corporation.
In
general, Section 203 defines an interested stockholder as any
entity or person who, together with the entity's or person's
affiliates and associates, beneficially owns, or within three years
prior to the time of determination of interested stockholder status
did own, 15% or more of the outstanding voting stock of the
corporations.
A
Delaware corporation may "opt out" of these provisions with an
express provision in its original certificate of incorporation or
an express provision in its amended and restated certificate of
incorporation or amended and restated bylaws resulting from a
stockholders' amendment approved by at least a majority of the
outstanding voting shares. We have not opted out of these
provisions. As a result, mergers or other takeover or change in
control attempts of us may be discouraged or
prevented.
Choice
of Forum
Upon
the completion of this offering, our amended and restated
certificate of incorporation will provide that the Court of
Chancery of the State of Delaware will be the exclusive forum for
any derivative action or proceeding brought on our behalf, any
action asserting a breach of fiduciary duty, any action asserting a
claim against us arising pursuant to the Delaware General
Corporation Law or any action asserting a claim against us that is
governed by the internal affairs doctrine. The enforceability of
similar choice of forum provisions in other companies' certificates
of incorporation has been challenged in legal proceedings, and it
is possible that a court could find these types of provisions to be
inapplicable or unenforceable.
56
Rule
144
In
general, under Rule 144, beginning 90 days after the date of this
prospectus, a person who is not deemed to be our affiliate and has
not been our affiliate at any time during the three months
preceding a sale will be entitled to sell any shares of our common
stock that such person has beneficially owned for at least six
months, including the holding period of any prior owner other than
one of our affiliates, without regard to manner of sale, volume
limitations or notice provisions of Rule 144. Sales of our common
stock by any such person would be subject to the availability of
current public information about us if the shares to be sold were
beneficially owned by such person, including the holding period of
any prior owner other than one of our affiliates, for less than one
year.
In
addition, under Rule 144, a person may sell shares of our common
stock acquired from us immediately upon the completion of this
offering, without regard to volume limitations or the availability
of public information about us, if:
●
the person is not
our affiliate and has not been our affiliate at any time during the
preceding three months; and
●
the person has
beneficially owned the shares to be sold for at least one year,
including the holding period of any prior owner other than one of
our affiliates.
Beginning 90 days
after the date of this prospectus, our affiliates who have
beneficially owned shares of our common stock for at least six
months, including the holding period of any prior owner other than
one of our affiliates, would be entitled to sell within any
three-month period a number of shares that does not exceed the
greater of:
●
1% of the number of
shares of our common stock then-outstanding, which will equal
approximately 454,598 shares immediately after the completion of
this offering and
●
the average weekly
trading volume in our common stock on the Nasdaq Global Select
Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
Sales
under Rule 144 by our affiliates or persons selling shares on
behalf of our affiliates are also subject to manner of sale
provisions and notice requirements and to the availability of
current public information about us.
Rule 701
In
general, under Rule 701, any of our employees, consultants or
advisors who purchase shares from us in connection with a
compensatory stock or option plan or other written agreement in a
transaction before the date of this offering that was completed in
reliance on Rule 701 and complied with the requirements of Rule 701
will, subject to the lock-up restrictions described below, be
eligible to resell such shares 90 days after the completion of this
offering in reliance on Rule 144, but without compliance with
certain restrictions, including the holding period, contained in
Rule 144.
Lock-Up Agreements
In
connection with this offering, we may require all of our directors
and officers agree, not to offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly,
shares of our common stock or any securities convertible into or
exchangeable for shares of our common stock or enter into any swap
or other arrangement that transfers to another any of the economic
consequences of ownership of our common stock during the period
from the date of this prospectus continuing through the date 180
days after the date of this prospectus. Certain of our employees,
including our executive officers, and directors may enter into
written trading plans that are intended to comply with Rule 10b5-1
under the Securities Exchange Act of 1934. Sales under these
trading plans would not be permitted until the expiration of the
lock-up agreements relating to our initial public offering
described above.
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS
The
following is a discussion of certain material U.S. federal income
tax considerations with respect to the ownership and disposition of
shares of common stock applicable to non-U.S. holders who acquire
such shares in this offering and hold such shares as a capital
asset within the meaning of Section 1221 of the Internal Revenue
Code of 1986, as amended, or the Code, (generally, property held
for investment). For purposes of this discussion, a "non-U.S.
holder" means a beneficial owner of our common stock (other than an
entity or arrangement that is treated as a partnership for U.S.
federal income tax purposes) that is not, for U.S. federal income
tax purposes, any of the following:
57
●
an individual
citizen or resident of the United States;
●
a corporation (or
other entity treated as a corporation for U.S. federal income tax
purposes) created or organized in the United States or under the
laws of the United States, any state thereof or the District of
Columbia, or any other corporation treated as such;
●
an estate, the
income of which is includable in gross income for U.S. federal
income tax purposes regardless of its source; or
●
a trust if (i) a
court within the United States is able to exercise primary
supervision over the administration of the trust and one or more
"U.S. persons," as defined under the Code, have the authority to
control all substantial decisions of the trust or (ii) such trust
has made a valid election to be treated as a U.S. person for U.S.
federal income tax purposes.
