U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20212022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission file number 000-54296
AXIM Biotechnologies, Inc. |
(Exact name of registrant as specified in its charter) |
(Exact name of registrant as specified in its charter)
Nevada | 27-4029386 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
(I.R.S. Employer
Identification Number)
6191 Cornerstone Court, E. Suite 114
San Diego, CA 92121
(Address of principal executive offices)
(858) 923-4422
(Registrant’s telephone number, including area code)
___________________________________________
(Former name, former address and former fiscal year, if changed since last report)
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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.
Large accelerated Filer | Accelerated Filer | Non-accelerated (Do not check if smaller reporting company) | Smaller reporting Company | 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 ☐ No ☒
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 136,178,104186,441,917 of common stock, par value $0.0001 per share, outstanding as of November 19, 2021.14, 2022.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
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Notes to Condensed Consolidated Financial Statements (unaudited). |
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CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2022 2021 (Unaudited) ASSETS Current assets: Cash $ Prepaid expenses Inventory Total current assets Property and equipment, net of accumulated depreciation Other Assets: Notes receivable- related party Patents (net of accumulated amortization of $23,509 and $7,409; respectively) Licenses (net of accumulated amortization of $408,452 and $128,718; respectively) Security deposit Operating lease right-of-use asset Total other assets TOTAL ASSETS $ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued liabilities $ Derivative liability - conversion feature Lease liability obligations Due to shareholder Due to first insurance funding convertible note payable (including accrued interest of $0 and $16,919 net of unamortized discount of $0 and $0) Deferred Revenue Promissory note (including accrued interest of $-0- and $44,041, respectively) (see note7) Total current liabilities Long-term liabilities: Deferred Revenue Convertible note payable (including accrued interest of $252,820 and $209,685, respectively) net of unamortized debt discount of $1,629,876 and $605,639, respectively(see note 11) Convertible note payable - related party (including accrued interest of $261,537 and $299,037, respectively) Lease liability obligations - Total long-term liabilities TOTAL LIABILITIES STOCKHOLDERS' DEFICIT Preferred stock, $0.0001 par value, 5,000,000 shares authorized; Series B Convertible Preferred Stock, $0.0001 par value 500,000 shares designated, Series C Convertible Preferred Stock, $0.0001 par value 500,000 shares designated, 500,000 and 500,000 shares issued and outstanding, respectively Common stock, $0.0001 par value, 300,000,000 shares authorized 185,441,917 and 138,099,981 shares issued and outstanding, respectively Additional paid in capital Subscription receivable Common stock to be issued Accumulated deficit TOTAL STOCKHOLDERS' DEFICIT TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ See accompanying notes to these unaudited condensed consolidated financial statementsAXIM BIOTECHNOLOGIES, INC.$ 163,746 452,963 65,390 163,561 20,089 20,089 249,225 636,613 102,069 116,810 - 104,268 226,491 242,591 3,861,548 4,141,282 5,000 5,000 34,374 76,871 4,127,413 4,570,012 $ 4,478,707 5,323,435 $ 1,049,828 909,458 1,995,618 - 34,374 56,871 - 180 53,698 32,873 - 1,126,919 29,720 - 454,693 3,163,238 2,580,994 118,965 - 1,315,353 761,604 4,261,537 4,299,037 20,000 5,695,855 5,080,641 8,859,093 7,661,635 50 50 18,545 13,811 58,752,209 51,000,166 (60,064 ) - 135,000 4,530,000 (63,226,126 ) (57,882,227 ) (4,380,386 ) (2,338,200 ) $ 4,478,707 5,323,435
CONDENSED CONSOLIDATED BALANCE SHEETS
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ASSETS |
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Current assets: |
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Cash |
| $ | 338,377 |
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| $ | 457,181 |
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Prepaid expenses |
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| 141,542 |
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| 255,923 |
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Inventory |
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| 20,127 |
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| 0 |
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Total current assets |
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| 500,046 |
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| 713,104 |
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Property and equipment, net of accumulated depreciation |
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| 103,997 |
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| 104,094 |
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Other Assets: |
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Notes receivable- related party |
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| 104,012 |
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| 103,242 |
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Patents (net of accumulated amortization of $2042 and $0; respectively) |
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| 247,958 |
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| 0 |
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Licenses (net of accumulated amortization of $35,474 and $0; respectively) |
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| 4,234,526 |
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| 0 |
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Goodwill |
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| 2,458,233 |
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| 2,458,233 |
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Intellectual Property and In-Process Research (net of accumulated amortization of $1,296,438 and $0; respectively) |
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| 6,503,562 |
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| 7,800,000 |
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Security deposit |
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| 5,000 |
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| 5,000 |
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Operating lease right-of-use asset |
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| 90,630 |
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| 130,722 |
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Total other assets |
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| 13,643,921 |
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| 10,497,197 |
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TOTAL ASSETS |
| $ | 14,247,964 |
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| $ | 11,314,395 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable and accrued liabilities |
| $ | 931,819 |
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| $ | 1,073,142 |
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Lease liability obligations |
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| 58,540 |
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| 53,851 |
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Due to shareholder |
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| 180 |
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| 180 |
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Due to first insurance funding |
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| 65,880 |
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| 25,369 |
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Promissory note (including accrued interest of $34,222 and $19,507, respectively) (see note 8) |
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| 538,440 |
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| 343,725 |
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Total current liabilities |
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| 1,594,859 |
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| 1,496,267 |
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Long-term liabilities: |
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Deferred tax liability |
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| 2,340,000 |
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| 2,340,000 |
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Convertible note payable (including accrued interest of $208,089 and $236,148, respectively) net of unamortized debt discount of $623,095 and $843,673, respectively(see note 11) |
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| 1,369,307 |
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| 1,676,788 |
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Convertible note payable - related party (including accrued interest of $264,037 and $158,648, respectively) |
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| 4,264,037 |
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| 4,158,648 |
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Lease liability obligations |
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| 32,090 |
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| 76,871 |
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Other liabilities of discontinued operations |
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| 0 |
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| 0 |
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Total long-term liabilities |
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| 8,005,434 |
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| 8,252,307 |
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TOTAL LIABILITIES |
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| 9,600,293 |
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| 9,748,574 |
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STOCKHOLDERS’ DEFICIT |
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Preferred stock, $0.0001 par value, 5,000,000 shares authorized; |
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Series B Convertible Preferred Stock, $0.0001 par value 500,000 shares designated, |
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Series C Convertible Preferred Stock, $0.0001 par value 500,000 shares designated, |
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500,000 and 500,000 shares issued and outstanding, respectively |
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Common stock, $0.0001 par value, 300,000,000 shares authorized 135,885,104 and 125,327,579 shares issued and outstanding, respectively |
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| 13,589 |
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| 12,533 |
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Additional paid in capital |
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| 50,009,591 |
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| 43,201,186 |
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Common stock to be issued |
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| 4,457,500 |
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| 201,974 |
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Accumulated deficit |
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| (49,833,059 | ) |
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| (41,849,922 | ) |
TOTAL STOCKHOLDERS’ DEFICIT |
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| 4,647,671 |
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| 1,565,821 |
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| $ | 14,247,964 |
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| $ | 11,314,395 |
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See accompanying notes to these unaudited condensed consolidated financial statements
| 3 |
| Table of Contents |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the For the For the For the Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2022 2021 2022 2021 Revenues $ $ $ $ cost of goods sold Gross profit Operating Expenses: Research and development expenses Selling, general and administrative Amortization of Other Assets Depreciation and amortization Total operating expenses from continuing operations Loss from continuing operations Other (income) expenses: Interest income - Change in fair value of derivative Liability conversion feature Income from Grants from Government Amortization of note discount Loss on Extinguishment of Debt Interest expense Total other (income) expenses Loss before provision of income tax Provision for income tax Income (loss) from continuing operations Income (loss) from discontinued operations NET LOSS $ $ $ $ NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS Earning per share from continuing operations Basic $ $ $ $ Diluted $ $ $ $ Earning per share from discontinued operations Basic $ $ - $ $ - Diluted $ $ - $ $ - Earning per share Basic $ $ $ ) $ Diluted $ $ $ $ Weighted average common shares outstanding - basic and diluted See accompanying notes to these unaudited condensed consolidated financial statementsAXIM BIOTECHNOLOGIES, INC.1,314 8,127 1,314 55,651 1,314 8,127 1,314 55,651 29,722 67,263 109,086 216,282 1,182,768 2,519,527 3,083,349 4,812,790 98,612 692,858 295,835 1,333,954 8,132 6,935 23,451 20,119 1,319,234 3,286,583 3,511,721 6,383,145 (1,317,920 ) (3,278,456 ) (3,510,407 ) (6,327,494 ) (256 ) (256 ) (769 ) 500,887 - (418,769 ) - - (59,986 ) - (279,981 ) 46,441 17,456 132,521 220,578 111,818 - 490,641 1,535,264 57,481 56,007 1,629,355 175,915 716,627 13,221 1,833,492 1,651,007 (2,034,547 ) (3,291,677 ) (5,343,899 ) (7,978,501 ) - - (2,034,547 ) (3,291,677 ) (5,343,899 ) (7,978,501 ) - - - (4,633 ) (2,034,547 ) (3,291,677 ) (5,343,899 ) (7,983,134 ) (2,034,547 ) (3,291,677 ) (5,343,899 ) (7,983,134 ) (0.01 ) (0.03) (0.04) (0.06 ) (0.01 ) (0.03) (0.04) (0.06 ) - - - - (0.01 ) (0.03 ) (0.034 (0.06 ) (0.01 ) (0.03 ) (0.034) (0.06 ) 171,893,796 133,663,974 158,091,581 129,803,948
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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| Nine Months Ended |
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| Three Months Ended |
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| Three Months Ended |
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| September 30, |
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| September 30, |
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| 2021 |
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| 2020 |
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Revenues |
| $ | 55,651 |
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| $ | 0 |
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| $ | 8,127 |
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| $ | 0 |
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Operating Expenses: |
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Research and development expenses |
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| 216,282 |
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| 235,431 |
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| 67,263 |
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| 109,139 |
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Selling, general and administrative |
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| 4,812,790 |
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| 2,442,420 |
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| 2,519,527 |
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| 1,184,267 |
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Amortization of other assets |
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| 1,333,954 |
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| 0 |
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| 692,858 |
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| 0 |
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Depreciation |
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| 20,119 |
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| 10,497 |
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| 6,935 |
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| 5,372 |
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Total operating expenses from continuing operations |
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| 6,383,145 |
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| 2,688,348 |
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| 3,286,583 |
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| 1,298,778 |
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Loss from continuing operations |
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| (6,327,494 | ) |
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| (2,688,348 | ) |
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| (3,278,456 | ) |
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| (1,298,778 | ) |
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Other (income) expenses: |
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Interest income |
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| (769 | ) |
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| (419 | ) |
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| (256 | ) |
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| (260 | ) |
Income from Grants from Government |
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| (279,981 | ) |
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| (25,899 | ) |
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| (59,986 | ) |
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| (25,899 | ) |
Unrealized loss (gain) on marketable securities |
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| 0 |
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| 104,705 |
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| 0 |
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| 0 |
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Realized loss (gain) on marketable securities |
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| 109,040 |
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| 0 |
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| 0 |
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Amortization of note discount |
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| 220,578 |
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| 63,745 |
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| 17,456 |
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| 22,313 |
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Loss on Extinguishment of Debt |
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| 1,535,264 |
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| 923,604 |
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| 0 |
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| 923,604 |
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Interest expense |
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| 175,915 |
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| 179,344 |
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| 56,007 |
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| 73,268 |
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Total other (income) expenses |
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| 1,651,007 |
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| 1,354,120 |
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| 13,221 |
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| 993,026 |
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Loss before provision of income tax |
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| (7,978,501 | ) |
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| (4,042,468 | ) |
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| (3,291,677 | ) |
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| (2,291,804 | ) |
Provision for income tax |
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| 0 |
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| 0 |
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| 0 |
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| 0 |
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Income (loss) from continuing operations |
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| (7,978,501 | ) |
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| (4,042,468 | ) |
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| (3,291,677 | ) |
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| (2,291,804 | ) |
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Income (loss) from discontinued operations |
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| (4,633 | ) |
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| 29,144 |
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| 0 |
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| 386,237 |
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NET LOSS |
| $ | (7,983,134 | ) |
| $ | (4,013,324 | ) |
| $ | (3,291,677 | ) |
| $ | (1,905,567 | ) |
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NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS |
| $ | (7,983,134 | ) |
| $ | (4,013,324 | ) |
| $ | (3,291,677 | ) |
| $ | (1,905,567 | ) |
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Earning per share from continuing operations |
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Basic |
| $ | (0.06 | ) |
| $ | (0.04 | ) |
| $ | (0.02 | ) |
| $ | (0.02 | ) |
Diluted |
| $ | (0.06 | ) |
| $ | (0.04 | ) |
| $ | (0.02 | ) |
| $ | (0.02 | ) |
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Earning per share from discontinued operations |
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Basic |
| $ | - |
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| $ | - |
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| $ | - |
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| $ | - |
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Diluted |
| $ | - |
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| $ | - |
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| $ | - |
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| $ | - |
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Earning per share |
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Basic |
| $ | (0.06 | ) |
| $ | (0.04 | ) |
| $ | (0.02 | ) |
| $ | (0.02 | ) |
Diluted |
| $ | (0.06 | ) |
| $ | (0.04 | ) |
| $ | (0.02 | ) |
| $ | (0.02 | ) |
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Weighted average common shares outstanding - basic and diluted |
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| 129,803,948 |
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|
| 105,383,791 |
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|
| 133,663,974 |
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|
| 123,496,143 |
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See accompanying notes to these unaudited condensed consolidated financial statements
| 4 |
| Table of Contents |
Unaudited Condensed Consolidated Statement of Stockholders’ Deficit Common Stock Series C Convertible Preferred Stock Common Stock Additional Paid In Subscription Amount Accumulated Shares Amount Shares Amount to be Issued Capital Receivable Deficit Total Balance at December 31, 2020 common stock to be issued for purchase of shares Common stock issued against common stock to be issued received in py common stock issued for severance payable of discontinued operations Common stock and warrants issued for cash stock based compensation- stock options Net loss Balance at March 31, 2021 Common stock issued for services Common stock issued for cash Convertible note and accrued interest converted to common stock Other Stock based compensation - stock options Loss on extinguishment of debt Net loss Balance at June 30, 2021 Common stock to be issued Common stock issued for services Common stock issued for cash Subscription Receivable share price adjustment Subscription price receivable stock based compensation- stock options Net loss Balance at September 30, 2021 Balance at December 31, 2021 common stock issued under s-1 common stock issued against common stock to be issued purchase of atd Common stock issued against common stock to be issued received in PY common stock issued stock purchase agreements common stock issued for services cashless exercise stock options stock issued on settlement of debt Stock based compensation - stock options Net loss Balance at March 31, 2022 stock issued on settlement of debt Stock based compensation - stock options common stock issued under s-1 stock issued settlement of claim Loss on extinguishment of debt Net loss Balance June 30, 2022 Stock issued on settlement of debt Sock based compensation-stock options Common stock issued under s-1 Common stock issued stock purchase agreements Net Loss Balance September 30, 2022 See accompanying notes to these unaudited condensed consolidated financial statementsAXIM BIOTECHNOLOGIES, INC.125,327,579 $ 12,533 500,000 $ 50 $ 201,974 $ 43,201,186 $ - $ (41,849,922 ) $ 1,565,821 168,500 168,500 108,965 11 (66,974 ) 66,963 - 379,463 38 224,963 225,001 1,712,500 171 433,829 434,000 99,742 99,742 (864,536 ) (864,536 ) 127,528,507 12,753 500,000 50 303,500 44,026,683 - (42,714,458 ) 1,628,528 1,114,351 111 (16,000 ) 792,389 776,500 1,234,113 123 (152,500 ) 402,376 249,999 2,647,464 265 582,442 582,707 500,000 50 332,450 (332,500 ) - 91,526 91,526 1,535,264 1,535,264 (3,826,924 ) (3,826,924 ) 133,024,435 13,302 500,000 50 135,000 47,763,130 (332,500 ) (46,541,382 ) 1,037,600 4,322,500 4,322,500 1,415,554 142 1,111,758 1,111,900 1,445,115 145 476,581 476,726 (103,688 ) 103,688 228,812 228,812 761,810 761,810 (3,291,677 ) (3,291,677 ) 135,885,104 13,589 500,000 50 4,457,500 50,009,591 - (49,833,059 ) 4,647,671 138,099,981 13,811 500,000 50 4,530,000 51,000,166 - (57,882,227 ) (2,338,200 ) 4,000,000 400 594,470 594,870 7,000,000 700 (4,270,000 ) 4,269,300 - 166,667 17 (25,000 ) 24,983 - 976,870 98 104,902 105,000 802,115 80 (100,000 ) 179,420 79,500 282,759 28 (28 ) 173,390 17 32,927 32,944 188,917 188,917 (2,086,714 ) (2,086,714 ) 151,501,782 $ 15,151 500,000 $ 50 $ 135,000 $ 56,395,057 $ - $ (59,968,941 ) $ (3,423,683 ) 891,610 89 64,107 64,196 182,215 182,215 6,750,000 675 377,950 (92,240 ) 286,385 3,544,247 354 225,817 226,171 154,292 154,292 (1,222,638 ) (1,222,638 ) 162,687,639 $ 16,269 500,000 $ 50 $ 135,000 $ 57,399,438 $ (92,240 ) $ (61,191,579 ) $ (3,733,062 ) 5,665,636 567 348,309 348,876 517,180 517,180 3,227,638 323 138,668 32,176 171,167 13,861,004 1,386 348,614 350,000 (2,034,547 ) (2,034,547 ) 185,441,917 $ 18,545 500,000 $ 50 $ 135,000 $ 58,752,209 $ (60,064 ) $ (63,226,126 ) $ (4,380,386 )
Unaudited Condensed Consolidated Statement of Stockholders’ Deficit
|
| Common Stock |
|
| Preferred Stock |
|
| Series A Convertible |
|
| Series B Convertible |
|
| Series C Convertible |
|
| Common Stock |
|
| Additional Paid In |
|
| Subscription Amount |
|
| Accumulated |
|
|
| |||||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| to be Issued |
|
| Capital |
|
| Receivable |
|
| Deficit |
|
| Total |
| |||||||||||||||
Balance at December 31, 2019 |
|
| 64,854,539 |
|
| $ | 6,486 |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | 0 |
|
|
| 500,000 |
|
| $ | 50 |
|
|
| 500,000 |
|
| $ | 50 |
|
| $ | 50,000 |
|
| $ | 28,623,060 |
|
| $ | 0 |
|
| $ | (35,440,042 | ) |
| $ | (6,760,397 | ) |
Common stock to be issued for Note receivable and True-up adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 0 |
|
Common stock issued against common stock to be issued received in PY |
|
| 250,000 |
|
|
| 25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (50,000 | ) |
|
| 49,975 |
|
|
|
|
|
|
|
|
|
|
| 0 |
|
Common stock issued for services |
|
| 662,839 |
|
|
| 66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 287,434 |
|
|
|
|
|
|
|
|
|
|
| 287,500 |
|
Common stock issued under registration statement on Form S-3 |
|
| 3,541,667 |
|
|
| 355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 962,145 |
|
|
|
|
|
|
|
|
|
|
| 962,500 |
|
Subscription price adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (518,948 | ) |
|
|
|
|
|
|
|
|
|
| (518,948 | ) |
Beneficial conversion of 190K convertible note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 190,000 |
|
|
|
|
|
|
|
|
|
|
| 190,000 |
|
Common stock issued for acquisition |
|
| 54,000,000 |
|
|
| 5,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,500,600 |
|
|
|
|
|
|
|
|
|
|
| 7,506,000 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,028,367 | ) |
|
| (2,028,367 | ) |
Balance at March 31, 2020 |
|
| 123,309,045 |
|
|
| 12,331 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 500,000 |
|
|
| 50 |
|
|
| 500,000 |
|
|
| 50 |
|
|
| 0 |
|
|
| 37,094,266 |
|
|
| 0 |
|
|
| (37,468,409 | ) |
|
| (361,712 | ) |
Common stock to be issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 135,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 135,000 |
|
Common stock issued for severance |
|
| 477,025 |
|
|
| 48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 149,952 |
|
|
|
|
|
|
|
|
|
|
| 150,000 |
|
Common stock issued under registration statement on Form S-3 |
|
| 3,953,125 |
|
|
| 395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 547,605 |
|
|
|
|
|
|
|
|
|
|
| 548,000 |
|
Common stock issued per stock purchase agreement |
|
| 3,975,383 |
|
|
| 397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 699,603 |
|
|
|
|
|
|
|
|
|
|
| 700,000 |
|
Series B preferred stock retirement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (500,000 | ) |
|
| (50 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (50 | ) |
Retired common stock |
|
| (18,570,356 | ) |
|
| (1,857 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,857 | ) |
Subscription price adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (90,887 | ) |
|
|
|
|
|
|
|
|
|
| (90,887 | ) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (79,389 | ) |
|
| (79,389 | ) |
Balance at June 30, 2020 |
|
| 113,144,222 |
|
|
| 11,314 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 500,000 |
|
|
| 50 |
|
|
| 135,000 |
|
|
| 38,400,539 |
|
|
| 0 |
|
|
| (37,547,798 | ) |
|
| 999,105 |
|
Common stock issued for services |
|
| 773,943 |
|
|
| 77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 378,613 |
|
|
|
|
|
|
|
|
|
|
| 378,690 |
|
Common stock issued for severance |
|
| 314,852 |
|
|
| 32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 254,968 |
|
|
|
|
|
|
|
|
|
|
| 255,000 |
|
Convertible note converted to common stock |
|
| 5,141,377 |
|
|
| 514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 50,900 |
|
|
|
|
|
|
|
|
|
|
| 51,414 |
|
Common stock issued per stock purchase agreement |
|
| 5,822,576 |
|
|
| 582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,098,048 |
|
|
|
|
|
|
|
|
|
|
| 1,098,630 |
|
Stock based compensation - stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 414,839 |
|
|
|
|
|
|
|
|
|
|
| 414,839 |
|
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 823,497 |
|
|
|
|
|
|
|
|
|
|
| 823,497 |
|
Loss on conversion of convertible note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 171,889 |
|
|
|
|
|
|
|
|
|
|
| 171,889 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,905,567 | ) |
|
| (1,905,567 | ) |
Balance at September 30, 2020 |
|
| 125,196,970 |
|
|
| 12,519 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 500,000 |
|
|
| 50 |
|
|
| 135,000 |
|
|
| 41,593,293 |
|
|
| 0 |
|
|
| (39,453,365 | ) |
|
| 2,287,497 |
|
| 5 |
| Table of Contents |
|
| Common Stock |
|
| Preferred Stock |
|
| Series A Convertible |
|
| Series B Convertible |
|
| Series C Convertible |
|
| Common Stock to be |
|
| Additional Paid In |
|
| Subscription Amount |
|
| Accumulated |
|
|
| |||||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Issued |
|
| Capital |
|
| Available |
|
| Deficit |
|
| Total |
| |||||||||||||||
Balance at December 31, 2020 |
|
| 125,327,579 |
|
|
| 12,533 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 500,000 |
|
|
| 50 |
|
|
| 201,974 |
|
|
| 201,974 |
|
|
| 43,201,186 |
|
|
| (41,849,922 | ) |
|
| 1,565,821 |
|
Common stock to be issued for Note receivable and True-up adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Common stock to be issued for purchase of shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 168,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 168,500 |
|
Common stock issued against common stock to be issued received in PY |
|
| 108,965 |
|
|
| 11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (66,974 | ) |
|
| 66,963 |
|
|
|
|
|
|
|
|
|
|
| - |
|
Common stock issued for severance payable of discontinued operation |
|
| 379,463 |
|
|
| 38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 224,963 |
|
|
|
|
|
|
|
|
|
|
| 225,001 |
|
Common stock issued for cash |
|
| 1,712,500 |
|
|
| 171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 433,829 |
|
|
|
|
|
|
|
|
|
|
| 434,000 |
|
Stock based compensation - stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 99,742 |
|
|
|
|
|
|
|
|
|
|
| 99,742 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (864,536 | ) |
|
| (864,536 | ) |
Balance at March 31, 2021 |
|
| 127,528,507 |
|
|
| 12,753 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
|
| 500,000 |
|
|
| 50 |
|
|
| 303,500 |
|
|
| 44,026,683 |
|
|
| 0 |
|
|
| (42,714,458 | ) |
|
| 1,628,528 |
|
Common stock issued for services |
|
| 1,114,351 |
|
|
| 111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (16,000 | ) |
|
| 792,389 |
|
|
|
|
|
|
|
|
|
|
| 776,500 |
|
Common stock issued for cash |
|
| 1,234,113 |
|
|
| 123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (152,500 | ) |
|
| 402,376 |
|
|
|
|
|
|
|
|
|
|
| 249,999 |
|
Convertible note #5 and accrued interest converted to common stock |
|
| 2,647,464 |
|
|
| 265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 582,442 |
|
|
|
|
|
|
|
|
|
|
| 582,707 |
|
S-1 agreement subscription receivable |
|
| 500,000 |
|
|
| 50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 332,450 |
|
|
| (332,500 | ) |
|
|
|
|
|
| 0 |
|
Stock based compensation - stock options |
|
| - |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 91,526 |
|
|
|
|
|
|
|
|
|
|
| 91,526 |
|
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,535,264 |
|
|
|
|
|
|
|
|
|
|
| 1,535,264 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,826,924 | ) |
|
| (3,826,924 | ) |
Balance at June 30, 2021 |
|
| 133,024,435 |
|
|
| 13,302 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 500,000 |
|
|
| 50 |
|
|
| 135,000 |
|
|
| 47,763,130 |
|
|
| (332,500 | ) |
|
| (46,541,382 | ) |
|
| 1,037,600 |
|
Common stock to be issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,322,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,322,500 |
|
Common stock issued for services |
|
| 1,415,554 |
|
|
| 142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,111,758 |
|
|
|
|
|
|
|
|
|
|
| 1,111,900 |
|
Common stock issued for cash |
|
| 1,445,115 |
|
|
| 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 476,581 |
|
|
|
|
|
|
|
|
|
|
| 476,726 |
|
Subscription receivable share price adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (103,688 | ) |
|
| 103,688 |
|
|
|
|
|
|
| 0 |
|
Subscription price receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 228,812 |
|
|
|
|
|
|
| 228,812 |
|
Stock based compensation - stock options |
|
| - |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 761,810 |
|
|
|
|
|
|
|
|
|
|
| 761,810 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,291,677 | ) |
|
| (3,291,677 | ) |
Balance at September 30, 2021 |
|
| 135,885,104 |
|
| $ | 13,589 |
|
|
| - |
|
| $ | 0 |
|
|
| - |
|
| $ | 0 |
|
|
| - |
|
| $ | 0 |
|
|
| 500,000 |
|
| $ | 50 |
|
| $ | 4,457,500 |
|
| $ | 50,009,591 |
|
| $ | 0 |
|
| $ | (49,833,059 | ) |
| $ | 4,647,671 |
|
Unaudited Condensed Consolidated Statements of Cash Flows For the For the Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ Less: (Loss) gain from discontinued operations Loss from continuing operations Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation Stock based compensation Amortization of prepaid insurance/expense Amortization of debt discount Common stock issued for services Common Stock issued in settlement of an obligation Amortization(impairment) of Intangible Assets Loss on conversion of convertible note Loss on extinguishment of debt Change in fair value of derivative liability Non-cash interest Expense Severance cost (Note Receivable waived) Changes in operating assets & liabilities: (increase) decrease in accounts receivable Increase in interest receivable (Increase) decrease in prepaid expenses Increase in due to First insurance Funding Increase in Deferred revenue inventory Increase in accounts payable and accrued expenses Net cash provided by (used in) operating activities from continuing operations Net cash provided by (used in) operating activities from discontinued operations - Net cash provided by (used in) operating activities CASH FLOW FROM INVESTING ACTIVITIES: Purchase of Property and Equipment Acquisition of patents Net cash provided by (used in) investing activities from continuing operations Net cash provided by (used in) investing activities from discontinued operations Net cash provided by (used in) investing activities CASH FLOW FROM FINANCING ACTIVITIES: Common stock issued under registration statement on Form S-3 Common stock issued under SPA repayment of first insurance funding Proceeds from common stock to be issued per stock purchase agreement - Proceeds from convertible notes - Repayment of convertible notes - Repayment of Promissory note Net cash provided by (used in) continuing financing activities Net cash provided by (used in) discontinued financing activities Net cash provided by (used in) financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ $ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION CASH PAID DURING THE PERIOD FOR: Interest $ Income taxes - net of tax refund NON-CASH INVESTING AND FINANCING ACTIVITIES Common stock issued against common stock to be issued $ $ Acquisition of patents against notes payable and accounts payable $ - $ Common stock to be issued for acquisition $ Common stock issued for severance $ $ Common stock issued against subscription receivable $ $ - Accrued interest converted to common stock $ $ - Common stock issued on cashless exercise of options $ $ - Common stock issued against Common stock to be issued for acquisition $ Initial derivative liability at issuance of notes $ Initial debt discount at issuance of notes $ Promissory note refinanced against convertible note $ Common stock issued against settlement of debt $ See accompanying notes to these unaudited condensed consolidated financial statementsSee accompanying notes to these unaudited condensed consolidated financial statements(5,343,899 ) $ (7,983,134 ) - (4,633 ) (5,343,899 ) (7,978,501 ) 23,451 20,119 888,313 953,076 187,562 296,542 132,521 220,578 79,500 1,904,400 230,369 295,834 1,333,954 122,887 137,388 1,535,264 (418,769 ) 1,316,846 102,387 (770 ) 1,701 (182,161 ) (89,391 ) (20,127 ) 80,614 148,685 375,180 228,426 (1,728,821 ) (1,689,200 ) (4,633 ) (1,728,821 ) (1,693,833 ) (8,710 ) (20,022 ) (10,000 ) (8,710 ) (30,022 ) - - (8,710 ) (30,022 ) 1,052,419 - 455,000 1,542,040 (59,789 ) 40,511 52,500 1,325,000 (1,243,200 ) (81,116 ) (30,000 ) 1,448,314 1,605,051 - - 1,448,314 1,605,051 (289,217 ) (118,804 ) 452,963 457,181 163,746 338,377 142,500 $ - $ - $ - 125,000 66,974 240,000 $ - 4,270,000 64,197 225,000 60,064 32,944 28 4,270,000 $ - 2,641,846 $ - 1,325,000 $ - 367,931 $ - 348,876 $ -
| 6 |
| Table of Contents |
Unaudited Condensed Consolidated Statements of Cash Flows
|
| For the |
|
| For the |
| ||
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | (7,983,134 | ) |
| $ | (4,013,324 | ) |
Less: (Loss) gain from discontinued operations |
|
| (4,633 | ) |
|
| 29,144 |
|
Loss from continuing operations |
|
| (7,978,501 | ) |
|
| (4,042,468 | ) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
| 20,119 |
|
|
| 10,496 |
|
Stock based compensation |
|
| 953,076 |
|
|
| 779,029 |
|
Amortization of prepaid insurance/expense |
|
| 296,542 |
|
|
| 146,583 |
|
Amortization of debt discount |
|
| 220,578 |
|
|
| 63,745 |
|
Common stock issued for services |
|
| 1,904,400 |
|
|
| - |
|
Amortization(impairment) of Intangible Assets |
|
| 1,333,954 |
|
|
| - |
|
Loss on extinguishment of debt |
|
| 1,535,264 |
|
|
| 923,604 |
|
Unrealized (gain) loss on marketable securities |
|
| 0 |
|
|
| 104,705 |
|
Realized (gain) loss on marketable securities |
|
| 0 |
|
|
| 109,040 |
|
|
|
|
|
|
|
|
|
|
Changes in operating assets & liabilities: |
|
|
|
|
|
|
|
|
Increase in interest receivable |
|
| (770 | ) |
|
| (419 | ) |
Increase in prepaid expenses |
|
| (182,161 | ) |
|
| (94,779 | ) |
Increase (decrease) in inventory |
|
| (20,127 | ) |
|
| 0 |
|
Increase (decrease) in security deposit |
|
|
|
|
|
| (255 | ) |
Increase in accounts payable and accrued expenses |
|
| 228,426 |
|
|
| 234,364 |
|
Net cash provided by (used in) operating activities from continuing operations |
|
| (1,689,200 | ) |
|
| (1,766,355 | ) |
Net cash provided by (used in) operating activities from discontinued operations |
|
| (4,633 | ) |
|
| (834,429 | ) |
Net cash provided by (used in) operating activities |
|
| (1,693,833 | ) |
|
| (2,600,784 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Cash acquired in acquisition |
|
| 0 |
|
|
| 79,814 |
|
Acquisition of patents |
|
| (10,000 | ) |
|
| - |
|
Increase (decrease) in property and equipment |
|
| (20,022 | ) |
|
| (86,169 | ) |
Net cash provided by (used in) investing activities from continuing operations |
|
| (30,022 | ) |
|
| (6,355 | ) |
Net cash provided by (used in) investing activities from discontinued operations |
|
| 0 |
|
|
| 0 |
|
Net cash provided by (used in) investing activities |
|
| (30,022 | ) |
|
| (6,355 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Common stock issued under registration statement on Form S-3 |
|
| - |
|
|
| 1,510,500 |
|
Common stock issued under SPA |
|
| 1,542,040 |
|
|
| 1,798,630 |
|
Borrowed from First Insurance Funding |
|
| 40,511 |
|
|
| 8,618 |
|
Proceeds from common stock to be issued per stock purchase agreement |
|
| 52,500 |
|
|
| - |
|
Repayment of Promissory note |
|
| (30,000 | ) |
|
| 0 |
|
Net cash provided by (used in) continuing financing activities |
|
| 1,605,051 |
|
|
| 3,317,748 |
|
Net cash provided by (used in) discontinued financing activities |
|
| 0 |
|
|
| (65,000 | ) |
Net cash provided by (used in) financing activities |
|
| 1,605,051 |
|
|
| 3,252,748 |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
| (118,804 | ) |
|
| 645,609 |
|
Cash and cash equivalents at beginning of period |
|
| 457,181 |
|
|
| 511,630 |
|
Cash and cash equivalents at end of period |
| $ | 338,377 |
|
| $ | 1,157,239 |
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
CASH PAID DURING THE PERIOD FOR: |
|
|
|
|
|
|
|
|
Interest |
| $ | 0 |
|
| $ | 0 |
|
Income taxes - net of tax refund |
| $ | 0 |
|
| $ | 0 |
|
NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Common stock issued against common stock to be issued |
| $ | 66,974 |
|
| $ | 50,000 |
|
Account receivable against conversion of debt and interest |
| $ | - |
|
| $ | 75,074 |
|
Common stock issued for services recorded as prepaid expense |
| $ | 0 |
|
| $ | 302,000 |
|
Common stock issued for severance |
| $ | 225,000 |
|
| $ | 450,000 |
|
Shares issued for acquisition of Sapphire Biotechnology |
| $ | 0 |
|
| $ | 7,506,000 |
|
Deferred tax liability accounted for as a result of Sapphire Biotech Acquisition |
| $ | 0 |
|
| $ | 1,845,000 |
|
Assets acquired and liability assumed for as a result of Sapphire Biotech Acquisition |
| $ | 0 |
|
|
| 525,365 |
|
BCF related to discount on conversion |
| $ | 0 |
|
| $ | 190,000 |
|
Common stock issued for note receivable |
| $ | 0 |
|
| $ | 135,000 |
|
Adoption of lease obligation and ROU asset |
| $ | 0 |
|
| $ | 164,910 |
|
Common stock retired |
| $ | 0 |
|
| $ | 1,857 |
|
Subscription price adjustment |
| $ | 0 |
|
| $ | 609,835 |
|
Convertible note converted to common stock |
| $ | 0 |
|
| $ | 51,414 |
|
Assets acquired as a result of Sapphire Biotech Acquisition |
| $ | 0 |
|
| $ | 33,319 |
|
Acquisition of patents against Notes payable and accounts payable |
| $ | 240,000 |
|
|
| 0 |
|
Common stock to be issued for acquisition |
| $ | 4,270,000 |
|
|
| 0 |
|
See accompanying notes to these unaudited condensed consolidated financial statements
AXIM BIOTECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SeptemberSEPTEMBER 30, 2021 and 20202022
NOTE 1: ORGANIZATION
Axim Biotechnologies, Ind., (the “Company”)The Company was originally incorporated in Nevada on November 18, 2010, as Axim International Inc. On July 24, 2014, the Company changed its name to AXIM Biotechnologies, Inc. to better reflect its business operations. The Company’s principal executive office is located at 61816191 Cornerstone Court E Suitesuite 114 San Diego CACa 92121. On August 7, 2014, the Company formed a wholly owned Nevada subsidiary named Axim Holdings, Inc. This subsidiary will be used to help facilitate the anticipated activities planned by the Company. On May 11, 2015 the Company acquired a 100% interest in Can ChewCanChew License Company a Nevada incorporated licensing Company, through the exchange of 5,826,706 shares of its common stock. In October 2017 the company formed a wholly owned subsidiary in the Netherlands for purposes of holding pharmaceutical licenses as required by the Netherlands regulations and laws. On October 16, 2018, the Company formed a wholly owned disregarded entity Marina Street, LLC as part of improvement of internal control over cash management and bank activities.
