UNITED STATES
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
For the quarterly period ended June 30, 2023
☐ 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: 000-56145
VICAPSYS LIFE SCIENCES, INC.
| 91-1930691 | ||
| (State or | (IRS Employer | |
| Incorporation or | Identification | |
| 7778 Mcginnis Ferry Rd. #269 | ||
| Suwanee, GA | 30024 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(972)891-8033
(Address of principal executive offices)
7778 Mcginnis Ferry Rd. #270, Suwanee GA 30024
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the registrantissuer (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 has 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
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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of August 24, 2010, there were 38,107,252 shares outstanding of the registrant’s $0.001 par value common stock par value $0.001 per share, outstanding.
Vicapsys Life Sciences, Inc.
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This reportQuarterly Report on Form 10-Q contains certain forward-looking statements that are or may be deemedsubject to be, “forward-looking statements” within the meaningvarious risks and uncertainties. Forward-looking statements are generally identifiable by use of Section 27A of the Securities Act of 1933,forward-looking terminology such as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward looking information. Some of the statements contained in this quarterly report are forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. The words “believe,“may,” “may,“will,” “should,” “potential,” “intend,” “expect,” “outlook,” “seek,” “anticipate,” “estimate,” “continue,“approximately,” “anticipate,“believe,” “intend,“could,” “plan,“project,” “expect” and“predict,” or other similar expressions are intended to identify forward-looking statements.words or expressions. Forward-looking statements include information concerning our possibleare based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or assumedstate other forward-looking information. Our ability to predict results or the actual effect of future financial performance and results of operations.
| ● | our lack of an operating history; | |
| ● | the net losses that we expect to incur as we develop our business; | |
| ● | Obtaining U.S. Food and Drug Administration (“FDA”) or other regulatory approvals or clearances for our technology; | |
| ● | implementing and achieving successful outcomes for clinical trials of our products; | |
| ● | convincing physicians, hospitals and patients of the benefits of our technology and to convert from current technology; | |
| ● | the ability of users of our products (when and as developed) to obtain third-party reimbursement; | |
| ● | any failure to comply with rigorous FDA and other government regulations; and | |
| ● | securing, maintaining and defending patent or other intellectual property protections for our technology. |
Forward-looking statements include risks and uncertainties and there are important factors that could cause actual future results to differ materially include thefrom those expressed or implied by such forward-looking statements. These factors, risks and uncertainties disclosedcan be found in our 2009Company’s Annual Report filed on Form 10-K filed with the Securities and Exchange Commission on April 14, 2023, (the “Form 10-K”) for the fiscal year ended December 31, 2022, as the same may be updated from time to time, including in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-K contained in Part I under “Risk Factors”.
| 3 |
| SSGI, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| ASSETS | ||||||||
| June 30, | December 31, | |||||||
| 2010 | 2009 | |||||||
| CURRENT ASSETS: | (unaudited) | (audited) | ||||||
| Cash and cash equivalents | $ | 104,236 | $ | 121,970 | ||||
| Restricted cash deposits | 237,918 | 507,028 | ||||||
| Contracts receivable, net | 1,720,253 | 1,091,343 | ||||||
| Costs and estimated earnings in excess of billings | ||||||||
| on uncompleted contracts | 704,060 | 57,411 | ||||||
| Prepaid expenses and other current assets | 38,785 | 89,591 | ||||||
| TOTAL CURRENT ASSETS | 2,805,252 | 1,867,343 | ||||||
| PROPERTY AND EQUIPMENT, NET | 546,370 | 347,874 | ||||||
| GOODWILL | 5,062,144 | - | ||||||
| CASH SURRENDER VALUE OF INSURANCE AND OTHER ASSETS | 785,897 | 15,538 | ||||||
| TOTAL ASSETS | $ | 9,199,663 | $ | 2,230,755 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | 2,723,811 | $ | 1,951,881 | ||||
| Billings in excess of costs and estimated earnings | ||||||||
| on uncompleted contracts | 747,123 | 251,797 | ||||||
| Current portion of long term debt | 491,984 | 111,891 | ||||||
| Promissory note payable | 893,160 | 353,691 | ||||||
| Current portion of due to stockholders | 450,000 | 11,395 | ||||||
| Term note payable, related party | 707,116 | 965,458 | ||||||
| TOTAL CURRENT LIABILITIES: | 6,013,194 | 3,646,113 | ||||||
| LONG TERM LIABILITIES | ||||||||
| Due to stockholders, net of current portion | 125,000 | 1,185,091 | ||||||
| Long term debt, net of current portion | 1,576,249 | 133,540 | ||||||
| TOTAL LIABILITIES | 7,714,443 | 4,964,744 | ||||||
| STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Common stock - $.001 Par Value, 100,000,000 shares authorized | ||||||||
| 34,187,952 and 34,687,630 issued and outstanding, respectively | 34,187 | 34,688 | ||||||
| Additional paid in capital | 8,464,836 | 3,138,628 | ||||||
| Accumulated deficit | (6,965,436 | ) | (5,907,305 | ) | ||||
| Total | 1,533,587 | (2,733,989 | ) | |||||
| Non-controlling interest in subsidiary | (48,367 | ) | - | |||||
| TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 1,485,220 | (2,733,989 | ) | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 9,199,663 | $ | 2,230,755 | ||||
VICAPSYS LIFE SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2023 | December 31, 2022 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 231,277 | $ | 14,097 | ||||
| Prepaid Expenses | 77,780 | 7,483 | ||||||
| Deferred offering costs | 69,090 | 50,441 | ||||||
| Total Current Assets | 378,147 | 72,021 | ||||||
| Total Assets | $ | 378,147 | $ | 72,021 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 665,911 | $ | 635,183 | ||||
| Accounts payable, related parties | 427,355 | 272,317 | ||||||
| Accrued salaries | 115,312 | 115,312 | ||||||
| Short-term note payable | 54,230 | — | ||||||
| Convertible note payable | 208,877 | — | ||||||
| Total Current Liabilities | 1,471,685 | 1,022,812 | ||||||
| Commitments and Contingencies (Note 6) | - | - | ||||||
| Stockholders’ Deficit: | ||||||||
| Series A Convertible Preferred Stock; par value $; shares authorized; -- shares issued and outstanding | — | — | ||||||
| Series B Convertible Preferred Stock; par value $; shares authorized; -- shares issued and outstanding | — | — | ||||||
| Preferred stock, value | — | — | ||||||
| Common Stock, par value $; shares authorized; shares issued and outstanding | 31,188 | 31,188 | ||||||
| Common stock to be issued, par value $; and shares outstanding, respectively | 1,456 | 727 | ||||||
| Additional paid-in capital | 14,335,203 | 14,135,257 | ||||||
| Accumulated deficit | (15,461,385 | ) | (15,117,963 | ) | ||||
| Total Stockholders’ Deficit | (1,093,538 | ) | (950,791 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 378,147 | $ | 72,021 | ||||
See accompanying notes are an integral part of theseto unaudited consolidated financial statements.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||||
| CONTRACT REVENUES EARNED | $ | 2,925,691 | $ | 1,023,022 | $ | 3,664,428 | $ | 2,696,207 | |||||||||
| COST OF REVENUES EARNED | 3,159,298 | 1,001,732 | 4,092,123 | 2,532,851 | |||||||||||||
| GROSS PROFIT (LOSS) | (233,607 | ) | 21,290 | (427,695 | ) | 163,356 | |||||||||||
| GENERAL AND ADMINISTRATIVE EXPENSES | |||||||||||||||||
| Payroll and related costs | 698,949 | 277,190 | 806,441 | 466,128 | |||||||||||||
| Insurance | 52,331 | 42,671 | 124,281 | 96,527 | |||||||||||||
| Marketing and advertising | 16,010 | 25,880 | 24,056 | 70,411 | |||||||||||||
| Office and technology expenses | 116,853 | 61,738 | 176,215 | 97,325 | |||||||||||||
| Professional fees | 194,415 | 61,989 | 301,503 | 114,571 | |||||||||||||
| Travel and entertainment | 16,852 | 7,039 | 23,380 | 9,388 | |||||||||||||
| Other operating expenses | 46,152 | 31,575 | 115,218 | 84,974 | |||||||||||||
| TOTAL GENERAL AND ADMINISTRATIVE EXPENSES | 1,141,562 | 508,082 | 1,571,094 | 939,324 | |||||||||||||
| LOSS FROM OPERATIONS | (1,375,169 | ) | (486,792 | ) | (1,998,789 | ) | (775,968 | ) | |||||||||
