Full Press Release Details
ASPEN PARK PHARMACEUTICALS, INC.
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Financial Statements
September 30, 2016 and 2015
ASPEN PARK PHARMACEUTICAL, INC.
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| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 1 |
| FINANCIAL STATEMENTS | |
| Balance Sheet s | 2 |
| Statement s of Operations | 3 |
| Statement s of Shareholders' Deficit | 4 |
| Statement s of Cash Flows | 5 |
| Notes to Financial Statements | 6-15 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee of Aspen Park Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of Aspen Park Pharmaceuticals, Inc. (the Company ) as of September 30, 2016 and 2015 and the related statement of operations, stockholders' deficit and cash flows for the years ended September 30, 2016 and 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and U.S. GAAS. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of Aspen Park Pharmaceuticals, Inc. as of September 30, 2016 and 2015 and the results of its operations and its cash flows for the years ended September 30, 2016 and 2015 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company has a working capital and shareholder deficit as of September 30, 2016 and has had negative cashflow from operations since inception. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liggett & Webb, P.A.
LIGGETT & WEBB, P.A.
Certified Public Accountants
Boynton Beach, Florida
ASPEN PARK PHARMACEUTICALS, INC.
________________________________________
September 30, 2016 and 2015
| 2016 | 2015 | |||||
| ASSETS | ||||||
| Current Assets: | ||||||
| Cash | $ | 55,043 | $ | 569,257 | ||
| Inventory | 1,696 | 22,134 | ||||
| Prepaid expenses | 325 | 24,241 | ||||
| TOTAL CURRENT ASSETS | 57,064 | 615,632 | ||||
| Long Term Assets: | ||||||
| Plant, Property, and Equipment | 1,290 | |||||
| TOTAL LONG TERM ASSETS | 1,290 | |||||
| TOTAL ASSETS | $ | 58,354 | $ | 615,632 | ||
| LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||
| Current Liabilities: | ||||||
| Accounts payable and accrued expenses | $ | 1,203,597 | $ | 522,039 | ||
| Accrued interest - related party (Note 5) | 53,108 | |||||
| TOTAL CURRENT LIABILITIES | 1,203,597 | 575,147 | ||||
| Note payable - related party (Note 5) | 1,250,000 | |||||
| TOTAL LIABILITIES | 1,203,597 | 1,825,147 | ||||
| COMMITMENTS AND CONTINGENCIES (NOTE 6) | ||||||
| SHAREHOLDERS' DEFICIT | ||||||
| Preferred Stock: $.01 par value, 400,000 shares authorized, | ||||||
| none issued and outstanding | ||||||
| Preferred Convertible Series A: $0.01 par value, 1,600,000 shares | ||||||
| authorized, 266,000 and 166,000 shares issued and outstanding in | ||||||
| 2016 and 2015, respectively. | 2,660 | 1,660 | ||||
| Common stock: $0.01 par value, 11,000,000 shares authorized; 7,970,000 | ||||||
| and 7,960,000 shares issued in 2016 and 2015, respectively, and 8,010,000 | ||||||
| and 8,000,000 shares outstanding in 2016 and 2015, respectively | 80,100 | 80,000 | ||||
| Additional paid-in capital | 2,575,304 | (18,922) | ||||
| Accumulated deficit | (3,803,287) | (1,272,233) | ||||
| Treasury stock: at cost, 40,000 shares in 2016 | ||||||
| and 2015, respectively | (20) | (20) | ||||
| TOTAL SHAREHOLDERS' DEFICIT | (1,145,243) | (1,209,515) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 58,354 | $ | 615,632 |
The accompanying notes are an integral part of these financial statements.
ASPEN PARK PHARMACEUTICALS, INC.