On March 17, 2020, the Company acquired Sapphire Biotech, Inc., (“Sapphire’) which is research and Development Company that has a mission to improve global cancer care through the development of proprietary therapeutics for inhibiting cancer growth and metastasis. Sapphire is also developing a line of novel diagnostics for early cancer detection, response to treatment, and recurrence monitoring. Additionally, with the onset of the COVID-19 pandemic, the Company decided to begin creating COVID-19 rapid diagnostic tools, including multiple first-in-class COVID-19 neutralizing antibody tests and other innovations.
Sapphire’s operations are located in the Greater San Diego Area.
COVID-19 impact and related risks
The ongoing global outbreak of COVID-19, and the various attempts throughout the world to contain it, have created significant volatility, uncertainty and disruption. In response to government directives and guidelines, health care advisories and employee and other concerns, A number of the Company’s employees have had to work remotely from home and those on site have had to follow the Company’s social distance guidelines, which could impact their productivity. COVID-19 could also disrupt the Company’s operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who cannot effectively work remotely but who elect not to come to work due to the illness affecting others in the Company’s office or laboratory facilities, or due to quarantines.
Because of COVID-19, travel, visits, and in-person meetings related to The Company’s business have been severely curtailed or canceled and the Company Developments – Divesturehas instead used on-line or virtual meetings to meet with potential customers and others.
In addition to operational adjustments, the consequences of Cannabis Related Assetsthe COVID-19 pandemic have led to uncertainties related to The Company’s business growth and ability to forecast the demand for its diagnostic testing and resulting revenues.
The full extent to which the COVID-19 pandemic and the various responses to it might impact The Company’s business, operations and financial results will depend on numerous evolving factors that are not subject to accurate prediction and that are beyond The Company’s control.
Changes to the Company’s Board of Directors
On May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc.,January 4, 2022, Mauricio Gatto Bellora tendered his resignation as a Nevada corporation (the “Company”), entered into an Agreement (the “Separation Agreement”) by and among the Company, CanChew License Company (“CanCo”), CanChew Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad Foundation, US (collectively, the “Sanammad Parties”), pursuant to which, among other matters as described herein, Drs. Anastassov and Van Damme and Mr. Changoer resigned as membersmember of the Company’s Board of Directors.Directors, and the Company on that date accepted his resignation. Mr. Bellora’s decision to resign was not the result of any disagreement with the Company.
Pursuant toOn January 6, 2022, the Separation Agreement, the Company transferred and assigned to an entity designated by Dr. Anastassov allrecord holder of the Company’s cannabis-related intellectual property other than the inventions and discoveries described in that certain cannabis-related patent application filed by the Company’s wholly-owned subsidiary, Sapphire Biotech, Inc. (water-soluble cannabinoid molecules). The Company also transferred 100% of its interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set forth above, any and all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in its entirety.
In addition, in consideration for the payment by the Company of $65,000, the Company purchased 100% of the issued and outstanding shares of Series B Preferred Stock held by the Sanammad Parties. Such shares shall be retired to treasury of the Company. The Sanammad Parties also agreed to forfeit and assign back to treasury, for no consideration, a total of 18,570,356500,000 shares of the Company’s common stock.Series C Preferred Stock, representing 100% of the 500,000 shares of Series C Preferred Stock issued and outstanding, which shares are entitled to cast a vote for election of up to four Series C Directors, whether by shareholder meeting (annual or special) or by written consent, acting pursuant to Section 78.320 of the Nevada Revised Statutes and Article III, Section 3 of the Company’s Amended and Restated Bylaws, consented by written consent in lieu of a meeting appointing Blake N. Schroeder to fill the director seat vacated by the resignation of Mauricio Javier Gatto Bellora.
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Mr. Blake N. Schroeder, 42, began his career with a commercial litigation law firm in Salt Lake City, Utah. Beginning in 2008, Schroeder focused on the sale and marketing of natural products and opening international marketplaces to those products. From 2008 to 2014 Mr. Schroeder served in various capacities at MonaVie, LLC developing international business plans and growing international businesses. From August 2014 to February 2016, Mr. Schroeder served as the Chief Operating Officer of for evergreen International, where he was responsible for global operation and sales of the multinational organization, including oversight of a global supply chain. From 2021 to the present, Mr. Schroeder has served as the Chief Executive Officer and Chairman of the Board of Medical Marijuana, Inc. From 2016 to the present, Mr. Schroeder serves as the chief executive officer of Kannaway USA, LLC, a wholly owned subsidiary of Medical Marijuana, Inc. Medical Marijuana, Inc. is one of the Company’s largest shareholders holding approximately 16.4% of the Company’s common stock, as of January 10, 2022. Mr. Schroeder holds a B.S. in Finance from Utah State University and a law degree from Syracuse University College of Law.
Changes in the Business
On March 7, 2022, the Company announced that is has shifted its focus for its rapid COVID-19 Neutralizing Antibody (“Nab”)(NAb) Test to become For Research Use Only (“RUO”). The test will provide researchers an important tool for COVID-19 research and is not intended for use in diagnostic procedures. The Company has also entered a separation agreement with Empowered Diagnostics, LLC following the FDA recall of Empowered’s products, including the NabNAb test.
NOTE 2: ACQUISITION OF SAPPHIRE BIOTECH, INC.
On March 17, 2020, the Company entered into a Share Exchange Agreement (“Agreement”) with Sapphire Biotech, Inc., a Delaware corporation (“Sapphire”) and all the Sapphire stockholders (collectively, the “Sapphire Stockholders”). Following the closing of the transaction, Sapphire will become a wholly owned subsidiary of AXIM.
Under the terms of the Agreement, the Company: (i) acquired 100% of Sapphire’s outstanding capital (consisting of 100,000,000 shares of common stock and zero (0) shares of Preferred Stock); and (ii) assume all of the outstanding debt of Sapphire. The outstanding debt includes two (2) convertible notes in the principal amounts of $310,000 and $190,000. Pursuant to the terms of the Share Exchange Agreement, the Company acquired 100% of the issued and outstanding shares of Sapphire by means of a share exchange with the Sapphire Stockholders in exchange for 54,000,000 newly issued shares of the common stock of AXIM (the “Share Exchange”). As a result of the Share Exchange, Sapphire became a 100% owned subsidiary of AXIM, which on a going forward basis will result in consolidated financial reporting by AXIM to include the results of Sapphire. The closing of the Share Exchange occurred concurrently with entry into the Share Exchange Agreement (the “Closing”).
In March 2020, the Company acquired SAPPHIRE BIOTECH, Inc., a biotechnology company focusing on improving cancer care through the development of proprietary therapeutics for inhibiting cancer growth and metastasis. The Company issued 54,000,000 shares of common stock with a total fair value of $7,506,000 and assumed net liabilities of $412,233 (resulting in a total acquisition cost of $7,918,233), in exchange for all outstanding shares of SAPPHIRE BIOTECH, Inc. The Company accounted for the acquisition using the acquisition method of accounting for business combinations. On the acquisition date, the Company performed a preliminary allocation of the purchase price to include the tangible assets acquired and the liabilities assumed with the remainder of the purchase price allocated to patents pending approval, in-process research and development (IPR&D) and goodwill. The Company incurred $6,000 of acquisition-related costs, which will be recorded as expense after the evaluation work been completed. In addition, the Company recorded an estimated deferred tax liability on the assets acquired, except for goodwill for which deferred taxes are not applicable.
The Company completed the valuation of the intangible assets acquired in the SAPPHIRE BIOTECH, Inc. transaction by September 2020. Pursuant to the valuation, the Company determined that the patents continue to be expanded and chose to subsume the patents within the IPR&D balance. In management’s judgment, the amount assigned to IPR&D represents the amount the Company would reasonably expect to pay an unrelated party for each project included in the technology. Based on the final valuation, the remaining excess purchase price has been allocated to goodwill.
The aggregate purchase price of $7,918,233consisted of common stock valued at $7,506,000 and the net liabilities assumed of $412,233. The value of the $7,506,000 of common shares issued was determined based on the closing price of the Company’s common shares at the acquisition date.
The following table summarizes the consideration paid for SAPPHIRE BIOTECH and the estimated amounts of the assets acquired and liabilities assumed recognized at the acquisition date.
Consideration: |
|
|
| |
Cash and cash equivalents |
| $ | 79,814 |
|
Property and equipment, net |
|
| 20,533 |
|
In process Research & Development (IPRD) |
|
| 7,800,000 |
|
Goodwill |
|
| 2,458,233 |
|
Security deposit |
|
| 12,785 |
|
Total asset acquired |
| $ | 10,371,365 |
|
|
|
|
|
|
Accrued expenses and other current liabilities |
| $ | 5,767 |
|
Deferred taxes liability |
|
| 2,340,000 |
|
Notes Payable including convertible and discount on conversion |
|
| 519,598 |
|
Total liabilities assumed |
| $ | 2,865,365 |
|
Net assets acquired |
| $ | 7,506,000 |
|
The fair value of acquired IPR&D was determined using the income approach, based on the likelihood of success of products reaching final development and commercialization. The fair value of acquired IPR&D was capitalized as of the Closing Date and is subsequently accounted for as an indefinite-lived intangible asset until completion or abandonment of the associated research and development efforts. Accordingly, during the development period after the Closing Date, this asset will not be amortized over a period of 36 months.
The acquired in process Research and development as it relates to rapid COVID testing has reached the commercialization stage and is awaiting FDA EUA.
The $2,458,233 of goodwill is not expected to be deductible for tax purposes.
The effective settlement of receivable/payable between the Company and Sapphire deemed to be not material, which was recorded as gain on intercompany transaction in P&L.
NOTE 3: ACQUISITION OF INTELLECTUAL PROPERTY 0FOF ADVANCED TEAR DIAGNOSTIC, LLC.
AXIM entered into two substantially contemporaneous transactions to acquire patents and 510(K) Licenses from Advanced Tear Diagnostics, LLC (the “Seller”) (collectively, the “Asset Acquisition”) for a total amount of $4,520,000.
The first transaction occurred on July 29, 2021, in which AXIM purchased five patents (the “Patents”) from the Seller for $250,000 (which includes assuming and paying $30,000 of the Seller’s liabilities). The bulk of the purchase price ($210,000) was in a note that requires seven equal monthly payments of $30,000, which payment started on September 3, 2021.
The second transaction occurred on JulyAugust 26, 2021, in which AXIM purchased certain eye disease diagnostic technology, which consisted of a 510(K) license for Lactoferrin, a biomarker for dry eye disease and a 510(K) license for IgE, a biomarker for allergic ocular reaction (collectively, the “510(K) Licenses”). The purchase price for the 510(K) Licenses was $4,270,000, which price was paid by issuing to the Seller 7 million shares of AXIM restricted common stock.
Together, the Patents and the 510(K) Licenses constitute the acquired technology asset (the “Technology Asset”), which for accounting purposes, are considered one unit of account. We are amortizing the Technology Asset ratably over the 11.54 average remaining life of the Patents.
In accordance with FASB’s requirements for accounting for business combinations (FASB Accounting Standards Codification, Topic 805, Business Combinations (“Topic 805”)), since all of the value of this acquisition resides in one asset, the Technology Asset, we have accounted for this transaction as the acquisition of an asset. The seller had not been able to commercialize or complete development of the Technology Asset prior to the asset acquisition and AXIM has established aan Ophthalmology Division to commercialize and market the diagnostic technology. In an asset acquisition, the total purchase price of the transaction, including transaction expenses, is allocated to the assets acquired based on the fair value of the assets acquired. In our acquisition of the Technology Asset, the total amount of the purchase price was allocated to the Technology Asset.
NOTE 4:3: BASIS OF PRESENTATION:
The unaudited condensed consolidated financial statements of AXIM Biotechnologies, Inc. (formerly Axim International, Inc.) as of September 30, 2021,2022, and for the three and nine months period ended September 30, 2021 and 2020 have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”).
The following (a) balance sheets as of September 30, 2021 (unaudited) and December 31, 2020, which have been derived from audited financial statements, and (b) the unaudited interim statements of operations and cash flows of AXIM Biotechnologies, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2021. These unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 26, 2021.
Principles of Consolidation
The consolidated financial statements include the accounts of Axim Biotechnologies, Inc. and its wholly owned subsidiaries Axim Holdings, Inc., Marina Street LLC, Axim Biotechnologies (the Netherland Company) and Sapphire Biotech, Inc. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated upon consolidation.
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NOTE 5:4: GOING CONCERN
The Company’s condensed consolidated financial statements have been presented assuming that the Company will continue as a going concern. The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit as of September 30, 2021. The Company has historically financed its operations primarily through the sale of common stock, promissory notes and convertible notes. To date, none of the Company’s products related to continuing operations are still in the product development phase. Management expects operating losses to continue and increase for the foreseeable future, as the Company progresses into clinical development activities for its lead product candidates. The Company’s prospects are subject to risks, expenses and uncertainties frequently encountered by companies in the biotechnology industry. As shown in the condensed consolidated financial statements, the Company has deficit innegative working capital of $1,094,813$2,914,013 and has an accumulated deficit of $49,833,059 and$63,226,126, has cash used in operating activities of continuing operations $1,689,200$1,728,821. The Company extinguished its old debt and discontinued operationsentered in debt exchange agreement. On April 16, 2018, the Company entered into a Stock Purchase Agreement and sold 1,945,000 shares of $4,633.our common stock registered under the Registration Statement on Form S-3 declared effective by the Securities and Exchange Commission on September 14, 2017. On March 11, 2019 the company issued shares in accordance with an SPA dated August 1, 2018 which the amount reduced due to shareholder by $400,000. During the year ended December 31, 2021, the Company raised additional capital of $1,610,538 through Stock Purchase Agreements. For the nine months ended September 30, 2022 the company raised $1,507,419 thru its S-1 and various stock purchase agreements This capital provides funds for research, development, and ongoing operations. The Company intends to raise substantial additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. That will raise a doubt about the ability of the Company to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
NOTE 6:5: SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 as well as the reported amounts of revenue and expenses during reporting periods. Actual results could differ from these estimates. Significant estimates are assumptions about collection of accounts receivable, intangible assets, useful life of intangible assets determination of the discount rate for operating leases and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate and expected dividend rate.
Operating lease We lease property under various operating leases which are disclosed on our Balance sheet in accordance with ASC 842 |
Risks and uncertainties
The Company operates in a dynamic and highly competitive industry and is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturer and contract research organizations, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows; ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.
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Products developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that the products will receive the necessary approvals, or that any approved products will be commercially viable. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval, it could have a materially adverse impact on the Company. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.
Beginning in late 2019, the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, has evolved into a global pandemic. The extent of the impact of the coronavirus outbreak on the Company’s business will depend on certain developments, including the duration and spread of the outbreak and the extent and severity of the impact on the Company’s clinical trial activities, research activities and suppliers, all of which are uncertain and cannot be predicted. At this point, the extent to which the coronavirus outbreak may materially impact the Company’s financial condition, liquidity or results of operations is uncertain. The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company may require additional funds to commercialize its products. The Company is unable to entirely fund these efforts with its current financial resources. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and operations.
There have been no material changes in the accounting policies from those disclosed in the financial statements and the related notes included in the Form 10-K.
Cash equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of September 30, 2021 and December 31, 2020,2022, the Company had no cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company had no uninsured balances at September 30, 20212022 and December 31, 2020.2021. The Company has never experienced any losses related to these balances.
Accounts Receivable
It is the Company’s policy to review accounts receivable at least on a monthly basis for conductibility and follow up with customers accordingly. COVID19Covid19 has slowed collection as our customers are in a mandated pause. The CompanyWe do not have geographic concentration of customers for the three months ending September 30, 2021 and 2020. There were no accounts receivable as of September 30, 2021’customers.
Concentrations
At September 30, 2022 and December 31, 2020,2021, there was no accounts receivable. For the year ended December 31, 2021, one customer accounted for 100% of accounts receivable. There were no accounts receivable as oftotal revenue. For the three and nine months ended September 30, 2021.
Inventory
Inventory consists2022 one customer accounted for 100% of raw materials owned by the Company and are stated at the lower of cost or market. As of September 30, 2021 and December 31, 2020, the Company had $20,127 and $-0-; respectively.sales.
Property and equipment
Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using straight-line method over the estimated useful life. New assets and expenditures that extend the useful life of property or equipment are capitalized and depreciated. Expenditures for ordinary repairs and maintenance are charged to operations as incurred. The Company’s property and equipment relating to continuing operations consisted of the following onat September 30, 20212022 and December 31, 2020,2021, respectively, and none related to discontinued operations.
|
| September 30, |
| December 31, |
|
| September 30, 2022 |
|
| December 31, 2021 |
| |||||
|
| 2021 |
|
| 2020 |
| ||||||||||
Equipment |
| $ | 154,809 |
| $ | 134,788 |
| |||||||||
Equipment of continuing operations |
| $ | 183,992 |
| $ | 175,283 |
| |||||||||
Less: accumulated depreciation |
| $ | 50,812 |
|
| $ | 30,694 |
|
|
| 81,923 |
|
|
| 58,473 |
|
|
| $ | 103,997 |
|
| $ | 104,094 |
|
| $ | 102,069 |
|
| $ | 116,810 |
|
ForDepreciation expense was $8,133 and $6,935 for the three months ended September 30, 2022 and 2021, respectively.
Depreciation expense was $23,451 and $20,119 for the nine months ended September 30, 20212022 and 2020, the Company recognized depreciation expense of $20,119 and $10,497 respectively. For the three months ended September 30, 2021, and 2020, the Company recognized depreciation expense of $6,935 and $5,372, respectively.
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In-Process Research and Development (IPR&D)
The fair value of IPR&D acquired through a business combination is capitalized as an indefinite-lived intangible asset until the completion or abandonment of the related research and development activities. When the related research and development is completed, the asset will be assigned a useful life and amortized.
The fair value of an IPR&D intangible asset is determined using an income approach. This approach starts with a forecast of the net cash flows expected to be generated by the asset over its estimated useful life. The net cash flows reflect the asset’s stage of completion, the probability of technical success, the projected costs to complete, expected market competition, and an assessment of the asset’s life-cycle. The net cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams.
The product development related to the IPR&D acquired reached completion in April 2021.
GoodwillIntangible Assets
Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired.
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances between annual tests indicate that the asset may be impaired. Impairment loss is recognized based on a comparison of the fair value of the assetnet tangible and identifiable intangible assets acquired in each business combination. We conduct an impairment analysis for goodwill annually in the fourth quarter or more frequently if indicators of impairment exist or if a decision is made to sell or exit a business. Significant judgments are involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others. The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill.
We first may assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value, withoutamount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test included in U.S. GAAP. To the extent our assessment identifies adverse conditions, or if we elect to bypass the qualitative assessment, goodwill is tested using a quantitative impairment test.
Impairment of Indefinite-Lived Intangible Assets
For indefinite-lived intangible assets such as in-process research and development (IPRD), we conduct an impairment analysis annually in the fourth quarter or more frequently if indicators of impairment exist. We first perform a qualitative assessment to determine if it is more likely than not that the carrying amount of each of the in-process research and development assets exceeds its fair value. The qualitative assessment requires the consideration of any recoverability.factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows. If we determine it is more likely than not that the fair value is less than its carrying amount of the in-process research and development assets, a quantitative assessment is performed. The quantitative assessment compares the fair value of the in-process research and development assets to its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized for the excess.
Intangible Assets
As required by generally accepted accounting principles, trademarksWe elected to perform a quantitative assessment of indefinite-lived intangible assets and patents are amortized if they have a definite life,determined that the amortization is estimated in straight line through three years starting in April 2021. As a resultfair value of the goodwill and IPRD related to the Sapphire acquisition of asset of Advanced Tear Diagnostic, LLC, we recognize patentswas less than its carrying amount and licenses, which are amortized in straight line over their remaining useful lives. that in-process research and development were fully impaired
The Company’s intangible assets relating to continuing operations and discontinued operations consisted of the following onat September 30, 20212022 and December 31, 2020, respectively.2021, respectively
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
| ||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Goodwill |
| $ | 2,458,233 |
| $ | 2,458,233 |
| |||||||||
Intellectual Property (IPRD) |
| 7,800,000 |
| 7,800,000 |
| |||||||||||
Patents |
| 250,000 |
| 0 |
|
| $ | 250,000 |
| $ | 250,000 |
| ||||
Licenses |
| 4,270,000 |
|
| 0 |
|
|
| 4,270,000 |
|
|
| 4,270,000 |
| ||
|
| 14,778,233 |
|
| 10,258,233 |
|
|
| 4,520,000 |
|
|
| 4,520,000 |
| ||
|
|
|
|
|
|
|
|
|
|
| ||||||
Less: accumulated amortization |
| 1,333,954 |
|
| 0 |
|
|
| 431,960 |
|
|
| 136,127 |
| ||
|
| $ | 13,444,279 |
|
| $ | 10,258,233 |
|
| $ | 4,088,040 |
|
| $ | 4,383,873 |
|
Estimated aggregate amortization expense for each of the threefive succeeding years ending December 31 is as follows:
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
| ||||
Amortization expense |
| $ | 2,088,000 |
|
| $ | 2,990,000 |
|
| $ | 2,990,000 |
|
| $ | 1,040,000 |
|
2022 2023 2024 2025 2026 and thereafter Amortization expense $ 98,656 $ 394,450 $ 394,450 $ 394,450 $ 2,806,034
Amortization expense recorded for the three months ended September 30, 2022 and 2021 was $98,612 and $692,858; respectively.
Amortization expense recorded for the nine months ended September 30, 2022 and 2021 was $295,835 and $1,333,954 respectively.
Goodwill and Intangible assets were impaired resulting in a net impairment loss in 2021 of $5,966,452, resulting from an FDA decision not to approve our COVID test. This impairment was not recorded until December 31, 2021
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Revenue Recognition
The Company follows the guidance contained in Topic 606 (FASB ASC 606). The core principle of Topic 606 (FASB ASC 606) is that an entity should recognize revenue to depict the transfer of goods of services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revenue recognition guidance contained in Topic 606, to follow the five-step revenue recognition model along with other guidance impacted by this standard: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transportation price; (4) allocate the transportation price; (5) recognize revenue when or as the entity satisfies a performance obligation. All revenue was from operations that were divested.
Revenues are recognized when title for goods is transferred; non-refundable fees and proceeds from irrevocable agreements recognized when inflows or other enhancements of assets of the Company are received.
Revenues from continuing operations recognized for three and nine months ended September 30, 20212022 and 20202021 amounted to $8,127, $55,651, $-0-$1,314 and $-0-,$8,127, respectively. Revenues from discontinued operations recognized for three months ended September 30, 2022 and 2021 amounted to $0 and $0, respectively.
Revenues from continuing operations recognized for nine months ended September 30, 20212022 and 20202021 amounted to $-0-, $-0-,$1,314 and $-0-, $7,990,$55,651, respectively. Revenues from discontinued operations recognized for the nine months ended September 30, 2022 and 2021 amounted to $0 and $4,633, respectively.
Collaboration Revenue
Revenue recognition for collaboration agreements will require significant judgment. The Company’s assessments and estimates are based on contractual terms, historical experience and general industry practice. Revisions in these values or estimations have the effect of increasing or decreasing collaboration revenue in the period of revision.
On August 21, 2020, the Company entered into a Distribution, License and Supply Agreement (“License Agreement”) with Empowered Diagnostics, LLC ("(“Empowered Diagnostics”"). The License Agreement has a term of xx years and provides Empowered Diagnostics with a right to commercialize The company’sCompany’s products worldwide with the exception of Mexico.
Under the License Agreement, the company is responsible for applying for and obtaining necessary regulatory approvals in the US and EU, as well as marketing, sales and distribution of the products. Empowered Diagnostics will pay a transfer price for all licensed products, and upon achievement of certain regulatory and sales milestones, the Company may receive payments from Empowered Diagnostics equal to 8% of the monthly gross revenue. Agreement continues until terminated by mutual consent or uncorrected breach.
This agreement with Empowered Diagnostics was terminated in February 2022 The Company did not recognize any revenue from this agreement,
Grant Income
In 2021 the Company has received government grants to drive its research and development efforts. Through these government grants, the government has provided funding for the Company to perform research and development activities which will assist in developing its products. The Company believes the government entities funding these grants are interested in the Company advancing its underlying technologies through research activities and not providing incentives for hiring employees or building facilities that would suggest that the grant monies are not for specific research activities.
In determining how to classify the monies received under government grants, the Company acknowledges that there is no specific guidance under US GAAP and that the FASB and AICPA have often drawn upon the guidance in IAS 20 for classification. In considering the alternatives provided by IAS 20 for the presentation of these grants in the Company’s financial statements, the Company believes that recognizing the government grant proceeds as a component of other revenue is a better reflection of the economics of the arrangements as the Company earns the funding through the performance of research and development which is not one of the Company’s primary business activities or central to its operations. The Company believes that presenting research and development funding from government grants, as other revenue provides consistency in our financial reporting. The Company also believes that this presentation clearly presents to users of its financial statements in one line the Company’s sources of funding from these grants. The Company notes that there are no contingencies associated with the receipt of or ability to retain the funds under the grant, other than undertaking and performing the related research and development activities.
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The Company recognizes funds received from contractual research and development services and from government grants as other revenue. These contracts and grants are not considered an ongoing major and central operation of the Company’s business. Our Income from Grants from Government for the three and nine months ended September 30, 2022 and 2021 was $0, $0 and 2020, was $59,986, $279,981 and $25,899, $25,899 respectively.
Cost of Sales
Cost of sales includes the purchase cost of products sold and all costs associated with getting the products to the customers including buying and transportation costs. Cost of sales all related to discontinued operations.
Shipping Costs
Shipping and handling costs billed to customers arewill be recorded in sales. Shipping costs incurred by the company are recorded in general and administrative expenses. Shipping costs all related to discontinued operations.
Fair Value Measurements
The Company applies the guidance that is codified under ASC 820-10 related to assets and liabilities recognized or disclosed in the financial statements at fair value on a recurring basis. ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.
The Company’s financial instruments are cash and cash equivalents, accounts receivable, accounts payable, notes payable, and long-term debt. The recorded values of cash and cash equivalents and accounts payable approximate their fair values based on their short-term nature. The recorded values of notes payable and long-term debt approximate their fair values, as interest approximates market rates.