| OTHER INCOME (EXPENSES): | |||||||||||||||||
| Interest income | - | - | 15 | 45 | |||||||||||||
| Other income | 1,009,855 | 2,063 | 1,009,855 | 2,629 | |||||||||||||
| Financing costs | - | - | - | (181,201 | ) | ||||||||||||
| Interest expense | (30,482 | ) | (45,663 | ) | (68,927 | ) | (73,983 | ) | |||||||||
| Loss on asset disposition | - | - | (285 | ) | (2,305 | ) | |||||||||||
| TOTAL OTHER INCOME (EXPENSES): | 979,373 | (43,600 | ) | 940,658 | (254,815 | ) | |||||||||||
| NET LOSS BEFORE TAXES | (395,796 | ) | (530,392 | ) | (1,058,131 | ) | (1,030,783 | ) | |||||||||
| PROVISION FOR TAXES | - | - | - | - | |||||||||||||
| LOSS BEFORE NON-CONTROLLING INTEREST IN | |||||||||||||||||
| NET LOSS OF SUBSIDIARY | (395,796 | ) | (530,392 | ) | (1,058,131 | ) | (1,030,783 | ) | |||||||||
| NON-CONTROLLING INTEREST IN NET LOSS | |||||||||||||||||
| OF SUBSIDIARY | 48,367 | - | 48,367 | - | |||||||||||||
| NET LOSS | $ | (347,429 | ) | $ | (530,392 | ) | $ | (1,009,764 | ) | $ | (1,030,783 | ) | |||||
| Earnings per share: | |||||||||||||||||
| Basic and Diluted | $ | (2,133.329 | ) | $ | (2,015.216 | ) | |||||||||||
| Weighted Average Outstanding Shares: | |||||||||||||||||
| Basic and Diluted | 496 | 512 | |||||||||||||||
| Net loss per share: | |||||||||||||||||
| Basic and Diluted | $ | (0.010 | ) | $ | (0.015 | ) | $ | (0.029 | ) | $ | (0.030 | ) | |||||
| Weighted Average Outstanding Shares: | |||||||||||||||||
| Basic and Diluted | 34,144,861 | 34,679,140 | 34,476,757 | 34,679,669 | |||||||||||||
VICAPSYS LIFE SCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
| Operating Expenses: | ||||||||||||||||
| Personnel costs | 66,913 | 30,915 | 130,944 | 61,284 | ||||||||||||
| Research and development expenses, related party | 2,000 | — | 12,000 | 10,000 | ||||||||||||
| Professional fees | 51,467 | 132,981 | 164,253 | 246,866 | ||||||||||||
| General and administrative expenses | 15,313 | 16,160 | 39,773 | 28,953 | ||||||||||||
| Total operating expenses | 135,693 | 180,056 | 346,970 | 347,103 | ||||||||||||
| Loss from operations | (135,693 | ) | (180,056 | ) | (346,970 | ) | (347,103 | ) | ||||||||
| Income (loss) before income taxes | (135,693 | ) | (180,056 | ) | (346,970 | ) | (347,103 | ) | ||||||||
| Income taxes | — | — | — | — | ||||||||||||
| Net income (loss) available to common shareholders | $ | (135,693 | ) | $ | (180,056 | ) | $ | (346,970 | ) | $ | (347,103 | ) | ||||
| Net income (loss) per common share: | ||||||||||||||||
| Basic | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
| Diluted | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | $ | 35,314,313 | 31,188,461 | $ | 35,314,313 | 29,957,398 | ||||||||||
| Diluted | $ | 35,314,313 | 31,188,461 | $ | 35,314,313 | 29,957,398 | ||||||||||
See accompanying notes are an integral part of theseto unaudited consolidated financial statements.
| 5 |
| SSGI, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Unaudited) | ||||||||
| Six Months Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (1,009,764 | ) | $ | (1,030,783 | ) | ||
| Non-controlling interest in net loss of subsidiaries | (48,367 | ) | - | |||||
| Loss before non-controlling interest in net loss of subsidiaries | (1,030,783 | ) | ||||||
| Adjustments to reconcile net loss to net cash and cash | ||||||||
| equivalents used in operating activities: | ||||||||
| Depreciation and amortization | 70,352 | 62,330 | ||||||
| Gain on asset disposition | 285 | - | ||||||
| Provision for bad debts | 11,586 | - | ||||||
| Warrants issued for compensation | 89,731 | 166,086 | ||||||
| Warrants issued as financing costs | - | 181,201 | ||||||
| Estimated losses on contracts | - | (59,354 | ) | |||||
| Loan forgiveness from stockholder loans | (866,055 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in assets: | ||||||||
| Contracts receivable | 796,585 | (166,106 | ) | |||||
| Costs and estimated earnings in excess of billings | ||||||||
| on uncompleted contracts | (13,698 | ) | (52,128 | ) | ||||
| Prepaid expenses and other current assets | 178,739 | 44,508 | ||||||
| Cash surrender value of insurance and other assets | 12,607 | 812 | ||||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable and accrued expenses | (334,645 | ) | (152,929 | ) | ||||
| Billings in excess of costs and estimated earnings | ||||||||
| on uncompleted contracts | 309,889 | 83,371 | ||||||
| Net cash used in operating activities | (802,755 | ) | (922,992 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Proceeds from sale of equipment | 6,200 | 34,924 | ||||||
| Release (deposits of) restricted cash | 269,110 | (367,036 | ) | |||||
| Purchase of subsidiary | (550,000 | ) | - | |||||
| Purchase of equipment | (10,114 | ) | (20,354 | ) | ||||
| Net cash used in investing activities | (284,804 | ) | (352,466 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Borrowings under term note payable, related party and promissory note | 925,000 | |||||||
| Issuance of common stock | 851,000 | - | ||||||
| Payments for term note payable, related party and promissory note | (322,825 | ) | ||||||
| Advances from stockholders | - | 696,007 | ||||||
| Net cash provided by financing activities | 1,069,825 | 1,298,182 | ||||||
| CHANGE IN CASH AND CASH EQUIVALENTS | (17,734 | ) | 22,724 | |||||
| Cash and cash equivalents at beginning of the period | 121,970 | 64,988 | ||||||
| Cash and cash equivalents at end of period | $ | 104,236 | $ | 87,712 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Interest paid during the period | $ | 68,927 | $ | 73,983 | ||||
| CHANGES IN NON-CASH FINANCING ACTIVITIES: | ||||||||
| Common stock issued for acquisition of subsidiary | $ | 3,974,773 | $ | - | ||||
| Promissory note issued for acquisition of subsidiary | $ | 1,173,473 | $ | - | ||||
| Warrants issued for acquisition of subsidiary | $ | 171,592 | $ | - | ||||
| Note payable issued for acquisition of subsidiary | $ | 700,000 | $ | - | ||||
| Warrants issued for loan forgiveness | $ | 244,898 | $ | - | ||||
VICAPSYS LIFE SCIENCES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Three and Six Months Ended June 30, 2023 and 2022
(Unaudited)
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Common Stock | Common Stock to be Issued | Additional Paid-in | Accumulated | Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance December 31, 2021 | 19,747,283 | $ | 19,747 | 12,067,458 | $ | 12,068 | $ | 13,976,159 | $ | (14,129,625 | ) | $ | (121,651 | ) | ||||||||||||||
| Common stock issued from common stock to be issued | 11,441,177 | 11,441 | (11,440,177 | ) | (11,441 | ) | — | — | — | |||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 1,081 | — | 1,081 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (167,047 | ) | (167,047 | ) | |||||||||||||||||||
| Balance March 31, 2022 | 31,188,460 | 31,188 | 627,281 | 627 | 13,977,240 | (14,296,672 | ) | (287,617 | ) | |||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 1,081 | — | 1,081 | |||||||||||||||||||||
| Net loss | — | — | — | — | -- | (180,056 | ) | (180,056 | ) | |||||||||||||||||||
| Balance June 30, 2022 | 31,188,460 | 31,188 | 627,281 | 627 | 13,978,321 | (14,476,728 | ) | (466,592 | ) | |||||||||||||||||||
| Balance December 31, 2022 | 31,188,460 | 31,188 | 727,281 | 727 | 14,131,709 | (15,117,963 | ) | (950,791 | ) | |||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 20,697 | — | 20,697 | |||||||||||||||||||||
| Net income | — | — | — | — | — | (211,277 | ) | (211,277 | ) | |||||||||||||||||||
| Balance March 31, 2023 | 31,188,460 | 31,188 | 727,281 | 727 | 14,152,406 | (15,325,692 | ) | (1,141,371 | ) | |||||||||||||||||||
| Beginning balance | 31,188,460 | 31,188 | 727,281 | 727 | 14,152,406 | (15,325,692 | ) | (1,141,371 | ) | |||||||||||||||||||
| Common stock to be issued pursuant to private placement completed in April 2023 | — | — | 400,000 | 400 | 99,600 | — | 100,000 | |||||||||||||||||||||
| Common stock to be issued per loan commitment | -- | -- | 328,571 | 329 | 83,197 | — | 83,526 | |||||||||||||||||||||
| Net loss | -- | -- | -- | -- | -- | (135,693 | ) | (135,693 | ) | |||||||||||||||||||
| Net income (loss) | -- | -- | -- | -- | -- | (135,693 | ) | (135,693 | ) | |||||||||||||||||||
| Balance June 30, 2023 | 31,188,460 | $ | 31,188 | 1,455,852 | $ | 1,456 | $ | 14,335,203 | $ | (15,461,385 | ) | $ | (1,093,538 | ) | ||||||||||||||
| Ending balance | 31,188,460 | $ | 31,188 | 1,455,852 | $ | 1,456 | $ | 14,335,203 | $ | (15,461,385 | ) | $ | (1,093,538 | ) | ||||||||||||||
See accompanying notes are an integral part of theseto unaudited consolidated financial statements.