This
discussion is based on current provisions of the Code, Treasury
regulations promulgated thereunder, judicial opinions, published
positions of the Internal Revenue Service and other applicable
authorities, all of which are subject to change (possibly with
retroactive effect). This discussion does not address all aspects
of U.S. federal income taxation that may be important to a
particular non-U.S. holder in light of that non-U.S. holder's
individual circumstances, nor does it address any U.S. federal
estate and gift taxes, any U.S. alternative minimum taxes or any
state, local or non-U.S. taxes. This discussion may not apply, in
whole or in part, to particular non-U.S. holders in light of their
individual circumstances or to holders subject to special treatment
under the U.S. federal income tax laws (such as insurance
companies, tax-exempt organizations, financial institutions,
brokers or dealers in securities, "controlled foreign
corporations," "passive foreign investment companies," Cayman Funds
and non-U.S. holders that hold our common stock as part of a
straddle, hedge, conversion transaction or other integrated
investment and certain
U.S.
expatriates).
If a
partnership (or other entity or arrangement treated as a
partnership for U.S. federal income tax purposes) holds our common
stock, the tax treatment of a partner therein will generally depend
on the status of the partner and the activities of the partnership.
Partners of a partnership holding our common stock should consult
their tax advisor as to the particular U.S. federal income tax
consequences applicable to them.
THIS
SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL
TAX CONSEQUENCES FOR NON-U.S. HOLDERS RELATING TO THE OWNERSHIP AND
DISPOSITION OF OUR COMMON STOCK. PROSPECTIVE HOLDERS OF OUR COMMON
STOCK SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY
STATE, LOCAL, FOREIGN INCOME AND OTHER TAX LAWS) OF THE OWNERSHIP
AND DISPOSITION OF OUR COMMON STOCK
Dividends
In
general, the gross amount of any distribution we make to a non-U.S.
holder with respect to its shares of common stock will be subject
to U.S. withholding tax at a rate of 30% to the extent the
distribution constitutes a dividend for U.S. federal income tax
purposes, unless the non-U.S. holder is eligible for a reduced rate
of withholding tax under an applicable tax treaty and the non-U.S.
holder provides proper certification of its eligibility for such
reduced rate. A distribution will constitute a dividend for U.S.
federal income tax purposes to the extent of our current or
accumulated earnings and profits as determined for U.S. federal
income tax purposes. To the extent any distribution does not
constitute a dividend, it will be treated first as reducing the
adjusted basis in the non-U.S. holder's shares of common stock and
then, to the extent it exceeds the adjusted basis in the non-U.S.
holder's shares of common stock, as gain from the sale or exchange
of such stock. Any such gain will be subject to the treatment
described in "—Gain on Sale or Other Disposition of Common
Stock."
Dividends we pay to
a non-U.S. holder that are effectively connected with its conduct
of a trade or business within the United States (and, if required
by an applicable tax treaty, are attributable to a U.S. permanent
establishment of such non-U.S. holder) will not be subject to U.S.
withholding tax, as described above, if the non-U.S. holder
complies with applicable certification and disclosure requirements.
Instead, such dividends generally will be subject to U.S. federal
income tax on a net income basis, at regular U.S. federal income
tax rates. Dividends received by a foreign corporation that are
effectively connected with its conduct of trade or business within
the United States may be subject to an additional branch profits
tax at a rate of 30% (or such lower rate as may be specified by an
applicable tax treaty). This discussion is based on current
provisions of the Code, Treasury regulations promulgated
thereunder, judicial opinions, published positions of the Internal
Revenue Service and other applicable authorities, all of which are
subject to change (possibly with retroactive effect). This
discussion does not address all aspects of U.S. federal income
taxation that may be important to a particular non-U.S. holder in
light of that non-U.S. holder's individual circumstances, nor does
it address any aspects of the unearned income Medicare contribution
tax pursuant to the Health Care and Education Reconciliation Act of
2010, any U.S. federal estate and gift taxes, any U.S. alternative
minimum taxes or any state, local or non-U.S. taxes. This
discussion may not apply, in whole or in part, to particular
non-U.S. holders in light of their individual circumstances or to
holders subject to special treatment under the U.S. federal income
tax laws (such as insurance companies, tax-exempt organizations,
financial institutions, brokers or dealers in securities,
"controlled foreign corporations," "passive foreign investment
companies," non-U.S. holders that hold our common stock as part of
a straddle, hedge, conversion transaction or other integrated
investment and certain U.S. expatriates).
58
If a
partnership (or other entity or arrangement treated as a
partnership for U.S. federal income tax purposes) holds our common
stock, the tax treatment of a partner therein will generally depend
on the status of the partner and the activities of the partnership.
Partners of a partnership holding our common stock should consult
their tax advisor as to the particular U.S. federal income tax
consequences applicable to them.