ASC 820-10 clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. ASC 820-10 requires valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:
Fair Value Hierarchy | Inputs to Fair Value Methodology | |
Level 1 | Quoted prices in active markets for identical assets or liabilities | |
Level 2 | Quoted prices for similar assets or liabilities; quoted markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the financial instrument; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from, or corroborated by, observable market information | |
Level 3 | Pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption is unobservable or when the estimation of fair value requires significant management judgment |
All items required to be recorded or measured on a recurring basis are based upon Level 3 inputs.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement
The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company.
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The Company’s acquired goodwill with a carrying amount of $2,458,233 were written down to zero, resulting in an impairment charge of $2,458,233, which was included in earnings for the period ending September 30, 2020.
In-process Research and Development with a carrying amount of $5,848,219 was written down to its implied fair value of zero, resulting in an impairment charge of $5,848,219, which was included in earnings for the period ending December 31, 2021.
Items recorded or measured at fair value on a recurring basis in the accompanying condensed consolidated financial statements consisted of the following items as of September 30, 2022
Total Level 1 Level 2 Level 3 Derivative liabilities $ 1,995,618 $ - $ - $ 1,995,618
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities.”
Professional standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free-standingfree standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instruments are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional Convertible Debt Instrument.”
The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.
ASC 815-40 provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an asset or a liability.
Income Taxes
The Company follows Section 740-10, Income tax (“ASC 740-10”) Fair Value Measurements and Disclosures of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. 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 the Statements of Operations in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including reversals of any existing taxable temporary differences, projected future taxable income, tax planning strategies, and the results of recent operations. If the Company determines that it would be able to realize a deferred tax asset in the future in excess of any recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
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The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
No amounts were accrued for the payment of interest and penalties as of September 30, 2022 and December 31, 2021 respectively. The Company is not aware of any uncertain tax positions that could result in significant additional payments, accruals, or other material deviation for the Nine months ended September 30, 2022 and 2021 respectively. |
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “Cares Act”) was enacted. The CARES Act included loans and grants to certain businesses, and temporary amendments to the Internal Revenue Code which changed net loss carryforward and back provisions and the business interest expenses limitation. Under the CARES Act provisions, the most relevant income tax considerations to Oncocyte relate to the amounts received under the Paycheck Protection Program loan program and the possible forgiveness of those loans by the SBA.
On December 21, 2020, the U.S. president has signed into law the “Consolidated Appropriations Act, 2021” which includes further COVID-19 economic relief and extension of certain expiring tax provisions. The relief package includes a tax provision clarifying that businesses with forgiven PPP loans can deduct regular business expenses that are paid for with the loan proceeds for federal tax purposes. Additional pandemic relief tax measures include an expansion of the employee retention credit, enhanced charitable contribution deductions, and a temporary full deduction for business expenses for food and beverages provided by a restaurant.
Concentrations of Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cashhad $0 and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit.$0 allowance for doubtful accounts at September 30, 2022 and 2021, respectively and had $0 accounts receivable at September 30, 2022 and $0 at December 31, 2021.
Net Loss per Common Share
Net loss per common share is computed pursuant to section 260-10-45 Earnings Per Share (“ASC 260-10”) of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding and the member potentially outstanding during each period. In periods when a net loss is experienced, only basic net loss per share is calculated because to do otherwise would be anti-dilutive.
There were 30,530,216 common share equivalents 47,140,220 at September 30, 20212022 and 32,556,727 common shares30,119,877 at December 31, 2020.2021. For the three and nine months ended September 30, 2022 and 2021 and 2020respectively these potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share.
Stock Based Compensation
All stock-based payments to employees and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options, are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the relevant service period. Stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached, or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable the measurement date is the date the award is issued. The Company accounts for stock options issued to non-employees based on the estimated fair value of the awards using the Black-Scholes option pricing model in accordance with ASC 505-50, Equity-Based Payment to Non-employees. Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options vest. The Company believes that the fair value of the stock options is more reliably measurable than the fair value of the services received. Stock options granted to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustments as such options vest and at the end of each reporting period, and the resulting change in value, if any, is recognized in the Company’s statements of operations and comprehensive loss during the period the related services are rendered.
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Research and Development
The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. For the three months and nineNine months ended September 30, 20212022 and 20202021 the Company incurred research and development expenses of $29,722, $109,086 and $67,263, $216,282 and $109,139, $235,431respectively from continuing operations, respectively. For the three months and nineNine months ended September 30, 20212022 and 20202021 the Company incurred research and development expenses of $-0-, $-0-$0, $0 and $(400,417), $426,665$0, $0 from discontinued operations, respectively. The Company has entered into various agreements with CROs. The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made to CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.
Recently Issued Accounting Standards
Accounting Standards Implemented Since December 31, 2020
ASC Update 2021-04
Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).
The amendments in this Update affect all entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. The amendments in this Update do not apply to modifications or exchanges of financial instruments that are within the scope of another Topic. That is, accounting for those instruments continues to be subject to the requirements in other Topics. The amendments in this Update do not affect a holder’s accounting for freestanding call options.
ASC Update No. 2020-10
In October 2020, the FASB issued ASC Update No. 2020-10, Codification Improvements. Update No. 2020-10 amends a wide variety of Topics in the Codification in order to improve the consistency of the Codification and the application thereof, while leaving Generally Accepted Accounting Principles unchanged.
ASC Update No. 2020-06
In August 2020, the FASB issued ASC Update No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in Update No. 2020-06 simplify the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity
Other recent accounting pronouncements issued by the FASB and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
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NOTE 7:6: PREPAID EXPENSES
Prepaid expenses consist of the following as of September 30, 20212022 and December 31, 2020:2021 respectively:
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
| ||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Prepaid insurance |
| $ | 96,881 |
| $ | 45,983 |
|
| $ | 65,390 |
| $ | 59,116 |
| ||
Prepaid services |
|
| 44,661 |
|
|
| 209,940 |
|
|
| - |
|
|
| 104,445 |
|
|
| $ | 141,542 |
|
| $ | 255,923 |
|
| $ | 65,390 |
|
| $ | 163,561 |
|
For the three and nine months ended September 30, 20212022 and 2020,2021 the Company recognized amortization of prepaid expense and prepaid insurance of $80,384, $296,542$22,121 and $78,504, $146,583,$105,353 respectively.
For the nine months ended September 30, 2022 and 2021 the Company recognized amortization of prepaid expense and prepaid insurance of $187,887 and $216,158 respectively.
NOTE 8:7: PROMISSORY NOTE
On August 8, 2014 the Company entered into a Promissory Note Agreement with CanChew Biotechnologies, LLC (CCB), a related party (the owners of CCB also own a majority of the outstanding shares of the Company), under which it borrowed $1,000,000 to fund working capital. The original loan was a demand note bearing interest at the rate of 7% per annum, which amount, along with principal, was payable upon demand. The demand note was amended effective January 1, 2015 to reduce the annual interest rate to 3%. All other terms and conditions shall remain in full force and effect. The Company is in discussions to have the demand note modified or exchanged for a longer term, fixed maturity note.
On May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc., a Nevada corporation (the “Company”), entered into an Agreement (the “Separation Agreement”). Pursuant to the Separation Agreement, the Company transferred 100% of its interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set forth above, any and all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in its entirety.
For the three and nine months ended September 30, 2021 and 2020, the Company recognized interest expense of $0, $0 and $0, $0, respectively on this note all was related to continuing operations.
On December 31, 2019, Sapphire Biotech, Inc. had entered into a Debt Exchange Agreement whereas the Company assumed three (3) loans totaling $128,375 of Debt owned by Sapphire Diagnostics, LLC which had an interest rate of 6% per annum. In the same Debt Exchange Agreement, the Company assumed four (4) additional loans made to Sapphire in 2019, which had an interest rate of 6% per annum. All seven (7) loans totaling $310,000, plus the aggregate interest accrued thereon of $14,218 making the face value of the new note $324,218. As of September 30, 20212022 and December 31, 2020,2021 respectively, the principal and accrued interest balances were $358,315$-0- and $343,725,$363,178 respectively. The note was refinanced January 27, 2022. With an effective date of April 1 2022. The Note is convertible into Axim common shares at a strike price of $0.1075 per share. The interest rate is 3% compounded monthly. The note is due January 27, 2032. This note now shows as a long term convertible note payable (see Note 11).
The Company owes $5,000 to the chairman of the board ofOn July 29, 2021, the Company forrecorded a working capital advance$210,000 note payable in conjunction with the acquisition of $5,000 made in Maypatents from Advanced Tear Diagnostics LLC. The note balance as of 2014, allDecember 31, 2021 is $90,000 with accrued interest of $1,515. The note was related to discontinued operations.paid off February 2022 and has a zero balance as of September 30, 2022
NOTE 8: OTHER COMMITMENTS
Under an agreement Mr. Changoer received on March 20, 2018 the Company issued 50,000 restrictive shares of its common stock and recorded $235,000of$235,000 of compensation expenses in the accompanying consolidated financial statements to account for the issuance of the incentive shares. As of September 30, 20212022 and December 31, 2020,2021 respectively, the total outstanding balance was $20,000$0 and $60,000$20,000 respectively for consulting fees to Mr. Changoer included in accounts payable.
On September 25, 2018, the Company amended Independent Director Compensation agreement. Under the agreement in lieu of the share compensation due to independent director of the Company for his annual service ending May 23, Dr. Philip A. Van Damme shall receive cash compensation of $20,000. Started from August 1, 2019 the company has been paying monthly clinical trial fee of $5,000. As of September 30, 20212022 and December 31, 2020,2021 respectively, the total outstanding balance was $-0- and $25,000,$0, respectively included in accounts payable.
Effective January 1, 2019 the company entered into a thirty-months consulting agreement with the chairman of the board which pays a monthly consulting fee of $20,000. The company has also been paying a monthly bonus fee of 15,000; this additional fee is on a month-to-month basis at the discretion of management. As of September 30, 20212022 and December 31, 2020,2021 respectively, the total outstanding balance was $40,000$0 and $225,000$40,000 respectively for consulting fees included in accounts payable.
On May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc., a Nevada corporation (the “Company”), entered into an Agreement (the “Separation Agreement”) by and among the Company, CanChew License Company (“CanCo”), CanChew Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad Foundation, US (collectively, the “Sanammad Parties”), pursuant to which, among other matters as described herein, Drs. Anastassov and Van Damme and Mr. Changoer resigned as members of the Company’s Board of Directors.
Pursuant to the Separation Agreement, the Company transferred and assigned to an entity designated by Dr. Anastassov all of the Company’s cannabis-related intellectual property other than the inventions and discoveries described in that certain cannabis-related patent application filed by the Company’s wholly-owned subsidiary, Sapphire Biotech, Inc. (water-soluble cannabinoid molecules). The Company also transferred 100% of its interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set forth above, any and all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in its entirety.
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In addition, in consideration for the payment by the Company of $65,000, the Company purchased 100% of the issued and outstanding 500,000 shares of Series B Preferred Stock held by the Sanammad Parties. Such shares shall be retired to treasury of the Company. The Sanammad Parties also agreed to forfeit and assign back to treasury, for no consideration, a total of 18,570,356 shares of the Company’s common stock.
In addition, each of Drs. Anastassov and Van Damme and Mr. Changoer have agreed to subject the shares of the Company’s common stock held by each of them to lock-up and leak-out restrictions, as follows: they shall not sell shares for a period of 12 months following the Effective Date and, thereafter, subject to a daily volume limitation of 5%, on an aggregate basis among them.
Further, the Company terminated the Consulting Agreement of Dr. Anastassov and the Employment Agreements for each of Dr. Van Damme and Mr. Changoer. In connection with the termination of Dr. Anastassov’s Consulting Agreement, the Company agreed to pay severance in the amount of $35,000 for March 2020 and $20,000 per month thereafter through July 2021 (the termination date contemplated by the Consulting Agreement). Commencing for the April 2020, the Company may, in its sole discretion, pay the $20,000 severance obligation by the issuance of shares of the Company’s common stock registered pursuant to the Registration Statement on Form S-8 filed with the Commission on May 29, 2015 (“S-8 Shares”). If the gross cash proceeds from the sale of any S-8 Shares issued in lieu of cash severance is less than $20,000, as determined 20 days after issuance of such S-8 Shares, then the Company has agreed to issue additional shares that would serve to “true-up” the value of the shares to the $20,000 monthly severance obligation; provided, however, that if 30 days after the date the severance payment is due the gross proceeds from the sale of S-8 Shares is less than $20,000, the Company must pay the shortfall in cash. In addition, for each month that Dr. Anastassov is entitled to receive severance, he shall receive S-8 Shares in an amount equal to the lesser of (a) 150,000 S-8 Shares, or (b) S-8 Shares valued at $15,000 based upon the closing price of the Company’s common stock as of the due date of the severance payment obligation. In connection with the termination of the Employment Agreements of Dr. Van Damme and Mr. Changoer, Mr. Changoer’s severance payments shall be $20,000 per month for 12 months, commencing April 2020 (paid in arrears) and Dr. Van Damme’s severance payments shall be $5,000 per month for 12 months, similarly commencing April 2020 and paid in arrears. The Company has the right to pay each of Dr. Van Damme’s and Mr. Changoer’s monthly severance payments in S-8 shares in lieu of cash subject to the same terms and restrictions (including true-up terms) as set forth above for Dr. Anastassov. As of September 30, 2021,2022, the accrued severance payment was $40,000$0 to Dr. Anastassov, $20,0000 to Mr. Changoer included in accounts payable.Changoer.
The Company retains the right to prepay the severance obligations to Drs. Anastassov and Mr. Changoer, without penalty.
No claims were alleged by the Company against any party, and no claims were alleged against the Company. However, in connection with the transactions described above, the parties entered into a general mutual release of all claims.
On July 29, 2021, the Company recorded a $210,000 note payable in conjunction with the acquisition of patents from Advanced Tear Diagnostics LLC. The note balance as of September 30, 2021 is $180,000 with accrued interest of $125.
NOTE 9: RELATED PARTY TRANSACTIONS
Related Party
The companyCompany has an employment agreement with Catalina Valencia CEO Saphire Biotechnologies, Inc.atat a rate of $15,000 per month commencing March 17, 2020. The agreement can be terminated with 30 days’ notice by either party.party
The company has a consulting agreement with Glycodots LLC whereby it will provide the services of Dr. Sergei A. Svarovsky at a rate of $15,000 per month commencing March 17, 2020. The agreement can be terminated with 30 days’ notice by either party.
Purchase of Promissory Note and Forbearance Agreement
Effective May 4, 2020, the Company acquired from TL-66, a California limited liability company (“Seller”), a promissory note issued to Seller by Dr. Anastassov (“Maker”) dated December 1, 2017, with a face value of $350,000 and a remaining balance due of approximately $100,000 (the “Note”). The purchase price for the Note was $100,000 payable by the Company issuing Seller One Million (1,000,000) restricted shares of the Company’s Common Stock. Effective May 6, 2020, the Company and Maker entered into a Forbearance Agreement whereby the Company agreed to forbear from making any collection efforts on the Note for a period of 24 months so long as Maker has not breached the Separation Agreement. Following 24 months, if there has been no breach of the Separation Agreement by Maker, repayment of the Note, including all principal and unpaid interest, will be waived in full. As of May, 4, 2020 the carrying value of the note receivable was $102,567, the value of the common stock to be issued was $135,000, resulting in a loss of $32,433 accounted as loss on debt extinguishment related to discontinued operations. The balance of the Note Receivable as of September 30, 2021 and December 31, 2020 is $102,567 for both periods, plus interest accrued thereon of $1,445 and $675, respectively.
NOTE 10: DUE TO FIRST INSURANCE FUNDING
On June 25, 2020, the Company renewed its D&O insurance policy with total premiums, taxes and fees for $93,357. A cash down payment of $18,671 was paid on July 6, 2020. Under the terms of the insurance financing, payments of $8,456,$8,546, which include interest at the rate of 4.6% per annum, are due each month for nine months commencing on July 25, 2020.
On June 25, 2021, the Company renewed its D&O insurance policy with total premiums, taxes and fees for $98,888.$. A cash down payment of $24,273 was paid on July 7, 2021. Under the terms of the insurance financing, payments of $1,797, which include interest at the rate of 4.420% per annum, are due each month for nine months commencing on July 25, 2021.
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On June 25, 2022, the Company renewed its D&O insurance policy with total premiums, taxes and fees for $89,391. A cash down payment of $8,776 was paid on June 23, 2022. Under the terms of the insurance financing, payments of $8,957, which include interest at the rate of 4.920% per annum totaling 1628, are due each month for nine months commencing on July 25, 2022.
The total outstanding due to First Insurance Funding as of September 30, 20212022 and December 31, 20202021 is $65,880$53,698 and $25,369,$32,873, respectively.
NOTE 11: CONVERTIBLE NOTES PAYABLE
The following table summarizes convertible note payable of related party as of September 30, 20212022 and December 31, 2020:2021 respectively:
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
| ||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Convertible note payable, due on November 1, 2026, interest at 3.5% p.a. |
| $ | 4,000,000 |
| $ | 4,000,000 |
|
| $ | 4,000,000 |
| $ | 4,000,000 |
| ||
Accrued interest |
|
| 264,037 |
|
|
| 158,648 |
|
|
| 261,537 |
|
|
| 299,037 |
|
Convertible note payable, net |
| $ | 4,264,037 |
|
| $ | 4,158,648 |
|
| $ | 4,261,537 |
|
| $ | 4,299,037 |
|
The interest on this note is payable bi-annually every May 1 and November 1. On May 1, 2019 the Company paid accrued interest of $60,278.
In 2020 the Company was authorized to apply the accounts receivable of $75,074 due from Kannaway towards its accrued interest.
On May 1, 2020, the Company agreed to modify its existing convertible note with a principal balance of $4 million, 3.5% interest rate convertible note with the current holder of that note. There were two changes to the existing agreement – (a) the conversion price was reduced from the $1.50 conversion price in the original Note to $0.25 cents in the modified Note and (b) the term of the note was extended from the original maturity date of November 1, 2021, to November 1, 2026. The Company’s stock closed trading on the day of the modification at $0.13 per share. The amendment of this convertible Note was also evaluated under ASC Topic 470-50-40, ”Debt Modifications and Extinguishments.” Based on the guidance, the instruments were determined to be substantially different due to the change in the conversion price being substantial, and debt extinguishment accounting was applied. The fair value of the modified convertible note was not different than the carrying value of the original note as such no extinguishment loss was recorded, The Note prior to the amendment of approximately $4 million, and the fair value of the Note and embedded derivatives after the amendment of approximately $4 million. There were no unamortized debt issuance costs and the debt discount associated with the original 2018 Note.
For the three and nine monthmonths ended September 30, 2022 and 2021, and 2020, interest expensesexpense was $35,000 $105,389 and $35,000, $105,389,respectively. For the nine months ended September 30, 2022 and 2021, interest expense was $105,000 and $105,000, respectively.
As of September 30, 20212022 and December 31, 2020,2021, the balance of secured convertible note was $4,264,037$4,261,537 and $4,158,648which$4,299,037 which included $264,037$261,537 and $158,648$299,037 accrued interest, respectively.
The following table summarizes convertible note payable as of September 30, 20212022 and December 31, 2020:2021 respectively:
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
| ||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Convertible note payable, due on October 1, 2029, interest at 3.5% p.a. |
| $ | 484,478 |
| $ | 484,478 |
|
| $ | 484,478 |
| $ | 484,478 |
| ||
Convertible Note payable, due on October 1, 2022, interest at 6% p.a. |
| - |
| 1,110,000 |
| |||||||||||
Convertible note payable, due on October 1, 2029, interest at 3.5% p.a. |
| 500,000 |
| 1,000,000 |
|
| 500,000 |
| 500,000 |
| ||||||
Convertible note payable, due on February 10, 2032, interest at 3.0% p. a. |
| 1,150,000 |
| - |
| |||||||||||
Convertible note payable, due on December 31, 2034, interest at 3% p.a. |
| 190,000 |
| 190,000 |
|
| 190,000 |
| 190,000 |
| ||||||
Convertible note payable, due on July 21, 2032, interest at 3.5% p.a. |
| 609,835 |
| 609,835 |
| |||||||||||
Convertible Note payable due January 27, 2032 interest at 3% p.a. |
| 367,931 |
|
|
| |||||||||||
Accrued interest (The accrued interest and principal are both included in the captions titled “convertible note payable” in the balance sheet) |
|
| 208,089 |
|
|
| 236,148 |
|
|
| 252,820 |
|
|
| 209,685 |
|
Total |
| 1,992,402 |
| 2,520,461 |
|
| 2,945,229 |
| 2,494,163 |
| ||||||
Less: unamortized debt discount/finance premium costs |
|
| (623,095 | ) |
|
| (843,673 | ) |
|
| (1,629,876 | ) |
|
| (605,639 | ) |
Convertible note payable, net |
| $ | 1,369,307 |
| $ | 1,676,788 |
|
| $ | 1,315,353 |
| $ | 1,888,524 |
| ||
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On September 16, 2016, we entered into a convertible note purchase agreement (the “Convertible Note Purchase Agreement” or “Agreement”) with a third-party investor. Under the terms of the Convertible Note Purchase Agreement the investor may acquire up to $5,000,000 of convertible notes from the Company. With various closings, under terms acceptable to the Company and the investor as of the time of each closing. Pursuant to the Agreement, on September 16, 2016 the investor provided the Company with $850,000 secured convertible note financing pursuant to four (4) Secured Convertible Promissory Notes (the “Notes”). Each of the Notes matures on October 1, 2029, and pay 3.5% compounded interest paid bi-annually. The Note are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company common stock at a conversion price equal to $0.2201 per share.
As of September 30, 20212022 and December 31, 2020,2021 respectively, the balance of secured convertible notes was $569,278$586,611 and $556,420,$573,612, which included $84,800$102,133 and $71,942$89,134 accrued interest, respectively.
On October 20, 2016 a third-party investor provided the Company with $1,000,000 secured convertible note financing pursuant to three (3) Secured Convertible Promissory Notes (the “Notes”). Each of the Notes mature on October 1, 2029 and pay 3.5% compounded interest paid bi-annually. The Notes are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company’s common stock at a fixed conversion price equal of $0.2201 per share. The investor paid cash of $500,000 for one of the Notes and issued to the Company two (2) secured promissory notes of $250,000 each for two (2) Convertible Notes of $250,000 each. The two secured promissory notes issued by the investor (totaling $500,000) as payment for two (2) secured Notes totaling $500,000 mature on February 1, 2017 ($250,000) and March 1, 2017 ($250,000), bear interest at the rate of 1% per annum, are full recourse and additionally secured by 10,486,303 shares of Medical Marijuana, Inc. (Pink Sheets symbol: MJNA) and were valued at $858,828 based upon the closing price of MJNA on October 20, 2016. A debt discount was recorded related to beneficial conversion feature inn connection with this convertible note of $499,318, related to the beneficial conversion feature of the note to be amortized over the life of the note or until the note is converted or repaid. As of September 30, 20212022 and December 31, 2020,2021 respectively, this note has not been converted and the balance of secured convertible notes was $587,744$605,630 and $1,148,944,$592,215, which included $87,744$105,630 and $148,944$92,215 accrued interest, respectively.
On June 7, 2021 the Company converted $500,000 of the Convertible Note with TL-66-LLC along with the accrued interest of $82,707 into 2,647,464 shares of the Company’s common stock at $0.2201 per share which resulted in a loss on extinguishment of debt of $1,535,264.
On December 31, 2019, Sapphire Biotech, Inc. entered into a Convertible Note Purchase Agreement whereas the Company issued a convertible note with a face value of $190,000 with a compounding interest rate of 3% per annum, the interest shall be payable annually beginning on December 31, 2020 until the maturity date of December 31, 2034, at which time all principal and interest accrued thereon shall be due and payable. The Convertible Note is secured by substantially all the Company’s tangible and intangible assets. In addition, the Convertible Note includes various non-financial covenants including the Company may not enter into any agreement, arrangement or understanding of any kind that would result in a transaction, or series of transactions, that would result in the sale of 50% or more of the Company’s capital stock without the prior approval of the holder.
Upon issuance, the Convertible Note was convertible into shares of the Company’s common stock at $1.90 per share. At December 31, 2019, the Company determined that the Convertible Note contained a beneficial conversion feature for which a full discount was recorded on the Convertible Note. The fair market value of the Company’s common stock was based upon the estimated per share acquisition price per the pending acquisition of the Company. The discount of $190,000 will be amortized using the effective interest method and will be fully amortized by December 31, 2034.
On March 17, 2020 the Company entered into a Share Exchange Agreement (“Agreement”) with Sapphire Biotech, Inc., a Delaware corporation (“Sapphire”) and all of the Sapphire stockholders (collectively, the “Sapphire Stockholders”). Following the closing of the transaction, Sapphire will become a wholly owned subsidiary of AXIM. Under the terms of the Agreement, the Company intends to assume the convertible notes in the principal amounts of $190,000. After the acquisition, the Convertible Note was able to convert 6,000,000 shares of Axim’s common stock. Upon assumption of the note, the Company recorded a beneficial conversion feature of $190,000. As of September 30, 20212022 and December 31, 2020,2021, the balance of secured convertible note was $199,991$205,690 and $195,716,$201,416, which included $9,991$15,690 and $5,716$11,416 accrued interest, respectively.
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On July 21, 2020 the Company entered into convertible note purchase agreement with Cross & Company, the Company owed to Cross & Company $609,835 of aggregated payments and desired to satisfy the amount due in full by issuing to Cross & Company a convertible promissory note. The convertible note matures on July 21, 2032 and incurred 3.5% compounded interest paid annually. The Note are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company common stock at a conversion price equal to $0.37. Notwithstanding the foregoing, holder shall not be permitted to convert the note, or portion thereof, if such conversion would result in beneficial ownership by holder and its affiliates of more than 4.9% of the debtor’s outstanding common stock as of the date of conversion. The Company determined that that the conversion of the amounts due into a long-term convertible note resulted in a debt extinguishment due to the change in the fair values exceeding 10%. Accordingly, the loss of $823,497 was included in the statement of operations as loss on debt extinguishment. As of September 30, 20212022 and December 31, 2020,2021, the balance of secured convertible note was $635,389$0 and $619,381,$0, which included $25,554$0 and $9,546$0 accrued interest, respectively.
The note was converted to 1,725,439 shares which included accrued interest at time of conversion of $28,578 common stock on November 24, 2021 at which time the company recorded loss on conversion expense of $51,763.
On September 27, 2021 the Company entered into convertible note purchase agreement with GS Capital LLC in the amount of $1,110,000. The note had an original issue discount of $100,000, bridge financing fees of $100,000 and legal costs of $30.000, which were amortized to financing cost on the issuance of note. It bears interest at a rate of 6% and matures September 29, 2022. The note is convertible to free trading shares six months after issuance at a conversion price of $0.25 per share subject to a 10 day look back period at time of conversion if the stock is trading at less than $0.25 for more than 5 days then the conversion price will be a 30 percent discount to the average of the two lowest closing prices within the 10 day look back period. On February 10, 2022, the Company paid in full the remaining balance due on that certain convertible note issued to GS Capital Partners, LLC, face value $1,110,000 (as amended, the “GS Note”). In connection with the repayment, the Company was required to pay accrued interest in the amount of $21,863, by issuing 173,390 restricted shares of the Company’s common stock pursuant to the formula set forth in the GS Note. The shares were issued February 22, 2022 and valued at the closing price on that date at $0.19 per shares which was valued at $32,944 for the accrued interest of $21,863 and the balance $11,081 was recorded as loss on conversion under loss on extinguishment of debt in statement of operation. Also the Company paid $133,200 as penalty for early repayment recorded under interest expenses in statement of operation. As of September 30, 2022 and December 31, 2021, the balance of this convertible note was $0 and $1,126,919, which included $0 and $16,919 accrued interest; respectively.
On December 31, 2019, Sapphire Biotech, Inc. had entered into a Debt Exchange Agreement whereas the Company assumed three (3) loans totaling $128,375 of Debt owned by Sapphire Diagnostics, LLC which had an interest rate of 6% per annum. In the same Debt Exchange Agreement, the Company assumed four (4) additional loans made to Sapphire in 2019, which had an interest rate of 6% per annum. All seven (7) loans totaling $310,000, plus the aggregate interest accrued thereon of $14,218 making the face value of the new note $324,218. As of September 30, 2022 and December 31, 2021 respectively, the principal and accrued interest balances were $375,427 and $0 respectively. The note was refinanced January 27, 2022. With an effective date of April 1 2022. The Note is convertible into Axim common shares at a strike price of $0.1075 per share. The interest rate is 3% compounded monthly. The note is due January 27, 2032. As a result of the beneficial conversion the company recognized a loss of $154,292 during the period ended September 30, 2022.
Debt Obligations
Effective February 10, 2022, The Company issued the following debt obligations in exchange for cash. A portion of the funds received by the Company were used to pay off the GS Capital Partners, LLC note, as discussed below.
Short Term Promissory Notes
Effective February 10, 2022, the Company issued two short term notes, each having a face amount of $250,000, in exchange for a total of $500,000 in cash (the “Short Term Promissory Notes”). The Short Term Promissory Notes bear interest at the rate of 1.5% per annum and were due and payable on or before March 10, 2022, unless demand for payment is made prior to such date. Both the notes were paid in full in February 2022.
Convertible Notes
Effective February 10, 2022, the Company issued seven convertible notes to a series of investors having an aggregate face value of $1,325,000 in exchange for $1,325,000 in cash (the “Convertible Notes”). One of the Convertible Notes, face value $25,000, was purchased by a director of the Company.
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Each of the Convertible Notes is (i) unsecured; (ii) bears interest at a rate of 3% per annum; (iii) matures on February 10, 2032; and (iv) is convertible, in whole or in part, at any time by the holder, into restricted shares of the Company’s common stock at a conversion price equal to the lesser of $0.08125 or 70% of the average of the two lowest closing prices of the Company’s common stock in the ten trading days preceding any particular conversion, provided, the holder is prohibited from converting the convertible note, or portion thereof, if such conversion would result in beneficial ownership by the holder and its affiliates of more than 4.999% of Company’s issued and outstanding common stock as of the date of the conversion. A debt discount was recorded related to beneficial conversion feature in connection with this convertible note of $1,325,000, which to be amortized over the life of the note or until the note is converted or repaid. During the third quarter 2022, $175,000 of the note and accrued interest of $2,840 was retired and converted to 5,665,636 common shares valued at $349,535 and a loss of $171,695 was recorded on conversion. Further the unamortized portion of debt discount of $167,571 and derivative liabilities balance of $227,459 on these notes were also transferred to loss on settlement account as gain and the company recorded a total net loss on conversion of debt of $111,807 on this transaction as loss on extinguishment of debt under statement of operation.
During the three and nine months ended September 30, 20212022 and 2020,2021 the Company amortized the debt discount on all the notes of $17,546,$46,441 and $17,456, respectively. During the nine months ended September 30, 2022 and 2021 the Company amortized the debt discount on all the notes of $132,521 and $220,578 and $22,313, $41,432, respectively, to other expenses.respectively. As of September 30, 20212022 and December 31, 2020,2021, unamortized debt discount was $623,095$1,629,876 and $843,673,$605,639, respectively.
NOTE 12: DERIVATIVE LIABILITIES
Upon the issuance of certain convertible note payable having a variable conversion rate, the Company determined that the features associated with the embedded conversion option embedded in the debt, should be accounted for at fair value, as a derivative liability.
On February 10, 2022 i.e. on the date of issuance of derivative instrument, the Company estimated the fair value of the embedded derivatives of $2,641,846 using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 163.09%, (3) risk-free interest rate of 2.03%, and (4) expected life of 10 years. The value of notes $1,325,000 was debited to beneficial conversion feature and the balance $1,316,846 was recorded as non-cash interest expenses under interest expenses in statement of operation.