| 6 |
VICAPSYS LIFE SCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 2023 | 2022 | |||||||
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net (loss) | $ | (346,970 | ) | $ | (347,103 | ) | ||
| Adjustments to reconcile net (loss) to net cash used in operating activities: | ||||||||
| Amortization of intangible asset | — | 15,644 | ||||||
| Stock-based compensation | 20,697 | 2,162 | ||||||
| Amortization of debt discount | 1,393 | -- | ||||||
| Deferred offering costs | (18,649 | ) | -- | |||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid Expenses | (70,297 | ) | (3,542 | ) | ||||
| Accounts payable | 158,634 | 78,693 | ||||||
| Accounts payable, related parties | 27,132 | 54,140 | ||||||
| Net Cash Used in Operating Activities | (228,060 | ) | (200,006 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from private placement | 100,000 | — | ||||||
| Proceeds from short-term note payable | 54,230 | — | ||||||
| Proceeds from short-term convertible note | 291,010 | — | ||||||
| Net Cash Provided By Financing Activities | 445,240 | — | ||||||
| Net Increase (Decrease) in Cash | 217,180 | (200,006 | ) | |||||
| Cash, Beginning of period | 14,097 | 217,295 | ||||||
| Cash, End of period | $ | 231,277 | $ | 17,289 | ||||
| Supplementary Cash Flow Information | ||||||||
| Cash paid for interest | $ | 706 | $ | - | ||||
| Cash paid for taxes | $ | 545 | $ | - | ||||
| Non-cash investing and financing activities | ||||||||
| Commitment fee for convertible debt treated as debt discount | $ | 83,526 | $ | - | ||||
| Discount on debt | $ | 26,400 | $ | - | ||||
See accompanying notes to unaudited consolidated financial statements.
| 7 |
VICAPSYS LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Vicapsys Life Sciences, Inc. (the “Company”(“VLS”) was incorporated under the laws ofin the State of Florida ason July 8, 1997 under the name All Product Distribution Corp. On August 19, 1998, the Company changed its name to Phage Therapeutics International, Inc. onOn November 13, 2007, the Company changed its name to SSGI, Inc. On December 26, 1996. In February 2008, through22, 2017, pursuant to a share exchange, the company acquired Surge Solutions Group,Share Exchange Agreement (the “Exchange Agreement”) by and among VLS, Michael W. Yurkowsky, ViCapsys, Inc. (“Surge”VI”) and the shareholders of VI, a private company, VI became a wholly owned subsidiary of VLS. We refer to VLS and VI together as the “Company”. As a consequenceVLS serves as the holding company for VI. Other than its interest in VI, VLS does not have any material assets or operations.
Per the schedule 14C filed on July 28, 2023, on July 28, 2023, stockholders of the latter exchange, which qualified asCompany approved a reverse merger; Surge becamesplit in the accounting acquirerrange from 1-for-2 to 1-for-50, with the Board of Directors able to pick the ratio or abandon the split. The split is subject to FINRA clearance and the reporting entity prospectively.
The Company’s strategy is to develop and commercialize, on a Florida construction company licensedworldwide basis, various intellectual property rights (patents, patent applications, know how, etc.) relating to operatea series of encapsulated products that incorporate proprietary derivatives of the chemokine CXCL12 for creating a zone of immunoprotection around cells, tissues, organs and devices for therapeutic purposes. The product name VICAPSYN™ is the Company’s proprietary product line that is applied to transplantation therapies and related stem-cell applications in the Southeastern United States. This newly acquired subsidiary specializes in the design, construction and maintenance of retail petroleum facilities.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S PLANS
The Company specializes in the design and construction of industrial and commercial buildings in the petroleum industry; and in the maintenance of retail petroleum facilities in Florida and Georgia. The Company's work is performed under various fee arrangements including cost plus fee contracts, fixed price contracts, fixed price contracts with incentive and penalty provisions, and straight hourly fee contracts. These contracts are undertaken by the Company alone or in conjunction with other contracts. The length of the Company's contracts typically range from three months or less to one year.
In March 2020, the World Health Organization declared the novel COVID-19 virus as a global pandemic. The COVID-19 outbreak in the United States continued to negatively impact to the Company’s ability to continue as a going concern is dependent upon its abilitysecure additional debt or equity funding to generate future profitablesupport operations in 2022 and 2023. In 2022, the Company received proceeds of $50,000 from the exercise of warrants. In April 2023, the Company raised an aggregate of $100,000 from the sale of shares of common stock to support current operations and to obtain the necessary financing to meetextend research and development of its obligations and repay its liabilities arising from normal business operations.product line. We also secured a short-term convertible loan in June 2023 for $330,000 which contained separately an original issuance discount of $26,400. From this short-term convertible loan, we received net proceeds of $290,350. The short-term convertible loan was also issued with a debt discount of $83,526 that was paid in shares of common stock.
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NOTE 13 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basis of Presentation and continue its operations. Realization values may be substantially different from carrying values as shown in the financial statements and do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.
The accompanying consolidated financial statements includesin this report have been prepared by the accountsCompany without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s wholly owned subsidiary and its 70% majority-owned subsidiary. All significant inter-company transactions have been eliminated.
These unaudited consolidated financial statements should be read in conjunction with a reading of the Company’s consolidated audited financial statements and notes thereto for the year ended December 31, 2022, filed with the Company’s annual report on Form 10-K with the Securities and Exchange Commission (the “SEC”) on April 14, 2023. Interim results of operations for the three and six months ended June 30, 2023, and 2022, are not necessarily indicative of future results for the full year. The unaudited consolidated financial statements of the Company include the consolidated accounts of VLS and its wholly owned subsidiary VI. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuredisclosures of contingent assets and liabilities at the date of the financial statements and the reported amountsamount of revenues and expenses during the reportingreported period. Actual results could differ from those estimates. The most significant management estimate relates to the determination of percentage of completion in connection with the recognition of profit on contracts.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturityan original term of three months or less when purchased to be cash equivalents. Cash andThe Company held no cash equivalents include money market accountsas of June 30, 2023, and investmentsDecember 31, 2022. Cash balances may, at certain times, exceed federally insured limits. If the amount of a deposit at any time exceeds the federally insured amount at a bank, the uninsured portion of the deposit could be lost, in whole or in part, if the bank were to fail.
Intangible Assets
Costs of intangible assets are accounted for through the capitalization of those costs incurred in connection with developing or obtaining such assets. Capitalized costs are included in intangible assets in the unaudited consolidated balance sheets. The Company’s intangible assets consist of costs incurred in connection with securing an Exclusive Patent License Agreement with The General Hospital Corporation, d/b/a repurchaseMassachusetts General Hospital (“MGH”), as amended (the “License Agreement”). These costs are being amortized over the term of the License Agreement which is based on the remaining patent life of the related patents being licensed.
In 2022, due to the combination of not having met certain due diligence requirements per the License Agreement, and the Company not raising sufficient capital necessary to maintain regular research and development activities in 2022, the Company reviewed the MGH license agreement backed by government securities.
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Long-Lived Assets
The Company recognizes impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying values. In 2022, management reviewed the Company’s long-lived assets and concluded an impairment of the License Agreement existed as of December 31, 2022 due to there being no projected undiscounted future net cash flows derived from the asset (See Note 4).
Fair Value of Financial Instruments
ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2023.
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued liabilities, payables with related parties, and debt discounts approximate their fair values because of the short maturity of these instruments.
Revenue Recognition
Revenue recognition is subjectaccounted for under ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) and all the related amendments. The core principle of ASC 606 requires that an entity recognize revenue to some credit risk through short term cash investmentsdepict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.
The Company’s contracts with customers are placed with high credit qualitygenerally on a contract and work order basis and represent obligations that are satisfied at a point in time, as defined in the new guidance, generally upon delivery or has services are provided. Accordingly, revenue for each sale is recognized when the Company has completed its performance obligations. Any costs incurred before this point in time, are recorded as assets to be expensed during the period the related revenue is recognized. The Company did not generate any revenue for the three and six months ended June 30, 2023, and 2022.
Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation,” which requires recognition in the financial institutions.statements of the cost of employee, director and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has entered into an overnight repurchaseelected to recognize forfeitures as they occur as permitted under the FASB’s Accounting Standards Update ASU 2016-09 Improvements to Employee Share-Based Payment.
Research and cash management agreementDevelopment
Costs and expenses that can be clearly identified as research and development are charged to expense as incurred. The Company incurred $2,000 and $12,000 in research development expenses for the three and six months ended June 30, 2023, respectively, with a financial institution to invest idle funds in US government securities.related party. The Company maintains its cash accountsincurred $0 and $10,000 in several commercial banks located in Central Florida. The Federal Deposit Insurance Corporation (FDIC) guarantees accounts inresearch development expenses for the financial institution up to $250,000. At various times throughout the period, the Company had cash balances that exceeded the FDIC limit.
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Income Taxes
The Company accounts for treasury stock at par value. Under this method, the treasury stock account is increased by the par value of each share of common stock reacquired. Any excess paid per share over the par value is debited to additional paid-in capital for the amount per share that was originally credited. Any remaining excess is charges to retained earnings.
ASC 740-10 prescribes a recognition threshold that a tax position is required to apply to taxable incomemeet before being recognized in the yearsfinancial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in which those temporary differencesinterim periods, disclosure, and transition issues. Interest and penalties are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assetsclassified as a component of interest and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized by the use of a valuation allowance. A valuation allowance is applied when in management’s view it is more likely than not (50%) that such deferred tax will not be utilized
Uncertain tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. EffectiveOnly tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized.