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Statements of Operations
For The Years ended September 30, 2016 and 2015
| 2016 | 2015 | |||||
| REVENUE, net | $ | 18,533 | $ | 16,683 | ||
| Cost of good sold | 25,410 | 6,062 | ||||
| GROSS PROFIT (LOSS) | (6,877) | 10,621 | ||||
| EXPENSES | ||||||
| General and administrative | 1,456,173 | 600,256 | ||||
| Research and development | 1,038,192 | 585,214 | ||||
| TOTAL OPERATING EXPENSES | 2,494,365 | 1,185,470 | ||||
| NET LOSS FROM OPERATIONS | (2,501,242) | (1,174,849) | ||||
| OTHER EXPENSES | ||||||
| Interest expense - related party | 29,812 | 53,108 | ||||
| NET LOSS BEFORE PROVISION FOR INCOME TAXES | (2,531,054) | (1,227,957) | ||||
| Provision for income taxes | ||||||
| NET LOSS | (2,531,054) | (1,227,957) | ||||
| Preferred Stock Dividend | 176,922 | 89,978 | ||||
| NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ | (2,707,976) | $ | (1,317,935) |
The accompanying notes are an integral part of these financial statements.
ASPEN PARK PHARMACEUTICALS, INC.
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Statements of Shareholders' Deficit
For The YearS ended September 30, 2016 and 2015
| PREFERRED STOCK | COMMON STOCK | TREASURY STOCK | ADDITIONAL PAID IN | ACCUMULATED | ||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | CAPITAL | DEFICIT | TOTAL | ||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2014 | $ | 8,000,000 | $ | 80,000 | $ | $ | (76,000) | $ | (44,276) | $ | (40,276) | |||||||||||||
| Series A Preferred Stock issued for cash | 166,000 | 1,660 | 2,073,340 | 2,075,000 | ||||||||||||||||||||
| Acquisition of patent asset | (2,019,293) | (2,019,293) | ||||||||||||||||||||||
| Purchase of treasury stock | 40,000 | (20) | (20) | |||||||||||||||||||||
| Share-based compensation | 3,031 | 3,031 | ||||||||||||||||||||||
| Net loss | (1,227,957) | (1,227,957) | ||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2015 | 166,000 | $ | 1,660 | 8,000,000 | $ | 80,000 | 40,000 | $ | (20) | $ | (18,922) | $ | (1,272,233) | $ | (1,209,515) | |||||||||
| Series A Preferred Stock issued for cash | 100,000 | 1,000 | 1,249,000 | 1,250,000 | ||||||||||||||||||||
| Forgiveness of Note Payable and Accrued Interest | 1,332,920 | 1,332,920 | ||||||||||||||||||||||
| Exercise of Warrant | 10,000 | 100 | 100 | |||||||||||||||||||||
| Share-based compensation | 12,306 | 12,306 | ||||||||||||||||||||||
| Net loss | (2,531,054) | (2,531,054) | ||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2016 | 266,000 | $ | 2,660 | 8,010,000 | $ | 80,100 | 40,000 | $ | (20) | $ | 2,575,304 | $ | (3,803,287) | $ | (1,145,243) |
The accompanying notes are an integral part of these financial statements.
ASPEN PARK PHARMACEUTICALS, INC.
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Statements of Cash Flows
For The Years ended September 30, 2016 and 2015
| 2016 | 2015 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
| Net loss | $ | (2,531,054) | $ | (1,227,957) | ||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||
| Impairment of patents | 625,000 | |||||
| Share-based compensation | 12,306 | 3,031 | ||||
| Impairment of inventory | 19,405 | |||||
| Changes in operating assets and liabilities: | ||||||
| Inventory | 1,033 | (22,134) | ||||
| Prepaid expenses | 23,916 | (24,241) | ||||
| Accrued interest - related party (Note 5) | 29,812 | 53,108 | ||||
| Accrued expenses | 681,558 | 477,763 | ||||
| NET CASH USED IN OPERATING ACTIVITIES | (1,138,024) | (740,430) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
| Acquisition of patent | (625,000) | (769,293) | ||||
| Purchase of computer equipment | (1,290) | |||||
| NET CASH USED IN INVESTING ACTIVITIES | (626,290) | (769,293) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
| Proceeds from issuance of Series A preferred stock | 1,250,000 | 2,075,000 | ||||
| Proceeds from exercise of Warrant | 100 | |||||
| Purchase of treasury stock | (20) | |||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 1,250,100 | 2,074,980 | ||||
| NET INCREASE (DECREASE) IN CASH | (514,214) | 565,257 | ||||
| CASH - BEGINNING OF PERIOD | 569,257 | 4,000 | ||||
| CASH - END OF PERIOD | $ | 55,043 | $ | 569,257 | ||
| SUPPLEMENTAL INFORMATION | ||||||
| Cash paid for interest expense | $ | $ | ||||
| Cash paid for income taxes | $ | $ | ||||
| Net cash paid for the acquisition of patent asset is as follows: | ||||||
| Patent asset acquired | $ | $ | 2,019,293 | |||
| Note issued to related party (Note 5) | (1,250,000) | |||||
| Net cash paid for the acquisition of patent asset | $ | $ | 769,293 | |||
| Supplemental non-cash items: | ||||||
| Forgiveness of debt - related party | $ | 1,250,000 | $ | |||
| Forgiveness of interest - related party | 82,920 | |||||
| Total non-cash activity | $ | 1,332,920 | $ |
The accompanying notes are an integral part of these financial statements.