THIS
SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL
TAX CONSEQUENCES FOR NON-U.S. HOLDERS RELATING TO THE OWNERSHIP AND
DISPOSITION OF OUR COMMON STOCK. PROSPECTIVE HOLDERS OF OUR COMMON
STOCK SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY
STATE, LOCAL, FOREIGN INCOME AND OTHER TAX LAWS) OF THE OWNERSHIP
AND DISPOSITION OF OUR COMMON STOCK.
Gain on Sale or Other Disposition of Common Stock
In
general, a non-U.S. holder will not be subject to U.S. federal
income tax on any gain realized upon the sale or other disposition
of the non-U.S. holder's shares of common stock
unless:
●
the gain is
effectively connected with a trade or business carried on by the
non-U.S. holder within the United States (and, if required by an
applicable tax treaty, is attributable to a U.S. permanent
establishment of such non-U.S. holder);
●
the non-U.S. holder
is an individual and is present in the United States for 183 days
or more in the taxable year of disposition and certain other
conditions are met; or
●
we are or have been
a U.S. real property holding corporation for U.S. federal income
tax purposes at any time within the shorter of the five-year period
preceding such disposition or such non- U.S. holder's
holding period of our common stock.
Gain
that is effectively connected with the conduct of a trade or
business in the United States (or so treated) generally will be
subject to U.S. federal income tax on a net income tax basis, at
regular U.S. federal income tax rates. If the non-U.S. holder is a
foreign corporation, the branch profits tax described above also
may apply to such effectively connected gain. An individual
non-U.S. holder who is subject to U.S. federal income tax because
the non-U.S. holder was present in the United States for 183 days
or more during the year of sale or other disposition of our common
stock will be subject to a flat 30% tax on the gain derived from
such sale or other disposition, which may be offset by U.S.-source
capital losses. We believe that we are not, and we do not
anticipate becoming, a U.S. real property holding corporation for
U.S. federal income tax purposes.
Withholdable
Payments to Foreign Financial Entities and Other Foreign
Entities
Under
the Foreign Account Tax Compliance Act, or FATCA, withholding tax
of 30% applies to certain payments to foreign financial
institutions, investment funds and certain other non-
U.S.
persons that fail to comply with certain information reporting and
certification requirements pertaining to their direct and indirect
U.S. security holders and/or U.S. accountholders and do not
otherwise qualify for an exemption. Such payments include dividends
with respect to our common stock and, beginning after December 31,
2016, the gross proceeds from the sale or other disposition of our
common stock. Prospective investors are encouraged to consult with
their own tax advisors regarding the possible implications of FATCA
on their investment in our common stock.
Backup Withholding, Information Reporting and Other Reporting
Requirements
We must
report annually to the Internal Revenue Service and to each
non-U.S. holder the amount of dividends paid to, and the tax
withheld with respect to, each non-U.S. holder. These reporting
requirements apply regardless of whether withholding was reduced or
eliminated by an applicable tax treaty. Copies of this information
reporting may also be made available under the provisions of a
specific tax treaty or agreement with the tax authorities in the
country in which the non-U.S. holder resides or is
established.
A
non-U.S. holder will generally be subject to backup withholding for
dividends on our common stock paid to such holder unless such
holder certifies under penalties of perjury that, among other
things, it is a non-U.S. holder (and the payer does not have actual
knowledge or reason to know that such holder is a U.S. person) or
otherwise establishes an exemption.
59
Information
reporting and backup withholding generally are not required with
respect to the amount of any proceeds from the sale or other
disposition of our common stock by a non-U.S. holder outside the
United States through a foreign office of a foreign broker that
does not have certain specified connections to the United States.
However, if a non-U.S. holder sells or otherwise disposes of its
shares of common stock through a U.S. broker or the U.S. offices of
a foreign broker, the broker will generally be required to report
the amount of proceeds paid to the non-U.S. holder to the Internal
Revenue Service and also backup withhold on that amount unless such
non-U.S. holder provides appropriate certification to the broker of
its status as a non-U.S. person (and the payer does not have actual
knowledge or reason to know that such holder is a U.S. person) or
otherwise establishes an exemption. Information reporting will also
apply if a non-U.S. holder sells
its shares of common stock through a foreign broker deriving more
than a specified percentage of its income from U.S. sources or
having certain other connections to the United States, unless such
broker has documentary evidence in its records that such non-U.S.
holder is a non-U.S. person (and the payer does not have actual
knowledge or reason to know that such holder is a U.S. person) and
certain other conditions are met, or such non-U.S. holder otherwise
establishes an exemption. Backup withholding is not an additional
income tax. Any amounts withheld under the backup withholding rules
from a payment to a non-U.S. holder generally can be credited
against the non-U.S. holder's U.S. federal income tax liability, if
any, or refunded, provided that the required information is
furnished to the Internal Revenue Service in a timely manner.
Non-U.S. holders should consult their tax advisors regarding the
application of the information reporting and backup withholding
rules to them.
Possible
Potential Conflicts
The
OTCQB and OTCBB on which we plan to have our shares of common stock
quoted does not currently have any director independence
requirements.