The Company reports earnings (loss) per share in accordance with the Company’s adoption of these provisions, interest related to the unrecognized tax benefitsASC 260, “Earnings per Share.” Basic earnings (loss) per share is recognized in the financial statements as a component ofcomputed by dividing net income taxes. The adoption of ASC 740 did not have an impact on the Company’s financial position and results of operations.
SCHEDULE OF ANTIDILUTIVE SECURITIES OF EARNINGS PER SHARE
| June 30, 2023 | June 30, 2022 | |||||||
| Common stock to be issued | 1,455,852 | 627,281 | ||||||
| Stock options | 2,670,000 | 1,900,000 | ||||||
| Convertible Debt | 330,000 | — | ||||||
| Warrants to purchase common stock | — | 4,060,000 | ||||||
| Anti-dilutive securities | 4,455,852 | 6,587,281 | ||||||
Recent Accounting Pronouncements
Management does not believe it hasthat any uncertain tax positions thatrecently issued, but not yet effective accounting pronouncements, if adopted, would resulthave a material effect on the accompanying unaudited consolidated financial statements for the three and six months ended June 30, 2023, and 2022.
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NOTE 4 – INTANGIBLE ASSETS
The Company’s intangible assets consist of costs incurred in connection with the License Agreement with MGH (See Note 5). The consideration paid for the rights included in the Company having a liability toLicense Agreement was in the taxing authorities.form of common stock shares which resulted in MGH receiving approximately 20% of the total outstanding shares of common stock of VI. The Company’s tax returns are subject to examination byestimated fair value of the federal and state tax authorities forcommon stock as of the years ended 2007 through 2009.
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and maintenance are expensed as incurred. Accelerated depreciation is used for tax reportingEquipment (“ASC 360”) requires that a company recognize an impairment loss if, and straight-line depreciation is used for financial statement reporting.
The Company concluded an impairment of the license agreement existed as of December 31, 2022 due to there being no projected undiscounted future net cash flows attributablederived from the asset. As such, the Company wrote off the carrying value of the asset as of December 31, 2022.
The Company did not incur any amortization expense related to the License Agreement for the three and six months ended June 30, 2023. The Company recognized $7,823 and $15,644 of amortization expense related assets are less thanto the carrying amount,License Agreement with MGH for the carrying amounts are reducedthree and six months ended June 30, 2022 which is included in general and administrative expenses on the unaudited consolidated statements of operations.
NOTE 5 – RELATED PARTY TRANSACTIONS
Consulting Agreements
On November 5, 2021, the Company entered into a Consulting Agreement (the “Poznansky Agreement”) with Mark Poznansky, MD, a minority stockholder and former Director. The Company engaged Dr. Poznansky to fair valuerender consulting services with respect to informing, guiding, and supervising the development of antagonists to immune repellents or anti-fugetaxins for the treatment of cancer. The initial term of the Poznansky Agreement was for six months (the “Initial Term”), which was extended indefinitely, and the Company agreed to pay the Consultant $2,000 per month commencing November 5, 2021, with consideration for an impairment lossincrease in the monthly fee following the completion for the Company’s successful up listing to the NASDAQ Stock Market. The Company incurred a total of $6,000 and $12,000 in expenses for the three and six months ended June 30, 2023 and 2022, respectively, related to the Poznansky Agreement, which is recognizedincluded in professional fees on the unaudited consolidated statements of operations. As of June 30, 2023, and December 31, 2022, $35,500 and $26,000, respectively, is included in accounts payable, related parties, on the unaudited consolidated balance sheets, related to the Poznansky Agreement.
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MGH License Agreement
On May 8, 2013, VI and MGH, a principal stockholder (see Note 6), entered into the License Agreement, pursuant to which MGH granted to the Company, in the field of coating and transplanting cells, tissues and devices for therapeutic purposes, on a worldwide basis: (i) an exclusive, royalty-bearing license under its rights in Patent Rights (as defined in the License Agreement) to make, use, sell, lease, import and transfer Products and Processes (each as defined in the License Agreement); (ii) a non-exclusive, sub-licensable (solely in the License Field and License Territory (each as defined in the License Agreement)) royalty-bearing license to Materials (as defined in the License Agreement) and to make, have made, use, have used, Materials for only the purpose of creating Products, the transfer of Products and to use, have used and transfer processes; (iii) the right to grant sublicenses subject to and in accordance with FASB ASC 360-10-05, Accountingthe terms of the License Agreement, and (iv) the nonexclusive right to use technological information (as defined in the License Agreement) disclosed by MGH to the Company under the License Agreement, all subject to and in accordance with the License Agreement (the “License”).
As amended by the Ninth Amendment to the License Agreement on May 30, 2023 (“Effective Date”), which adds to the due diligence requirements as amended by Eighth Amendment to the License Agreement, requires that within one year of the Ninth Amendment Effective Date, the Company shall submit a research and development plan for the Impairmentpatent rights associated with MGH 24644 with mutually acceptable diligence requirements to be added by amendment to the Agreement for development of the product or Disposalprocess for the therapy and/ or prophylaxis of Long-Lived Assets.a human disorder in the license field.
As amended by the Eighth Amendment to the License Agreement on March 14, 2022 (“Effective Date”), which replaces the prior pre-sales due diligence requirements in their entirety, the License Agreement requires that the Company satisfy the following requirements prior to the first sale of Products (“MGH License Milestones”), by certain dates.
Pre-Sales Diligence Requirement:
| (x) | The Company shall provide a detailed business plan and development plan by June 1st, 2022. As of the date of this filing the Company has yet to submit the business and development plan and is negotiating the extension of this requirement with MGH. | |
| (xi) | The Company shall raise $2 million in financing by December 1st, 2022. | |
| (xii) | The Company shall raise an additional $8 million in financing by December 1st, 2023. | |
| (xiii) | The Company shall initiate research regarding the role of CXCL12 in beta cell function and differentiation by January 1st, 2023. | |
| (xiv) | The Company shall initiate diabetic non-human primate studies using cadaveric islets encapsulated in the CXCL12 technology by March 1st, 2023. | |
| (xv) | The Company shall initiate research regarding other applications of the CXCL12 platform by June 1st, 2023. | |
| (xvi) | The Company shall initiate a Phase I clinical trial of a Product or Process by March 1st, 2024. | |
| (xvii) | The Company shall initiate a Phase II clinical trial of a Product or Process within thirteen (13) years from Effective Date. | |
| (xviii) | The Company shall initiate Phase III clinical trial of a Product or Process within sixteen (16) years from Effective Date. |
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Additionally, as amended by the Eighth Amendment to the License Agreement on March 14, 2022, which replaces the prior post-sales due diligence requirements in their entirety, the License Agreement requires that the Company satisfy the following requirements post-sales of Products (“MGH License Milestones”), by certain dates.
Post-Sales Diligence Requirements:
| (i) | The Company shall itself or through an Affiliate or Sublicensee make a First Commercial Sale within the following countries and regions in the License Territory within eighteen (18) years after the Effective Date of this Agreement: US and Europe and China or Japan. | |
| (ii) | Following the First Commercial Sale in any country in the License Territory, Company shall itself or through its Affiliates and/or Sublicensees use commercially reasonable efforts to continue to make Sales in such country without any elapsed time period of one (1) year or more in which such Sales do not occur due to lack such efforts by Company. |
In consideration of the update to the diligence milestones, the Company shall pay the following Annual Minimum Royalty payments:
| (i) | Prior to the First Commercial Sale, the Company shall pay to MGH a non-refundable annual license fee of ten thousand dollars ($10,000) by June 30, 2022, and on each subsequent anniversary of the Eighth Amendment Effective Date thereafter. The first non-refundable annual license fee was paid on July 1, 2022. As of June 30, 2023, the Company has yet to pay the second non-refundable license fee and is included in accounts payable, related party, on the unaudited consolidated balance sheets. | |
| (ii) | Following the First Commercial Sale, Company shall pay MGH a non-refundable annual minimum royalty in the amount of one hundred thousand dollars United States Dollars ($100,000) per year within sixty (60) days after each annual anniversary of the Effective Date. The annual minimum royalty shall be credited against royalties subsequently due on Net Sales made during the same calendar year, if any, but shall not be credited against royalties due on Net Sales made in any other year. |
The License Agreement also requires VI to pay to MGH a 1% royalty rate on net sales related to the first license sub-field, which is the treatment of Type 1 Diabetes (“T1D”). Future sub-fields shall carry a reasonable royalty rate, consistent with industry standards, to be negotiated at the time the first such royalty payment shall become due with respect to the applicable Products and Processes (as defined in the License Agreement).
The License Agreement additionally requires VI to pay to MGH a $1.0 million “success payment” within 60 days after the first achievement of total net sales of Product or Process equal to or to exceed $100,000,000 in any calendar year and $4,000,000 within 60 days after the first achievement of total net sales of Product or Process equal or exceed $250,000,000 in any calendar year. The Company is also required to reimburse MGH’s expenses in connection with the preparation, filing, prosecution and maintenance of all Patent Rights.
The License Agreement expires on the later of (i) the date on which all issued patents and filed patent applications within the Patent Rights have expired (November 2033) or have been abandoned, and (ii) one year after the last sale for which a royalty is due under the License Agreement.
