UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

Alterola Biotech, Inc.

(Exact name of Registrant as specified in its charter)

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

[X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 807,047,948 shares as of February 13, 2022. 

PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

Our consolidated financial statements included in this Form 10-Q are as follows:

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the Securities Exchange Commission (“SEC”) instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the interim period ended December 31, 2022 are not necessarily indicative of the results that can be expected for the full year.

ALTEROLA BIOTECH, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2022 AND MARCH 31, 2022

See accompanying notes to financial statements.

ALTEROLA BIOTECH, INC.

UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31, 2022 AND 2021

See accompanying notes to financial statements.

ALTEROLA BIOTECH, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FROM JANUARY 7, 2021 (INCEPTION) TO MARCH 31 2022 AND DECEMBER 31, 2022  

See accompanying notes to financial statements.

ALTEROLA BIOTECH, INC.

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2022 AND 2021

See accompanying notes to financial statements.

ALTEROLA BIOTECH, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

Recent Developments

On August 26, 2022, we entered into a letter of intent (the “LOI”) dated August 25, 2022 with Bright Green Corporation (“Bright Green”), a Delaware corporation, with a binding provision for Bright Green to acquire a 25% interest (the “Share Purchase”) in our company from existing shareholders in exchange for $4,000,000 (the “Purchase Price”). The LOI also has a non-binding option for Bright Green to acquire all of our outstanding capital stock.

The Share Purchase was subject to a Share Purchase Agreement which was executed on October 03, 2022.

The Purchase Price was divided equally among the following shareholder companies for their shares, controlled by affiliates of our company namely: Phyotherapeutix Holdings Ltd (Colin Stott), Equipped4 Holdings Limited (Dominic Schiller) and TPR Global Limited (Timothy Rogers).

These shareholder affiliates, through their respective companies, have committed to enter into loan agreements with our company to provide up to $4,000,000 USD of working capital.

With respect to the non-binding option for Bright Green to acquire all of our shares, we and Bright Green have agreed to work in good faith and in a reasonable time-frame to reach a binding agreement to be executed in a final set of definitive documents (“Definitive Agreement”) governing the option for a price equal to $0.06 per share. 

As part of the strategic partnership and pursuant to the terms and subject to the conditions of the arrangement, we plan to gain access to Bright Green’s planned cannabis and cannabis extracts, derivatives, products and research services, and Bright Green will in turn benefit from our established industry relationships and sector expertise. The parties believe a successful collaboration will create a strong pathway to secure, provide and supply cannabis and derivative products to the pharmaceutical industry.

On October 7, 2022, we appointed David Hitchcock as our CEO, and Terry Rafih as a member of our board of directors.

Our Business 

Our goal is to provide better medicines for patients around the world. We believe in harnessing the therapeutic potential of cannabinoids and cannabinoid- like compounds, which can be developed into valuable treatments to seriously ill patients. Rather than just focusing on one method of identifying, researching and developing such medicines, we are interested in developing new medicines from all sources including botanical, traditional chemical synthesis and biosynthetic methodologies.

On May 28, 2021, we acquired ABTI Pharma Limited, a company registered in England and Wales (“ABTI Pharma”), with the purchase of all of its capital stock in exchange for 600,000,000 shares of our common stock pro rata to the ABTI Pharma shareholders.

As a result of the acquisition, we are a pharmaceutical company working with cannabinoid and cannabinoid like molecules. We have three areas of focus:

Phytotherapeutix Ltd, a subsidiary of ABTI Pharma Ltd, has generated a number of molecules with patents pending, some of which have demonstrable pharmacological activity, similar to that of CBD. This means that some of these molecules are anticipated to have a similar market potential to CBD across a range of therapeutic areas.

Ferven Ltd, another subsidiary of ABTI Pharma Ltd, is looking to produce cannabinoids by fermentation. The exclusively licensed organism has the potential to be genetically modified to produce multiple cannabinoids at an anticipated very low cost of goods. It is anticipated that the selected genetically modified organisms will grow very quickly, which in turn, reduces the cost of production.

Nano4M Ltd is a company which has exclusively licensed its nano-formulation patents and know-how to ABTI Pharma Ltd.

As a result of the acquisition of assets and intellectual property from C2 Wellness Corp. on December 2, 2021, Alterola now has the following assets and intellectual property:

• Novel cannabinoid molecules and their associated intellectual property;
• Novel cannabinoid pro-drugs, and their associated intellectual property;
• Novel proprietary cannabinoid formulations, designed to target lymphatic delivery, and their associated intellectual property;
• Novel proprietary nano-encapsulated cannabinoid formulations, in self-dissolving polymers, and their associated intellectual property; and
• Cannabinoids and cannabinoid pro-drug formulations for topical ocular delivery, and their associated intellectual property.

Additionally, we may consider entering into Joint Venture Partnerships, or acquire companies with complimentary portfolios or enter into Licensing Agreements to enhance the product portfolio. These are strategies the Company may implement and any such opportunities will be assessed on a case by case basis and on their merit at the time.

At present, the Company is waiting to hear whether Bright Green Corporation will exercise its option to acquire the remaining 75% of the Company’s common stock.  

Alterola and ABTI Pharma Ltd management have extensive experience, know-how and connections in the cannabinoid medicines sector, and are looking to utilize this knowledge and experience for the development of such medicines from existing cannabinoids and cannabinoid-like molecules.

Our address is 47 Hamilton Square Birkenhead Merseyside CH41 5AR United Kingdom. Our telephone number is +44 151 601 9477. Our website is www.alterolabio.com. The company has a fully operational US$ and a £ sterling bank account in the United Kingdom with the HSBC Group.