No
member of management will be required by us to work on a full time
basis. Accordingly, certain conflicts of interest may arise between
us and our officer(s) and director(s) in that they may have other
business interests in the future to which they devote their
attention, and they may be expected to continue to do so although
management time must also be devoted to our business. As a result,
conflicts of interest may arise that can be resolved only through
their exercise of such judgment as is consistent with each
officer's understanding of his/her fiduciary duties to
us.
Currently we have
only two officers and three directors and will seek to add
additional officer(s) and/or director(s) as and when the proper
personnel are located and terms of employment are mutually
negotiated and agreed, and we have sufficient capital resources and
cash flow to make such offers.
We
cannot provide assurances that our efforts to eliminate the
potential impact of conflicts of interest will be
effective.
Code
of Business Conduct and Ethics
In July
2015, we adopted a Code of Ethics and Business Conduct which is
applicable to our future employees and which also includes a Code
of Ethics for our founders, president, chief executive officer, and
principal financial officers and any persons performing similar
functions.
A code
of ethics is a written standard designed to deter wrongdoing and to
promote:
–
honest and ethical
conduct,
–
full, fair,
accurate, timely and understandable disclosure in regulatory
filings and public statements,
–
compliance with
applicable laws, rules and regulations, the prompt reporting
violation of the code, and
–
accountability for
adherence to the code.
A copy
of our Code of Business Conduct and Ethics is attached as an
Exhibit to our Registration Statement.
Board
of Directors
All
directors will hold office until the completion of their term of
office, which is not longer than one year, or until their
successors have been elected. Our current directors’ term of
office expires on Feb 15, 2016. All officers are appointed annually
by the board of directors subject to existing employment agreements
(of which there are currently none) and will serve at the
discretion of the board.
Currently,
directors receive compensation for their role as directors and may
receive compensation for their role as officers. As long as we have
no additional directors besides our current board all votes on
issues are resolved in favor of the board’s
vote.
60
Involvement
in Certain Legal Proceedings
Except
as described below, during the past ten years, no present director,
executive officer or person nominated to become a director or an
executive officer of Hoverink Biotechnologies, Inc.:
–
the prompt
reporting violation of the code, and
–
accountability for
adherence to the code.
1. had a petition
under the federal bankruptcy laws or any state insolvency law filed
by or against, or a receiver, fiscal agent or similar officer
appointed by a court for the business or property of such person,
or any partnership in which he was a general partner at or within
two years before the time of such filing, or any corporation or
business association of which he was an executive officer at or
within two years before the time of such filing;
2. was convicted in a
criminal proceeding or subject to a pending criminal proceeding
(excluding traffic violations and other minor
offenses);
3. was subject to any
order, judgment or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining his from or otherwise limiting his
involvement in any of the following activities:
i. acting as a futures
commission merchant, introducing broker, commodity trading advisor
commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the Commodity Futures
Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or
dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity;
ii.
engaging in any
type of business practice; or
iii. engaging
in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws;
or
4. was the subject of
any order, judgment or decree, not subsequently reversed, suspended
or vacated, of an federal or state authority barring, suspending or
otherwise limiting for more than 60 days the right of such person
to engage in any activity described in paragraph (3) (i), above, or
to be associated with persons engaged in any such activity;
or
5. was found by a
court of competent jurisdiction (in a civil action), the Securities
and Exchange Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law,
and for which the judgment has not been reversed, suspended or
vacated.
Committees
of the Board of Directors
Concurrent with
having sufficient members and resources, the Hoverink
Biotechnologies, Inc. board of directors will establish an audit
committee and a compensation committee. We believe that we will
need a minimum of five directors to have effective committee system
s . The audit committee will
review the results and scope of the audit and other services
provided by the independent auditors and review and evaluate the
system of internal controls. The compensation committee will manage
any stock option plan we may establish and review and recommend
compensation arrangements for the officers. No final determination
has yet been made as to the memberships of these committees or when
we will have sufficient members to establish committees. See
“Executive Compensation” hereinafter.
All
directors will be paid by Hoverink Biotechnologies, Inc.and shall
be reimbursed for any expenses incurred in attending directors'
meetings provided that Hoverink Biotechnologies, Inc.has the
resources to pay these fees. Hoverink Biotechnologies, Inc.will
consider applying for officers and directors liability insurance at
such time when it has the resources to do so.
61
Compensation
of Executive Officers Summary Compensation Table
To
provide you with a complete picture of the compensation the
following table and the related notes set forth information
relating to the compensation paid to each of the named executive
officers by us.
Name
and Principal Position
|
Year
|
Salary
($)
|
Option
Awards
($)
(1)
|
Total
($)
|
|
|
|
|
|
Debbie
Carter, Chief Executive Officer, CFO
|
|
|
|
|
|
2015
|
0
|
----
|
0
|
|
2016
|
0
|
----
|
0
|
Cyrus
Sajna, Vice President and Chief Operating Officer
|
2015
|
0
|
----
|
0
|
|
2016
|
0
|
----
|
0
|
Davidra
Sajna, Chairman and President
|
2015
|
----
|
----
|
----
|
|
2016
|
----
|
----
|
----
|
Grants
of Plan-Based Awards Table
Three
of our executives officers received grants of stock, option awards
or other plan-based awards during the period of June 30, 2017
except as stated above. The Company has activity with respect to
awards.