The License Agreement also grants MGH the right to terminate the License Agreement if VI fails to make any payment due under the License Agreement or defaults in the performance of any of its other obligations under the License Agreement, subject to certain notice and rights to cure set forth therein. MGH may also terminate the License Agreement immediately upon written notice to VI if VI: (i) shall make an assignment for the benefit of creditors; or (ii) or shall have a petition in bankruptcy filed for or against it that is not dismissed within 60 days of filing. As of the date of this filing, this License Agreement remains active and the Company has not received any termination notice from MGH.
VI may terminate the License Agreement prior to its expiration by giving 90 days’ advance written notice to MGH, and upon such termination shall, subject to the terms of the License Agreement, immediately cease all use and sales of Products and Processes.
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The Company incurred costs to MGH of $2,000 and Advertising Costs$12,000 for the three and six months ended June 30, 2023 which is classified as research and development costs, related party, on the consolidated unaudited statements of operations. The Company incurred costs to MGH of $-0- and $10,000, respectively, for the three and six months ended June 30, 2022. As of June 30, 2023, and December 31, 2022, $15,097 and $3,097, respectively, is included in accounts payable, related parties, on the consolidated balance sheets, for services that remain unpaid.
During the three and six months ended June 30, 2023, and 2022, there have not been any sales of Product or Process under this License Agreement.
Accounts Payable, related parties and Accrued Salaries, related party
The Company incurred director fees of $62,500 and $125,000, respectively, for the three and six months ended June 30, 2023 to Federico Pier, the Company’s Chief Executive Officer and Chairman of the Board, which are included in personnel costs on the unaudited consolidated statements of operations. The Company incurred director fees of $30,000 and $60,000 for the three and six months ended June 30, 2022, respectively, to Mr. Pier. As of June 30, 2023, and December 31, 2022, $242,955 and $144,000, respectively, of these director fees are included in accounts payable, related parties, on the unaudited consolidated balance sheets.
The Company incurred consulting fees of $22,500 and $45,000 for the three and six months ended June 30, 2023 and 2022, respectively, to Jeff Wright, the Company’s Chief Financial Officer, which are included in professional fees on the unaudited consolidated statements of operations. As of June 30, 2023, and December 31, 2022, $133,906 and $99,000, respectively, is included in accounts payable, related parties, on the unaudited consolidated balance sheets.
In August 2020, Frances Tonneguzzo, the Company’s Chief Executive Officer (the “former CEO”) tendered her resignation as CEO. For the three and six months ended June 30 2023, and 2022, the Company did not incur any expenses to the former CEO. As of June 30, 2023, and December 31, 2022, $115,312, respectively, of unpaid salary to the former CEO is included in accrued salaries, related party on the unaudited consolidated balance sheets. See Note 6 for a consulting agreement executed with the former CEO.
NOTE 6– COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is not aware of any material, existing or pending legal proceedings against the Company, nor is it involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
MGH License Agreement
As discussed in Note 5, the Company executed a License Agreement with MGH. Prior to the first commercial sale, the License Agreement requires the Company to pay MGH a non-refundable annual license fee of $10,000 by June 30, 2022, and on each subsequent anniversary of the Effective Date thereafter. The first non-refundable annual license fee was paid on July 1, 2022. As of June 30, 2023, the Company had yet to pay the second non-refundable license fee and is included in accounts payable, related party, on the unaudited consolidated balance sheets. Additionally, following the first commercial sale, the License agreement requires the Company to pay MGH a non-refundable annual minimum royalty in the amount of $100,000 per year within sixty days after each annual anniversary of the Effective Date. The Company has yet to generate any revenue as of June 30, 2023.
The License Agreement also requires VI to pay to MGH a 1% royalty rate on net sales related to the first license sub-field, which is the treatment of T1D. Future sub-fields shall carry a reasonable royalty rate, consistent with industry standards, to be negotiated at the time the first such royalty payment shall become due with respect to the applicable Products and Processes (as defined in the License Agreement).
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The License Agreement additionally requires VI to pay to MGH a $1.0 million “success payment” within 60 days after the first achievement of total net sales of Product or Process equal or exceeding $100,000,000 in any calendar year and advertising$4,000,000 within 60 days after the first achievement of total net sales of Product or Process equal to or exceeding $250,000,000 in any calendar year. The Company is also required to reimburse MGH’s expenses in connection with the preparation, filing, prosecution and maintenance of all Patent Rights. No expense reimbursements were paid to MGH during the three and six months ended June 30, 2023, and 2022. As of June 30, 2023, and December 31, 2022, $15,097 and $3,097, respectively, is included in accounts payable, related parties, on the unaudited consolidated balance sheets.
Consulting Agreements
On January 12, 2022, the Company entered into a Consulting Agreement (the “Donohoe Agreement”) with Donohoe Advisory Associates, LLC. (the “Consultant”). The Company engaged the Consultant to provide assistance and advice to the Company in support of the Company’s efforts to obtain a listing on a national securities exchange. The Company agreed to pay the Consultant a retainer fee of $17,500, which is to be applied to the Company’s monthly invoices until such time as the retainer fee is exhausted or the engagement under the agreement ends. The Company did not incur any expenses related to the Donohoe Agreement for the three and six months ended June 30, 2023. The Company incurred $5,820 and $10,680 in expenses for the three and six months ended June 30, 2022, respectively, which are included in professional fees on the unaudited consolidated statements of operations, and none of which is included in accounts payable on the unaudited consolidated balance sheet. As of June, 2023, the remaining balance of the retainer paid to the Consultant was $6,820 and is included in prepaid expenses on the unaudited consolidated balance sheet. If the Company is successful in listing on an exchange, the Company will be obligated to pay a “success fee” to the Consultant of either $10,000 or that number of registered common shares equivalent to $10,000 divided by the closing price of the Company’s common stock on the last day of trading on the OTC Market. The form of the success fee will be determined by the Company.
On March 7, 2022, the Company entered into a Consulting Agreement (the “Consulting Agreement”) with Alpha IR Group, LLC. (the “Consultant”). The Company engaged the Consultant to provide consulting, investor relations, and corporate and transaction communication related services. The initial term of the Consulting Agreement was for three months (the “Initial Term”) beginning March 1, 2022, and the Company agreed to pay compensation equal to the sum of $50,000 payable in cash or stock options for the three months of service. The Company incurred $24,000 and $0, respectively, in expenses for the three and six months ended June 30, 2023, which are included in professional fees on the unaudited consolidated statements of operations. The Company incurred $16,667 and $33,333 in expenses for the three and six months ended June 30, 2022. As of June 30, 2023, the balance owed to the Consultant was $74,000 which is included in accounts payable on the unaudited consolidated balance sheet.
Employment Agreement
The Company has an employment agreement with Federico Pier, the Company’s Chief Executive Officer and Chairman of the Board. Pursuant to the terms of the employment agreement, Mr. Pier will receive a $ one-time cash bonus if the Company’s common stock is up listed to NASDAQ or the New York Stock Exchange, or the Company secures and receives financing of at least $8 million. Additionally, the Company shall issue Mr. Pier, pursuant to the Company’s equity incentive plan, a restricted stock unit award containing the following terms: Mr. Pier shall receive shares of common stock of the Company The Company will use issue such Equity Payments within seventy-three days after the attainment of the applicable Market Capitalization Target. Mr. Pier shall remain eligible to receive additional equity-based compensation awards as the Company may grant from time to time.
On January 1, 2022, the Company entered into a consulting agreement (the “Toneguzzo Agreement”) with Frances Toneguzzo, Ph.D., the Company’s former CEO. Pursuant to the one-year term of the Toneguzzo Agreement in exchange for services in leading the research and development teams and laboratory work, the consultant received $5,000 per month. The Company did not extend the Toneguzzo Agreement after the expiration of the one-year term. As of June 30 2023, and December 31, 2022, $40,000 is included in accounts payable on the unaudited consolidated balance sheets, related to the Toneguzzo Agreement.
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NOTE 7 – SHORT-TERM LIABILITIES
Convertible Note Payable
As discussed in Note 2, on June 27, 2023, the Board of Directors approved a resolution authorizing the Company to obtain a secured six-month term loan for the principal amount of $330,000. In connection therewith, on June 27, 2023, the Company entered into a Securities Purchase Agreement with selected accredited investors whereby the Company had the right to secure the convertible note. The holder has conversion rights upon event of default and the conversion price is equal to the average of the three lowest prices of the Company’s common stock of the trailing ten days prior to the date conversion of the convertible note. At issuance and at June 30, 2023, the Company estimated the fair value of the conversion option embedded in the Note and determined its value to be de minimis due to the fact that settlement into shares of common stock only occurs upon an event of default. If the event of default were triggered this would provide the Note holder with little upside potential and therefore no value was allocated to the embedded derivative.
Original Issuance Discount
The principal face value of the loan is $330,000 and was issued with an original issuance discount of $26,400 which resulted in aggregate proceeds of $303,600. The loan carries an interest rate of 10% per year, has a default interest rate of 18% per year, and a maturity date of December 27, 2023. Interest is payable on a monthly basis beginning one month following the issue date. Following an event of default, the noteholder has the right to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the note into fully paid and non-assessable shares of Common Stock. Additionally, the noteholders have the option to convert the $26,400 original issuance discount, which will accrete over the life of the loan based on the effective interest method. The convertible note is also presented net of the issuance costs of $13,250 which will accrete over the life of the note, based on the effective interest method. Accretion expense incurred related to the original issuance discount for the three and six months ended June 30, 2023 was approximately $661.