ASPEN PARK PHARMACEUTICALS, INC.
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Notes to Financial Statements
For The Years ended September 30, 2016 and 2015
1.BUSINESS AND ORGANIZATION
Nature of Operations
Aspen Park Pharmaceuticals, Inc. (the Company ) was incorporated on June 9, 2014 in the State of Delaware. The Company is a privately held therapeutics company focused on the development and commercialization of novel therapies for men's health diseases and conditions, including male secondary hypogonadism, benign prostatic hyperplasia, prostate cancer and side effects of prostate cancer therapies, and sexual dysfunction. Our business is primarily focused on the development of several early and late stage clinical products and includes one product, PREBOOST, of which we have commenced marketing and sales.
On April 17, 2015, the Company effected a 1000-for-1 forward stock split of all then issued and outstanding shares of common stock and preferred stock. References made to outstanding shares and calculations requiring the use of shares in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect this 1000-for-1 stock split.
Further, the Company's future operations are dependent on, among other factors, retaining the services of future employees and consultants, the success of the Company's research, development, manufacture, and marketing activities, and, ultimately, regulatory and market acceptance of the Company's current and future products.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company utilized significant estimates and assumptions in determining the fair value of its common stock related to the share-based compensation arrangement described in Note 8. A number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector and the prices at which the Company sold shares of convertible preferred stock, the superior rights and preferences of securities senior to the Company's common stock at the time and the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company. The Company utilized the option pricing method utilizing the back-solve method (a form of the market approach defined in the AICPA Practice Aid) in accordance within the framework of the American Institute of Certified Public Accountants, or AICPA, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation, or the AICPA Practice Aid, to estimate the fair value of its common stock and in performing retrospective valuation analyses. The valuation methodology included estimates and assumptions that require the Company's judgment. Significant changes to the key assumptions used in the valuations could result in different fair values of common stock at each valuation date.
The Company recognizes revenue when it is realized, or realizable and earned. The Company will consider revenue to be realized, or realizable and earned, when the following revenue recognition requirements are met: persuasive evidence of an arrangement exists; the products or services have been accepted by the customer via delivery or acceptance; the sales price is fixed or determinable; and collectability is reasonably assured.
ASPEN PARK PHARMACEUTICALS, INC.
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Notes to Financial Statements
For The Years ended September 30, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with maturity of 90 days or less at the date of purchase. At September 30, 2016 and 2015, cash and cash equivalents consisted entirely of cash.
Research and Development
The Company is engaged in research and development work. Research and development costs are charged to expense as incurred. The Company records expense for in-process research and development projects acquired as asset acquisitions which have not reached technological feasibility and which have no alternative future use.
On April 1, 2016, the Company completed the purchase of a patent for an orally administered tamsulosin for the treatment of benign prostatic hyperplasia which we intend to develop into a viable product. Under the terms of the agreement, the Company paid $250,000 upon contract execution and $375,000 upon achieving the first development milestone. The Company will pay a total of $4,375,000 upon the achievement of additional milestones, and additional installments totaling $10,000,000 payable over two years commencing on the first anniversary following the approval of the product by United States Food and Drug Administration ( FDA ). These additional milestones will be accrued upon the successful completion of each clinical development event as defined by the agreement, and the installment payments will be accrued when certain cumulative revenue targets are achieved. As required by the purchase agreement, we simultaneously entered into an agreement with another third-party for services related to the development of the product.