Options
Exercised and Stock Vested Table
None of
our named executive officers exercised any stock options, and no
restricted stock units, if any, held by our named executive
officers vested during the period ended June 30, 2015. The Company
has no activity with respect to these awards.
Outstanding
Equity Awards at Fiscal Year-End Table
3 of
our named executive officers had outstanding stock or option awards
as of March 30, 2017 that would be compensatory to the officer. The
Company has issued any awards to its named executive officers. The
Company and its Board of Directors have issued grant awards as it
sees fit to its employees as well as key consultants.
DESCRIPTION
OF CAPITAL STOCK
Introduction
The
Company is authorized to issue 100,000,000 shares of common stock,
par value $0.0001, of which [35,772,000`] Shares are outstanding as
of the date of the registration statement, of which this prospectus
is a part. The Company is also authorized to issue 20,000,000 share
of preferred stock, par value $0.0001, of which no shares were
outstanding as of the date of the registration statement, of which
this prospectus is a part.
Preferred
Stock
None.
We presently do not have plans to issue any shares of preferred
stock. However, preferred stock could be used to dilute a potential
hostile acquirer. Accordingly, any future issuance of preferred
stock or any rights to purchase preferred shares may have the
effect of making it more difficult for a third party to acquire
control of us. This may delay, defer or prevent a change of control
in our Company or an unsolicited acquisition proposal. The issuance
of preferred stock also could decrease the amount of earnings
attributable to, and assets available for distribution to, the
holders of our common stock and could adversely affect the rights
and powers, including voting rights, of the holders of our common
stock.
62
Common
Stock
Our
certificate of incorporation authorizes the issuance of 100,000,000
shares of common stock. There are 35,772,000 shares of our common
stock issued and outstanding at June 30, 2017 that is held by 38
shareholders. The holders of our common stock:
–
have equal ratable
rights to dividends from funds legally available for payment of
dividends when, as and if declared by the board of
directors;
–
are entitled to
share ratably in all of the assets available for distribution to
holders of common stock upon liquidation, dissolution or winding up
of our affairs;
–
do not have
preemptive, subscription or conversion rights, or redemption or
access to any sinking fund; and
–
are entitled to one
non-cumulative vote per share on all matters submitted to
stockholders for a vote at any meeting of stockholders
See
also Plan of Distribution regarding negative implications of being
classified as a “Penny Stock.”
Authorized
but Un-issued Capital Stock
Delaware law
requires stockholder approval for any issuance of authorized
shares. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise
additional capital or to facilitate corporate
acquisitions.
One of
the effects of the existence of un-issued and unreserved common
stock (and/or preferred stock) may be to enable our board of
directors to issue shares to persons friendly to current
management, which issuance could render more difficult or
discourage an attempt to obtain control of our board by means of a
merger, tender offer, proxy contest or otherwise, and thereby
protect the continuity of our management and possibly deprive the
stockholders of opportunities to sell their shares of our common
stock at prices higher than prevailing market prices.
Shareholder
Matters
As an
issuer of "penny stock" the protection provided by the federal
securities laws relating to forward looking statements does not
apply to us if our shares are considered to be penny stocks which
they currently are and probably will be for the foreseeable future.
Although the federal securities law provide a safe harbor for
forward-looking statements made by a public company that files
reports under the federal securities laws, this safe harbor is not
available to issuers of penny stocks. As a result, we will not have
the benefit of this safe harbor protection in the event of any
claim that the material provided by us, including this prospectus,
contained a material misstatement of fact or was misleading in any
material respect because of our failure to include any statements
necessary to make the statements not misleading.
Certain
provisions of Delaware law described below create rights that might
be deemed material to our shareholders. Other provisions might
delay or make more difficult acquisitions of our stock or changes
in our control or might also have the effect of preventing changes
in our management or might make it more difficult to accomplish
transactions that some of our shareholders may believe to be in
their best interests.
Amendments to Bylaws - Our articles of incorporation provide
that the power to adopt, alter, amend, or repeal our bylaws is
vested exclusively with the board of directors. In exercising this
discretion, our board of directors could conceivably alter our
bylaws in ways that would affect the rights of our shareholders and
the ability of any shareholder or group to effect a change in our
control; however, the board would not have the right to do so in a
way that would violate law or the applicable terms of our articles
of incorporation.
63
There is no established public market for our
common stock, and there can be no assurance that any market will
develop in the foreseeable future .
Transfer of our
common stock may also be restricted under the securities or
securities regulations laws promulgated by various states and
foreign jurisdictions, commonly referred to as "Blue Sky" laws.