Debt Discount
To secure the convertible note, the Company paid a commitment fee of $83,526 by issuing 328,571 shares of the Company’s common stock. The common stock was yet to be issued as of June 30, 2023. See Note 8. The convertible note is also presented net of the debt discount of $83,526 which represents the relative fair value of the common stock issued as of June 30, 2023, which will accrete over the life of the convertible note. Accretion expense incurred related to the debt discount for the three and six months ended June 30, 2023 was approximately $1,393.
The balance of the convertible note as of June 30, 2023 was $208,877, which is presented net of aggregate debt discount of $206,824 and aggregate accretion expense of $2,054.
Short-Term Note Payable
The Company entered into a commercial insurance premium finance and security agreement in May 2023. The agreement finances the Company’s annual D&O insurance premium. Payments are expenseddue in monthly installments of approximately $6,400 and carry an annual percentage interest rate of 13.9%.
The Company had an outstanding premium balance of approximately $54,230 at June 30, 2023 related to the agreement, which is included in short-term note payable in the consolidated balance sheets. Interest expense for the three and six months ended June 30, 2023 was approximately $706.
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NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
The Company has authorized shares of preferred stock, $ par value per share.
Series A Preferred Stock
On December 19, 2017, the Company amended its articles of incorporation by filing a certificate of designation with the Secretary of State of Florida therein designating a class of preferred stock as incurred. MarketingSeries A Preferred Stock, $ par value per share, consisting of million () shares. Each holder of shares of Series A Preferred Stock shall be entitled to the number of votes equal to the number of votes held by the number of shares of common stock into which such share of Series A Preferred Stock could be converted, and advertising costsexcept as otherwise required by applicable law, shall have the voting rights and power equal to the voting rights and powers of the common stock. The holders of the Series A Preferred Stock shall vote together with the holders of the common stock of the Company as a single class and as single voting group upon all matters required to be submitted to a class or series vote pursuant to the protective provisions of the Certificate of Designation or under applicable law.
In the event of liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, the holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any common stock holders, distribution of any surplus funds equal to the greater of (i) the sum of $1.67 per share or (ii) such amount per share as would have been payable had all shares been converted to common stock.
Each share of Series A Preferred Stock is convertible into shares of common stock at a conversion Rate of 2:1 (the “Series A Conversion Rate”). The Series A Conversion Rate shall be adjusted for stock splits, stock combinations, stock dividends or similar recapitalizations.
Pursuant to the Articles of Incorporation, the shares of Series A Preferred Stock automatically converted into shares of common stock to be issued on February 12, 2021, (the one-year anniversary of the initial filing by the Company of the Form 10 filed with the SEC). The common stock shares for the conversion of the Series A Preferred Stock were issued on January 13, 2022.
As of June 30, 2023, and December 31, 2022, there were -- shares of Series A Preferred Stock issued and outstanding.
Series B Preferred Stock
On December 19, 2017, the Company amended the articles of incorporation by filing a certificate of designation with the Secretary of State of Florida therein designating a class of preferred stock as Series B Preferred Stock, $ par value per share, consisting of million () shares (the “Series B Preferred Stock Certificate of Designation”).
Each holder of shares of Series B Preferred Stock shall be entitled to the number of votes equal to the number of votes held by the number of shares of common stock into which such share of Series B Preferred Stock could be converted, and except as otherwise required by applicable law, shall have the voting rights and power equal to the voting rights and powers of the common stock. The holders of the Series B Preferred Stock shall vote together with the holders of the common stock of the Company as a single class and as single voting group upon all matters required to be submitted to a class or series vote pursuant to the protective provisions of the Series B Preferred Stock Certificate of Designation or under applicable law. In the event of liquidation, dissolution or winding up of the Corporation, either voluntarily or involuntarily, the holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any common stock holders, distribution of any surplus funds equal to the greater of : the sum of $0.83 per share or such amount per share as would have been payable had all shares been converted to common stock.
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The holder of Series B Preferred Stock may elect at any time to convert such sharers into common stock of the Company. Each share of Series B Preferred Stock is convertible into shares of common stock at a conversion rate of 1:1 (the “Series B Conversion Rate”). The Series B Conversion Rate shall be adjusted for stock splits, stock combinations, stock dividends or similar recapitalizations.
Pursuant to the Articles of Incorporation, the shares of Series B Preferred Stock automatically converted into shares of common stock to be issued on February 12, 2021, the one-year anniversary of the initial filing by the Company of the Form 10 filed by the Company with the SEC. The common stock shares for the conversion of the Series B Preferred Stock were issued on January 13, 2022.
As of June 30, 2023, and December 31, 2022, there were -- shares of Series B Preferred Stock issued and outstanding.
Common Stock
The Company has authorized shares of common stock, $ par value per share. As of June 30, 2023, and December 31, 2022, there were shares, respectively, of common stock issued and outstanding.
Common Stock Issuances
On February 12, 2021, the Company issued shares of common stock to the holders of Series A Preferred Stock, pursuant to the automatic conversion feature of the Series A Certificate of Designation, whereby, the Series A shares are to automatically convert on the one-year anniversary of the Company filing its Registration Statement on Form 10. The Form 10 Registration Statement was filed with the SEC on February 12, 2020. The common stock shares for the conversion of the Series A Preferred Stock were issued on January 13, 2022.
On February 12, 2021, the Company issued shares of common stock to the holders of Series B Preferred Stock, pursuant to the automatic conversion feature of the Series B Certificate of Designation, whereby, the Series B shares are to automatically convert on the one-year anniversary of the Company filing its Registration Statement on Form 10. The Form 10 Registration Statement was filed with the SEC on February 12, 2020. The common stock shares for the conversion of the Series B Preferred Stock were issued on January 13, 2022.
In 2022, the Company determined that the former Series B Preferred Stockholders, subsequent to all Series B Preferred Stock having previously been converted to shares of common stock in 2021, were owed additional shares of common stock due to an adjustment to the conversion price that occurred as a result of a down round trigger event that occurred in 2019 when the Company sold shares of common stock and a warrant in a private placement at a price of $, which was below the original conversion ratio of the Series B Preferred Stock. Management determined the total additional shares owed to the Preferred B Stockholders to be as a result of the down round trigger. The financial statement impact of this down round trigger was not significant. The shares owed to the Series B Preferred Stockholders due to the 2019 trigger event have been presented on the statement of stockholders’ deficit retrospectively as common stock to be issued with no impact on total stockholders’ deficit. The Company issued the additional shares to the Series B Preferred Stockholders on March 24, 2022.
In July 2022, the Company received proceeds totaling $50,000 and issued shares of common stock pursuant to the exercise of warrants at $0.50 per share.
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Common Stock to be issued
As of June 30, 2023 and December 31, 2022, there were and , respectively, shares of common stock to be issued.
In April 2023, the Company entered into Security Purchase Agreements (“SPA’s) with select accredited investors in connection with a private offering. The Company raised an aggregate amount of $100,000 issuing shares of common stock at $ per share.
In connection with the promissory note as discussed in Note 7, to secure the note, the Company paid a commitment fee by issuing 328,571 shares of the Company’s common stock. The relative fair value of the common stock was $83,526 as of June 30, 2023. The shares were subsequently issued in July 2023.
The remaining amount of common shares to be issued relates to shares to be issued pursuant to a Stock Issuance and Release Agreement (“SRI Agreement”) executed by the Company in February 2019 to stockholders for no consideration who purchased shares in 2018 at $, shares of common stock to be issued to two initial shareholders of VI, and shares to be issued pursuant to the exercise of warrants in July 2022.
Stock Option-Based Compensation Plan
On August 10, 2022, the Board of Directors of the Company approved and adopted the Vicapsys Life Sciences, Inc., 2022 Omnibus Equity Incentive Plan (the “Plan”). The material terms of the 2022 Plan are set forth below:
| ● | The Board or a committee established by the Board will administer the 2022 Plan. |
| ● | |
| ● | Eligible recipients of awards include an employee, director or independent contractor of the Company who has been selected as an eligible participant by the Administrator, subject to certain limitations relating to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). |
| ● | No non-employee director may be granted awards under the 2022 plan during any calendar year if such awards and cash fees paid for serving as a non-employee director would exceed $150,000 in the non-employee director’s initial year of service, or $195,000 in any year thereafter. |
| ● | In no event shall the exercise price of an option issued pursuant to the 2022 Plan be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the date of grant. |
The purposes of the Plan are to (i) provide an additional incentive to selected employees, directors, and independent contractors of the Company or its Affiliates whose contributions are essential to the growth and success of the Company, (ii) strengthen the commitment of such individuals to the Company and its Affiliates, (iii) motivate those individuals to faithfully and diligently perform their responsibilities and (iv) attract and retain competent and dedicated individuals whose efforts will result in the long-term growth and profitability of the Company. To accomplish these purposes, the Plan provides that the Company may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Other Stock-Based Awards or any combination of the foregoing.