Inventories are valued at the lower of cost or market. The cost is determined using the first-in, first-out (FIFO) method. Inventories are also written down for management's estimates of product which will not sell prior to its expiration date. Write-downs of inventories establish a new cost basis which is not increased for future increases in the market value of inventories or changes in estimated obsolescence. We wrote off $19,405 and $0 in inventory due to upcoming expiration dates on the PREBOOST product for the years ended September 30, 2016 and 2015, respectively. Inventory consisted of finished goods of $1,696 and $22,134 for the years ended September 30, 2016, and 2015, respectively.
The Company's policy is to expense advertising costs as incurred. Advertising costs were $0 and $69,115 for the years ended September 30, 2016, and 2015, respectively.
The Company is primarily engaged in research and development and operates in one industry segment which includes the development, manufacture, and marketing and selling of consumer health products. Therefore, no segment data is disclosed in this report.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist entirely of cash deposits. The Company places its cash in high quality financial institutions and generally limits the amount of credit exposure with any one institution. The Company's cash balance of $55,043 and $569,297 at September 30, 2016 and 2015, respectively. As of September 30,2016, the cash balance was less than the federally insured limit of $250,000 and as of September 30, 2015 exceeded the limit by $319,297.
ASPEN PARK PHARMACEUTICALS, INC.
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Notes to Financial Statements
For The Years ended September 30, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income taxes are accounted for under the asset-and-liability 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 bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary 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 enactment date. The Company recognizes positions taken or expected to be taken in a tax return in accordance with Accounting Standards Codification (ASC) Topic 740, Income Taxes, which prescribes a recognition threshold and measurement process. Interest and penalties on tax liabilities, if any, would be recorded in interest expense and other non-interest expense, respectively.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
Level 1 - Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Valuations based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 - Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
The carrying amounts of the Company's cash and cash equivalents, accrued expenses and note payable approximate fair value based on liquidity and the short maturities of these instruments.
Recently Adopted Accounting Pronouncements
Development Stage Entities (Topic 915)
On June 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation . The standard eliminated 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 are 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 has elected early application of this standard.
Recently Issued Accounting Pronouncements
Revenue from Contracts with Customers (Topic 606)
On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) . The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Early adoption is not permitted. The impact on the Company's financial statements of adopting ASU 2014-09 is being assessed by management.
ASPEN PARK PHARMACEUTICALS, INC.
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Notes to Financial Statements
For The Years ended September 30, 2016 and 2015
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements (Continued)
Presentation of Financial Statements Going Concern (Sub-Topic 205-40)
On August 27, 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern . The standard provides guidance about management's responsibility to evaluate whether there is a substantial doubt about the organization's ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. The impact on the Company's financial statements of adopting ASU 2014-15 is being assessed by management.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
3.RELATED PARTY TRANSACTIONS AND BALANCES
On November 24, 2014, the Company issued a note payable in the amount of $1,250,000 to Millennium Sciences, Inc. ( Millennium ), a New York corporation, as well as assumed $769,293 in accrued legal fees, as consideration for the assignment of rights to in-process research and development in the form of patent properties. Millennium is owned by Harry Fisch, the Company's Chief Scientific Officer, and he is also the named inventor or co-inventor of the assigned patent properties. The Company determined that Dr. Fisch controlled both entities as defined by ASC 805 and, as such, the patent was required to be transferred at its historical cost basis. The patent asset was historically accounted for as in-process R&D and had no cost basis to transfer. As such, the entire consideration of $2,019,293 was recorded as a distribution in additional paid-in capital in the Statement of Shareholders' Deficit.
On November 24, 2014, the Company authorized the issuance of the Series A Preferred Stock. See Note 9. Included among the investors in the Series A Preferred Stock are Mitchell Steiner, the Company's Chief Executive Officer, who invested $200,000, Elgar Peerschke, a member of the Board of Directors, who invested $250,000, and Alan Annex, a shareholder of the Company's outside legal counsel, who invested $100,000.