We do not incorporate the information on or accessible through our websites into this Quarterly Report, and you should not consider any information on, or that can be accessed through, our websites a part of this Quarterly Report.

Results of Operations for the Three and Nine Months Ended December 31, 2022 and 2021

We have generated no revenues since inception and we do not anticipate earning revenues until such time that we are able to market and sell our ingredients and / or products / medicines.  

We incurred operating expenses of $540,621 for the three months ended December 31, 2022, as compared with $2,800,677 for the same period ended 2021. We incurred operating expenses of $1,823,992 for the nine months ended December 31, 2022, as compared with $3,213,315 for the same period ended 2021.

Our operating expenses for the nine months ended December 31, 2022 were mainly the result of $546,571 in directors fees and expenses, $481,429 in consulting fees, $363,193 in professional fees, $101,238 in salaries and wages, $86,816 in accounting and audit fees and $41,086 in research and development. By contrast, our operating expenses for the nine months ended December 31, 2021 were mainly the result of $2,545,963 in consulting fees, $322,324 in research and development, $92,525 in accounting and audit fees and $91,083 in salaries and wages.

Our operating expenses in 2022 increased as a result of human resource expenditures for employees, consultants and directors, as well as expenditures for information technology support, intellectual property submissions and maintenance, transfer agent services legal fees and accounting and audit fees. With more staff and the lack of financing, we have not been able to ramp up research and development activities for the nine months ended December 31, 2022, with only $41,086 spent as compared to $124,034 spent for the same period in 2021.

If we are able to obtain financing, we expect that our operational expenses will increase significantly for the balance of the fiscal year ended March 31, 2023 and beyond. This would be the result of increased research and development expenses associated with our product candidates, the development of those candidates in compliance with regulatory processes, laws and regulations, increased payroll as we take on more help, as well as the expenses associated with our reporting obligations with the Securities and Exchange Commission.

We recorded a net loss of $534,789 for the three months ended December 31, 2022, as compared with $2,800,677 for the same period ended 2021. We recorded a net loss of $1,722,691 for the nine months ended December 31, 2022, as compared with $3,213,315 for the same period ended 2021.

As a relatively recently formed pharmaceutical company, the company has limited operations to date, and expects to have reoccurring losses, as is typical with companies in the pharmaceutical industry, for the foreseeable future. As explained above, the company intends to raise capital and ramp up its efforts to bring its product candidates to market. This will require significant capital, product development to continue and complete and momentum on those product candidates through the regulatory process. There are no assurances that we will be able to generate revenues and achieve profitable operations.

Liquidity and Capital Resources

As of December 31, 2022, we had $192,011 in current assets, consisting mostly of a deferred tax credit, and current liabilities of $1,822,696. We had a working capital deficit of $1,630,685 as of December 31, 2022, compared with a working capital deficit of $1,187,515 as of September 30, 2022.

We used cash for operating activities of $1,156,498 for the nine months ended December 31, 2022, as compared with cash used of $2,596,081 for the same period ended 2021. Our negative operating cash flow for 2022 was mainly the result of a net loss, net changes in operating assets and liabilities and deferred tax credit offset by shares issued for services. Our negative operating cash flow for 2021 was the result of our net loss, offset by net changes in operating assets and liabilities.

We used cash for investing activities of $18,147 for the nine months ended December 31, 2022, as compared with $12,000,000 used in investing activities for the same period ended 2021 for investments in intellectual property from C2 Wellness Corp. on December 2, 2021.

Financing activities provided $1,093,405 for the nine months ended December 31, 2022, as a result of related party notes, as compared with $14,625,352 provided for the same period ended 2021, as a result of proceeds from share issuances and convertible notes.

On August 1, 2022, we entered into loan agreements for a total of US $75,000.. We issued 2,250,000 shares to note holders in connection with the loan agreements. The sum of 75,000 was repaid fully by December 23, 2022.

As part of the SPA, executed on October 03, 2022, the shareholder affiliates, through their respective companies, have committed to enter into loan agreements with our company to provide up to $4,000,000 USD of working capital. 

Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next 12 months. We intend to fund operations through short-term or long-term debt and/or equity financing arrangements, however this may be insufficient to fund expenditures or other cash requirements. If Bright Green exercises its option, we will have sufficient cash from the exercise price and proceeds therefrom. Without it, we plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.   

Off Balance Sheet Arrangements

As of December 31, 2022, we had no off-balance sheet arrangements.

Going Concern

Our financial statements were prepared assuming we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have negative working capital of $1,630,685  as of December 31, 2022, and have incurred losses since inception of $9,556,419. We expect to incur further losses in the development of our business and have been dependent on funding operations from inception. These conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans include continuing to finance operations through the private or public placement of debt and/or equity securities and the reduction of expenditures. At present, the Company is waiting to hear whether Bright Green Corporation will exercise its option to acquire the remaining 75% of the Company’s common stock.   However, no assurance can be given at this time as to whether we will be able to achieve these objectives. The financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4.     Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2022. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of December 31, 2022, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending March 31, 2023: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended December 31, 2022 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.     Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A:  Risk Factors

Please see the Risk Factors contained in our Annual Report on Form 10-K/A filed with the SEC on September 14, 2022, which are incorporated herein by reference.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

On August 1, 2022, the Company signed loan agreements with note holders for the sum of $75,000. A total of 2,250,000 shares were issued to the note holders in connection with loan agreements.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3.     Defaults upon Senior Securities

None

Item 4.     Mine Safety Disclosures

Not applicable.

Item 5.     Other Information

None

Item 6.      Exhibits

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.