Absent compliance with such individual state laws, our common stock
may not be traded in such jurisdictions. Because the securities
registered hereunder have not been registered for resale under the
blue sky laws of any state, the holders of such shares and persons
who desire to purchase them in any trading market that might
develop in the future, should be aware that there may be
significant state blue-sky law restrictions upon the ability of
investors to sell the securities and of purchasers to purchase the
securities. Accordingly, investors may not be able to liquidate
their investments and should be prepared to hold the common stock
for an indefinite period of time.
In
addition and without limiting the foregoing, the Company will be
subject to applicable provisions, rules and regulations under the
Exchange Act with regard to security transactions during the period
of time when this Registration Statement is effective.
Our
shares of common stock are subject to the "penny stock" rules of
the Securities and Exchange Commission. The SEC has adopted rules
that regulate broker-dealer practices in connection with
transactions in "penny stocks". Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on
the NASDAQ system, provided that current price and volume
information with respect to transactions in such securities is
provided by the exchange or system). Penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from those rules, to deliver a standardized risk
disclosure document prepared by the SEC, which specifies
information about penny stocks and the nature and significance of
risks of the penny stock market. A broker-dealer must also provide
the customer with bid and offer quotations for the penny stock, the
compensation of the broker- dealer, and sales person in the
transaction, and monthly account statements indicating the market
value of each penny stock held in the customer's account. In
addition, the penny stock rules require that, prior to a
transaction in a penny stock not otherwise exempt from those rules,
the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and
receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the trading
activity in the secondary market for stock that becomes subject to
those penny stock rules. If a trading market for our common stock
develops, our common stock will probably become subject to the
penny stock rules, and shareholders may have difficulty in selling
their shares.
OTCQB/OTCBB
Considerations
OTCQB
and OTCBB securities are not listed and traded on the floor of an
organized national or regional stock exchange. Instead, OTCQB and
OTCBB securities transactions are conducted through a telephone and
computer network connecting dealers in stocks. OTCQB and OTCBB
stocks are traditionally smaller companies that do not meet the
financial and other listing requirements of a regional or national
stock exchange.
To be
quoted on the OTCQB and OTCBB, a market maker must file an
application on our behalf in order to make a market for our common
stock. We are not permitted to file such application on our own
behalf. No market maker has agreed to file an application with
FINRA on our behalf. There can be no assurance that a market maker
will file an application with FINRA or that the market
maker’s application will be accepted by FINRA, nor can we
estimate as to the time period that the application will
require.
The
OTCBB is separate and distinct from the NASDAQ stock market. NASDAQ
has no business relationship with issuers of securities quoted on
the OTCBB. The SEC’s order handling rules, which apply to
NASDAQ-listed securities, do not apply to securities quoted on the
OTCBB.
Although the NASDAQ
stock market has rigorous listing standards to ensure the high
quality of its issuers, and can delist issuers for not meeting
those standards, the OTCQB and OTCBB have limited to no listing
standards. Rather, it is the market maker who chooses to quote a
security on the system, files the application, and is obligated to
comply with keeping information about the issuer in its files.
FINRA cannot deny an application by a market maker to quote the
stock of a company assuming all FINRA questions relating to its
Rule 211 process are answered accurately and satisfactorily. The
only requirement for ongoing inclusion in the OTCBB is that the
issuer be current in its reporting requirements with the
SEC.
Although we
anticipate that quotation on the OTCQB and OTCBB will increase
liquidity for our stock, investors may have difficulty in getting
orders filled because trading activity on the OTCBB in general is
not conducted as efficiently and effectively as with NASDAQ-listed
securities. As a result, investors’ orders may be filled at a
price much different than expected when an order is
placed.
Investors must
contact a broker-dealer to trade OTCBB securities. Investors do not
have direct access to the bulletin board service. For bulletin
board securities, there only has to be one market
maker.
64
If we
become able to have our shares of common stock quoted on the OTCQB
and OTCBB, we will then try, through a broker-dealer and its
clearing firm, to become eligible with the DTC to permit our shares
to trade electronically. If an issuer is not
“DTC-eligible,” then its shares cannot be
electronically transferred between brokerage accounts, which, based
on the realities of the marketplace as it exists today (especially
the OTCQB and OTCBB), means that shares of a company will not be
traded (technically the shares can be traded manually between
accounts, but this takes days and is not a realistic option for
companies relying on broker dealers for stock transactions - like
all the companies on the OTCQB and OTCBB). What this boils down to
is that while DTC-eligibility is not a requirement to trade on the
OTCQB and OTCBB, it is a necessity to process trades on the OTCQB
and OTCBB if a company’s stock is going to trade with any
volume. There are no assurances that our shares will ever become
DTC-eligible or, if they do, how long it will take.
Because
OTCQB and OTCBB stocks are usually not followed by analysts, there
may be lower trading volume than for NASDAQ-listed
securities.
Section
15(g) of the Exchange Act
Our
shares will be covered by Section 15(g) of the Exchange Act, and
Rules 15g-1 through 15g-6 promulgated thereunder. They impose
additional sales practice requirements on broker-dealers who sell
our securities to persons other than established customers and
accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000
excluding revenue or annual income exceeding $200,000 or $300,000
jointly with their spouses).