On September 30, 2022, the Company estimated the fair value of the embedded derivatives of $1,995,618 using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 162.72%, (3) risk-free interest rate of 2.32%, and (4) expected life of 9.86 years. The change of $418,769 was recorded as gain on change in fair value of derivative liabilities for the nine months ended September 30, 2022.
The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the nine months ended September 30, 2022:
Balance, December 31, 2021 Issuance of convertible note payable Derivative liabilities on settlement of note transferred to gain on settlement Mark to market Balance, September 30, 2022 $ - 2,641,846 (227,459 ) (418,769 ) $ 1,995,618
NOTE 13: STOCK INCENTIVE PLAN
On May 29, 2015, the Company adopted its 2015 Stock Incentive Plan. Under the Plan the Company may issue up to 10,000,000 S-8 shares to officers, employees, directors or consultants for services rendered to the Company or its affiliates or to incentivize such parties to continue to render services. S-8 shares are registered immediately upon the filing of the Plan and are unrestricted shares that are free-trading upon issuance. On May 20, 2021 the board consent increased the issue up to 20,000,000 shares. As of September 30, 20212022 and December 31, 20202021 respectively, there were 8,739,2859,635,350 and 9,806,000 shares available for issuance under the Plan.
On May 13, 2020, Alim Seit-Nebi the Chief Technology Officer and Co-Founder of Sapphire Biotechnology was granted the options to purchase 1 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options will vest six months from the date of grant, one third of the options will vest one year from the date of grant, and the remaining one third of the options will vest two years from the date of grant.
On May 13, 2020, Dr. Douglas Lake the Chief Clinical Officer and Co-Founder of Sapphire Biotechnology was granted the options to purchase 2 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options will vest six months from the date of grant, one third of the options will vest one year from the date of grant, and the remaining one third of the options will vest two years from the date of grant.
On May 13, 2020, Timothy R, Scott the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options vested immediately, one third of the options will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.
On May 13, 2020, Robert Cunningham the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options vested immediately, one third of the options will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.
On May 13, 2020, Maurico Bellora the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the purchase price of $0.126 per share. One third of the options vested immediately, one third of the options will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.
On September 10, 2020, Noel C. Gillespie the Senior Patent Attorney of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the purchase price of $0.61 per share. One third of the options vested immediately, one third of the options will vest one year from the date of grant, and the remaining one third of the options will vest two years from the date of grant.
On August 2, 2021, Bijan Pedram the Senior Scientific of Sapphire Biotechnology was granted the options to purchase 0.1 million shares of Axim common stock under the plan at the purchase price of $0.67 per share. 25% of the Option shares will be vested upon the one anniversary of the vesting commencement day and the balance of the option shares will be vested of thirty-six (36) successive equal monthly in the first anniversary of the vesting commencement day.
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On August 17, 2021, JeftJeff Busby the Senior Vice president of Sales of Axim Biotechnology was granted the options to purchase 1 million of shares of Axim common stock under the plan at the purchase price of $0.60 per share. 25% of the Option shares will be vested upon the one anniversary of the vesting commencement day, 25% of the Option shares will be vested upon the two anniversaries of the vesting commencement day, 25% of the Option shares will be vested upon the three anniversary of the vesting commencement day and 25% of the Option shares will be vested upon the four anniversaries of the vesting commencement day.
On September 1, 2021, Laura M. Periman Medical advisory board member of Axim Biotechnology was granted the options to purchase 0.1 million of shares of Axim common stock under the plan at the purchase price of $0.64 per share. 50% of the Option shares will be vested upon the one anniversary of the vesting commencement day and 50% of the Option shares will be vested upon the two anniversaries of the vesting commencement day.
On September 4, 2021, Kelly K. Nichols Medical advisory Board member of Axim Biotechnology was granted the options to purchase 0.1 million of shares of Axim common stock under the plan at the purchase price of $0.62 per share. 50% of the Option shares will be vested upon the one anniversary of the vesting commencement day and 50% of the Option shares will be vested upon the two anniversaries of the vesting commencement day.
On September 8, 2021, Joseph Tauber the Ophthalmic Chief Medical Officer (CMO) of Axim Biotechnology was granted the options to purchase 1 million of shares of Axim common stock under the plan at the purchase price of $0.622 per share. 25% of the Option shares will be vested upon the one anniversary of the vesting commencement day, 25% of the Option shares will be vested upon the two anniversaries of the vesting commencement day, 25% of the Option shares will be vested upon the three anniversary of the vesting commencement day and 25% of the Option shares will be vested upon the four anniversaries of the vesting commencement day.
On August 22, 2022, 13,500,000 options were issued with a strike price of $0.052; 5,750,000 vesting immediately and the balance vesting between six months and a year from issuance.
For the three and nine months ended September 30, 20212022 and 20202021 the Company recorded compensation expense of $517,180 and $761,810, respectively.
For the nine months ended September 30, 2022 and 2021 the Company recorded compensation expense of $888,313 and $953,076, and $414,839, $235,000, respectively.respectively
NOTE 13:14: STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock, with a par value of $0.0001 per share. Of the 5,000,000 authorized preferred shares, 4,000,000 are undesignated “blank check” preferred stock. The Company may issue such preferred shares and designate the rights, privileges and preferences of such shares at the time of designation and issuance. As of September 30, 2021,2022, and December 31, 20202021 there are -0- and -0- shares of undesignated preferred shares issued and outstanding, respectively.
There are zero shares issued and outstanding of Series A and Series B Preferred stock as of September 30, 2021.2022.
Series C Convertible Preferred Stock
On August 17, 2016 the Company designated up to 500,000 shares of a new Series C Convertible Preferred Stock (Series C Preferred Stock). The holders of the Series C Preferred are entitled to elect four members to the Company’s board of directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. Each share of Series C Convertible Preferred is convertible into one share of the Company’s common stock. The Series C Convertible Preferred designation contains a number of protective and restrictive covenants that restrict the Company from taking a number of actions without the prior approval of the holders of the Series C Preferred or the unanimous vote of all four Series C Directors. If at any time there are four Series C Directors, one such director must be independent as that term is defined in the Series C designation. Any challenge to the independence of a Series C Director is a right conferred only upon the holders of the Series B Convertible Preferred Stock and may only be made by the holders of the Series B Convertible Preferred Stock.
On August 18, 2016 the Company issued all 500,000 shares of its newly designated Series C Preferred Stock to MJNA Investment Holdings, LLC in exchange for cash of $65,000. As the holders of the Series C Preferred Stock, MJNA Investment Holdings, LLC has designated Dr. Timothy R. Scott, John W. Huemoeller II, Robert Cunningham and Blake Schroeder as their four Series C Directors.
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On February 20, 2019, MJNA Investment Holdings LLC (“Seller”) sold its 500,000 shares of AXIM Biotechnologies, Inc.’s, a Nevada corporation (the “Company”) Series C Preferred Stock to Juniper & Ivy Corporation, a Nevada corporation (“Purchaser”) for a purchase price of $500,000 (the “Purchase Price”) pursuant to a Preferred Stock Purchase Agreement (the “Purchase Agreement”). Payment of the Purchase Price was made as follows (i) a $65,000 payment made by check payable to Seller, which Purchaser borrowed from an unrelated third-party and which has no recourse against the Series C Preferred Stock or assets of Purchaser (the “Loan”), and (ii) the issuance by Purchaser to Seller of a promissory note, face value, $435,000, which has no recourse against the Series C Preferred Stock or assets of Purchaser (the “Note”). The Company’s Chief Executive Officer John W. Huemoeller II is the President of Purchaser. Mr. Huemoeller provided a personal guaranty for the Loan and the Note.
The holders of the Series C Preferred Stock are entitled to elect four members to the Company’s Board of Directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. As a result of this transaction, a change in control has occurred.
Effective April 2, 2019, Blake N. Schroeder resigned as a member of the Company’s Board of Directors. Mr. Schroeder’s resignation was not because of any disagreements with the Company on matters relating to its operations, policies and practices.
On April 3, 2019 pursuant to the Company’s Amended and Restated Bylaws, the holder of the Company’s Series C Preferred Stock appointed Mauricio Javier Gatto-Bellora to fill the director seat vacated by the resignation of Mr. Schroeder.
On July 21, 2020 pursuant to the Company’s Amended and Restated Bylaws, the holder of the Company’s Series C Preferred Stock appointed Peter O’Rourke to fill one of the vacant positions on board created by the resignations of Dr. George Anastassov, Lekhram Changoer, and Dr. Philip Van Damme.
Common Stock and Common Stock Warrants
Common Stock
The Company has authorized 300,000,000 shares of common stock, with a par value of $0.0001 per share. As of September 30, 2021,2022 and December 31, 2020,2021, the Company had 135,885,104185,441,917 and 125,327,579138,099,981 shares of common stock issued and outstanding, respectively.
2022 Transactions:
During January 2022, the Company issued 519,247 shares for cash of gross proceeds of $75,000 pursuant to various stock purchase agreements. The cash was received in the fourth quarter 2021 and first quarter 2022. The Company also issued warrants to purchase an aggregate of 519,247 shares of common stock at an average exercise price of $0.315 per share. The warrants are exercisable within a 3-year period from issuance.
In January 2022, the Company issued 7,000,000 shares of its common stock pursuant to its asset acquisition of Advanced Tear Diagnostics which was under common stock to be issued.
In January 2022, the Company issued 302,115 of its shares of common stock, valued at $100,000, in exchange for services which have been recorded as a prepaid expense.
On January 11, 2022, the company issued 282,759 shares of common stock upon the exercise of 500,000 options at an exercise price of $0.126 a share. This exercise was performed on a cashless basis.
In March 2022, the Company issued 624,290 of its shares of common stock pursuant to a stock purchase agreement for cash gross proceeds of $55,000.
In March 2022, the Company issued 173,390 shares of its common stock, valued at $32,944, in settlement of interest due to prepayment of a note and the Company recognized a loss on conversion of $11,081 under loss on extinguishment of debt in statement of operation.
In March 2022, the company issued 500,000 of its shares of common stock, valued at $79,500 in exchange for services related to the arrangement of meetings and conferences.
The Company also issued 10,750,000 shares of its common stock January thru June of 2022 for cash of $881,255 pursuant to an equity purchase agreement, dated on May 14, 2021, which shares were registered pursuant to that S-1 Registration Statement filed by the Company with the SEC on May 14, 2021, and declared effective by the SEC on June 22, 2021.
The Company issued 891,610 of its shares to settle the amounts owed to George Anastassov and Lekhram Changoer. The debt totaled $60,000 and the company recognized a loss on settlement of $4,196
The Company issued 3,544,247 of its shares in settlement of claims made by individuals pursuant to various stock Purchase agreements. The company recognized a current period loss of $226,171 as a result of this settlement.
During the third quarter 2022 the company issued 2,227,638 shares pursuant to its S-1 for cash of $138,991 and a subscription receivable of $60,064.
On July 14, 2022, the Company entered into the Equity Purchase Agreement with Cross & Company, pursuant to which we have the right to “put,” or sell, up to $30,000,000 worth of shares of our common stock to Cross. As provided in the Equity Purchase Agreement, we may require Cross to purchase shares of our common stock from time to time by delivering a put notice to Cross specifying the total number of shares to be purchased (such number of shares multiplied by the purchase price described below, the “Investment Amount”); provided there must be a minimum of ten trading days between delivery of each put notice. We may determine the Investment Amount, provided that such amount may not be more than 300% of the average daily trading volume in dollar amount for our common stock during the five trading days preceding the date on which we deliver the applicable put notice, unless waived by Cross in its sole discretion. Additionally, such amount may not be lower than $10,000 or higher than $250,000. Cross will have no obligation to purchase shares under the Equity Line to the extent that such purchase would cause Cross to own more than 4.99% of our issued and outstanding shares of common stock.
The Company also issued 1,000,000 shares of its common stock January thru September of 2022 for cash of $60,064 pursuant to an equity purchase agreement, dated on July 14, 2022, which shares were registered pursuant to that S-1 Registration Statement filed by the Company with the SEC on July 25, 2022, and declared effective by the SEC on August 4, 2022. The subscription amount of $60,064 was received subsequent to September 30 2022. This was shown as subscription receivable on the equity statement.
Also during the third quarter of 2022 the company issued 13,861,004 shares pursuant to various stock purchase agreements for cash of $350,000.
The Company converted debt of $177,840 including accrued interest of $2,840 in exchange for 5,665,636 shares of its stock valued at $349,535 and as a result recognized a loss on extinguishment of $111,807, including cancellation of balance debt discount of $167,571 and a gain due to cancellation of derivative liabilities as of date of settlement of $227,459.
| Table of Contents |
2021 Transactions:
Common Stock
On December 13, 2021 the company entered into an agreement where it will issue $100,000 of stock in exchange for services to be rendered under a consulting agreement, currently shown as stock to be issued.
On November 7, 2021 the company issued 1,725,439 of its shares in settlement of a debt of 638,412 including accrued interest of $28,578.
During the period between May 14, 2021 and December 31, 2021 the Company issued total 500,000 shares valued $129,274 pursuant to the Company’s Registration Statement on Form S-1. The Company received $129,274 in cash.
On October 12, 2021 the Company issued 118,000 shares to GS capital valued at $57,466 pursuant to services rendered in obtaining financing.
On October 18, 2021 the company issued 175,000 shares of its common stock valued at $52,500 pursuant to a stock purchase agreement.
During the year ended December 31, 2021, the company issued 196,438 shares of common stock upon the exercise of 300,000 options at an exercise price of $0.126 a share. This exercise was performed on a cashless basis.
On July 29, 2021 the Company issued 122,000 restricted shares of its common stock to third party valued at $50,000 pursuant to the stock purchase agreement. The cash was received in 2021.
During August and September 2021 the Company issued 1,060,715 commons shares and warrants to purchase 1,060,715 shares of common stock at an exercise price of $0.60 for gross cash proceeds of $297,000 pursuant to various Warrant Stock purchase agreements. The cash was received in the third quarter ending 2021. Warrants are exercisable within a 3 year3-year period from issuance.
During July and September 2021 the company issued 1,415,554 restricted shares of its common stock valued at $1,111,900 to third parties for certain services, recorded as consulting fees.
In September 2021 the company issued 262,400 restricted shares of its common stock valued at $129,724 pursuant to S-1 Agreement to third party for cash, recorded as subscription receivable.
Pursuant to its purchase of Advanced Tear Diagnostics, LLC the company has recorded 7,000,000 shares of its common stock to be issued valued at $4,270,000.
Pursuant to a Stock purchase agreement the company has recorded 175,000 of its common shares to be issued valued at $52,500.
On May 14, 2021, The Company entered into the Equity Purchase Agreement with Cross, pursuant to which we have the right to “put,” or sell, up to $10,000,000 worth of shares of our common stock to Cross. As provided in the Equity Purchase Agreement, we may require Cross to purchase shares of our common stock from time to time by delivering a put notice to Cross specifying the total number of shares to be purchased (such number of shares multiplied by the purchase price described below, the “Investment Amount”); provided there must be a minimum of ten trading days between delivery of each put notice. We may determine the Investment Amount, provided that such amount may not be more than 500% of the average daily trading volume in dollar amount for our common stock during the five trading days preceding the date on which we deliver the applicable put notice, unless waived by Cross in its sole discretion. Additionally, such amount may not be lower than $10,000 or higher than $1,000,000. Cross will have no obligation to purchase shares under the Equity Line to the extent that such purchase would cause Cross to own more than 4.99% of our issued and outstanding shares of common stock.
In June 2021 the company issued 500,000 restricted shares of its common stock valued at $332,500 pursuant to S-1 Agreement to third party recorded as subscription receivable. Actual proceeds were $228,812. The difference of $103,688 was adjusted to additional paid in capital and was calculated in accordance with the S-1 agreement.
During April, May and June 2021 the company issued 2,647,464 restricted shares of its common stock valued at $2,117,971 pursuant to conversion of convertible note and accrued interest of $582,707(Note$582,707 (Note 12) with a loss on extinguishment of debt $1,535,264.
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| Table of Contents |
During April, May and June 2021 the Company issued 1,234,113 shares for cash of gross proceed of $402,500 pursuant to various Warrant Stock purchase agreements. The cash was received in the second quarter ending 2021. Out of these 519,828 shares of common stock valued at $152,500 was adjusted with common stock to be issued of prior period. The company also issued warrants to purchase 175,000 shares of common stock at an exercise price of $0.75 and 714,285 shares of common stock at an exercise price of $0.80. Warrants are exercisable within a 3 year period from issuance.
During April, May and June 2021 the company issued 1,114,351 restricted shares of its common stock valued at $792,389 to third parties for certain services, recorded as consulting fees.
During March 2021 the Company issued 1,712,500 shares for cash of gross $434,000 pursuant to various Stock purchase agreements. The cash was received in the first quarter ending 2021. The company also issued warrants to purchase 900,000 shares of common stock at an exercise price of $0.75. Warrants are exercisable within a 3 year period from issuance.
Company paid finders fees of $20,000 in cash during this period for capital raise and will also issue shares equaling $16,000 in market value, which was issued during the three monthsyear ended September 30,December 31, 2021.
On March 18, 2021 the company issued 488,428 restricted shares of its common stock valued at $291,974 to third parties for certain services, recorded as consulting fees. Out of these 108,965 shares of common stock valued at $66,974 was adjusted with common stock to be issued of prior year.
2020 Transactions:
During the period between January 1, 2020 and December 31, 2020 the Company issued total 17,292,751 shares valued $3,309,130 pursuant to the Company’s Registration Statement on Form S-3. The Company received $3,309,130 in cash.
On January 13, 2020 the Company issued 250,000 restricted shares of its common stock to third party valued at $50,000, which were carried on the books as stock to be issued.
On January 23, 2020 and February 26, 2020 the Company issued 600,000, and 62,839 restricted shares of its common stock to third party valued at $262,500, and $25,000 pursuant to the stock purchase agreement for certain services, recorded as advertising and promotion expense and License, permits & Patents, respectively.
On March 17, 2020 the company acquired 100% of the issued and outstanding shares of Sapphire by means of a share exchange with the Sapphire Stockholders in exchange for 54,000,000 restricted shares of its common stock at valued $7,506,000.
On April 21, 2020 the Company issued 1,176,470 restricted shares of its common stock to third party valued at $100,000 pursuant to the stock purchase agreement. The cash was received in 2020.
On May 6, 2020, the Company entered into an agreement with Sanammad Foundation, the Sanammad Parties agreed to forfeit and assign back to treasury, for no consideration, a total of 18,570,356 shares of the Company’s common stock, for which the fair value was $2,562,709, however for accounting purpose this transaction recording at par value adjustment to additional paid in capital. This transaction is related to the divesture of the previous operations to Sanammad.
On May 22, 2020 the Company issued 190,810 and 286,215 S-8 shares valued at $60,000 and $90,000 pursuant to the Company’s Registration Statement on Form S-8 for severance fees.
On June 10, 2020 and June 24, 2020 the Company issued 2,173,913 and 625,000 restricted shares of its common stock to third party valued at $500,000 and $100,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.
On July 1, 2020 the Company issued 185,185 and 370,370 restricted shares of its common stock to third party valued at $25,000 and $50,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.
On July 2, 2020 and July 9, 2020 the Company issued 714,285 and 1,785,714 restricted shares of its common stock to third party valued at $100,000 and $250,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.
On July 10, 2020 the Company issued 5,141,377 restricted shares of its common stock in exchange for the conversion of $51,414 of a convertible note payable, which included $6,414 in interest.
On July 10, 2020 the Company issued 142,857 and 357,153 restricted shares of its common stock to third party valued at $20,000 and $50,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.
On July 10, 2020 the Company issued 250,000 and 107,143 restricted shares of its common stock to third party valued at $35,000 and $15,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.
On July 14, 2020 the Company issued 200,000 restricted shares of its common stock to third party valued at $23,630 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.
On July 21, 2020 the Company entered into convertible note purchase agreement with Cross & Company, the Company owed to Cross & Company $609,835 of aggregated payments due to subscription price adjustment and desired to satisfy the amount due in full by issuing to Cross & Company a convertible promissory note (see note 10).
On July 22, 2020 the Company issued 65,359 and 130,719 restricted shares of its common stock to third party valued at $20,000 and $40,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.
On July 22, 2020 the Company issued 163,398 and 326,797 restricted shares of its common stock to third party valued at $50,000 and $100,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.
On July 22, 2020 the Company issued 816,993 and 65,359 restricted shares of its common stock to third party valued at $250,000 and $20,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.
On July 24, 2020 359,524 shares for the purchase of prepaid marketing expenses valued at $302,000
On August 4, 2020 the Company issued 141,243 restricted shares of its common stock to third party valued at $50,000 pursuant to the stock purchase agreement. The cash was received in 2020.
On August 6, 2020 the Company issued 148,166 and 166,686 S-8 shares valued at $120,000 and $135,000 pursuant to the Company’s Registration Statement on Form S-8 for severance fees.
On August 12, 2020 the Company issued 414,419 restricted shares of its common stock to third party valued at $76,690 pursuant to the stock purchase agreement for certain services, recorded as commission fees.
On December 7, 2020 the Company issued 130,609 S-8 shares of its common stock to third party value at $75,000 pursuant to the Company’s Registration Statement on Form S-8 for severance fees.
NOTE 14:15: STOCK OPTIONS AND WARRANTS
Options to purchase common stock are granted at the discretion of the Board of Directors, a committee thereof or, subject to defined limitations, an executive officer of the Company to whom such authority has been delegated. Options granted to date generally have a contractual life of ten years.
The stock option activity for ninethree months ended September 30, 20212022 and the year ended December 31, 20202021 respectively is as follows:
|
| Options Outstanding |
|
| Weighted Average Exercise Price |
|
| Options Outstanding |
|
| Weighted Average Exercise Price |
| ||||
Outstanding at December 31, 2019 |
| 2,000,000 |
| $ | 0.75 |
| ||||||||||
Granted |
| 8,300,000 |
| 0.27 |
| |||||||||||
Exercised |
| - |
| - |
| |||||||||||
Expired or canceled |
| - |
| - |
| |||||||||||
Outstanding at December 31, 2020 |
| 10,300,000 |
| 0.36 |
|
| 10,300,000 |
| $ | 0.36 |
| |||||
Granted |
| 2,960,715 |
| 0.60 |
|
| 2,960,715 |
| 0.60 |
| ||||||
Exercised |
| - |
| - |
|
| (300,000 | ) |
| 0.35 |
| |||||
Expired or canceled |
| (2,000,000 | ) |
| 0.75 |
|
| (2,000,000 | ) |
| 0.75 |
| ||||
Outstanding at September 30, 2021 |
| 11,260,715 |
| $ | 0.36 |
| ||||||||||
Outstanding at December 31, 2021 |
| 10,960,715 |
| $ | 0.37 |
| ||||||||||
Granted |
| 13,500,000 |
| 0.052 |
| |||||||||||
Exercised |
| (500,000 | ) |
| 0.37 |
| ||||||||||
Balance September 30, 2022 |
| 23,960,715 |
| $ | 0.19 |
| ||||||||||
The following table summarizes the changes in options outstanding, option exercisability and the related prices for the shares of the Company’s common stock issued to employees and consultants under a stock option plan at September 30, 2021 and December 31, 2020:2,000,000options issued to John Huemoeller were canceled to allow for issuances to other employees.2022:
As of September 30, 20212022
|
|
| Options Outstanding |
| Options Exercisable |
|
|
| Options Outstanding |
| Options Exercisable |
| ||||||||||||||||||||||||||||||||
Weighted Average Exercise Price ($) | Weighted Average Exercise Price ($) |
|
| Number Outstanding |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Weighted Average Exercise Price ($) |
|
| Number Exercisable |
|
| Weighted Average Exercise Price ($) |
| Weighted Average Exercise Price ($) |
| Number Outstanding |
| Weighted Average Remaining Contractual Life (Years) |
| Weighted Average Exercise Price ($) |
| Number Exercisable |
| Weighted Average Exercise Price ($) |
| |||||||||||||||
| $ | 0.36 |
|
|
| 11,260,715 |
|
|
| 8.5 |
|
| $ | 0.36 |
|
|
| 8,227,380 |
|
| $ | 0.36 |
| 0.19 |
|
| 23,960,715 |
|
| 9.0 |
| $ | 0.19 |
|
| 17,141,095 |
| $ | 0.19 |
| |||||
As of December 31, 20202021
|
|
| Options Outstanding |
| Options Exercisable |
|
|
| Options Outstanding |
| Options Exercisable |
| ||||||||||||||||||||||||||||||||
Weighted Average Exercise Price ($) | Weighted Average Exercise Price ($) |
|
| Number Outstanding |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Weighted Average Exercise Price ($) |
|
| Number Exercisable |
|
| Weighted Average Exercise Price ($) |
| Weighted Average Exercise Price ($) |
| Number Outstanding |
| Weighted Average Remaining Contractual Life (Years) |
| Weighted Average Exercise Price ($) |
| Number Exercisable |
| Weighted Average Exercise Price ($) |
| |||||||||||||||
| $ | 0.36 |
|
|
| 10,300,000 |
|
|
| 9.8 |
|
| $ | 0.36 |
|
|
| 7,466,662 |
|
| $ | 0.36 |
| 0.36 |
|
| 10,960,715 |
|
| 8.5 |
| $ | 0.37 |
|
| 8,094,046 |
| $ | 0.37 |
| |||||
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| Table of Contents |
The Company determined the value of share-based compensation for options vested using the Black-Scholes fair value option-pricing model with the following weighted average assumptions:
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
| ||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Expected life (years) |
| 10 |
| 10 |
|
| 10 |
| 10 |
| ||||||
Risk-free interest rate (%) |
| 1.74 |
| 0.61 |
|
| 3.03 |
| 1.74 |
| ||||||
Expected volatility (%) |
| 190 |
| 230 |
|
| 229 |
| 190 |
| ||||||
Dividend yield (%) |
| - |
| - |
|
| - |
| - |
| ||||||
Weighted average fair value of shares at grant date |
| $ | 1.74 |
| $ | 0.61 |
|
| $ | 0.19 |
| $ | 1.74 |
| ||
For the three months endedending September 30, 2021 and 2020 stock-based compensation expense related to vested2022 the company issued 13,500,000 options was $761,810 and $0, respectively.with a value of $675,000.
For the three and nine months ended September 30 2022 and 2021 and 2020 stock-basedthe company recorded compensation expense related to vested options wasof $517,180, $888,313 and $761,810, $953,076 and $779,029, respectively.
Warrants
The following table summarizes warrant activity during the year ended December 31, 2021 and the nine months ended September 30, 2021:2022:
|
| Number of Warrants |
| Weighted Average Exercise Price |
|
| Number of Warrants |
|
| Weighted Average Exercise Price |
| |||||
Outstanding at December 31, 2020 |
| - |
| $ | 0 |
|
| - |
| $ | - |
| ||||
Granted |
| 2,850,000 |
| 0.71 |
|
| 3,025,000 |
| 0.71 |
| ||||||
Forfeited/Cancelled |
| - |
| - |
|
| - |
| - |
| ||||||
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
| - |
| |
Outstanding at September 30, 2021 |
|
| 2,805,000 |
|
| $ | 0.71 |
| ||||||||
Outstanding at December 31, 2021 |
| 3,025,000 |
| $ | 0.71 |
| ||||||||||
Granted |
| 519,247 |
| 0.31 |
| |||||||||||
Exercised |
|
|
|
|
| |||||||||||
Outstanding at September 30, 2022 |
|
| 3,544,247 |
|
| 0.65 |
| |||||||||
All outstanding warrants are exercisable at September 30, 20212022 and there was no unrecognized stock-based compensation expense related to warrants. During the nine months ended September 30, 2020 there was no warrant activity.
NOTE 15:16: DISCONTINUED OPERATIONS
During May 2020 the Company decided to discontinue most of its operating activities pursuant to the Separation Agreement entered into by and among the Company, CanChew License Company (“CanCo”), CanChew Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad Foundation, US (collectively, the “Sanammad Parties”). (see Note 1).
Pursuant to the terms of the Purchase Agreement dated as of May 6, 2020, Sanammad Parties agreed to acquire from the Company substantially all of its assets and its wholly-owned subsidiaries and to assume certain liabilities and its wholly-owned subsidiaries. Sanammad Parties agreed to pay a purchase price of $2,609,100 reflected in amount due Canchew were deemed paid in full. The sale, which was completed on May 6, 2020, did not include the Company’s cash and certain other excluded assets and liabilities.
The assets sold and liabilities transferred in the transaction were the sole revenue generating assets of the Company. The results of operations associated with the assets sold have been reclassified into discontinued operations for periods prior to the completion of the transaction.
The following is a summary of assets and liabilities sold, stock retired and gain recognized, in connection with the sale of assets to Sanammad parties:
Other current assets |
| $ | 5,000 |
|
Total current assets |
| $ | 510,017 |
|
Intangible assets, net of amortization |
| $ | 47,375 |
|
Total asset |
| $ | 562,392 |
|
|
|
|
|
|
Notes payable |
| $ | 880,000 |
|
Accounts payable and accrued expenses |
| $ | 210,640 |
|
Due to Canchew |
| $ | 1,526,603 |
|
Stock retired |
| $ | 1,857 |
|
Total liabilities and equity |
| $ | 2,619,100 |
|
|
|
|
|
|
The gain on sale of assets was reported during the period was determined as follows: |
|
|
|
|
Loss on sale of assets |
| $ | 562,392 |
|
Gain on sale of liabilities |
| $ | 2,619,100 |
|
|
|
|
|
|
Net gain from sale of assets and liabilities |
| $ | 2,056,708 |
|
The resulting gain from the sale will be fully offset by existing net operating loss carryforwards available to the Company.
For the nine months ended September 30, 2021 and 2020 the Company recognized interest expense of $-0- and $-0-, respectively.
Additionally, the operating results and cash flows related to assets sold on May 06, 2020 are included in discontinued operations in the consolidated statements of operations and consolidated statements of cash flows for the twelve months ended December 31, 2020 and 2019.
As of September 30, 2022 and December 31, 2021 and 2020,respectively, the Company has nil asset and liabilities of the discontinued operations in the unaudited condensed consolidated balance sheet in accordance with the provision of ASC 205-20.
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Loss from Discontinued Operations
TheIn 2020, the sale of the majority of the assets and liabilities related to the Sanammad parties represents a strategic shift in the Company’s business. For this reason, the results of operations related to the assets and liabilities held for sale for all periods are classified as discontinued operations.