Stock Option Activity
SCHEDULE OF STOCK OPTIONS ACTIVITY
Number of Options | Weighted- Average Exercise Price per Share | Weighted- Average Remaining Life (Years) | Aggregate Intrinsic Value (Per Option) | |||||||||||||
| Outstanding at December 31, 2022 | 2,670,000 | $ | 0.62 | $ | ||||||||||||
| Outstanding at June 30, 2023 | 2,670,000 | $ | 0.62 | $ | ||||||||||||
| Exercisable at June 30, 2023 | 2,670,000 | $ | 0.62 | $ | ||||||||||||
The Company adopted FASB ASC 820 “Fair Value Measurements”, (“FASB ASC 820”) for its non-financial assets and liabilities and for its financial assets and liabilities measured at fair value on a nonrecurring basis. This Standard provides a framework for measuring fair value in generally accepted accounting principles, expands disclosures about fair value measurements, and establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The adoption of FASB ASC 820 for the Company’s non-financial assets and liabilities did not have a material impact on the Company’s consolidated financial statements.
| June 30, 2010 | December 31, 2009 | |||||||
| Contract billings | $ | 1,813,478 | $ | 1,272,788 | ||||
| Allowance for doubtful accounts | (93,225 | ) | (181,445 | ) | ||||
| Total | $ | 1,720,253 | $ | 1,091,343 | ||||
| June 30, 2010 | December 31, 2009 | |||||||
| Costs incurred on uncompleted contracts | $ | 4,846,097 | $ | 1,072,453 | ||||
| Estimated earnings | 490,320 | 269,282 | ||||||
| 5,336,417 | 1,341,735 | |||||||
| Less billings to date | 5,379,480 | 1,536,121 | ||||||
| Total | $ | (43,063 | ) | $ | (194,386 | ) | ||
| June 30, 2010 | December 31, 2009 | |||||||
| Costs and estimated earnings in excess of | ||||||||
| billings on uncompleted contracts | $ | 704,060 | $ | 57,411 | ||||
| Billings in excess of costs and estimated | ||||||||
| earnings on uncompleted contracts | (747,123 | ) | (251,797 | ) | ||||
| Total | $ | (43,063 | ) | $ | (194,386 | ) | ||
| Current Assets | $ | 2,221,217 | ||
| Property and Equipment | 265,209 | |||
| Other Assets | 785,798 | |||
| Goodwill | 5,062,144 | |||
| Liabilities Assumed | (2,314,540 | ) | ||
| $ | 6,019,838 |
| Warrants | $ | 171,592 | ||
| Stock | 3,674,773 | |||
| Cash | 1,000,000 | |||
| Note Payable | 1,173,473 | |||
| $ | 6,019,838 |
| June 30, 2010 | December 31, 2009 | |||||||
| 5.00% note payable to a former stockholder, $9,317 principal and interest payments monthly, through June 2015 | $ | 491,748 | $ | - | ||||
| 5.00% note payable to a former stockholder, $2,097 principal and interest payments monthly, through June 2015 | 111,125 | - | ||||||
| 3.25% note payable to a former stockholder, | ||||||||
| $2,357 principal and interest payments monthly, | ||||||||
| through January 2016. | 144,600 | - | ||||||
| 4.00% note payable to a former stockholder, $26,496 principal and interest payable monthly, through May 2014. | 1,150,889 | - | ||||||
| 7.99% note payable to Chrysler Financial collateralized by vehicle and guaranteed by founding stockholders. Due in monthly installments of $293 including interest through May 2012. | 6,240 | 15,435 | ||||||
| 8.75% to 8.99% notes payable to Ford Credit collateralized by vehicles and guaranteed by founding stockholders. Due in monthly installments of $2,918 including interest through 2013. | 38,931 | 47,002 | ||||||
| 6.50% to 7.15% notes payable to Wachovia Bank collateralized by vehicles and guaranteed by founding stockholders. Due in monthly installments of $5,654 including interest through 2012. | 86,509 | 113,170 | ||||||
| 7.50% note payable to Wells Fargo collateralized by a vehicle and equipment. Due in monthly installments of $967 including interest through 2012. | 22,320 | 28,759 | ||||||
| 5.40% note payable to Premium Financing Specialists. Due in monthly installments of $11,952 including interest through 2010 paid in June. | - | 23,743 | ||||||
7.65% note payable to SunTrust Bank collateralized by a vehicle. Due in monthly installments of $349 including interest through 2014. | 15,871 | 17,322 | ||||||
| 2,068,233 | 245,431 | |||||||
| Less current portion | 491,984 | 111,891 | ||||||
| Total | $ | 1,576,249 | $ | 133,540 | ||||
| 2011 | $ | 491,984 | ||
| 2012 | 494,199 | |||
| 2013 | 457,274 | |||
| 2014 | 446,134 | |||
| 2015 and thereafter | 178,642 | |||
| $ | 2,068,233 |
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| Weighted Average | ||||||||||||
| Number of | Remaining | |||||||||||
| Warrants | Weighted Average | Contractual Life | ||||||||||
| Outstanding | Exercise Price | (Years) | ||||||||||
| Balance, December 31, 2009 | 3,525,053 | $ | 0.60 | 4.47 | ||||||||
| Warrants Issued | 1,295,000 | $ | 0.63 | 4.88 | ||||||||
| Balance, June 30, 2010 | 4,820,053 | $ | 0.61 | 4.39 | ||||||||
| Number of | Remaining | |||||||||
| Warrants | Contractual Life | |||||||||
| Outstanding | Exercise Price | (Years) | ||||||||
| 4,820,053 | $ | 0.61 | 1.0 – 9.0 | |||||||
| June 30, | December31, | |||||||
| 2010 | 2009 | |||||||
| Risk free interest rate | 1.12% - 1.63 | % | .5% - 1.8 | % | ||||
| Expected volatility | 231% - 297 | % | 20% - 86 | % | ||||
| Expected term of stock warrant in years | 2.5 - 3.5 | 1.5 – 5.0 | ||||||
| Expected dividend yield | 0 | % | 0 | % | ||||
| Average value per option | .02 - .69 | .13 - .73 | ||||||
| 2010 | 2009 | |||||||
| Tax benefit at U.S. statutory rate | 34.00 | % | 34.00 | % | ||||
| State taxes, net of federal benefit | 3.63 | 3.63 | ||||||
| Change in valuation allowance | (37.63 | ) | (37.63 | ) | ||||
| - | % | - | % | |||||
| June 30, | December 31, | |||||||
| Deferred Tax Assets | 2010 | 2009 | ||||||
| Net Operating Loss Carryforward | $ | 2,365,000 | $ | 1,958,000 | ||||
| Other | 88,000 | 173,000 | ||||||
| Total Deferred Tax Assets | 2,453,000 | 2,131,000 | ||||||
| Deferred Tax Liabilities | ( 313,000 | ) | (278,000 | ) | ||||
| Net Deferred Tax Assets | 2,140,000 | 1,853,000 | ||||||
| Valuation Allowance | (2,140,000 | ) | (1,853,000 | ) | ||||
| Total Net Deferred Tax Assets | $ | - | $ | - | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The purpose of management’sfollowing discussion and analysis (“MD&A”) is to increase the understanding of the reasons for material changes in our financial condition since the most recent fiscal year-end and results of operations during the current fiscal period as compared to the corresponding period of the preceding fiscal year. The MD&A should be read in conjunction with the condensedunaudited consolidated financial statements and accompanyingthe notes thereto appearing in Part I, Item 1 of this Quarterly Report. Historical results and our 2009 Annualtrends that might appear in this Quarterly Report on Form 10-K.
Overview
Vicapsys Life Sciences, Inc. (the “Company”, “we”(“VLS”) was incorporated under the laws ofin the State of Florida ason July 8, 1997 under the name All Product Distribution Corp. On August 19, 1998, the Company changed its name to Phage Therapeutics International, Inc. On November 13, 2007, the Company changed its name to SSGI, Inc. On December 22, 2017, pursuant to a Share Exchange Agreement (the “Exchange Agreement”) by and among VLS, Michael W. Yurkowsky, ViCapsys, Inc. (“VI”) and the shareholders of VI, a private company, VI became a wholly owned subsidiary of VLS. We refer to VLS and VI together as the “Company”.
The Company’s strategy is to develop and commercialize, on December 26, 1996. In February 2008, through a share exchange, the company acquired Surge Solutions Group, Inc.. Asworldwide basis, various intellectual property rights (patents, patent applications, know how, etc.) relating to a consequenceseries of encapsulated products that incorporate proprietary derivatives of the latter exchange, which qualified aschemokine CXCL12 for creating a reverse merger, we became the accounting acquirerzone of immuno protection around cells, tissues, organs and the reporting entity prospectively.
Results of Operations – Three and general construction in Florida including new commercial construction. We perform under cost-plus-fee contracts, fixed-price contracts,Six Months Ended June 30, 2023, and fixed-price contracts modified by incentive and penalty provisions. The lengths of our contracts typically range from three months or less to one year.
Revenues
The Company also agreed, as part ofdid not have any revenues for the Modification Agreement, to use its best efforts to repay outstanding credit card indebtedness incurred by the Companythree and personally guaranteed by the former officer and director.
Operating Expenses
We classify our operating expenses into four categories: personnel costs, research and development expenses, professional fees, and general and administrative expenses. The Company’s revenuetotal operating expenses for the three and six months ended June 30, 2023 were $135,693 and $346,970, respectively, compared to $180,056 and $347,103 for the three and six months ended June 30, 2022.