Rule
15g-1 exempts a number of specific transactions from the scope of
the penny stock rules (but is not applicable to us).
Rule
15g-2 declares unlawful broker-dealer transactions in penny stocks
unless the broker-dealer has first provided to the customer a
standardized disclosure document.
Rule
15g-3 provides that it is unlawful for a broker-dealer to engage in
a penny stock transaction unless the broker-dealer first discloses
and subsequently confirms to the customer current quotation prices
or similar market information concerning the penny stock in
question.
Rule
15g-4 prohibits broker-dealers from completing penny stock
transactions for a customer unless the broker-dealer first
discloses to the customer the amount of compensation or other
remuneration received as a result of the penny stock
transaction.
Rule
15g-5 requires that a broker-dealer executing a penny stock
transaction, other than one exempt under Rule 15g-1, disclose to
its customer, at the time of or prior to the transaction,
information about the sales persons compensation.
Rule
15g-6 requires broker-dealers selling penny stocks to provide their
customers with monthly account statements.
Rule
3a51-1 of the Exchange Act establishes the definition of a "penny
stock," for purposes relevant to us, as any equity security that
has a minimum bid price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to a limited
number of exceptions. It is likely that our shares will be
considered to be penny stocks for the immediately foreseeable
future. For any transaction involving a penny stock, unless exempt,
the penny stock rules require that a broker or dealer approve a
person's account for transactions in penny stocks and the broker or
dealer receive from the investor a written agreement to the
transaction setting forth the identity and quantity of the penny
stock to be purchased.
In
order to approve a person's account for transactions in penny
stocks, the broker or dealer must obtain financial information and
investment experience and objectives of the person and make a
reasonable determination that the transactions in penny stocks are
suitable for that person and that that person has sufficient
knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prepared by the SEC relating to
the penny stock market, which, in highlight form, sets
forth:
–
the basis on which
the broker or dealer made the suitability determination,
and
–
that the broker or
dealer received a signed, written agreement from the investor prior
to the transaction
Disclosure also has
to be made about the risks of investing in penny stock in both
public offerings and in secondary trading and commission’s
payable to both the broker-dealer and the registered
representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in
penny stock transactions. Additionally, monthly statements have to
be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny
stocks.
65
Many
brokers have decided not to trade penny stocks because of the
requirements of the penny stock rules and, as a result, the number
of broker-dealers willing to act as market makers in such
securities is limited. If the Company remains subject to the penny
stock rules for any significant period, which is likely, it could
have an adverse effect on the market, if any, for the
Company’s securities. If the Company’s securities are
subject to the penny stock rules, investors will find it difficult
to dispose of the Company’s securities.
State
Securities – Blue Sky Laws
There
is no established public market for our common stock, and there can
be no assurance that any market will develop in the foreseeable
future. Transfer of our common stock may also be restricted under
the securities or securities regulations laws promulgated by
various states and foreign jurisdictions, commonly referred to as
"Blue Sky" laws. Absent compliance with such individual state laws,
our common stock may not be traded in such jurisdictions. Because
the securities registered hereunder have not been registered for
resale under the blue sky laws of any state, the holders of such
shares and persons who desire to purchase them in any trading
market that might develop in the future, should be aware that there
may be significant state blue-sky law restrictions upon the ability
of investors to sell the securities and of purchasers to purchase
the securities. Accordingly, investors may not be able to liquidate
their investments and should be prepared to hold the common stock
for an indefinite period of time.
We have
applied for listing in Mergent, Inc., a leading provider of
business and financial information on publicly listed companies,
which, once published, will provide Hoverink Biotechnologies, Inc.
with “manual” exemptions in approximately 33 states as
indicated in CCH Blue Sky Law Desk Reference at Section 6301
entitled “Standard Manuals Exemptions.” Our application
was approved by Mergent, Inc.in June 2015.
Thirty-three states
have what is commonly referred to as a "manual exemption" for
secondary trading of securities such as those to be resold by
selling stockholders under this registration statement. In these
states, so long as we obtain and maintain a listing in Mergent,
Inc. or Standard and Poor's Corporate Manual, secondary trading of
our common stock can occur without any filing, review or approval
by state regulatory authorities in these states. These states are:
Alaska, Arizona, Arkansas, Colorado, Connecticut, District of
Columbia, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Maine,
Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska,
New Jersey, New Mexico, North Carolina, North Dakota, Ohio,
Oklahoma, Oregon, Rhode Island, South Carolina, Texas, Utah,
Washington, West Virginia and Wyoming. We cannot secure this
listing, and thus this qualification, until after our registration
statement is declared effective. Once we secure this listing
(assuming that being a development stage and shell company is not a
bar to such listing), secondary trading can occur in these states
without further action.