The following is a summary of the results of operations related to the assets and liabilities held for sale (discontinued operations) for the nine months ended September 30, 2022 and 2021 and 2020:respectively:
|
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2022 |
|
| September 30, 2021 |
| ||||
Net sales |
| $ | 0 |
| $ | 5,097 |
|
| $ | - |
| $ | - |
| ||
Total expenses |
| $ | (4,633 | ) |
| $ | (1,935,278 | ) |
| $ | - |
| $ | (4,633 | ) | |
Gain from sale of asset and liability |
| $ | 0 |
| $ | 2,046,708 |
|
| $ | - |
| $ | - |
| ||
Other (loss) income |
| $ | 0 |
| $ | (87,383 | ) |
| $ | - |
| $ | - |
| ||
(Loss) income from discontinued operations |
| $ | (4,633 | ) |
| $ | 29,144 |
|
| $ | - |
| $ | (4,633 | ) | |
The following is a summary of net cash provided by or used in operating activities, investing activities and financing activities for the assets and liabilities held for sale (discontinued operations) for the nine months ended September 30, 2022 and 2021 and 2020:respectively:
|
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2022 |
|
| September 30 2021 |
| ||||
Net (loss) income from discontinued operations |
| $ | (4,633 | ) |
| $ | 29,144 |
|
| $ | - |
|
| $ | (4,633 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||||
Adjustment of non-cash activities |
| 0 |
| (1,551,166 | ) |
| - |
| - |
| ||||||
Decrease in accounts receivable |
| 0 |
| 315,843 |
|
| - |
| - |
| ||||||
Increase in inventory |
| 0 |
| (22,203 | ) |
| - |
| - |
| ||||||
Increase in accounts payable and accrued expenses |
| 0 |
| 393,953 |
|
| - |
| - |
| ||||||
Net cash provided by (used in) operating activities |
| $ | (4,633 | ) |
| $ | (834,429 | ) |
| $ | - |
|
| $ | (4,633 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||||
Net cash provided by (used in) investing activities |
| $ | 0 |
|
| $ | 0 |
|
| $ | - |
|
| $ | - |
|
Net cash provided by (used in) financing activities |
| $ | 0 |
|
| $ | (65,000 | ) |
| $ | - |
|
| $ | - |
|
As of September 30, 2022 and December 31, 2021 respectively, the Company has nil asset and liabilities of the discontinued operations in the unaudited condensed consolidated balance sheet in accordance with the provision of ASC 205-20. |
NOTE 16:17: COMMITMENT AND CONTINGENCIES
On January 2, 2019 the Company entered into the term of Executive’s employment agreement, at a base salary of $10,000 per month with John W. Huemoeller II to serve as its Chief Executive Officer. The Company and Executive acknowledge and agree that Executive’s employment hereunder shall at all times be “at will,” which means that either Executive may resign at any time for any reason or for no reason, and that the Company may terminate Executive’s employment at any time for any reason or for no reason, in either case, subject to the applicable provisions of this Agreement. In further consideration for Executive’s services and subject to the approval of the Board, Executive will be granted an option to purchase 2,000,000 shares of the Company’s common stock (the “Option Shares”). The option will be subject to the terms and conditions applicable to stock options granted under the Company’s 2015 Stock Incentive Plan, as amended from time to time (the “Plan”), and as described in the Plan and the stock option agreement, which Executive will be required to sign. 50% of the Option Shares shall vest on the date of grant and the remaining 50% of the Option Shares shall vest on the 12- month anniversary of the grant date, subject to Executive’s continued employment by the Company. The exercise price per share will be equal to the fair market value per share on the date of grant, as determined by the last closing price of the Company’s common stock the day prior to grant. Beginning in October 2019, the board decided to increase CEO base salary to $35,000 per month.
On April 24, 2017 the company entered into an employment agreement with Robert Malasek, its Chief Financial Officer and Secretary. The agreement does not have a set term and may be terminated at any time by the Company or Mr. Malasek with proper notice. The shares were issued in the 1st quarter 2018. Beginning in October 2019, the board ratified to increase CFO base salary to $3,000per$3,000 per month.
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| Table of Contents |
Industry Sponsored Research Agreement— Sapphire entered into the Industry Sponsored Research Agreement (“SRA”) effective February 7, 2020 to test and confirm the inhibitory activity of SBI-183 (exclusively licensed on January 13, 2020) and SBI-183 analogs, including those synthesized by the Company. The testing will include cell-based in vitro assays, NMR binding studies and testing to determine if SBI-183 enhances the activity of cytotoxic drugs in vitro. Animal studies will also be conducted under the SRA. Specifically, SBI-183 analogs will be evaluated in a mouse model of triple negative breast cancer using human tumor xenografts. The work will be performed over a period of one year with the total cost of the SRA totaling $150,468 paid prior to acquisition. For the nine months ended September 30,year December 31, 2021, the Company recorded research and development expenses of $216,282.$284,869.
On August 5, 2020 Sapphire was awarded a $395,880 phase I Small Business Innovation Research (SBIR) grant by the National Cancer Institute (NCI). The grant will support continued development of novel small molecules that inhibit the enzymatic activity of Quiescin Sulfhydryl Oxidase I (QSOX1) based on a lead compound. QSOX1 is a tumor-derived enzyme that is important for cancer growth, invasion and metastasis. Sapphire is conducting this research with technology it has exclusively licensed from Skysong Innovations, LLC, the intellectual property management company for Arizona State University. Sapphire will subcontract tumor biology work for evaluating analog inhibitors for QSOX1 to Dr. Doug Lake’s laboratory at Arizona State University and Mayo Clinic Arizona. Grant income received for the nine monthsyears ended September 30, 2021 and 2020 was $279,981 and $25,899; respectively.$279,981. There was nil in 2022.
On August 25, 2020 we signed an exclusive licensing, manufacturing and distribution agreement with Empowered Diagnostics LLC to execute the high-volume production of our rapid point-of-care diagnostic test. AXIM and Empowered have completed the technology transfer and Empowered Diagnostics has built out their production facility to be able to manufacture millions of our neutralizing antibody tests for COVID-19 per month. In exchange for this license Empowered will pay Axim a royalty on net sales on all licensed products sold by Empowered covered by this license which global with the exception of Mexico.
This agreement was cancelled in February, 2022.
On September 15, 2022 the company entered into a license and distribution agreement for its Lactoferrin dry eye test, Ige allergy test for allergic conjunctivitis and quantitative MMp-9 test to identify ocular surface inflammation.
Axim was paid an initial license fee of $150,000 and has the right to cancel the agreement if minimum sales targets are not reached. This amount was recorded as deferred revenue and amortized over 5 years beginning September 15, 2022. The licensee is Versea Ophthalmics, LLC, A Delaware Limited Liability Company.
The agreement will provide Verséa with the exclusive commercial right to AXIM’s proprietary portfolio of point-of-care (POC) lab testing readers and three key biomarker diagnostic tests designed specifically to assist eye-care physicians in detecting and quantifying biomarkers associated with aqueous deficient Dry Eye Disease and non-specific allergic conjunctivitis. The three AXIM’s key biomarker tests – the Ocular Immunoglobulin E (IgE) test, the Lactoferrin test, and the future MMP-9 test – require the collection of 0.5 microliters in tears and provide quantitative results in under 10 minutes, an industry-leading return time.
Verséa plans to launch IgE and Lactoferrin tests at the upcoming 2022 American Academy of Ophthalmology (AAO) and American Academy of Optometry (AAOPT) conferences. The MMP-9 test is anticipated to follow in the next 18-24 months.
In recent months, AXIM has been preparing for the scaling of production of its tests in anticipation of an agreement such as the one reached with Verséa and is now prepared to support new orders associated with the agreement and subsequent launch.
Operating Lease
Lease Agreement—On March 3, 2020, Sapphire entered into a 3-year lease agreement (“Lease”) to relocate to a larger space within the same business park. The new space totals 1,908 square feet with monthly base rent in the 1st year $4,713, 2nd year $4,854 and 3rd year $5,000 at implicit interest rate of 6%. Upon commencement of the Lease on April 25, 2020, the previous lease will expire.
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Operating Leases - Right of Use Assets and Purchase Commitments Right of Use Assets
We have operating leases for office space that expire through 2023. Below is a summary of our right of use assets and liabilities as of September 30, 2021.2022.
Right-of-use assets |
| $ | 90,630 |
|
| $ | 34,374 |
|
|
|
|
|
|
|
| ||
Lease liability obligations, current |
| $ | 58,540 |
|
| $ | 34,374 |
|
Lease liability obligations, noncurrent |
|
| 32,090 |
|
|
|
|
|
Total lease liability obligations |
| $ | 90,630 |
|
| $ | 34,374 |
|
|
|
|
|
|
|
| ||
Weighted-average remaining lease term |
| 1.58 years |
|
| 0.58 years |
| ||
|
|
|
|
|
|
| ||
Weighted-average discount rate |
| 6 | % |
| 6 | % | ||
The following table summarizes the lease expense for the three and nine months ended September 30, 2022 and 2021 and 2020:respectively:
|
| September 30, |
|
| September 30, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Operating lease expense |
| $ | 43,122 | * |
| $ | 18,852 |
|
Short-term lease expense |
|
| 11,545 |
|
|
| 15,313 |
|
Total lease expense |
| $ | 54,667 |
|
| $ | 34,165 |
|
Three Months ended September 30, 2021
September 30, September 30, 2022 2021 Operating lease expense Short-term lease expense Total lease expense $ 15,000 * $ 14,421 12,932 4,166 $ 27,932 $ 18,587
*We recorded $54,667$27,932 of operating lease expense this includes $11,545$15,644 of maintenance charges and month to month lease.
Nine Months ended September 30, 2022
September 30, September 30, 2022 2021 Operating lease expense $44,416 ** Short-term lease expense Total lease expense $89,708 ** $ 43,122 45,292 11,545 $ 54,667
**We recorded $89,708 of operating lease expense this includes $45,292 of maintenance and month to month lease charges.
Approximate future minimum lease payments for our right of use assets over the remaining lease periods as of September 30, 2021,2022, are as follows:
Remainder of 2021 |
| $ | 14,562 |
| ||||
2022 |
| 59,416 |
|
| $ | 15,000 |
| |
2023 |
|
| 20,000 |
|
|
| 20,000 |
|
Total minimum payments |
| 93,978 |
|
| 35,000 |
| ||
Less: amount representing interest |
|
| (3,348 | ) |
|
| (626 | ) |
Total |
| $ | 90,630 |
|
| $ | 34,374 |
|
Litigation
As of September 30,December 31, 2021, and this report issuing date, the Company is not a party to any pending material legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. To the knowledge of management, no director, executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent of the Company’s Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.
NOTE 18: NOTES RECEIVABLE
Purchase of Promissory Note and Forbearance Agreement
Effective May 4, 2020, the Company acquired from TL-66, a California limited liability company (“Seller”), a promissory note issued to Seller by Dr. Anastassov (“Maker”) dated December 1, 2017, with a face value of $350,000 and a remaining balance due of approximately $100,000 (the “Note”). The purchase price for the Note was $100,000 payable by the Company issuing Seller One Million (1,000,000) restricted shares of the Company’s Common Stock. Effective May 6, 2020, the Company and Maker entered into a Forbearance Agreement whereby the Company agreed to forbear from making any collection efforts on the Note for a period of 24 months so long as Maker has not breached the Separation Agreement. Following 24 months, if there has been no breach of the Separation Agreement by Maker, repayment of the Note, including all principal and unpaid interest, will be waived in full. As of May, 4, 2020 the carrying value of the note receivable was $102,567, the value of the common stock to be issued was $135,000, resulting in a loss of $32,433 accounted as loss on debt extinguishment related to discontinued operations. The balance of the Note Receivable as of September 30, 2022 and December 31, 2021 respectively is $0 and $102,567 excluding interest accrued thereon of $0 and $1,701, respectively. The repayment of the note including all principal and interest has been waived and the remaining balance was recorded as severance cost of $102,387 during the nine months ended September 30, 2022.
NOTE 17:19: SUBSEQUENT EVENTS
Common Stock Issuances
On October 13, 2021 the company27, 2022, Company issued 118,000 restricted1,000,000 shares of its common stock valued at $70,800pursuant to third party for certain services, recordedan equity purchase agreement, dated on July 14, 2022, which shares were registered pursuant to that S-1 Registration Statement filed by the Company with the SEC on July 25, 2022, and declared effective by the SEC on August 4, 2022. The subscription amount is not received as advertising and promotion expense and License, permits & Patents, respectively.of date.
Employees Termination
On October 19, 2021,September 15, 2022, the Company issuedentered into a total of 175,000 Common Stock Purchase Warrants (exercise price $0.30)License and Distribution Agreement with Versea Ophthalmics, LLC (“Agreement”). Due to third party valued at $152,500. Pursuant to an extension approvedthe Agreement, the positions of: (i) National Sales Director; and (ii) Chief Medical Officer held by the Board of Directors on August 20, 2021, all Warrants shall be validJeff Busby and Dr. Joseph Tauber, respectively, were no longer necessary for 36 months from effective date included cashless exercise. The cash was received in 2021 for the purchase of the warrants.Company operations and, therefore, eliminated.
In October 2021, The Company concluded a Security Purchase Agreement with GS Capital Partners, pursuant to s to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a 6% convertible note of the Company, in the form attached hereto as Exhibit A in the aggregate principal amount of $1,110,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The Note shall contain an original issue discount of $100,000.00 such that the purchase price of the Note shall be $1,010,000.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the Securities and Exchange Commission (the “SEC”). You may read and copy any document we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549, U.S.A. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC’s internet site at http://www.sec.gov.
On our Internet website, http://www.aximbiotech.com, we post the following recent filings as soon as reasonably practicable after they are electronically filed with or furnished to the SEC: our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
When we use the terms “AXIM”, “Company”, “we”, “our” and “us” we mean Axim Biotechnologies, Inc., a Nevada corporation, and its consolidated subsidiaries, taken as a whole, as well as any predecessor entities, unless the context otherwise indicates.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, the other reports, statements, and information that the Company has previously filed with or furnished to, or that we may subsequently file with or furnish to, the SEC and public announcements that we have previously made or may subsequently make include, may include, or may incorporate by reference certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and that are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that Act. To the extent that any statements made in this report contain information that is not historical, these statements are essentially forward-looking. Forward-looking statements can be identified by the use of words such as “anticipate”, “estimate”, “plan”, “project”, “continuing”, “ongoing”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, marketability of our products; legal and regulatory risks associated with trading publicly; our ability to raise additional capital to finance our activities; the future trading of our common stock; our ability to operate as a public company; our ability to protect our proprietary information; general economic and business conditions; the volatility of our operating results and financial condition; our ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed from time to time in our filings with the SEC, or otherwise.
Information regarding market and industry statistics contained in this report is included based on information available to us that we believe is accurate. It is generally based on industry and other publications that are not produced for purposes of securities offerings or economic analysis. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. We do not undertake any obligation to publicly update any forward-looking statements. As a result, investors should not place undue reliance on these forward-looking statements.
BUSINESS |
Overview
Axim Biotechnologies, Inc., a Nevada corporation, wasis a leading developer of diagnostic healthcare solutions serving to enhance the health of people. Through the development of diagnostic solutions that quickly and accurately diagnose various diseases, our products allow healthcare workers to quickly test and treat at the point-of-care, which leads to improved patient outcomes and provides numerous economic benefits to the healthcare system.
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Axim’s core competencies include development of rapid lateral flow immunoassays, reagents and monoclonal antibody development for such assays. Our current products fall into these categories:
(1) Eye Health, wherein we acquired two FDA cleared 510(k) tests for dye eye disease and have internally developed a third assay; and
(2) SARS-CoV-2 neutralizing antibody tests; and
(3) Oncology, where we licensed from Mayo Clinic and Arizona State University Quiescin Sulfhydryl Oxidase 1 (“QSOX1”), an important enzyme for cancer growth, invasion and metastasis.
Following the acquisition of two FDA cleared 510(k) tests for dye eye disease, the Company’s product focus has been primarily in the area of Eye Health. We continue to maintain the products and assays developed in connection with SARS-CoV-2 neutralizing antibody tests should a commercialization opportunity present itself in the future. In the area of Oncology, our scientists have developed an extensive library of unique compounds targeting cancer growth, invasion and metastasis. However, the Company believes that the development of any products utilizing any one or more of these compounds should be with a pharmaceutical partner. Until one is identified, the Company will continue to focus on the more immediate revenue-generating opportunities relating to Eye Health.
Our principal executive office is located at 6191 Cornerstone Court, E. Suite 114, San Diego, CA 92121. Our telephone number is (858) 923-4422 and our website is www.aximbiotech.com. Unless expressly noted, none of the information on our website is part of this Report. Our common stock is quoted on the OTCQB Marketplace operated by the OTC Markets Group, Inc., under the ticker symbol “AXIM.”
Historical Business Operations
We were originally incorporated in the State of Nevada on November 18, 2010, under the name AXIM International, Inc. On July 24, 2014, we changed our name to AXIM Biotechnologies, Inc. to better reflect
The Company’s historical business operations focused on the research, development and production of pharmaceutical, nutraceutical and cosmetic products based upon our proprietary technologies. This business and its related intellectual property were divested by the Company in May, 2020.
In March 2020, we acquired Sapphire Biotech, Inc. (“Sapphire”), a diagnostic healthcare solutions company, changing our business operations. Our principal corporate headquarters are located at 6191 Cornerstone Court, E., Suite 114, San Diego, CA 92121. Our website address is www.aximbiotech.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. The trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.
Acquisition of Sapphire Biotech, Inc.
On March 17, 2020, the Companywe entered into a Share Exchange Agreement (“Agreement”) with Sapphire Biotech, Inc., a Delaware corporation (“Sapphire”) and all of the Sapphireits stockholders, (collectively, the “Sapphire Stockholders”). Following thepursuant to which, upon closing of the transaction, we: (i) acquired 100% of Sapphire’s outstanding capital, consisting of 100,000,000 shares of common stock; and (ii) assumed all of the outstanding debt of Sapphire. The outstanding debt included two convertible notes in the principal amounts of $310,000 and $190,000, respectfully.
In exchange for 100% of the issued and outstanding shares of Sapphire, we issued an aggregate of 54,000,000 newly issued shares of Company common stock to Sapphire’s existing stockholders (the “Share Exchange”). As a result of the Share Exchange, Sapphire became a wholly owned subsidiary of AXIM.
Current Operations Following the AcquisitionCompany, which has resulted in consolidated financial reporting by the Company to include the results of Sapphire Biotech, Inc.Sapphire.
OncologyAcquisition of Advanced Tear Diagnostics, LLC Technology
We continue to advance our mission of improving global cancer care through the development of novel therapeutics for controlling metastatic cancer spread, and diagnostics for early cancer detection, response to treatment, and for monitoring post-treatment recurrence. We have made significant progress with the development of additional analogs of SBI-183 licensedOn August 26, 2021, we purchased certain eye disease diagnostic technology from Mayo Clinic and Arizona State University, funded by the Small Business Innovation Grant awarded Sapphire on August 11, 2020 in the amount of $395,880.
We have been investigating the enzyme Quiescin Sulfhydryl Oxidase 1 (QSOX1)Advanced Tear Diagnostics, LLC, a Delaware Limited Liability Company (“Advanced Tear”), a master regulator of extracellular matrix remodeling, and its over-expression by tumor cells. Over-expression of QSOX1 has been unambiguously linked to promoting tumor invasion and metastasis. One of the Company’s co-founders, Dr. Douglas Lake, has discovered that a small molecule SBI-183 inhibited the enzymatic activity of QSOX1 and as a result suppressed tumor cell invasion in vitro and metastasis of breast tumor cells in vivo. Through its medicinal chemistry efforts the Company synthesized multiple structural analogs of SBI-183 and unveiled SPX-1009 lead compound that demonstrated 40-fold improvement in suppressing invasion and metastasis in several cancer models.
The Company believes that its therapeutic drug development strategy targeting the metastatic spread is a unique, novel and pioneering approach to saving lives. The near-term objective of the Company is to demonstrate the ability of its lead anti-QSOX1 drug candidates to suppress tumor growth and metastasis and to advance them into pre-clinical studies. Subsequently, the Company plans to explore strategic collaborations, including partnerships, joint ventures and out-licensing agreements, in order to pursue development of the chosen drug candidate.
The Company believes that QSOX1 has a significant potential to be developed into an important biomarker for liquid biopsy cancer test. The Company anticipates that ongoing diagnostic product development in 2021 may result in a commercial prototype in the futureconsisting of a universal companion diagnostic to measure the efficacy of any ongoing cancer treatments based on measuring QSOX1 levels. In order to focus on the Company’s new eye care business and commercialization of its diagnostic test510(K) license for Lactoferrin, a biomarker for dry eye disease and a 510(K) license for IgE, a biomarker for allergic ocular reaction (collectively, the “510(K) Licenses”). The purchase price for the 510(K) Licenses was $4,270,000, which price was paid by issuing 7,000,000 restricted shares of Company aimscommon stock to explore potential collaborationsAdvanced Tear.
Also on August 26, 2021, we purchased technology and intellectual property relating to co-developelectrochemical impedance spectroscopy which included five pending patent applications (the “Pending Patents”) from Advanced Tear for $250,000 (includes assuming and paying $30,000 of the Advanced Tear liabilities). The bulk of the purchase price ($210,000) was in a blood testnote that makes possible the early detectionrequires seven equal monthly payments of cancer.$30,000, which payment started on September 3, 2021. The note has since been repaid in full.
COVID-19Eye Health Overview
With the onset of the COVID-19 pandemic, we began creating COVID-19 rapid diagnostic tools, including multiple first-in-class COVID-19 neutralizing antibody tests and other innovations. AXIM’s rapid diagnostic test for detecting neutralizing antibodies is the first of its kind. The test has the ability to deliver results in under 10 minutes and can detect the level of neutralizing antibodies an individual has. We initially designed this test to be used at point-of-care facilities to measure levels of neutralizing antibodies in convalescent plasma so that plasma with the highest levels of neutralizing antibodies can be identified and administered to patients fighting COVID-19. However, we made the strategic decision to develop the capability to test whole blood at the point of care. The pivot was the result of substantial market research and feedback from potential customers. With the advent of several vaccines to immunize against COVID-19, it is anticipated that end users may find AXIM’s test to measure levels of neutralizing antibodies of substantial value.
As our scientific team was hard at work developing our COVID-19 rapid diagnostic tests and virus-capturing face mask, we were frustrated by the delays and costs caused by lack of supply of a recombinant virus binding protein (VBP) for SARS-CoV-2 that was essential to our testing. To continue our projects as planned and decrease overall costs, AXIM’s team decided to make its own VBP that is even more potent than current outsourced options. AXIM’s laboratory tests have proven the RBD spike protein binds with our novel VBP. Initial tests also show that our novel VBP is approximately 10 times more potent and stable than current VBP options on the market. This now in-house development of the core ingredients needed to manufacture strips could potentially derive additional revenue and allows us to control our supply chain. We have already manufactured enough VBP for millions of rapid diagnostic tests.
We completed our technology transfer to our manufacturing partner, Empowered Diagnostics LLC and continue to provide clinical and regulatory support relating to the pending Emergency Use Authorization for the neutralizing antibody test. Empowered Diagnostics has built out their production facility to be able to manufacture millions of our tests per month. On August 30, 2021, our manufacturing partner filed an amended EUA with the FDA for our rapid COVID-19 neutralizing antibody test in whole blood at point of care locations. After several discussions with the FDA, the company amended the EUA application for ImmunoPass for the test results to be interpreted qualitatively. The package included updated clinical trials, BSL3 lab live virus comparisons, stability and control studies and a robustness study to further validate the test’s accuracy when conducted under varying conditions. The FDA has initially reviewed the EUA and had several inquiries which were responded to and filed on October 8, 2021. The Company is looking forward to the FDA completing the review of the EUA. If the EUA is approved, the sales and manufacturing activities can commence immediately which we anticipate will result in significant revenue shortly thereafter.
With respect to our other COVID-19 related tests, we have made the strategic decision to suspend development of our high throughput rapid neutralizing antibody test, NeuCovix-HT™ and our ELISA neutralizing antibody test. Our focus has shifted to development of a second generation neutralizing antibody test as we believe there is greater potential in the point of care market versus lab testing. On October 12,26, 2021, we announcedacquired the development of the second generation version of the Company’s Rapid Neutralizing Antibody Test for COVID-19. The first rapid test developed by the Company, currently under FDA review, measures levels of neutralizing antibodies which provide protection from COVID-19 infection if blood levels are high enough. The second generation version of the original test differentiates between antibodies that simply bind to the virus but do not neutralize it versus antibodies that bind and neutralize the virus. This is important because COVID-19 vaccines do not induce high levels of neutralizing antibodies in all recipients. AXIM’s second generation test will provide users with a test that shows if they responded to their COVID-19 vaccine and a semi-quantitative analysis of their neutralizing antibody levels in a single test. We have filed for patent protection of the invention.
Axim Eye Care
Axim Biotechnologies, Inc. has acquired thetechnology, intellectual property and the exclusive global rights to market two FDA cleared lateral flow assays which utilize a non-invasive, quantitative, point of care human tear test to aid in the diagnosis and selection of therapeutics for the treatment of eye diseases. The barrier for entrance into the dry eye space is difficult and requires extensive clinical studies, large capital expense and FDA 510k approval. This process alone can take several years and substantial investment, with no certainty that the product will receive FDA 510k approval. With the acquisition, the Company became focused on improving the landscape for the diagnosis of ophthalmological conditions such as Dry Eye Disease (DED) through rapid diagnostic tests. The Company owns two of the two 510k’s, Axim automatically hasonly five FDA Cleared Diagnostic tests for Dye Eye Disease.
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Currently, we have FDA 510k clearance to commercialize the test for Lactoferrin (aqueous deficiency biomarker) and the test for ImmunoglobulinIgE (non-specific allergy biomarker). The Company’sOur objective is to establish point of care testing for dry eye disease (DED)(“DED”) and to establish this modality as the new modality and the new standard of care. The tests are quick, simple to use, and inexpensive to the clinic. The tests are CMS and private insurance reimbursable.
Axim believesWhile at one time the tests were sold in numerous eye doctors’ locations, when the Company acquired the assays, they had been mothballed. The Company has had to redevelop the tests, reagents and select a quantitative reader. Since the acquisition of the technology, the Company has been successful in redevelopment and is launching sales.
We have signed a supply agreement with Barcelona-based IUL SA (“IUL”) for our iPeak DED readers, which will be deployed for diagnostic testing with a focus on lactoferrin and IgE levels. This state-of-the-art portable reader is a colorimetric lateral flow reader designed to hold different cassette sizes and can read cassettes of up to five strips and seven lines per strip at a time.
iPeak is equipped with “Flash Eye” technology based on the principles of machine vision illumination. Its camera captures the image of the test illuminated from LED lights situated in the most studied geometry to achieve a precise and uniform illumination and enhance the colors of any lateral flow test. The iPeak technology also allows for more sensitivity, which is the main success of its application.
We evaluated the iPeak readers in the lab against several other comparable products before deciding on IUL’s state-of-the-art products. The Company’s diagnostic testing process for DED, and specifically for lactoferrin levels as a primary indicator, will include the use of reagent strip samples. The new readers are calibrated with the new test strips and will be distributed to ophthalmologists and optometrists at the point of care. The patients’ tear sample will be obtained and applied to the strips and then an ophthalmologist or optometrist will run the strips through a reader to determine lactoferrin levels and incidence and severity of DED.
On September 19th, the Company announced that it had signed an exclusive global commercialization agreement with Verséa Ophthalmics, LLC, a business division of Verséa Holdings, Inc. (“Verséa”), is one of the fastest growing U.S. healthcare companies, specialized in the sale and distribution of diagnostic and therapeutic solutions.
Our tests are considered moderately complex by CLIA. This requires the user of the test to obtain a CLIA certificate of compliance. This is done by filing a simple application with CMS (Form 116) and paying a fee. However, there are various lab requirements that must be in place first and there is a considerable amount of ongoing record keeping that is required, which restricts potential growth of the business. Our distribution partner currently assists in the CLIA filing to provide as effortless process for the customer as possible.
The FDA allows for a CLIA waivers and we intend to pursue a waiver for both current tests and all future product offerings. We plan to file for the waiver in the first quarter of 2023 after conducting a fairly simple comparative clinical study. The objective will be to determine whether the AXIM Eye test system has equal or better simplicity than the other forms of diagnostic testing for DED, which we believe is the case. This study is a key component of the filing process with the FDA for a Clinical Laboratory Improvement Amendment (CLIA) Certificate of Waiver. We believe that the acquisition of these FDA 510k cleared diagnostic products, alonga waiver and the distribution partnership we have with proven management practices and capital,Versea will allow the business willto grow at a rapid pace.
Low levels of Lactoferrin confirm inadequate glandular tear production (aqueous deficiency) and high levels of IgE indicate an active ocular allergy. If both biomarkers are normal, the cause of a patient’s Dry Eyepatient’s dry eye condition could be attributed to evaporative dry eye. BySo, by performing these two tests, an eye doctor may now precisely knowbetter assess the underlying cause of the tear film disorder, its severity and the appropriate treatment protocol to pursue. In addition, these tests are rapid, accurate, reimbursable, profitable and can be performed by a technician, which allows the physician to be more productive and attend to more patients.
Dye Eye Market
An estimated 16 million Americans have been diagnosed with DED, but the actual number of Americans suffering from dry eye symptoms is likely much higher. Some reports indicate that nearly half of all U.S. adults experience dry eye signs and symptoms, and 33% of patients in eye care clinics present with complaints about dry eye.
DED, though widespread, is under-diagnosed, in part because symptoms do not always correlate with objective signs. It has a highly variable symptom profile at different stages of the disease, and there is often a discordance between signs and symptoms. A patient can have severe symptoms yet show no sign of ocular surface damage, while others have advanced ocular surface damage, yet report no symptoms. This lack of correlation between clinical signs and symptoms of DED makes diagnosing and treating patients a challenge. Often times, inflammation is present before the clinical signs of DED.
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Currently, our eye business focuses exclusively on ophthalmology and optometry, in the United States, where there are 37,000 optometrists and 19,000 ophthalmologists performing approximately 400,000 medical (dilated) eye exams per day. Of this total, we believe that approximately 20% to 30% would present with symptoms where the Company’s Lactoferrin and IgE tests would be indicated. It is estimated that total US market for our eye care systems could approach 50,000 systems. (USA Only)
We have completed development of our immunoassay system, which includes an automated colorimetric photometer reader and two FDA market-cleared point-of-care (POC) quantitative diagnostic ophthalmic lab tests. These are:
Ocular Lactoferrin )Lf) CPT code 83520 2021 CMS reimbursement $17.27/eye *
Ocular Immunoglobulin E (IgE) CPT Code 83520 2021 CMS reimbursement $16.46/eye*
Studies indicate that in 2021, 16-49 million Americans had DED, representing 32 - 98 million potential use cases for our POC tests. These tests are not limited to DED diagnostics, but can also be used to determine the lactoferrin and allergic components of tear film prior to:
· | Contact lens fitting – approximately 45 million people wear contact lens in the US alone (2021). | |
· | LASIK surgery- approximately 718,000 (2020). | |
· | Cataract surgery with lens exchange - approximately 3.8 million (2018). |
The barrier for entrance into the dry eye space is difficult and requires extensive clinical studies, large capital expense and FDA 510k clearance. This process alone can take several years and substantial investment, with no certainty that the product will receive FDA 510k clearance. For this reason, the Company determined that acquiring the two 510k’s would be a favorable strategic decision.
Business Model
Our eye business model utilizes a razor/razor blade model with the idea of placing as many readers into the field as possible and selling the disposable tests. It is anticipated that our gross profits will be generated from the manufacturing and sale of tests to our distribution partner who then resells the tests. Discounts will be offered to purchasing groups, corporate accounts, academic institutions engaged in research or training, and others as deemed appropriate. It is anticipated that the average price for the reader will be at our acquisition cost so we can get as many razors in the field, while pricing of consumable diagnostic kits will be at roughly half of the CMS published reimbursement floor rate.
Market demand for the system is expected to be moderate to begin with until we are granted a waiver from CLIA. At that time we expect extremely high demand for our system and tests. We also expect very high demand for our recently developed MMP-9 quantitative test once we get a FDA 510k clearance. While we must compete with other capital equipment expenditures under consideration in any ophthalmic physician’s office, we believe that no other ophthalmic device offers the combination of compelling clinical and financial benefits afforded by our system. The clinical utility of the tests offers important diagnostic precision, differentiation and treatment management direction. Inner-office efficiencies significantly improve the patient flow characteristics, reducing patients in office visit time and greatly reducing physicians chair time with each patient.
Financially, for every patient per day tested, the physician will receive, on average, $2 in reimbursement for every $1 expended on supplies. CMS and private insurance allow for physicians to retest their patients as often as deemed medically necessary.