Upon
effectiveness of this Prospectus, the Company intends to continue
to be deemed a “reporting issuer” under Section
12 ) of the Exchange
Act, as amended, by way of filing a Form 8-A with the SEC. A Form
8-A is a “short form” of registration whereby
information about the Company will be incorporated by reference to
the Registration Statement on Form S-1, of which this prospectus is
a part. Upon filing of the Form 8-A, if done, the Company’s
shares of common stock will become “covered
securities,”
or “federally covered securities” as described in some
states’ laws, which means that unless you are an
“underwriter” or “dealer,” you will have a
“secondary trading” exemption under the laws of most
states (and the District of Columbia, Guam, the Virgin Islands and
Puerto Rico) to resell the shares of common stock you purchase in
this offering. However, four states do impose filing requirements
on the Company: Michigan, New Hampshire, Texas and Vermont. The
Company may, at its own cost, make the required notice filings in
Michigan, New Hampshire, Texas and Vermont immediately after filing
its Form 8-A with the SEC.
We
currently do not intend to and may not be able to qualify
securities for resale in other states which require shares to be
qualified before they can be resold by our
shareholders.
Limitations
Imposed by Regulation M
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not simultaneously
engage in market making activities with respect to our common stock
for a period of two business days prior to the commencement of such
distribution.
LEGAL
MATTERS
Ben
Bunker ESQ. The Bunker Law Group, PLLC benbunker@bunkerlawgroup.com T
(702) 784-5990 3753 Howard Hughes Parkway, Suite 200 Las Vegas,
Nevada 89169 has given his opinion as attorneys-at-law regarding
the validity of the issuance of the Shares offered by the Company
and whether the shares offered in the Primary Offering and
Secondary Offering may be sold pursuant to this prospectus after it
becomes effective and while it remains current.
66
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On Feb
16, 2015 the above referenced shares of common stock were issued to
additional founders for their services in assisting with the
business plan, plan development and formation of the Company. The
foregoing issuances of securities were affected in reliance upon
the exemption from registration provided by section 4(2) under the
Securities Act of 1933, (the “Act”) as
amended.
The
Company issued 1,000,000 shares to W. Neil Gallagher, for
consulting services The Company issued 6,900,000 shares to Davidra
Nicole Sajna,Chairman, President
The
Company issued 6,800,000 shares to Debbie Carter our chief
executive officer, and chief financial officer The Company issued
8,200,000 shares to Cyrus Sajna, Vice President
On
9/22/2017 the company entered into a loan for $115,090 This loan
matures in 9/22/2022 and can be paid in full at any time before
without prepayment penalty.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
Not
applicable.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
On
September 8th, 2017, “Hoverink Biotechnologies, Inc., a
Delaware corporation, (the “ Company ”), with the
approval of its board of directors and shareholders owning a
majority of the Company’s issued and outstanding shares by
written consent in lieu of a meeting, filed a Certificate of Change
(the “ Certificate of Change ”) with the Secretary of
State of Delaware.
As a
result of the Certificate of Change, the Company will be changing
its name to “Hoverink Biotechnologies, Inc.” ,
effective as of September 11, 2017.
In
February 2015, the Company implemented a change of control by
issuing shares to new shareholders, redeeming shares of existing
shareholders, electing new officers and directors and accepting the
resignations of its then existing officers and directors. In
connection with the change of control, the shareholders of the
Company and its board of directors unanimously approved the change
of the Company’s name from Sky Run Acquisition Corporation to
Hoverink Biotechnologies, Inc. Prior to this the company was a
shell as defined in Rule 405. The company
ceased being a shell as of Feb 15th 2016.
We were
incorporated in Delaware in July 2013 as Skyrun Acquistion
Corporation. Our principal executive offices are located at 1801
Century Park E., 24th Floor Los Angeles, California
90067:866-443-4666. Our website address is in beta at
https://hoverinkbiotech.yolasite.com/
ITEM
5. OTHER INFORMATION
(a)
Not
applicable.
(b)
Item 407(c)(3) of
Regulation S-K:
On
September 8th, 2017, “Hoverink Biotechnologies, Inc., a
Delaware corporation, (the “ Company ”), with the
approval of its board of directors and shareholders owning a
majority of the Company’s issued and outstanding shares by
written consent in lieu of a meeting, filed a Certificate of Change
(the “ Certificate of Change ”) with the Secretary of
State of Delaware.
As a
result of the Certificate of Change, the Company will be changing
its name to “Hoverink Biotechnologies, Inc.” ,
effective as of September 11, 2017.Although in February, 2015, the
members of the Board of Directors has changed as has the control of
the Company, there have not been any material changes to the
procedures by which security holders may recommend nominees to the
Board of Directors.
ITEM
6. EXHIBITS
(a)
Exhibits
31.1 Certification of
the Chief Executive Officer and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of
the Chief Executive Officer and Chief Financial Officer \pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
67
SIGNATURES
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.
|
HOVERINK
BIOTECHNOLOGIES, INC.
|
|
|
|
|
|
|
October 13,
2017
|
By:
|
/s/
Debbie
Mae Carter
|
|
|
|
Debbie Mae
Carter
|
|
|
|
President and
Principal Executive Officer Principle Financial Officer
|
|
68