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Dye Eye Disease Market Competition
Currently there are five FDA approved tests for DED:
Biomarker | Company | Type | CLIA status |
Lactoferrin | Axim | (quantitative analysis) | moderate complexity |
IgE | Axim | (quantitative analysis) | moderate complexity |
MMP9 | Quidel | (qualitative only) | waived |
Osmolarity | TearLab | (quantitative analysis) | waived |
Ocular Adenovirus | Quidel | (qualitative only) | waived |
The preferred clinical analysis is quantitative, giving us an advantage over the competition. Since our reader can interpret many different analytes other than Lf and IgE, it also opens the possibility of additional quantitative test development.
New Quantitative MMP-9 Test
On March 8, 2022, we announced that we had successfully developed what we believe to be the first-ever rapid quantitative tear test for MMP-9, an inflammatory biomarker for DED. Matrix metalloproteinase-9 (MMP-9), an inflammatory biomarker consistently elevated in the tears of dry eye patients, may accelerate early diagnosis when detected.
Ocular surface disease (OSD) and dry eye syndrome are often mistakenly considered synonymous. OSD occurs when there is damage to the front surface of the eyes, the cornea. The central role of inflammation in OSD is widely recognized, but the ability to measure this in the clinic has been limited to the Quidel InflammaDry test, which measures tear matrix MMP-9 levels and provides a positive/negative result around a threshold of 40ng/ml of MMP-9. This “yes or no” report has clinical value, but it is limited. Currently available MMP-9 testing does not detect a reduction in tear MMP-9 levels until the concentration drops below 40ng/ml and, thus, may miss clinically significant improvement that did not reach that threshold.
The clinical benefits of our quantitative tear MMP-9 testing would be a significant advancement in the ability to measure the degree of inflammation affecting dry eye patients, allowing for more objective classification of their disease. Equally important would be the ability to measure improvement in control of inflammation that is the goal of many of our therapies for OSD, including pharmaceuticals, thermal pulsation treatments and even light based therapies.
We intend to run a clinical study for MMP-9 in the 1st quarter of 2020. The distribution agreement we have with Versea calls for Versea to pay for half of the expense in return for a paid up license to market the test after the 510-k clearance is achieved.
We are also in the process of developing additional bio-marker tests that will be done on the existing platform, without the constant need of the clinician to upgrade to a newer platform. The Lateral Flow test reader is software driven and can be programmed to interpret other biomarkers as they are clinically studied and FDA approved. The test uses 1.0 microliters of human tear fluid, that is applied to a disposable lateral flow cassette (one cassette per patient tested). The disposable single use cassette generates a substantial, reoccurring revenue stream for our eye business and our stakeholders.
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CURRENT OPERATIONS FOLLOWING ACQUISITION OF SAPPHIRE AND ADVANCED TEAM DIAGNOSTICS ASSETS
Summary:
· | AXIM’s strategic focus is on commercializing FDA-cleared Dry Eye Disease (DED) diagnostic system | |
· | Plans to address largely underserved DED diagnosis market with patent pending tear collection method and approved tests, supported by world-class DED management team | |
· | Supply agreements in place to fulfill demand for DED readers and test strips, creating large revenue opportunity | |
· | Company places emphasis on generating positive cash flow through DED program |
The Company has been working diligently to further position AXIM for both immediate and long-term success. Since our acquisition of Sapphire Biotech and with the onset of the COVID-19 pandemic, we have been focused on three key areas specific to the diagnostic area; oncological, COVID-19, and most recently, dry eye disease (DED). Each of these provide strong upside potential for AXIM; however, each comes with its own set of regulatory and scientific hurdles that must be overcome. While the Company remain optimistic about each program, we believe it to be of the utmost importance to focus the most time and resources on the program with the ultimate potential for success, in the nearest term. While these other programs will not be abandoned, the Company recognizes that waiting on the painstaking slow regulatory approvals needed to generate revenue is not the best strategy to further our mission and unlock shareholder value. As such, following an extensive analysis by our management team, board of directors, and expert consultants with an objective perspective, the Company determined our best path forward lies with DED. The DED initiative is an extremely large opportunity for our Company and has been gaining strong momentum in recent months. The Company believes it offers the most potential for rapid and immediate growth, which could lead to ultimate profitability for the organization.
Since the third quarter of 2021, we have acquired substantial assets, including already approved diagnostic tests, which complement the research we had been conducting to-date. Despite DED being the most common ocular surface disorder, affecting approximately 350 million people worldwide—causing persistent eye irritation, blurred vision, pain and decreased quality of life—the sector has seen little innovation. There remains a desperate demand for better DED testing and diagnosis, especially at the point-of-care, and we believe we are well positioned to dominate this marketplace, while we actively work to develop and bring to market new solutions enabling us to offer comprehensive state-of-the-art suite of DED solutions.
Our next-generation solutions are unique in that they offer patients not only a fast and reliable answer as to why they are suffering, but offer a solution to physicians who are looking to help patients suffering from this overly common disease.
Covid Neutralizing Antibodies
Over the past few years, as COVID ravaged the world, our scientific team proved its world-class scientific acumen by swiftly developing first-in class COVID-19 neutralizing antibody tests. Shortly after its development, we filed for Emergency Use Authorization with the Food and Drug Administration (FDA), signed a distribution and manufacturing agreement, initiated live virus comparison studies, and filed several patent applications on the diagnostic tools. We waited in anticipation that the FDA would move quickly given the nature of the pandemic; however, we were disappointed week after week until we finally received a response that the FDA had changed its guidance and that they were denying our application. This was unfortunate especially given our firm belief in its efficacy and potential to assist in the global fight against this virus. In the last few months, we have adjusted our strategy to offer the rapid point-of-care test For Research Use Only to try and capture some revenue while we look for another partner to do the heavy lifting of running a new clinical study and resubmitting the EUA application. That said, we are fearful that the U.S. government’s drive to approve such solutions is fading, and that it is unlikely to grant an EUA to ours or similar tests, although it is still a possibility since this virus is likely going to be around for a long time. However, it is this realism that further underscored our need for a readjustment of our focus on the DED program.
QSOX1 Cancer Therapy
In terms of our oncological diagnostic program, our scientists have been diligently investigating the enzyme Quiescin Sulfhydryl Oxidase 1 (QSOX1), a master regulator of extracellular matrix remodeling and its overexpression by cancerous tumor cells that is clearly linked to promoting tumor invasion and metastasis. This discovery led us down three paths; one in the development of a diagnostics, point-of-care tool which would measure QSOX levels, leading to pre diagnosis of cancer; another being our identification and the licensing of SBI-183, a compound that showed promise as a cancer treatment given its QSOX1 suppressing properties and the last being that we were awarded a $395,880 phase I Small Business Innovation Research (SBIR) grant by the National Cancer Institute (NCI) to continue research and development of novel small molecules that inhibit the enzymatic activity of QSOX1 based on SBI-183. Given our razor sharp focus on DED, we have decided to postpone the submission of a Phase II SBIR grant.
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DED Business
It is important to underscore the rationale supporting the Company’s decision to focus on DED. According to the American Academy of Ophthalmology, approximately 20 million people in the U.S. have DED and the number is growing in both young and old adults. It is imperative that clinicians determine how to best diagnose and treat DED.
Diagnosing DED is a particular challenge because of the multifactorial nature of the disease, with symptoms similar to other ocular surface conditions. There is often discordance between signs and symptoms, highlighting the need for more sensitive and accurate diagnostic tools. Figures from the American Journal of Ophthalmology corroborate this. As of July 2017, an estimated six million people reported DED symptoms without receiving a diagnosis.
The DED marketplace is massive, with analysts projecting the global market to grow at a CAGR of 6.6% from 2021 to 2026 and reach $6.1 billion by 2024.
Accordingly, in mid-2021, we started building the infrastructure and foundation needed to engage this large and dynamic market successfully. Our cutting-edge, next-generation solutions provide AXIM with far higher prospects of predictable growing revenue and earnings power.
On August 26, 2021, we signed an agreement to acquire two FDA-cleared 510(k)’s DED diagnostic testing technologies. The tests are part of a highly specialized point-of-care (POC) lab testing system explicitly designed to assist eye care physicians in detecting and quantifying various biomarkers associated with external ocular disorders. The tests are also approved for insurance and Medicare reimbursement. Both these tests are non-invasive, Rapid Lateral Flow Assays using tears:
The first is a rapid (10-minute) lateral flow diagnostic assay that tests for exact levels of lactoferrin through the collection of 1.0 microliter in tears. The benefits of testing lactoferrin Levels in the tear film include:
· | Low Lactoferrin levels directly correlate to DED caused by aqueous deficiency | |
· | The severity of DED can be determined by the Lactoferrin level | |
· | Low Lactoferrin levels may represent increased surgical risk or contact lens intolerance | |
· | Changes in Lactoferrin levels may show the efficacy of the prescribed treatment |
The second test is for the measurement of Ocular Immunoglobulin E (IgE), a biomarker for allergies and a key biomarker primarily associated with Dry Eye Disease. The benefits of Testing IgE Levels in the Tear Film include:
· | The presence of IgE indicates the diagnosis of allergic conjunctivitis | |
· | Levels of IgE increase with the severity of the allergic response | |
· | IgE testing can help differentiate allergic conjunctivitis from dry eye syndrome | |
· | Allergic conjunctivitis is a contraindication for LASIK and other surgical procedures |
Lactoferrin is a tear protein that protects the ocular surface through antimicrobial and anti-inflammatory properties. Lower concentrations of lactoferrin have been demonstrated in patients with dry eye, which is associated with decreased aqueous tear production. Ocular Immunoglobulin E (IgE) is a biomarker for allergies and a key biomarker primarily associated with allergic conjunctivitis. Mild allergic conjunctivitis is frequently challenging to clinically distinguish from dry eye. AXIM’s diagnostic technology allows for eye doctors to not only identify and differentiate clinically overlapping conditions but also drive more targeted therapeutic interventions. The tests provide doctors with access to real-time quantitative results at the point-of-care, allowing them to better prescribe a therapy to patients, leading to overall improved personalized patient care.
On March 8 of this year, we announced that we had successfully developed what we believe to be the first-ever rapid quantitative tear test for MMP-9, an inflammatory biomarker for DED. Matrix metalloproteinase-9 (MMP-9), an inflammatory biomarker consistently elevated in the tears of dry eye patients. The central role of inflammation in OSD is widely recognized, but the ability to measure this in the clinic has been limited to the Quidel InflammaDry test, which provides a positive/negative result. This “yes or no” report has clinical value, but it is limited.
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The clinical benefits of our quantitative tear MMP-9 testing are a significant advance in the ability to measure the degree of inflammation affecting dry eye patients, allowing for more objective classification of their disease. Equally important would be the ability to measure improvement in control of inflammation that is the goal of many therapies for OSD, including pharmaceuticals, thermal pulsation treatments and even light based therapies.
Key Diagnostic Device Supply Agreement
In February of this year, we entered into a key supply agreement for DED test strip readers which will be deployed for diagnostic testing, focusing on lactoferrin levels. The readers, a point of care medical device, will be supplied by Barcelona, Spain-based IUL SA (“IUL”). We will be utilizing state-of-the-art portable iPeak readers that were tested against other comparable products. These readers are designed to hold different cassette sizes and are equipped with connectivity and can read cassettes of up to five strips and seven lines per strip at a time. iPeak is equipped with “Flash Eye” technology based on the principles of machine vision illumination.
We are also in the process of developing additional biomarker tests that will be done on the existing platform, without the constant need of the clinician to upgrade to a newer platform. The Lateral Flow test reader is software-driven and can be programmed to interpret other biomarkers as they are clinically studied and FDA approved. The test uses 1.0 microliters of human tear fluid that is applied to a disposable lateral flow cassette (one cassette per patient tested). The disposable single use cassette generates a substantial, recurring revenue stream for our eye business.
Exclusive Global Commercial Partnership
On September 19th, the Company announced that it had signed an exclusive global commercialization agreement with Verséa Ophthalmics, LLC, a business division of Verséa Holdings, Inc. (“Verséa”), one of the fastest growing U.S. healthcare companies, specialized in the sale and distribution of ocular diagnostic and therapeutic solutions.
The agreement will provide Verséa with the exclusive commercial right to AXIM’s proprietary portfolio of point-of-care (POC) lab testing readers and three key biomarker diagnostic tests designed specifically to assist eye-care physicians in detecting and quantifying biomarkers associated with aqueous deficient Dry Eye Disease and non-specific allergic conjunctivitis. The three AXIM’s key biomarker tests – the Ocular Immunoglobulin E (IgE) test, the Lactoferrin test, and the future MMP-9 test – require the collection of 1.0 microliters in tears and provide quantitative results in under 10 minutes, an industry-leading return time.
On September 30th, Verséa launched the IgE and Lactoferrin tests at the 2022 American Academy of Ophthalmology (AAO) and American Academy of Optometry (AAOPT) conferences. The MMP-9 test is anticipated to follow in the next 12-18 months upon FDA clearance. In recent months, AXIM has been preparing for the scaling of production of its tests in anticipation of an agreement such as the one reached with Verséa and is now prepared to support new orders associated with the agreement and subsequent launch.
The commercial launch of the Company’s IgE and Lactoferrin tests mark the evolution of Axim as a development-stage biotech company to a revenue generating healthcare organization. Since the development of our novel ocular diagnostic tests and subsequent success in proving their effectiveness, the Company had been searching for a partner with a solid commercial infrastructure and a firm commitment to eye care, capable of bringing our tests to clinical offices on a global scale. With existing sales channels to support their human amniotic membrane therapeutics, Verséa has added our technology to their expanding portfolio of healthcare solutions. Our partner’s mission aligns with that of the Company’s—together, we aim to change the landscape of dry eye disease diagnosis.
On October 4th, the Company announced that it had received an initial order of 19,000 point-of-care (POC) diagnostic tests and 100 readers targeting ocular surface diseases through its exclusive global commercialization partner Verséa Ophthalmics, LLC (“Verséa”), marking the Company’s first large-scale revenue generating order.
The order is part of the recently announced exclusive global commercialization agreement reached between Verséa and AXIM to support the commercial launch of sales at the 2022 American Academy of Ophthalmology (AAO) conference in Chicago. The order represents the largest revenue-generating event in the history of the Company. AXIM is completing the manufacturing and is preparing the order for shipment from its lab facilities in San Diego, California as per Verséa’s direction. The order includes both the tear based tests for Lactoferrin and Immunoglobulin E (IgE) as well as the 100 of the associated digital reader that allows for quantitative test results. The tests provide doctors with access to real-time quantitative results within 10 minutes, allowing them to more accurately diagnose and prescribe targeted therapy to patients, leading to overall improved personalized patient care. Both tests are FDA-cleared and have dedicated Medicare CPT codes that allow for rapid POC diagnosis of common ocular conditions such as dry eye disease (DED) and allergic conjunctivitis.
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This large order through our agreement with Verséa Ophthalmics marks a pivotal point for AXIM, where we are revenue generating. This initial order through Versea also supports the Company’s vision that our tests and readers will become available in clinics nationwide. While our readers can be used over and over again, our test strips are one-time use and we expect to receive repeat orders from clinicians who have performed the tests and for this to be an additive to the growing new test demand.
The expectation with the Versea partnership is that the launch of the ocular surface disease testing platform is the beginning of a robust testing pipeline of future diagnostic test solutions that can be introduced on the same digital reader system. Eye care professionals have struggled with differentiating mild allergic conjunctivitis from dry eye disease as well as distinguishing between different causes of dry eye [aqueous deficient versus evaporative] which impacts clinical decision making. The portfolio of rapid, tear-based, quantitative point of care tests allows for more specific diagnoses, targeted therapeutic intervention and the potential for therapeutic monitoring which is a true breakthrough for the industry.
CLIA Waiver Process
Commencing early 2023, the Company plans to conduct a comparative clinical study. The objective will be to prove that the AXIM Eye test system has equal or better simplicity than the other forms of diagnostic testing for DED. This study is a key component of our filing process with the FDA for a Clinical Laboratory Improvement Amendment (CLIA) Certificate of Waiver. We will be targeting a waiver for both IgE and the Lactoferrin diagnostic tests. The testing is expected to prove that the products are simple to use with minimal risks of erroneous results. The expected timeline for filing and a final CLIA decision is approximately three to six months.
Patented Tear Collection System
Tear fluid analysis contributes to the greater understanding of various ocular and systemic diseases. AXIM is developing and filed for a patent of a novel tear sample collector system that is extremely cost-effective to produce on a mass scale. It is soft, non-intimidating, and easy to use by untrained personnel. It features a simple indicator that appears on the strip when enough tear fluid has been absorbed.
AXIM 2023: Goals and Targeting Positive Cash Flow
Our DED business strategy is starting to take off. Looking ahead we plan to:
· | Successfully complete our clinical trials to prove the accuracy and ease of use to achieve CLIA waivers. | |
· | Generate positive, peer reviewed reviews by eye care professionals as to the performance and ease of use. | |
· | Evaluate other next-generation DED treatments that may include oral or topical therapeutics. We have one in our cross-sights and, when ready, plan to commence clinical research with a leading university to prove safety and efficacy. If it works out as expected, we plan to pursue a license or business combination. | |
· | Penetrate the ophthalmologist and optometrist marketplace through our partner with our industry-changing DED diagnostic technology. | |
· | Identify potential strategic acquisition targets to accelerate our DED diagnostic and therapeutic applications and capabilities expansion. | |
· | Grow our DED business to reach a positive cash flow run rate by the end of 2023 and build its profitability beyond. |
With our partnership with Versea, Axim is now commercializing a healthcare solution that holds the potential to truly revolutionize the world. With the sales launch of Axim’s diagnostic platform, Axim is executing on vision of penetrating a market where DED impacts over 350 million people. This strategy will enable our business to grow revenues and increase our earnings power to enhance shareholder value.
Milestones 2020 to Date
On January 13, 2020, Sapphire Biotech entersentered into an agreement with Skysong Innovations, LLC for an exclusive license to technology relating to SBI-183, an anti-metastatic compound suppressing tumor cell growth and blocking metastasis (and grants equity to Mayo Clinic Ventures and Arizona State University).metastasis.
On February 6, 2020, Sapphire Biotech signs the Sponsored Research Agreement (SRA)signed an SRA with Arizona State University to conduct in vitro testing and in vivo pre-clinical animal studies rewith cancer inhibitory agents that will prevent metastases.
On March 18, 2020, Axim Biotechnologies announceswe announced the acquisition of Sapphire Biotech.Sapphire.
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On March 24, 2020, Sapphire announcesannounced the completion of in-vitro studies on the new compound, SPX-1009, proving ten-fold greater inhibition of tumor metastasis than parent compound SBI-183 following testing of over 80 analogs.
On March 27, 2020, Sapphire Biotech signssigned an agreement with TD2 to initiate animal studies to evaluate the efficacy of SPX-1009 as an anti-metastatic treatment and to measure levels of QSOX1 as a potential companion diagnostic test.
On July 15, 2020, AXIMwe announced the development of a rapid diagnostic test measuring levels of functional neutralizing antibodies that are believed to prevent SARS-CoV-2 from entering the host cells. Unlike currently available serological COVID-19 tests that detect an antibody response to the virus, AXIM’sour rapid 10-minute test measures a specific subpopulation of antibodies to block binding of the virus to host cell receptors. While there are expensive, time consuming laboratory tests that measure neutralizing antibodies, AXIM’sour test differs in that it is a portable, low cost, rapid point-of-care test with results in 10 minutes. The test is currently being reviewed by the FDA for Emergency Use Authorization.
On August 5, 2020, the Companywe announced the development, patent filing and Emergency Use Authorization (EUA) submissionEAU filing of NeuCovix-HT™, a high throughput (HT)(“HT”) patent-pending diagnostic test that measures levels of functional antibodies in plasma or serum that neutralize SARS-CoV-2, the virus that causes COVID-19. Unlike current serology tests for COVID-19 that qualitatively detect antibodies to the virus, the HT testNeuCovix-HT™ quantitatively measures functional antibodies that block binding of the virus to host cell receptors. For strategic reasons, the Company has decidedThe patent filing and EUA filing have been withdrawn due to focus on the point of care market and has withdrawn the EUA applicationuncertain commercial potential for thea HT diagnostic test.
On August 11, 2020, Sapphire was awarded a $395,880 phase I Small Business Innovation Research (SBIR)SBIR grant by the National Cancer Institute (NCI). The grant will supporthas supported the continued development of novel small molecules that inhibit the enzymatic activity of Quiescin Sulfhydryl Oxidase I (“QSOX1”)QSOX1 based on thea lead compound SBI-183 licensed from Mayo Clinic and Arizona State University.compound. QSOX1 is a tumor-derived enzyme that is important for cancer growth, invasion and metastasis. The term of thecompany has filed a final grant extends into the 1st quarter, 2022.report with NCI, detailing numerous research findings.
On August 24, 2020, Aximwe signed an exclusive limited licensing, manufacturing and distribution agreement (“Agreement”)with Empowered Diagnostics LLC (“Empowered Diagnostics”) for high volume production of AXIM’sour rapid diagnostic test measuring levels of functional neutralizing antibodies that are believed to prevent SARS-CoV-2 from entering the host cells. On November 4, 2020, the parties entered into the Technology Transfer and Supply Agreement related to the Agreement. The tech transferagreement has nowsince been completed, and the Company’s supply of biologics to Empowered is continuing. If the neutralizing antibody test is approved by the FDA for distribution, the Company anticipates receiving significant revenues from the supply of the biologics as well as royalties agreed to under the Agreement.terminated.
On September 16, 2020, the Companywe filed the Emergency Use Authorization (EUA)EUA application with the Food and Drug Administration (FDA)FDA for measuring COVID-19 neutralizing antibodies in plasma and serum through its first-in-class rapid diagnostic test. On January 2022, the FDA notified us that the priorities for testing had changed in favor of quantitative measurement of neutralizing antibodies, thus signaling that the Company’s EUA for the qualitative test would no longer be considered.
On September 22, 2020, Aximwe announced that the United States Patent and Trademark Office (USPTO) has(“USPTO”) had issued the Company a new Notice of Allowance for a patent (Application No. 15/748,784) on anti-neoplastic compounds and methods targeting Quiescin Sulfhydryl Oxidase 1 (QSOX1), including the compound SBI-183,QSOX1, an enzyme important for tumor cell growth, invasion and metastasis. Mayo Clinic and Arizona State University have exclusively licensed the rights under this patent to the Company.
On September 29, 2020, Aximwe announced that it haswe had filed a second provisional patent for a first-in-class face mask that captures and deactivates SARS-CoV-2, the coronavirus responsible for the ongoing COVID-19 pandemic. The earlier provisional filing for the face mask was on August 14, 2020. On August 13, 2021, the Company filed a PCT and U.S. utility applications converting the two provisional applications.
On September 30,December 31, 2020, Aximwe announced that it haswe had filed a provisional patent for a recombinant virus binding protein (VBP)VBP for SARS-CoV-2, the coronavirus responsible for the current COVID-19 pandemic, and isare now manufacturing the VBP. The CompanyAs a result, we no longer needsneed to rely on outside protein supply to continue our research, and can greatly cut down onreducing our manufacturing costs. The Company chose to maintain the confidentiality of the VBP as a trade secret and, thus, decided not to disclose the formula which would have been required for the conversion of the provisional to a utility patent application.
On December 3, 2020, we announced the development and patent filing for an enzyme-linked immunosorbent assay (“ELISA”)-based diagnostic test for the detection of SARS‐CoV-2 neutralizing antibodies. The Company is not pursuing development of the ELISA test, and, instead, will focus resources on the point of care neutralizing antibody test.
On February 3, 2021, we announced the initiation of clinical trials for ImmunoPass, our rapid point-of-care test that semi-quantitatively measures levels of neutralizing antibodies to COVID-19. The clinical trials were completed and the results submitted to the FDA in support of the amended EUA for the neutralizing antibody test that is pending review and approval.
On March 8, 2021, we announced that we had successfully completed point-of-care clinical trials on our much awaited ImmunoPass rapid test that semi-quantitatively measures levels of COVID-19 neutralizing antibodies to help understand COVID-19 immunity, validate vaccine’svaccine effectiveness and estimate how long the vaccine will be effective in patients.
On March 24, 2021, the Company, through Empowered Diagnostics, filed an EAU application with the FDA for measuring COVID-19 neutralizing antibodies in whole blood for a Point-of-Care rapid diagnostic test. This relationship has been terminated.
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On August 03, 2021, we announced that the Company has signed a Binding Term Sheet to acquire the technology for the testing of Dry Eye Disease (DED), including two FDA clearances for the commercial sale of two ophthalmic diagnostic lab tests. The applicationtransaction closed on August 26, 2021.
On March 6, 2022, we announced that while the Company explores filing one or more EUA’s for point of care and/or at home use, it would begin to sell the Company’s neutralizing antibody (“Nab”) rapid test For Research Use Only (“RUO”) as it does not require FDA approval.
On March 8, 2022, we announced that we had successfully developed what we believe to be the first-ever rapid quantitative tear test for MMP-9, an inflammatory biomarker for Dry Eye Disease. Matrix metalloproteinase-9 (MMP-9), an inflammatory biomarker consistently elevated in the tears of dry eye patients, may accelerate early diagnosis when detected.
On April 27, 2022, we announced the successful development of a rapid quantitative tear test for Lacritin, a tear protein that autonomously promotes tearing and is being review by the FDA, and we have received and responded to their inquiries.deficient in all forms of Dry Eye Disease.
On May 3, 2021,10, 2022, we announced the development of a new ELISA test that measures neutralizing antibodies against six common variantsnovel tear sample collector system and the filing of SARS-CoV-2 virus. The new test may provide vaccine companies with valuable information for how well their vaccines protect against SARS-CoV-2 variants. Aa provisional patent application was filed for it with the new diagnostic test.U.S. Patent and Trademark Office that provides a more comfortable experience for patients and that facilitates the tear collection process.
On May 5, 2021, our manufacturing partner, Empowered Diagnostics filed24, 2022, we announced that we had completed the optimization of a rapid diagnostics test for approvalthe quantitative measurement of Ocular Immunoglobulin E (IgE), a biomarker for our rapid COVID-19 neutralizing antibody test in whole blood at point of care locations in Canada and the EU.
The applications are pending approval in Canada and the EU; CE mark has been filed for Canada.ocular allergies.
On May 6, 2021,June 2, 2022, we launched the Company completed pre-clinical drug studies for SPX-1009, demonstrating the suppression of malignant metastatic melanoma cells. The clinical work was completed by Dr. Douglas Lake at Arizona State University. The Company intendsCompany’s new mobile-optimized website designed to initiate animal studiesprovide doctors, researchers and other medical professionals with tailored, timely information and resources that will enable them to demonstrate suppression of tumor growth and metastasis in a murine model of melanoma mid-2022.make informed decisions when purchasing AXIM’s proprietary diagnostic tests.
On July 29, 2021,12, 2022, we entered into an Asset Purchase Agreementannounced our publication in collaboration with Advanced Tear Diagnostics, LLC (ATD) to acquire certain intellectual property relating to electrochemical impedance/capacitance technology (EIS), including three pending patent applications co-owned withresearchers at Arizona State University and two solely owned by ATD for(ASU) entitled, “Third COVID-19 Vaccine Dose Boosts Neutralizing Antibodies in Poor Responders“ in Communications Medicine, part of the purchase priceNature family of $250,000. The Company intends to conduct research and development with the aim of exploring EIS as a new platform for its diagnostic tests, initially for ophthalmic applications. EIS is a powerful technique that utilizes a small amplitude, alternating current (AC) signal to probe the impedance characteristics of a cell. EIS offers the potential to develop rapid point of care tests with very high sensitivity capable of molecular measurement and measuring numerous multi-markers on one sensor. The potential exists to develop sensors for virtually any sample type, and any analyte to which there is an antibody available.journals.
On August 3, 2021,July 21, 2022, we announced that Axim’s CEO John Huemoeller had been featured on the Company and ATD entered into a Binding Term Sheet with the intent to sign the definitive agreement to acquire the technology for testing of Dry Eye Disease, including two 510k premarket clearances from the FDA to commercialize two ophthalmic diagnostic point of care lab tests to measure levels of Lactoferrin, a biomarker for DED, and Immunoglobulin, a biomarker for allergic reaction. The purchase price was seven million (7,000,000) shares of Axim common stock.Vision is More Than 20/20™ podcast.
On AugustJuly 26, 2021,2022, we entered intoannounced that we had developed an Asset Purchase Agreement, the definitive agreement to finalize the acquisitionenhanced version of the Dry Eye Disease technology pursuant to the terms of the Binding Term Sheet signed August 2, 2021.
On August 30, 2021, our manufacturing partner filed an amended EUA with the FDA for ourits rapid COVID-19 neutralizing antibodyOcular Immunoglobulin E (IgE) test in whole blood at pointresponse to a study recently published in Nature that climate change is making allergy season occur sooner and for a longer period of care locations. After several discussions with the FDA, the company amended the EUA application for ImmunoPass for the test results to be interpreted qualitatively. The package included updated clinical trials, BSL3 lab live virus comparisons, stability and control studies and a robustness study to further validate the test’s accuracy when conducted under varying conditions. The FDA has made inquiries which have been responded to and were filed on October 8, 2021.time than in recent years.
On September 15, 2021,19, 2022, we announced the appointmentsigned an exclusive global commercial partnership agreement with Verséa Ophthalmics, LLC, a business division of Jeffrey A. Busby to the position of Senior Vice President-Business Development. Mr. Busby brings 30 years experience developing and managing national and international ophthalmic medical device sales and support. He will be responsible for the launch and commercializationVerséa Holdings, Inc. (“Verséa”), one of the Company’s recently acquiredfastest growing US healthcare companies, specialized in the sale and distribution of ocular diagnostic technologies for dry eye disease.relating to Axim’s proprietary portfolio of point-of-care (POC) lab testing readers and three key biomarker diagnostic tests designed specifically to assist eye-care physicians in detecting and quantifying biomarkers associated with aqueous deficient Dry Eye Disease and non-specific allergic conjunctivitis.
On September 21, 2021,29, 2022, we announced the appointment of Joseph Tauber, MD, as Chief Medical Officer and Chairmanstarted selling our ophthalmic point-of-care (POC) diagnostic product portfolio in advance of the Company’s Medical Advisory Board. Dr. Tauber is an internationally recognized authority in the fieldAmerican Academy of ocular surface diseases including dry eye and meibomitis management. Dr. Tauber has over 30 years experience as Ophthalmology Annual Meeting through our exclusive commercialization partner Verséa clinical trials researcher and has served on numerous scientific advisory boards.Ophthalmics, LLC, a subsidiary of Verséa Holdings, Inc.
On October 5, 2021,4, 2022, we appointed Dr. Laura Periman toreceived an initial order of 19,000 point-of-care (POC) diagnostic tests and 100 readers targeting ocular surface diseases through our exclusive global commercialization partner Verséa Ophthalmics, LLC (“Verséa”), marking the Company’s Medical Advisory Board. Dr. Periman has extensive clinical practice experience specializing in ocular surface disease and dry eye disease.first large-scale revenue generating order.
On October, 11, 2021, we announced the appointment of Dr. Henry D. Perry to the Company’s Medical Advisory Board joining Chairman Dr. Tauber and Dr. Periman. Dr. Perry is recognized as one of the country’s leading cornea and refractive surgeons.
On October 12, 2021, we announced the our second generation test that measures neutralizing antibodies against COVID-19 . The first rapid test developed by the Company, currently under FDA review, measures levels of neutralizing antibodies which provide protection from COVID-19 infection if blood levels are high enough. The second generation version of the original test differentiates between antibodies that simply bind to the virus but do not neutralize it versus antibodies that bind and neutralize the virus. This is important because COVID-19 vaccines do not induce high levels of neutralizing antibodies in all recipients. AXIM’s second generation test provides users with a test that shows if they responded to their COVID-19 vaccine and a semi-quantitative analysis of their neutralizing antibody levels in a single test. We have also filed for patent protection of the invention.
On October, 20, 2021, we announced the appointment of Kelly K. Nichols, O.D., M.P.H., Ph.D., to the Company’s Medical Advisory Board joining Chairman Dr. Tauber, Dr. Periman and Dr. Perry. Dr. Nichols is a founding member of the Ocular Surface Society of Optometry, and currently serves as Dean of the School of Optometry at The University of Alabama at Birmingham. She is an acknowledged expert on DED and Ocular Surface Disease and has been extensively published.
Anticipated Expenses
During the next twelve months we anticipate incurring costs related to: (i) filing Exchange Act reports, (ii) contractual obligations, (iii) clinical trials, (iv) continued research and development, and (v) launch and commercializationinventory for sales of two ophthalmic “point of care” diagnostic lab tests.dye eye products.
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Intellectual PropertyINTELLECTUAL PROPERTY
OVERVIEW:
Category Issued Patent Provisional Patent Applications QSOX-1 1 11 SARS-CoV-2 13 EYE Health 2 EIS Platform 6
I. QSOX1-RELATED INVENTIONS.
QSOX1 (Quiescin Sulfhydryl Oxidase 1) is an enzyme that is over-expressed in multiple tumor types. Genetically silencing QSOX1 in tumors slows their growth, migration, invasion and metastasis. Based on these findings, the inventors of the inventions described below tested libraries of chemical compounds for the ability to inhibit QSOX1. Several inhibitors of the QSOX1 enzyme were identified. Initially, SBI-183 was identified and animal studies confirmed its ability to suppress tumor growth. The inventors subsequently developed an entire library of analogs of the parent compound, SBI-183, detailed in several inventions below to identify compounds with greater inhibitory activity. These compounds have the potential to be developed into therapeutic treatments for metastasis and to be used in conjunction with other neoplastic treatments, such as chemotherapy.
Included in the group of QSOX1-related inventions below is the identification of a specific splice variant of QSOX1, identified as QSOX1-L, as a unique Biomarker for the detection of certain tumors over-expressingoverexpressing QSOX1. This biomarker formed the basis for the invention relating to a Rapid Diagnostic Test for certain cancers.
A. Anti-Neoplastic Compounds and Methods Targeting QSOX1
1. US Provisional Patent Application No. 62/218.732 filed on September 15, 2015
PCT Provisional Patent Application W02017048712A1
US Nonprovisional Application No. 15/748,784 filed on January 30, 2018
Notice of Patent Allowance dated September 17, 2020
US 10,894,034 B2 Issued January 19, 2021
Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1
Assignee: Mayo Clinic/Arizona State University
Exclusive Licensee: Axim Biotechnologies, Inc.
Compounds and methods involving inhibition of the enzymatic activity of QSOX1. The compounds and methods can be used in treatment of neoplastic cells to suppress tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidney and pancreas. Claims include the compound SBI-183 as a neoplastic agent found to inhibit tumor growth, invasion and suppress metastasis of tumors by inactivating QSOX1.
a. Continuation US Patent Application 17/124/242 filed on December 16, 2020
Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1
Assignee: Mayo Clinic/Arizona State University
Exclusive Licensee: Axim Biotechnologies, Inc.
Compounds and methods involving inhibition of the enzymatic activity of QSOX1. The compounds and methods can be used in treatment of neoplastic cells, for example, to suppress tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidney, and pancreas.
2. US Provisional Patent Application No. 62/916,065 filed on October 16, 2019
Title: Chemical Compounds that Inhibit QSOX1 for the Treatment of Cancer
Assignees: Arizona State University/Axim Biotechnologies, Inc.
Derivatives of the parent compound SBI-183 have been identified as inhibiting the enzymatic activity of QSOX1. These compounds can be used in treatment of neoplastic cells by suppressing tumor growth and invasion in a variety of cancers that over-expressoverexpress QSOX1, including but not limited to myeloma and cancers of the breast, kidney and pancreas.
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3. US Provisional Patent Application No. 62/916,067 filed October 16, 2019
Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1
Assignees: Arizona State University/Axim Biotechnologies, Inc.
Exclusive Licensee: Axim Biotechnologies, Inc.
Compounds that are structurally distinguishable from the compound, SBI-183 are SPX-013 and SPX-014, and have been identified as inhibiting the enzymatic activity of QSOX1. The compounds and methods can be used in treatment of neoplastic cells by suppressing tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidney and pancreas.
4. US Provisional Patent Application No. 62/944/283 filed December 5, 2019
Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1
Assignees: Arizona State University/Sapphire Biotech, Inc.
Exclusive Licensee: Axim Biotechnologies, Inc.
Compounds that are structurally distinguishable from the SBI-183 have been identified as inhibiting the enzymatic activity of QSOX1. One in particular, SPX-1009, also inhibits tumor cell growth, migration and invasion in vitro and metastasis in a mouse model of triple negative breast cancer. This invention concerns analogs of this lead compound SPX-1009. In in vitro testing, the lead compound SPX-1009 and its analogs have been found to be more potent and to have improved pharmacodynamics in mouse models of cancer.
5. US Provisional Patent Application No. 62959752 filed January 10, 2020
Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1 and Inhibiting Cellular Responses to MET Receptor.
Assignee: Axim Biotechnologies, Inc.
Compounds and methods involving inhibition of the enzymatic activity of QSOX1 and methods of inhibiting cellular responses to the MET receptor signaling are disclosed which include administering any one or more compounds or pharmaceutical compositions. The compounds and methods can be used in treatment of neoplastic cells, for example, to suppress tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidney and pancreas. The uniqueness of the invention relates to the combined inhibition of QSOX1 and cellular responses to the MET receptor signaling.
B. Unique Biomarker QSOX1-L Identified and Rapid Diagnostic for Various Cancers
1. US Provisional Patent Application No. 62/829,556 filed April 4, 2019;
Utility Patent Application No. 16/841,521 filed April 6, 2020
International Patent Application No. PCT/US2020/026936 filed April 6, 2020
Title: Systems and Methods for Rapid Diagnostic for Various Cancers
Assignee: Axim Biotechnologies, Inc.
QSOX1-L, a splice variant of QSOX1, has been identified as a novel biomarker of bladder cancer and possibly other cancers in serum. Proprietary antibodies have been generated that selectively detect only this variant and not others. QSOX1-L has been used to develop a rapid and cost-effective diagnostic test for bladder and possibly other urologic cancers from urine.
C. Unique Compound SPX-184 Invented and methods for Neoplastic Cell Growth Inhibition of Tumors and Cancers
2. US Provisional Patent Application No. 63/280,553 filed November 17, 2021Title: Compositions, Compounds, and Methods for Neoplastic Cell Growth Inhibition of Tumors and Cancers Assignee: Axim Biotechnologies, Inc.
The present invention generally relates to compositions, compounds and methods for the treatment of various tumors or cancer and cell growth inhibition utilizing SPX-184.
II. SARS-CoV-2-RELATED INVENTIONS
A. Rapid Diagnostic Test to Measure Levels of Neutralizing Antibodies to SARS-CoV2
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1. US Provisional Application No. 63/023,646 filed May 12, 2020
Title: Convalescent Plasma Testing and Treatment
Assignee: Axim Biotechnologies, Inc. (Axim) and Arizona State University (ASU)
Exclusive Licensee: Axim Biotechnologies, Inc. (ASU’s Interest)
Exclusive Licensee: Empowered Diagnostics, Inc. (Axim’s Interest). License terminated March 4, 2022.
The invention refers to a Rapid Test to measure levels of Neutralizing Antibodies to SARS-CoV2. Unlike currently available serological COVID-19 tests that detect an antibody response to the virus, the rapid 10-minute test measures a specific subpopulation of antibodies that block binding of the virus to host cell receptors. In contrast to current tests using live viruses which are time-consuming, expensive and require trained personnel in a tightly controlled laboratory setting to measure neutralizing antibodies, the rapid test is a portable, low cost, rapid point- of-care test that measures levels of neutralizing antibodies in 10 minutes.
2. US Provisional Application No. 63/144,454 Filed February 1, 2021; US Provisional Application
No. 63/152,774.152,774 Filed February 23, 2021
2021.
Title: Rapid LFA Diagnostic Test to Measure Levels of Neutralizing Antibodies to SARS- CoV-2 from Whole Blood
Assignee: Axim Biotechnologies, Inc.
Exclusive Licensee: Empowered Diagnostics, Inc. License terminated March 4, 2022.
The invention methods and test kits can be used with any sample in which the presence, absence and/or quantity of neutralizing antibodies (nAbs)(Nabs) to SARS-CoV-2 is desired to be determined, such as for example, serum, plasma, whole blood, saliva, mucous, and other biological fluids. In a particular embodiment, the invention methods and/or kits are used with whole blood.
All provisionals referenced in 1. and 2. above relating to the LFA Diagnostic Test were the subject of a conversion into an International Patent Application No. PCT/US2021/032106.
3. US Provisional Patent Application No. 63/252,908
Filing Date: October 6, 2021
Title: Development of the Engender SAR-Cov2 Recombinant Protein Variants
Assignee: Axim Biotechnologies, Inc.
The invention relates to differentiates between antibodies that bind to the virus but do not neutralize and those that do bind and neutralize the virus. COVID-19 vaccines do not induce high levels of neutralizing antibodies in all recipients.recipients AXIM’s second generation test provides users with a test that shows if they responded to their COVID-19 vaccine and a semi-quantitative analysis of their neutralizing antibody levels in a single test.
4. Status Update: All provisionals referencedUS Provisional Patent Application No. 63/275,856
Filing Date: November 4, 2021
Title: Tests For Detection of Neutralizing And Non-Neutralizing Antibodies and Related Methods.
The invention relates to the detection of the percent neutralizing to non-neutralizing antibodies in 1.a single test. Totality of non-Nab provides information on the presence of general innate immune response Nab test determines serum neutralizing activity. Ratio Nab/Non-Nab provides percent of protective Abs.
5. Continuation-in-Part 17/590,353 filed on February 1, 2022 to US Provisional Application 17/319,08 filed on May 12, 2021
Title: Assay for Neutralizing Antibody Testing and 2. hereinTreatment
Assignee: Axim Biotechnologies, Inc.
The invention diagnostic test is intended for semi-quantitative measurement of neutralizing antibodies in plasma, serum or whole blood of persons who have had recent or prior infection with SARS-CoV2 or have received a COVID-19 vaccine.
6. Continuation-in-Part 17/726, 431 filed on April 21, 2022 of US Provisional Application 17/319,08 filed on May 12, 2021
Title: Assay for Neutralizing Antibody Testing and Treatment
Assignee: Axim Biotechnologies, Inc.
The invention diagnostic test is intended for semi-quantitative measurement of neutralizing antibodies in plasma, serum or whole blood of persons who have had recent or prior infection with SARS-CoV2 or have received a COVID-19 vaccine. A sequence listing was filed with the application relating to the LFA Diagnostic Test wereimplementation of new variants to SARS-CoV-2 into the subject of a conversion into an International Patent Application No. PCT/US2021/032106.invention diagnostic test to detect neutralizing antibodies.
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B. AlphaLisa Assay for High Throughput Detection of Neutralizing Antibodies to SARS-CoV2
1.US1. US Provisional Application No. 63/060,635 filed August 3, 2020; US Provisional Application No. 63/061,112 filed August 4, 2020
Title: NeuCovix-HT AlphaLisa assay for high throughput detection of Neutralizing Antibodies to SARS-CoV-2.SARS-CoV-2
Assignee: Axim Biotechnologies, Inc. and Arizona State University (ASU)
Exclusive Licensee: Axim Biotechnologies, Inc. (ASU’s Interest)
2. Status Update: The invention refers to an AlphaLisa assay for high throughput (HT) detection of Neutralizing antibodies to SARS-CoV-2. Included in the claims is the HT diagnostic test that measures levels of functional antibodies in plasma or serum that neutralize SARS- CoV-2, the virus that causes COVID19. Unlike current serology tests for COVID 19 that qualitatively detect antibodies to the virus, the HT test quantitatively measures functional antibodies that block binding of the virus to host cell receptors.
All provisionals referenced in 1. herein relating to the AlphaLisa Assay have been abandoned due to the Company’s decision that commercialization of this technology is not viable.
C. Direct Competitive ELISA for the Detection of SARS-Cov2 Neutralizing Antibodies
1. US Provisional Application No. 63/152,807 filed February 23, 2021
Title: Direct Competitive ELISA for the Detection of SARS-CoV2 Neutralizing Antibodies
Assignee: Axim Biotechnologies, Inc.
2. Status Update: The invention relates to a method for rapid detection of SARS-CoV2 Neutralizing Antibodies in one of the following test samples: human or animal serum, plasma, saliva, tear, sweat, exhaled breath condensate. The test sample is mixed with an ACE2 label detection reagent. The sample mixture is incubated, and the quantity of ACE2 label detection reagent bound to the RBD molecules indicates the quantity of SARs-Co2 Neutralizing Antibodies.
The provisional referenced in 1. herein relating to the ELISA technology has been abandoned due to the Company’s decision that commercialization of this technology is not viable.
D. ACE2 Variants
1. US Provisional Application No. 63/081,811081, 811 filed September 22, 2020
Title: Super-ACE2 Variants
Assignee: Axim Biotechnologies, Inc.
The invention relates to a new variant recombinant protein of ACE2 identified as ACE2-614-Fc (“Super ACE2”), that is more potent and has a longer shelf life and is more stable than wild type ACE2. Super ACE2 variant can be used in a variety of ways:ways as follows:
1)a. Development of competitive assays for neutralizing antibodies that disrupt RBD- ACE2 interaction.
2)b. Direct assays for virus spike antigens. Super ACE2 acts as a very specific antibody to capture Spike proteins through the RBD domain.
3)c. Cardio-vascular, blood-pressure and related disorders therapeutic and diagnostic.
4)d. Anything related to the virus capture such as (i) Mask treatments, (ii) Aerosols, (iii) Sprays and drops, (iv) Ointment and dermal applications, (v) Surfaces
E. Facemask Having Enhanced Infectious Agent Capturing and Related Methods
1. US Provisional Application No. 63/066,104 filed August 14, 2020;
US Provisional Application No. 63/084,407 filed September 28, 2020
Title: Facemask Having Enhanced Infectious Agent Capturing &and Related Methods
Assignee: Axim Biotechnologies, Inc.
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The invention is a facemask with a filtration material and an infectious agent capture-moiety. Infectious agent capture-moiety refers to any compound or biomolecule that can bind to any infectious agent. The filtration material acts as a scaffold to either directly block or impede the flow-through of the infectious agent or to support the infectious agent capture moiety. The infectious agent capture- moietycapture-moiety then functions to directly block or impede the flow-through of an infectious agent. The infectious agent-capture moiety can aerosolized and sprayed or applied onto pre-treated filtration material and can be specific to capture infectious agents, such as SARS-CoV-2. In such embodiments, the facemasksfacemask is capable of providing enhanced protection for the user and to others from SARS-CoV-2.SARS-CoV2.
2.F. Molecules and Related Assays, Test Kits and Methods
1. US NonprovisionalProvisional Patent Application No. 17/402,355, filed August 13, 202163/378,673
Title: Face Masks and Other Protective Devices Having Enhanced Virus
Entrapment Efficiency and Related MethodsFiling Date: October 6, 2022
The nonprovisional patent application is a conversion of the two provisional applications referenced herein in 1.Title: Molecules and Related Assays, Test Kits and Methods
Assignee: Axim Biotechnologies, Inc.
Various recombinant proteins, test kits, test kit components and methods for detecting and measuring first and second different antibodies are provided in the invention. In some aspects, a test kit and method for detecting and measuring “binding antibodies” (for example, non-neutralizing antibodies) as well as “functional antibodies” (for example, neutralizing) in a single test and at the same time are demonstrated. Such test kit and method can advantageously improve the diagnosis and therapy of various diseases. |
III. TECHNOLOGY PLATFORM-RELATED INVENTIONS
A. Electrical Capacitance/Impedance Spectroscopy
1.Title:1. Title: Imaginary Impedance Approach and Signal Decoupling Algorithm for Multi-Marker Detection Using Electrochemical Impedance Spectroscopy”.Spectroscopy.
U.S. Patent Application
Serial No.: 16/495,682
Filed: March 20, 2018
Exclusive License of Advanced Tear Diagnostics, LLC’s (ATD)
Interest: Axim Biotechnologies
Co-owned by Arizona State University.
Methods for detecting one or more analytes in a sample utilizing Electrochemical Impedance Spectroscopy (EIS) measurement. In one method, analyte detection includes comparing an imaginary impedance measurement to a calibration curve of concentrations for each target analyte. The calibration curve of concentrations for each target analyte is established at an optimal frequency. In another method, a signal decoupling algorithm is utilized for detection of more than one analyte on an electrode.
2. Title: Electrochemical Osmolarity or Osmolality Sensor for Clinical Assessment”.Assessment.
U.S. Provisional Patent Application Serial No.: 62/455,913. Filed: February 7, 2017 PCT: W02018 148236
Exclusive Licensee of ATD’s Interest: Axim Biotechnologies, Inc.
Co-owned by Arizona State University
Osmolality and osmolality sensors and methods utilizing electrochemical impedance to detect changes in impedance to varying salinity concentrations. By way of example, the impedance reported at the specified frequency varies logarithmically with the concentration of sodium chloride subject to the sensor surface. Measurements obtained by the sensors and methods herein are utilized, for example, to differentiate between the clinical stages of dry eye disease (290- 316 mOsm/L) to complement the current diagnostic procedures. Blood serum, urinalysis, and saliva also may be tested and the corresponding osmolarity or osmolality level evaluated for indications of a disease or condition.
3. Title: Point of Care Apparatus and Methods for Analyte Detection Using Electrochemical Impedance Spectroscopy”.Spectroscopy.
U.S. Provisional Patent Application: US2021/011778171. PCT/US 2018 03760.
Filed: May 4, 2018
Exclusive Licensee of ATD’s
Interest: Axim Biotechnologies, Inc.
Co-owned by Arizona State University
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The presence of analytes can be detected in the bodily fluid using Electrochemical Impedance Spectroscopy (“EIS”) or Electrochemical Capacitance Spectroscopy (“ECS”) in devices, such as handheld point-of-care devices. The devices, as well as systems and methods, utilize using EIS or EIS in combination with an antibody or other target-capturing molecule on a working electrode. Imaginary impedance or phase shift, as well as background subtraction, also may be utilized.
4. Title: Point of Care Apparatus and Methods for Detecting Cancer Using Electrochemical Impedance or Capacitance Spectroscopy.”
U.S. Provisional Patent Application
Serial No.: 16/119,989
Filed: August 3, 2018
Exclusive Licensee: Axim Biotechnologies, Inc.
The presence of cancer biomarkers or other analytes can be detected in the bodily fluid using EIS or ECS in devices, such as handheld point-of-care devices. The devices, as well as systems and methods, utilize using EIS or ECS in combination with an antibody or other target-capturing molecule on a working electrode. Imaginary impedance or phase shift, as well as background subtraction, also may be utilized.
5. Title: Point of Care Apparatus and Methods for Detecting Cancer Using Electrochemical Impedance or Capacitance Spectroscopy.”
U.S. Patent Application Continuation-in-Part.
Serial NO.No.: 16/121,474 Filed: September 4, 2018.2018
Exclusive Licensee: Axim Biotechnologies, Inc.
This disclosure is related to detection tools, diagnostics and related methods in volving the use of an electrochemical sensor in conjunction with electrochemical impedance spectroscopy or electrochemical capacitance spectroscopy, and more particularly to using such tools to detect cancer via biomarkers contained in bodily fluids using such detection tools, diagnostics, and related methods. Many different analyte detection devices and systems exist. However, those that can be practically applied in a clinical, point of care or other setting requiring accuracy and reliability are fairly limited and tend to be complex and expensive.
6. Title: Point-of-Care Apparatus and Methods for Detecting Cancer Using Electrochemical Impedance or Capacitance Spectroscopy
US Patent Application No. 17/876,364
Filing Date: July 28, 2022
Assignee: Axim Biotechnologies, Inc.
This disclosure is related to detection tools, diagnostics and related methods in volving the use of an electrochemical sensor in conjunction with electrochemical impedance spectroscopy or electrochemical capacitance spectroscopy, and more particularly to using such tools to detect cancer via biomarkers contained in bodily fluids using such detection tools, diagnostics, and related methods. Many different analyte detection devices and systems exist. However, those that can be practically applied in a clinical, point of care or other setting requiring accuracy and reliability are fairly limited and tend to be complex and expensive.
IV. EYE HEALTH
1. Title: TEAR SAMPLE COLLECTORS, SYSTEMS AND METHODS
U.S. Provisional Patent Application No. 63/307,987 filed February 8, 2022.
Exclusive Assignee: Axim Biotechnologies, Inc.
Tear fluid analysis contributes to the greater understanding of various ocular and systemic diseases and obtaining adequate samples for tear analysis requires effective collection methods. Most tear sample collectors on the market use capillary designs as tear sample collectors. These designs are intimidating to the patient when a sharp looking object is approaching the eye, are rather difficult to use by untrained personnel and are expensive to manufacture. Quidel InflammaDry is using a wick type tear sample collector that does not have any fill-up indicator and is rather intricate to produce on mass scale. Other prototype sample collectors employ Q-tip designs, filter paper strips (Schirmer’s test) are imprecise, some are difficult to produce en masse. Here we introduce a laminated and looped tear sample collectors that addresses the above problems and that are: 1) Cost-effective to produce on mass scale 2) Features a fill-up indicator (in case of laminated version) 3) Easy to use 4)Soft and non-intimidating to user and patient.
Trade Secrets2. Title: TESTS FOR HUMAN MONOMERIC LACRITIN
US Patent Application No. 63/301,437 Filed January 20, 2022
Exclusive Licensee: AXIM Biotechnologies, Inc.
The invention relates to a Rapid Point of Care test for Human Monomeric Lacritin. Lacritin is a tear protein that, in its monomeric form, autonomously promotes tearing and ocular surface survival. Lacritin is the only identified growth-like factor decreased in tears from patients with ocular surface inflammation resulting from blepharitis, and it is downregulated in contact lens-related dry eye. This provisional describes six different lateral flow assay designs for the detection of monomeric lacritin from human tears to diagnose blepharitis, Sjögren’s syndrome, Dry Eye Disease and other inflammatory conditions or as a companion diagnostics at point of care settings.
V. TRADEMARKS
We rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technologyhave two trademarks registered with the United States Patent and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisorsTrademark Office: Axim (Registration Date: May 19, 2015; and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these procedures, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors, or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.Axim Biotech (Registration Date: May 31, 2016).
Market, Customers and Distribution Methods
Our focus is on the development of innovative pharmaceutical and diagnostic and pharmaceutical products focusing on diseases and conditions for which currently there are no known efficient therapeutic ingredients or delivery systems.products. We plan to be an active player in thisthe field of biosciences with our extensive R&D and pipeline of innovative products.
Regarding the 2020 exclusive licensing, manufacturing, and distribution agreement with Empowered Diagnostics LLC to manufacture and sell Currently, our rapid point-of-care diagnostic test, the technology transfer has been completed. Empowered Diagnostics have built out their production facility to be able to manufacture millions of our neutralizing antibody tests for COVID-19 per month. The FDA is presently reviewing Empowered’s Emergency Use Authorization relating the test.
With the addition of our new Axim Eyeeye business the Company will focusfocuses exclusively on ophthalmology and optometry, in the United States, where there are 37,000 optometrists and 19,000 ophthalmologists performing approximately 400,000 medical (dilated) eye exams per day. Of this total, approximately 20% to 30% would present with symptoms where ATD’s Lactoferrin & IgE tests would be indicated. It is estimated that total US market for AXIM EYE systems could approach 50,000 systems. (USA Only)
AXIM EYE has completed development of its immunoassay system which includes an automated colorimetric photometer reader and two (2) FDA market cleared point-of-care (POC) quantitative diagnostic ophthalmic lab tests for Ocular Lactoferrin and Ocular Immunoglobulin. Both of these products are covered by CPT codes and CMS reimbursement eligible. Studies indicate that in 2021, there were 16-49 million Americans diagnosed with Dry Eye Disease (DED), representing 32 - 98 million potential Axim Eye POC tests. These tests are not limited to DED diagnostics but can also be used to determine the Lactoferrin and allergic components of tear film prior to Contact lens fitting (45 million people wear contact lens in the US), LASIK surgery (approximately 7,180,000, Cataract surgery with lens exchange (approximately 3.8 million).
Competition
The biotechbiotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products and intellectual property. While we believe that our scientific knowledge, technology, and development experience provide us with competitive advantages, weproducts.
We face potential competition from many different sources, including major pharmaceutical, specialtycommercial pharmaceutical and biotechnology companies,enterprises, academic institutions, governmentalgovernment agencies, and private and public research institutions. Our commercial opportunities will be reduced or eliminated if our competitors develop and private research institutions, somecommercialize products that are safer, more effective, have fewer side effects or all of which may have greater access to capital or resourcesare less expensive than we do. For any products that we or our collaborators may ultimately commercialize, not onlydevelop based on the use of our technologies.
While we believe that the potential advantages of our new technologies will enable us to compete effectively against other providers of technology for Covid-19 NAb product development and manufacturing, many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, clinical trials, regulatory approvals and marketing approved products than we do. Smaller or early stage companies may also prove to be significant competitors, particularly through arrangements with large and established companies, and this may reduce the value of our technologies. In addition, these third parties compete with any existing diagnostic testsus in recruiting and therapiesretaining qualified scientific and those products currentlymanagement personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.
The barrier for entrance into the dry eye space is difficult and requires extensive clinical studies, large capital expense and FDA 510k clearance. This process alone can take several years and substantial investment, with no certainty that the product will receive FDA 510k clearance. It is estimated that as of 2021, the total Company funding necessary to develop a Class II 510k cleared medical device is approximately $30 million. The development but we will also have to compete with new technologiesand engineering costs comprise approximately $2-5 million of this total. There are many factors that may become available ininfluence these costs, including the future.need for clinical studies, regulatory pathway and technology complexity.
We expectbelieve that the market will become increasingly competitivewe are well situated in the future. ManyEye Health sector with two 510(k) cleared tests. Additionally, the preferred clinical analysis is quantitative, giving us an advantage over the competition. Since our reader can interpret many different analytes other than Lf and IgE, it also opens the possibility of our competitors, either alone or together with their collaborative partners, operate much larger research and development programs, and have substantially greater commercial and financial resources than we do, as well as significantly greater experience in: developing product candidates and technologies, undertaking preclinical studies and clinical trials, obtaining FDA and other regulatory approvals of product candidates, formulating and manufacturing diagnostic products and drug candidates and launching, marketing and selling these candidates. As a result, these companies may obtain marketing approval more rapidly than we are able and may be more effective in developing, selling, and marketing their products.additional quantitative test development.
In the eye care sector, the tools currently available include tests for osmolarity (salt content in tears) and MMP-9 (eye inflammation). However, both are non-differential meaning they are screening tests that require follow-up testing because positive results could point to conditions other than Dry Eye Disease. Axim’s eye tests are specifically differential for a diagnosis of Dry Eye Disease and also provide a quantitative measure for the doctor to assess the severity of the condition.
Source and Availability of Raw Materials
As our scientific team was developing our COVID-19 rapid diagnostic tests and virus-capturing face mask,In General there are a limited number of suppliers for raw materials that we were frustrated by the delays and costs caused by lack of supply of a recombinant virus binding protein (VBP) for SARS-CoV-2 that was essential to our testing. To continue our projects as planned and decrease overall costs, AXIM’s team decided to make its own VBP. This now in-house development of the core ingredients neededuse to manufacture our products allows usand product candidates and there may be a need to assess alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates for clinical trials, and if approved, ultimately for commercial sale. We do not have any control our supply chain.over the process or timing of the acquisition of these raw materials by us.
Government Regulation
The Emergency Use Authorization (EUA) submitted on July 15, 2020 for the Company’s rapid diagnostic test kit for the independent detection of neutralizing antibodies in sera of patients who had been exposed to the SARS-CoV-2 virus using plasma and serum samples has been withdrawn. Axim decided to withdraw this EUA in favor of submitting a new EUA filed by our partner, Empowered Diagnostics, for the same test but using whole blood to be administered at the point of care. We believe that the market reception to the point of care test will be greater using whole blood v. plasma or serum. We have already received initial inquiries from the FDA that we responded to and filed on October 8, 2021.
Similarly, Axim decided to withdraw the August 5, 2020 EUA for NeuCovix-HT™, the high throughput (HT) diagnostic test that measures levels of functional antibodies in plasma or serum that neutralize SARS-CoV-2, the virus that causes COVID-19. We have also decided not to pursue commercialization of our ELISA test. We believe our focus on the point of care market versus lab testing with NeuCovix and the ELISA test will be more advantageous for Axim.
An EUA would allow usWe currently manufacture the majority of our preclinical and Covid-19 testing materials in-house, and use contract manufacturers for the manufacture of some of our product candidates. We may or may not manufacture the products we develop, if any. Our internal manufacturing and contract manufacturers are subject to marketextensive governmental regulation.
In the dye eye segment, we either make our reagents or they are sourced from select suppliers. We use contract manufacturers for the manufacture of our assays and sellreaders.
Government Regulation
Government authorities in the test withoutU.S. (including federal, state and local authorities) and in other countries extensively regulate, among other things, the needmanufacturing, research and clinical development, marketing, labeling and packaging, storage, distribution, post-approval monitoring and reporting, advertising and promotion, export and import of pharmaceutical products, such as those we are developing. 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. Moreover, failure to pursuecomply with applicable regulatory requirements may result in, among other things, warning letters, clinical holds, civil or criminal penalties, recall or seizure of products, injunction, disbarment, partial or total suspension of production or withdrawal of the lengthyproduct from the market. Any agency or judicial enforcement action could have a material adverse effect on us.
Many, if not all of our customers, are covered entities under the Health Insurance Portability and expensive drug approval process. The FDA may issue an EUA duringAccountability Act of August 1996 or HIPAA. As part of the operation of our business, we provide reimbursement assistance to certain of our customers and as a public health emergency if it determines thatresult we act in the potential benefitscapacity of a product outweigh the potential risks and if other regulatory criteria are met. If an EUA is granted for the test,business associate with respect to any patient-identifiable medical information, or PHI, we will rely on the FDA policies and guidancereceive in connection with these services. We and our customers must comply with a variety of requirements related to the marketinghandling of patient information, including laws and saleregulations protecting the privacy, confidentiality and security of PHI. The provisions of HIPAA require our customers to have business associate agreements with us under which we are required to appropriately safeguard the PHI we create or receive on their behalf. Further, we and our customers are required to comply with HIPAA security regulations that require us and them to implement certain administrative, physical and technical safeguards to ensure the confidentiality, integrity and availability of electronic PHI, or EPHI. We are required by regulation and contract to protect the security of EPHI that we create, receive, maintain or transmit for our customers consistent with these regulations. To comply with our regulatory and contractual obligations, we may have to reorganize processes and invest in new technologies. We also are required to train personnel regarding HIPAA requirements. If we, or any of our employees or consultants, are unable to maintain the privacy, confidentiality and security of the test. If these policiesPHI that is entrusted to us, we and/or our customers could be subject to civil and guidance change unexpectedly and/criminal fines and sanctions and we could be found to have breached our contracts with our customers. Under the Health Information Technology for Economic and Clinical Health Act, or materially or ifHITECH Act, and recent omnibus revisions to the HIPAA regulations, we misinterpret them, potential salesare directly subject to HIPAA’s criminal and civil penalties for breaches of our privacy and security obligations and are required to comply with security breach notification requirements. The direct applicability of the test could be adversely impacted. In addition,HIPAA privacy and security provisions and compliance with the FDAnotification requirements requires us to incur additional costs and may revoke an EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization. If granted, we cannot predict how long an EUA for the test will remain in place. The termination of an EUA for the test, if granted, could adversely impactrestrict our business financial condition, and results of operations.
U.S. Government Regulation
Government authorities in the United States and other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing of our product, which is a medical device. In the United States, the FDA regulates medical devices under the Federal Food, Drug, and Cosmetic Act and implementing regulations. Failure to comply with the applicable FDA requirements, both before and after approval, may subject us to administrative and judicial sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, administrative fines or criminal prosecution.
Unless exempted by regulation, medical devices may not be commercially distributed in the United States until they have been cleared or approved by the FDA. Medical devices are classified into one of the three classes, Class I, II or III, on the basis of the controls necessary to reasonably assure their safety and effectiveness. Class II devices, the classification assigned to our two tests for lactoferrin and IgE, are subject to general controls, such as labeling, pre-market notification and adherence to good manufacturing practices. Laboratories or sites that perform our tests need to have a CLIA certificate, be inspected, and must meet the CLIA quality standards.
| 49 |
After a device receives 510(k) clearance, any modification to the device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, would require a new 510(k) clearance or an approval of a Premarket Approval, or PMA. A PMA is the FDA process of scientific or regulatory review to evaluate the safety and effectiveness of Class III medical devices which are those devices which support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Although the FDA requires the manufacturer to make the initial determination regarding the effect of a modification to the device that is subject to 510(k) clearance, the FDA can review the manufacturer’s determination at any time and require the manufacturer to seek another 510(k) clearance or an approval of a PMA.
CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. The regulations promulgated under CLIA establish three levels of in vitro diagnostic tests: (1) waiver; (2) moderately complex; and (3) highly complex. The standards applicable to a clinical laboratory depend on the level of diagnostic tests it performs. A CLIA waiver is available to clinical laboratory test systems if they meet certain requirements established by the statute. Waived tests are simple laboratory examinations and procedures employing methodologies that are so simple and accurate as to render the likelihood of erroneous results negligible or to pose no reasonable risk of harm to patients if the examinations or procedures are performed incorrectly. These tests are waived from regulatory oversight of the user other than the requirement to follow the manufacturer’s labeling and directions for use. We may also seek additional EUAs fromintend to file a waiver application with the FDA for the Axim Eye System.
Regardless of whether a medical device requires FDA clearance or approval, a number of other FDA requirements apply to the device, its manufacturer and those who distribute it. Device manufacturers must be registered and their products listed with the FDA, and certain adverse events and product malfunctions must be reported to the FDA. The FDA also regulates the product labeling, promotion and, in some cases, advertising of medical devices. In addition, manufacturers and their suppliers must comply with the FDA’s quality system regulation which establishes extensive requirements for quality and manufacturing procedures. Thus, suppliers, manufacturers and distributors must continue to spend time, money and effort to maintain compliance, and failure to comply can lead to enforcement action. The FDA periodically inspects facilities to ascertain compliance with these and other requirements.
Environmental Matters
No significant pollution or other types of hazardous emission result from our other product candidates forcurrent operations, and we do not anticipate that our operations will be materially affected by federal, state or local provisions concerning environmental controls. Our costs of complying with environmental, health and safety requirements have not been material. Furthermore, compliance with federal, state and local requirements regulating the detection and/discharge of materials into the environment, or treatmentotherwise relating to the protection of COVID-19 and the SARS-CoV-2 virus. If granted,environment, have not had, nor are they expected to have, any material effect on the additional EUAs would allow us to market and sell additional product candidates withoutcapital expenditures, earnings or competitive position of the need to pursue the lengthy and expensive drug approval process. There is no guarantee thatCompany. However, we will be ablecontinue to obtain any additional EUAs. Failure to obtain additional EUAs or the termination of such EUAs, if obtained, could adversely impact our business, financial condition, and results of operations.monitor emerging developments in this area.
Employees
As of September 15, 2021,30, 2022, we employed an internationally recognized authority in the field of ocular surface diseases included dry eye disease and meibomitis management, Dr. Joseph Tauber, as our Chief Medical Officer and Chairman of our Medical Advisory Board. Also, as of September 15, 2021, we employed Jeffrey Busby, a veteran of the eye care industry, as Senior Vice President of Business Development to launch and commercialize Axim’s diagnostic medical devices to diagnose Dry Eye Disease and Allergic Reaction. As of August 22, 2021, we have 6had six full-time employees and 1three part-time employee.employees. We also allow and utilize the services of independent contractors. Management believes that we have a good relationship with our employees.
Company Website
We maintain a corporate Internet website at: www.aximbiotech.com and an eye care-related website at: www.aximeye.com. The contents of our website are not incorporated in or otherwise to be regarded as part of this Report.
We file reports with the Securities and Exchange Commission (“SEC”), which are available on our website free of charge. These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, “Section 16” filings on Form 3, Form 4, and Form 5, and other related filings, each of which is provided on our website as soon as reasonably practical after we electronically file such materials with or furnish them to the SEC. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company.
Liquidity and Capital Resources
We are in our early stages of development and growth, without established records of sales or earnings. We will be consideringsubject to numerous risks inherent in the conversionbusiness and operations of some of our part-time employees to full-time positions. We are currently in discussions with qualified individuals to engage them for positions in salesfinancially unstable and marketing, research and development, and operations. Management believes the Company has good relationships with its employees.early stage or emerging growth companies.
Costs and effects of compliance with environmental laws
The expense of complying with environmental regulations is of minimal consequence.
Results of Operations
The following discussionAs of September 30, 2022, we had cash and cash equivalents of $163,746, working capital deficit of $(2,914,013), and an accumulated deficit of $63,226,126. We estimate our G&A expenses for 2022 to be approximately $3,500,000, which includes projected audit and accounting costs of $250,000. R&D expenses for 2022 will vary based on drug formulation and clinical trial project activity that the Company is engaged in, which in turn is determined by available capital. We do not expect R&D expenditures to exceed $2 million in 2022.
We can provide no assurance that the Company can continue to satisfy its cash requirements for at least the next twelve months.
We expect to obtain financing through shareholder loans, private placements and/or registered offerings of our securities. Shareholder loans may be without stated terms of repayment or interest. In addition, we may consider taking on long-term or short-term debt from financial conditioninstitutions in the immediate future. Shareholders loans may be granted from time to time as required to meet current working capital needs. We have no formal agreement that ensures that we will receive such loans. We may exhaust this source of funding at any time.
We are dependent upon certain related parties to provide continued funding and resultscapital resources. If continued funding and capital resources are unavailable at reasonable terms, we may not be able to implement our plan of operations foroperations. These loans may include terms that may be highly dilutive to existing shareholders.
On September 14, 2017, our Registration Statement on Form S-3 was declared effective by the period ended September 30,2021 should be readSEC. We issued 7,494,792 shares common stock pursuant to the Company’s Registration Statement on Form S-3 during the year ending December 31, 2020. No shares were issued in conjunction with2021 under the financial statementsS-3.
On June 22, 2021, our Registration Statement on Form S-1 was declared effective by the SEC. We issued 1,000,000 shares of Company common stock pursuant to an equity purchase agreement, dated on May 14, 2021, and the notes to those statements that are included elsewhere in this ReportRegistration Statement on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results andS-1 during the timingyear ending December 31, 2021. Subsequent to the year ended December 30, 2021, the Company issued an additional 4,000,000 shares of events could differ materially from those anticipated in these forward-looking statements as a resultits common stock for cash of a number of factors. We use words such as “anticipate”, “estimate”, “plan”, “project”, “continuing”, “ongoing”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, and similar expressions$484,126 pursuant to identify forward-looking statements.the equity purchase agreement, which shares were also registered pursuant to the S-1 Registration Statement.
ComparisonDuring January 2022, the Company issued 519,247 shares for cash of gross proceeds of $75,000 pursuant to various stock purchase agreements. The cash was received in the fourth quarter 2021 and first quarter 2022. The Company also issued warrants to purchase an aggregate of 519,247 shares of common stock at an average exercise price of $0.315 per share. The warrants are exercisable within a three year period from issuance.
Effective February 10, 2022, the Company issued two short term notes, each having a face amount of $250,000, in exchange for a total of $500,000 in cash (the “Short Term Promissory Notes”). The Short Term Promissory Notes bear interest at the rate of 1.5% per annum and were due and payable on or before March 10, 2022, unless demand for payment is made prior to such date. Both of the nine months and three months ended September 30, 2021 to September 30, 2020.two notes was paid in full on February 14, 2022.
ForEffective February 10, 2022, the nine months periods ended September 30, 2021 and 2020, our revenues from continuing operations totaled $55,651 and $-0-, respectively, our revenues from discontinued operations totaled $-0- and $7,990, respectively.
|
| Nine months |
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| Nine months |
|
|
|
|
|
|
| ||||
|
| Period Ended |
|
| Period Ended |
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| $ Change |
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| % Change |
| ||||
|
| 30-Sep-21 |
|
| 30-Sep-20 |
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|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
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| ||||
Research and development |
| $ | 216,282 |
|
| $ | 235,431 |
|
| $ | (19,149 | ) |
|
| -8.13 | % |
Depreciation |
|
| 20,119 |
|
|
| 10,497 |
|
|
| 9,622 |
|
|
| 91.66 | % |
Advertising and promotions |
|
| 824,425 |
|
|
| 432,810 |
|
|
| 391,615 |
|
|
| 90.48 | % |
Travel and entertainment expenses |
|
| 45,755 |
|
|
| 14,237 |
|
|
| 31,518 |
|
|
| 221.38 | % |
Office/Other expenses |
|
| 105,578 |
|
|
| 268,253 |
|
|
| (162,675 | ) |
|
| -60.64 | % |
Impairment and amortization |
|
| 1,333,954 |
|
|
| 3,158 |
|
|
| 1,330,796 |
|
|
| 42140.47 | % |
Licenses and permits |
|
| 30,098 |
|
|
| 59,619 |
|
|
| (29,521 | ) |
|
| -49.52 | % |
Legal and other fees |
|
| 1,280,207 |
|
|
| 353,986 |
|
|
| 926,221 |
|
|
| 261.65 | % |
Offices salary and wages |
|
| 817,657 |
|
|
| 315,000 |
|
|
| 502,657 |
|
|
| 159.57 | % |
Consulting fees |
|
| 496,735 |
|
|
| 320,937 |
|
|
| 175,798 |
|
|
| 54.78 | % |
Compensation costs |
|
| 953,076 |
|
|
| 414,839 |
|
|
| 538,237 |
|
|
| 129.75 | % |
Audit fees |
|
| 119,671 |
|
|
| 99,203 |
|
|
| 20,468 |
|
|
| 20.63 | % |
Filing fees |
|
| 8,489 |
|
|
| 9,489 |
|
|
| (1,000 | ) |
|
| -10.54 | % |
Insurance expense |
|
| 71,099 |
|
|
| 90,889 |
|
|
| (19,790 | ) |
|
| -21.77 | % |
Directors fees |
|
| 60,000 |
|
|
| 60,000 |
|
|
| - |
|
|
| 0.00 | % |
Total Operating expenses from continuing operations |
| $ | 6,383,145 |
|
| $ | 2,688,348 |
|
| $ | 3,694,797 |
|
|
| 137.44 | % |
Our operating expenses from continuing operationsCompany issued seven convertible notes to a series of investors having an aggregate face value of $1,325,000 in exchange for $1,325,000 in cash (the “Convertible Notes”). One of the nine months periods ended September 30, 2021 and 2020, were $6,383,145 and $2,688,348, respectively. Our operating expenses and (income) from discontinued operations for the nine months periods ended September 30, 2021 and 2020, were $4,633 and $(29,144), respectively. The Company included in above tableConvertible Notes, face value $25,000, was purchased by Blake N. Schroeder who is the largest changes are Impairment and Amortization of Other Assets of $1,333,954 this includes the three months of amortization of intangible asset during the nine months ended September 30, 2021 and 2020, respectively.
For the three months periods ended September 30, 2021 and 2020, our revenues from continuing operations totaled $8,127 and $-0-, respectively, our revenues from discontinued operations totaled $-0- and $-0-, respectively.
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| Period Ended |
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| Period Ended |
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| % Change |
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|
| 30-Sep-21 |
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| 30-Sep-20 |
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Research and development |
| $ | 67,263 |
|
| $ | 109,139 |
|
| $ | (41,876 | ) |
|
| -38.37 | % |
Depreciation |
|
| 6,935 |
|
|
| 5,372 |
|
|
| 1,563 |
|
|
| 29.10 | % |
Advertising and promotions |
|
| 151,142 |
|
|
| 70,324 |
|
|
| 80,818 |
|
|
| 114.92 | % |
Travel and entertainment expenses |
|
| 16,722 |
|
|
| 195 |
|
|
| 16,527 |
|
|
| 8475.52 | % |
Office/Other expenses |
|
| 34,634 |
|
|
| 97,419 |
|
|
| (62,785 | ) |
|
| -64.45 | % |
Impairment and amortization |
|
| 692,858 |
|
|
| - |
|
|
| 692,858 |
|
|
| 100.00 | % |
Licenses and permits |
|
| 10,625 |
|
|
| 5,348 |
|
|
| 5,277 |
|
|
| 98.68 | % |
Legal and other fees |
|
| 824,823 |
|
|
| 117,392 |
|
|
| 707,431 |
|
|
| 602.62 | % |
Offices salary and wages |
|
| 593,059 |
|
|
| 105,000 |
|
|
| 488,059 |
|
|
| 464.82 | % |
Consulting fees |
|
| 55,870 |
|
|
| 130,384 |
|
|
| (74,514 | ) |
|
| -57.15 | % |
Compensation costs |
|
| 761,810 |
|
|
| 587,392 |
|
|
| 174,418 |
|
|
| 100.00 | % |
Audit fees |
|
| 23,500 |
|
|
| 17,500 |
|
|
| 6,000 |
|
|
| 34.29 | % |
Filing fees |
|
| 2,870 |
|
|
| 4,590 |
|
|
| (1,720 | ) |
|
| -37.47 | % |
Insurance expense |
|
| 24,472 |
|
|
| 28,723 |
|
|
| (4,251 | ) |
|
| -14.80 | % |
Directors fees |
|
| 20,000 |
|
|
| 20,000 |
|
|
| - |
|
|
| 0.00 | % |
Operating expenses from continuing operations |
| $ | 3,286,583 |
|
| $ | 1,298,778 |
|
| $ | 1,987,805 |
|
|
| 153.05 | % |
Other (Income) expenses:
Our Interest receivable for the three and nine months ended September 30, 2021 and 2020, was $256, $769 and $206, $419, respectively.
Our Income form Grants from Government for the three and nine months ended September 30, 2021 and 2020, was $59,986, $279,981 and $25,899, $25,899 respectively, the increase in this account is because the studies of managementa director of the Company.
The Company recordedEach of the Convertible Notes is (i) unsecured; (ii) bears interest at a changerate of 3% per annum; (iii) matures on February 10, 2032; and (iv) is convertible, in FMVwhole or in part, at any time by the holder, into restricted shares of the Company’s common stock at a conversion price equal to the lesser of $0.08125 or 70% of the average of the two lowest closing prices of the Company’s common stock in the ten trading securitiesdays preceding any particular conversion, provided, the holder is prohibited from converting the convertible note, or portion thereof, if such conversion would result in beneficial ownership by the holder and its affiliates of more than 4.99% of Company’s issued and outstanding common stock as unrealized gain (loss) and realized gain (loss) of $-0-, $-0- and $-0-, $104,705 for from discontinued operations the three and nine months ended September 30, 2021 and 2020, respectively.date of the conversion.
OurOn February 10, 2022, the Company paid in full the remaining balance due on that certain convertible note issued to GS Capital Partners, LLC, face value $1,110,000 (as amended, the “GS Note”). In connection with the repayment, the Company was required to pay accrued interest expensein the amount of continuing$21,875, by issuing 173,390 restricted shares of the Company’s common stock pursuant to the formula set forth in the GS Note.
In March 2022, the Company issued 624,290 of its shares of common stock pursuant to a stock purchase agreement for cash gross proceeds of $55,000.
In January 2022 the company issued 7,000,000 of its shares in completion of its agreement with Advanced Tear Diagnostics regarding the purchase of various patents.
| 51 |
In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. The COVID-19 pandemic, as it was declared by the World Health Organization, has continued to spread and has already caused severe global disruptions. The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.
We expect COVID-19, along with the resulting government-imposed restrictions on businesses, to negatively impact our operations due to decreased consumer demand as well as potential production and warehouse limitations which results in an event or condition, before consideration of management’s plans, that could impact our ability to meet future obligations. We believe that our cash and cash equivalents on hand and these cost reduction measures, as needed, will provide sufficient liquidity to fund our operations for the threenext 12 months from the issuance of the consolidated financial statements.
Sources of Capital
We expect to sustain our working capital needs through shareholder loans, private placements and/or registered offerings of our securities. Shareholder loans may be without stated terms of repayment or interest. We may consider taking on any long-term or short-term debt from financial institutions in the immediate future. Shareholders loans may be granted from time to time as required to meet current working capital needs. We have no formal agreement that ensures that we will receive such loans. We may exhaust this source of funding at any time.
During the next twelve months, we anticipate incurring costs related to:
(i) | filing Exchange Act reports; | |
(ii) | contractual obligations; | |
(iii) | building inventory of our approved devices; | |
(iii) | clinical trials; and | |
(iv) | continued research and development of our diagnostic tests. |
We believe we will be able to meet these costs through use of funds in our treasury, deferral of fees by certain service providers and nine months ended September 30, 2021additional amounts, as necessary, to be loaned to or invested in us by our shareholders, management or other investors. As of the date of the period covered by this report, we have limited cash. There are no assurances that we will be able to secure any additional funding as needed. Currently, however our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and 2020, was $56,007, $175,915repay our liabilities arising from normal business operations when they come due. Management’s plan includes obtaining additional funds by equity financing and/or related party advances; however, there is no assurance of additional funding being available.
Known Trends or Uncertainties
We have seen some consolidation in the pharmaceutical and $73,268, $179,344, respectively. biotechnology industries during economic downturns. These consolidations have not had a negative effect on us to date; however, should consolidations and downsizing in the industry continue to occur, those events could adversely impact our financial results and business operations going forward.
The changespotential for growth in new markets is uncertain. We will continue to explore these opportunities until such time as we either generate sales or determine that resources would be more efficiently used elsewhere.
As discussed in this Annual Report, the world has been affected due to the COVID-19 pandemic. The pandemic has negatively impacted our business in various ways over the last two years, including, more recently, as a result of global supply chain constraints at least partially attributable to the pandemic. Until the pandemic has passed, there remains uncertainty as to the effect of COVID-19 on our business in both the short and long-term.
Inflation
Inflation has increased during the periods covered by this Annual Report, and is expected to continue to increase for the threenear future. Inflationary factors, such as increases in the cost of our products (and components thereof), interest rates, overhead costs and nine months period ended September 30, 2021, were primarilytransportation costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future (especially if inflation rates continue to rise) due to accretionsupply chain constraints, consequences associated with COVID-19 and the ongoing conflict between Russia and Ukraine, employee availability and wage increases, trade tariffs imposed on certain products from China and increased product pricing due to semiconductor product shortages.
| 52 |
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of the convertible notes of TL-66.operations, liquidity, capital expenditures or capital resources that is material to investors.
Going concernConcern
The Company’s unaudited condensed consolidated financial statements have been presented assuming that the Company will continue as a going concern. As shown in the financial statements, the Company has deficit innegative working capital of $1,094,813 and$2,914,013, has an accumulated deficit of $49,833,059,$63,226,126, has cash used in continuing operating activities of $1,689,200$1,728,821 and presently does not have the resources to accomplish its objectives during the next twelve months. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments related to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
The Company may not be able to meet its contractual obligations to Arizona State University regarding ongoing research and maintain its staff at current levels required by various employment agreements. |
The Company intends to raise additional capital through private placements and/or registered offerings of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
The below will be updated upon auditor review
Results of Operations
Comparison of the nine months and the three months ended September 30, 2022 and 2021
Nine months ended September 30, 2022 September 30, 2021 $ Change % Change Revenues Gross margin percentage Operating expenses Loss from continuing operations Loss from discontinued operations Other expenses (income) Net loss $ 1,314 $ 55,651 $ (54,337 ) > 100 % - - - - 3,511,721 6,383,145 (2,871,424 ) > 44 % (3,510,407 ) (6,327,494 ) (2,817,087 ) > 44 % (4,633 ) 4,633 100 % 1,833,492 1,651,007 182,485 11 % $ (5,343,899 ) (7,983,134 ) ) (2,639,235 ) > 33 %
Three months ended September 30 2022 September 30, 2021 $ Change % Change Revenues Gross margin percentage Operating expenses Loss from continuing operations Loss from discontinued operations . % Other expenses (income) Net loss $ 1,314 $ 8,127 $ (6,813 ) > 83 % - - - - 1,319,234 3,286,583 (1,967,349 ) > 59 % (1,317,920 ) (3,278,456 ) (1,960,536 ) > 59 % 716,627 13,221 703,406 5320 % $ (2,034,547 ) (3,291,677 ) (1,257,130 ) > 38 %
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Revenue
Revenues from continuing operations recognized for the nine months ended September 30, 2022 and 2021 amounted to $1,314 and $55,651, respectively. Revenues from discontinued operations recognized for nine months ended September 30, 2022 and 2021 amounted to $0 and $0.
Cost of Revenue from continuing operations recognized for Nine months ended September 30, 2022 and 2021 amounted to $-0- and $-0-, respectively. Cost of Revenue from discontinued operations recognized for three months ended September 30, 2022 and 2021 amounted to, $0and $0, respectively.
Revenues from continuing operations recognized for the three months ended September 30, 2022 and 2021 amounted to $1,314 and $8,127, respectively. Revenues from discontinued operations recognized for three months ended September 30, 2022 and 2021 amounted to $0 and $0.
Cost of Revenue from continuing operations recognized for three months ended September 30, 2022 and 2021 amounted to $-0- and $-0-, respectively. Cost of Revenue from discontinued operations recognized for three months ended September 30, 2022 and 2021 amounted to, $0 and $0, respectively.
Operating Expenses
Research and Development Expenses
For the three and nine months ended September 30, 2022 and 2021 the Company incurred research and development expenses of $29,722, $109,086 and $67,263 and $216,282 from continuing operations, respectively.
Selling, General and Administrative Expenses
Our Selling, General and Administrative expenses for the three and nine months ending September 30, 2022 and 2021 were $1,182,768, $3,083,349, and $2,519,527, $4,812,790 respectively. The decrease is primarily due to services in legal, consulting and accounting, advertising and s because of the decrease that was caused by the acquisition of Sapphire Biotech and Advanced tear Diagnostics
Depreciation Expenses
For the three and nine months ending September 30, 2022 and 2021 our depreciation expenses were $8,132, $23,451 and $6,935, $20,119. The increase is primarily due to the purchase of fixed assets
Amortization Expenses
For the three and nine months ended September 30, 2022 our amortization expenses were $98,612, $295,835 and $692,858 and $1,333,954. The decrease primarily due to writing off the intangible assets as a result of the acquisition of Sapphire Biotech.
Other Income and Expenses
Our interest expenses for the three and nine months ended September 30, 2022 and 2021 were $57,481, $1,629,355 and $56,007, $175,915 respectively, variance was due to non-cash interest expenses. Loss on extinguishment of debt for the three and nine months ended September 30, 2022 and 2021 were $111,818, $490,641 and $-0-, $1,535,264 respectively, variance was result of debt exchange. Amortization of debt discount was $46,441, $132,521and $17,456 and, $220,578, respectively. Income grants from government for the three and nine months ending September 30, 2022 and 2021 were $0, $0 and $59,986 and $279,981 respectively, and the variance was a result of receiving innovation research grants from NCI in 2021.
For the nine Months Ended September 30, 2022 and 2021
Net Cash Provided by/Used in Operating Activities
Net cash used in continuing operating activities and discontinued operating activities was $1,689,200$1,728,821 and $4,633$0, respectively, for the nine months ended September 30, 2021,2022, as compared to net cash used of $1,766,355$1,689,200 and $834,429$4,633 for the nine months ended September 30, 2020.2021. The cash used in operating activities is primarily attributable to our net loss from operations of $5,343,899 and offset by net changes in the balances of operating assets and liabilities and non-cash expenses. For the nine months ended September 30, 20212022, stock-based compensation was $953,076 and$888,313, amortization of debt discount was $220,578.$132,521, common stock issued for service was $79,500, amortization of intangible was $295,835, loss on extinguishment of debt was $137,388, non-cash interest expense was $1,316,846, loss on conversion of debt of $122,887, common stock issued on settlement $230,369, and severance cost of $102,387, depreciation expense of $23,451 and this was offset by change in fair value if derivative liability of $418,769. For the Nine months ended September 30, 2021 these non-cash expenses were stock-based compensation of $953,076 and amortization of $1,333,954. For the nine months ended September 30, 20212022 and 20202021 the Company recorded increase to accounts payable and accrued expenses $193,427 and $234,364of $371,537, $228,426, respectively, of continuing operating activities.
Net Cash Providedprovided by Investing Activities
Net cash (used in) provided byused in investing activities during the period ended September 30, 2021 was $(30,022) compared to $6,3552022 $8,710 and $30,022, respectively for the same period in 20202021 due to $79,814 cash acquired in Sapphire acquisition.purchase of equipment and patents
Net Cash Provided by Financing Activities
Net cash provided by financing activities during the nine months period ended September 30, 2021,2022, was $1,605,051$1,448,314, and $3,252,748$1,605,051 for the same period in 2020.
Off-Balance Sheet Arrangements2021. The Company has successfully raised significant capital in exchange for its common stock for the nine months ended September 30, 2022 and 2021.
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Critical accounting policiesAccounting Policies
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 34 to our unaudited condensed consolidated financial statements.
Recently issued accounting standards
In October 2018, the FASB issued ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, that changes the guidance for determining whether a decision-making fee paid to a decision makersOur management’s discussion and service providers are variable interests. The guidanceanalysis of financial condition and results of operations is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. The adoption of this ASU did not have any material impactbased on our consolidated financial position, resultsstatements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of operations, cash flows, or presentation thereof.
In October 2018,these financial statements requires us to make estimates and judgments that affect the FASB issued ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, that changesreported amounts of assets, liabilities and expenses and the guidance for determining whether a decision-making fee paid to a decision makersdisclosure of contingent assets and service providers are variable interests. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. The adoption of this ASU did not have any material impact onliabilities in our consolidated financial position,statements during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of operations, cash flows,which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or presentation thereof.conditions.
In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance did not have any material impact on the Company’s financial statements.Financial Instruments
Other recent accounting pronouncements issued byFair value is defined as the FASBprice that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the SEC did not orlowest priority to unobservable inputs.
Research and Development Costs
Research and development costs are not believedexpensed as incurred. Research and development reimbursements and grants are recorded by managementus as a reduction of research and development cost
Share-Based Payments
We estimate the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to have a material impactprovide service in exchange for the award. We account for forfeitures of stock options as they occur.
Income Taxes
We use the asset and liability method to calculate deferred taxes. Deferred taxes are recognized based on the Company’s presentdifferences between the financial reporting and income tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We review deferred tax assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset will be fully realized. A valuation allowance, if necessary, is provided against deferred tax assets, based upon our assessment as to their realization.
We recognize tax when the positions meet a “more-likely-than-not” recognition threshold. There were no tax positions for which it is considered reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or futuredecrease within the next year. We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses.
Recently Issued Accounting Standards
Note 6 to consolidated financial statements.
ASC Update 2021-04
Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force)
The amendmentsstatements appearing elsewhere in this Update affect all entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. The amendments in this Update do not apply to modifications or exchanges of financial instruments that are within the scope of another Topic. That is, accounting for those instruments continues to be subject to the requirements in other Topics. The amendments in this Update do not affect a holder’s accounting for freestanding call options.
ASC Update No. 2020-10
In October 2020, the FASB issued ASC Update No. 2020-10, Codification Improvements. Update No. 2020-10 amends a wide variety of Topics in the Codification in order to improve the consistency of the Codification and the application thereof, while leaving Generally Acceptedreport includes Recently Issued Accounting Principles unchanged.Standards.
Foreign Currency Transactions
Our Foreign currencyexchange gain (loss) were $9,711, and $5,716 forin the three and nine months ended September 30, 2021 were $1,569 and $2,1132022 was $0, compared to $152,152 for the same periodperiods in 2020.2021. All Foreignforeign currency gain (loss) were related to discontinued operations.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021,30,2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 202130,2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of our business. However, at this time, we are not aware on any material pending, threatened or unasserted claims.
Item 1A. Risk Factors.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the period between January 1, 20212022, and September 30, 2021March 31, 2022, the Company issued total 1,234,11316,401,801 shares valued $402,500 pursuant to$4,612,444 that were not registered under the Company’s Registration Statement on Form S-3. The Company received in cash.Securities Act.
On April 8, 2021During the first and June 15, 2021 the Company issued 1,234,113 shares for cash of $402,500 pursuant to various Stock purchase agreements. The cash was received in 2021.
On April 8, 2021, May 28 2021 and June 15, 2021second quarter 2022 the company issued 4,261,81510,750,000 shares pursuant to an S-1 valued at $973,495.
During the First quarter 2022 the company issued 802,115 restricted shares of its common stock valued at $1,675,496$79,500 to third parties for certain services, recorded as advertising and promotion expense and License, permits & Patents, respectively.respectively and 173,390 shares valued at $32,944 in settlement of debt.
The company issued 1,143,537 shares pursuant to various stock purchase agreements valued at $125,000 the cash was received in 2021 and 2022.
The issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act of 1933 and Regulation D as transactions by an issuer not involving any public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. The sales of these securities were made without general solicitation or advertising.
The Company intends to use the proceeds from sale of the securities, if any, for the operations, research and development and clinical trials, and working capital.
There were no underwritten offerings employed in connection with any of the transactions set forth above.
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Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
On May 14, 2021, Thethe Company entered into the Equity Purchase Agreement with Cross, pursuant to which we have the right to “put,” or sell, up to $10,000,000 worth of shares of our common stock to Cross. As provided in the Equity Purchase Agreement, we may require Cross to purchase shares of our common stock from time to time by delivering a put notice to Cross specifying the total number of shares to be purchased (such number of shares multiplied by the purchase price described below, the “Investment Amount”); provided there must be a minimum of ten trading days between delivery of each put notice. We may determine the Investment Amount, provided that such amount may not be more than 500% of the average daily trading volume in dollar amount for our common stock during the five trading days preceding the date on which we deliver the applicable put notice, unless waived by Cross in its sole discretion. Additionally, such amount may not be lower than $10,000 or higher than $1,000,000. Cross will have no obligation to purchase shares under the Equity Line to the extent that such purchase would cause Cross to own more than 4.99% of our issued and outstanding shares of common stock.
Compensation of Company Directors and Advisory Board Members
Our Directors are compensated $5,000 on a quarterly basis plus on each annual anniversary of Board service additional $20,000. Our Directors and Advisory Board Members are reimbursed for reasonable out-of-pocket expenses related to attending board of directors’ meetings and for promoting our business. In the future, we may compensate our Directors for serving on Special Committees and our Advisory Board Members with additional cash or other compensation. From time to time we may request certain members of the board of directors to perform services on our behalf. In such cases, we will compensate the directors for their services at rates no more favorable than could be obtained from unaffiliated parties.
Item 6. Exhibits.
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Notes to Condensed Consolidated Financial Statements (unaudited) |
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Item 15. Exhibits.Exhibit Index
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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.
| AXIM BIOTECHNOLOGIES, INC. |
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Dated: November | By: | /s/ John W. Huemoeller II |
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| John W. Huemoeller II |
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| President and Director |
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| Principal Executive Officer |
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Dated: November | By: | /s/ Robert Malasek | |
Robert Malasek |
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Principal Financial Officer