$10,833 monthly increase in Director fees for our CEO commencing in January 2023, resulted in an increase in personnel costs to $66,913 and $130,944 for the three and six months ended June 30, 2023, respectively, from $30,915 and $61,284 for the three and six months ended June 30, 2022. We incurred $2,000 and $12,000 in research and development expenses during the three and six months ended June 30, 2023, respectively, related to a ninth amendment license fee and also an annual royalty fee we agreed to pay upon execution of $3.66 millionthe Eighth Amendment to the License Agreement with MGH. Research and development expenses remained consistently low as the Company continued ongoing financing efforts in the wake of the negative impact of COVID-19, which continued to hinder the Company’s ability to raise the additional capital necessary to maintain regular operating activities. The decrease in general and administrative costs to $15,313 for the three months ended June 30, 2023, from $16,160 for the three months ended June 30, 2022, was primarily due to no amortization expense incurred during the three months ended June 30, 2023 related to the intangible asset that was written off as of December 31, 2022, and was partially offset by an increase in insurance expense related to the new D&O policy. The increase in general and administrative costs to $39,773 for the six months ended June 30, 2010 increased $0.97 million or 35.9%, compared to $2.70 million2023, from $28,953 for the six months ended June 30, 2009. This increase was in revenues2022, was primarily due to our acquisition of B&M Construction Co., Inc.,insurance expense incurred related to the new D&O policy. The decrease in professional fees to $51,467 and $164,253 for the backlog between the two companies. Significant time was spent during thethree and six months ended June 30, 2010 finalizing2023, from $132,981 and $246,866 for the acquisitionthree and seeking additional capital. (See “Recent Financings” )
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Funding Requirements
We anticipate that substantial additional equity or debt financings or funding from collaborative agreements or from foundations, government grants or other sources, will be needed to complete preclinical and animal testing necessary to file an Investigational New Drug Application with the U.S. Food and Drug Administration, and that further funding beyond such amounts will be required to commence trials and other activities necessary to begin the process of development and regulatory approval of a product for the continued growth of the Company. Additional capital will also be required for the clinical development of the recently discovered anti-fibrotic applications and corporate partnerships will be necessary to move Company products into advanced clinical development and commercialization. We also anticipate our cash expenditures will increase as we continue to operate as a publicly traded entity.
Liquidity and Capital Resources
At June 30, 2023, we had $231,277 of cash on hand and an accumulated deficit of $15,461,385.
We do not believe that we have enough cash on hand to operate our business during the next 12 months. We anticipate we will need to raise an additional $1 million through the issuance of debt or equity securities to sustain base operations during the next 12 months, excluding development work. There can be no assurance that we will be able to obtain additional funding on commercially reasonable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends.
If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our future revenue streams, products or therapeutic candidates or to grant licenses on terms that may not be favorable to us.
To date, we have financed our operations through our sale of equity and debt securities. Failure to generate revenue or to raise funds could cause us to go out of business, which would result in the complete loss for investors in our Company.
To date, we have generated no revenues, and no substantial revenues are anticipated until we have implemented our full plan of operations. To implement our strategy to grow and expand per our business plan, we intend to generate working capital via a gross lossprivate placement of equity or debt securities, or to secure a loan. If we are unsuccessful in raising capital or securing a loan, we could be required to cease business operations and investors would lose all of their investment.
In July 2022, the Company received aggregate proceeds totaling $50,000 and issued 100,000 shares of common stock pursuant to the exercise of warrants at $0.50 per share.
In April 2023, the Company entered into Security Purchase Agreements (“SPA’s) with select accredited investors in connection with a private offering by the Company to raise a maximum of $300,000 through the sale of shares of common stock at $0.25 per share. The Company has raised an aggregate amount of $100,000 as of the date of these consolidated financial statements.
In June 2023, the Board of Directors approved a percentage of contract revenues of 11.67% or $0.43 million on revenues of $3.66 million as comparedresolution authorizing the Company to obtain a $.16 million gross profit on sales of $2.70 millionsix-month term loan for the same periodprincipal amount of $330,000. In connection therewith, the Company entered into a Securities Purchase Agreement with selected accredited investors whereby the Company secured a convertible promissory note in 2009.the amount of $330,000, which was issued with an original issuance discount of $26,400 and resulted in aggregate proceeds of $303,600. The Company received aggregate proceeds of $290,350, net of issuance costs.
Additionally, we will have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. Our gross loss increased $0.59 million from a gross profitmanagement will have to spend additional time on policies and procedures to make sure our Company is compliant with various regulatory requirements.
This additional corporate governance time required of $0.16 million formanagement could limit the six months end June 30, 2010amount of time management has to implement our business plan and 2009, respectively. Our costmay impede the speed of revenues increased approximately 61.6% from $2.53 millionour operations.
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Working Capital Deficit
| June 30, 2023 | December 31, 2022 | |||||||
| Current Assets | $ | 378,147 | $ | 72,021 | ||||
| Current Liabilities | 1,471,685 | 1,022,812 | ||||||
| Working Capital Deficit | $ | (1,093,538 | ) | $ | (950,791 | ) | ||
Cash Flows
Cash activity for the six months ended June 30, 20092023, and 2022 is summarized as follows:
| Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash used in operating activities | $ | (228,060 | ) | $ | (200,006 | ) | ||
| Net increase (decrease) in cash | $ | 217,180 | $ | (200,006 | ) | |||
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4) during the periods presented, investments in special-purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to $4.09 million forany derivative contracts or synthetic leases.
Contractual Obligations
MGH License Agreement
The Company has executed a License Agreement with MGH. Prior to the six months endedfirst commercial sale, the License Agreement requires the Company to pay MGH a non-refundable annual license fee of $10,000 by June 30, 2010. This decrease2022, and on each subsequent anniversary of the Effective Date thereafter. The first non-refundable annual license fee was due primarily to our inability to fund cash needed to commence constructionpaid on new contracts as well asJuly 1, 2022. Additionally, following the unfavorable pricing model required to obtain contracted work.
The License Agreement also requires VI to Ryan Seddon, our former Chairman of the Board, Chief Executive Officer and President, notes payablepay to financial institutions for our transportation equipment, purchase considerationMGH a 1% royalty rate on net sales related to the majority B&M Shareholder and notes payablefirst license sub-field, which is the treatment of T1D. Future sub-fields shall carry a reasonable royalty rate, consistent with industry standards, to former shareholders of B&M Construction. Other liabilities increased approximately $0.39 million or 30% overbe negotiated at the balance $1.32 million at December 31, 2009. This increase wastime the first such royalty payment shall become due primarilywith respect to the purchase consideration to the majority B&M Construction shareholderapplicable Products and Processes (as defined in the amountLicense Agreement).
The License Agreement additionally requires VI to pay to MGH a $1.0 million “success payment” within 60 days after the first achievement of $1.17 million. Ryan Seddon,total net sales of Product or Process equal or exceeding $100,000,000 in any calendar year and $4,000,000 within 60 days after the former Chairmanfirst achievement of total net sales of Product or Process equal to or exceeding $250,000,000 in any calendar year. The Company is also required to reimburse MGH’s expenses in connection with the Board, Chief Executive Officerpreparation, filing, prosecution and President,maintenance of all Patent Rights.
The Company entered into a consulting agreement with Donohoe Advisory Associates, LLC to provide assistance and Ricardo Sabha, a former officer and director and current employeeadvice to the Company forgave $1.07 million in loans. Former B&M Construction shareholders accounted for $0.75 million. Notes payable to several financial institutions for the purchases of our transportation equipment decreased $0.04 million to $0.17 million between these two periods due to amortization of the principal balance as a result of monthly installment payments.
| For the six months ended June 30, | ||||||||
| 2010 | 2009 | |||||||
| Net cash used in operating activities | $ | ( 802 | ) | $ | ( 923 | ) | ||
| Net cash used in investing activities | ( 284 | ) | ( 352 | ) | ||||
| Net cash provided by financing activities | 1,069 | 1,298 | ||||||
| Net increase (decrease) in cash | $ | ( 17 | ) | $ | 23 | |||
| 23 |
Employment Agreement
The Company has an employment agreement with Federico Pier, the Company’s Chief Executive Officer and Chairman of the Board. Pursuant to the terms of the employment agreement, Mr. Pier will receive a $100,000 one-time cash bonus if the Company’s common stock is up listed to NASDAQ or the New York Stock Exchange, or the Company secures and receives financing of at $0.10 per share. On that date, we accepted subscriptions for 2.9 millionleast $8 million. Additionally, the Company shall issue Mr. Pier, pursuant to the Company’s equity incentive plan, a restricted stock unit award containing the following terms: Mr. Pier shall receive shares of common stock from 12 accredited investorsof the Company (i) representing 1% of the Company’s fully diluted equity as of the payment date (the “Initial Equity Payment”) if the Company achieves a market capitalization of at least $250 million for $0.29sixty consecutive days during the Term (the “Initial Market Capitalization Target”); and (ii) representing the difference between 2% of the Company’s fully diluted equity as of the payment date and the amount of Initial Equity Payment (the “Subsequent Equity Payment” and, together with Initial Equity Payment, “Equity Payments”) if the Company achieves a market capitalization of at least $500 million for sixty consecutive days during the Term (the “Subsequent Market Capitalization Target” and, together with Initial Market Capitalization Target, “Market Capitalization Targets”), such that Mr. Pier has, in cash. On May 25, 2010, we accepted $0.18 million in cash for 1.8 million shares from 5 accredited investors. From May 27 to June 30, 2010, we accepted subscriptions for 3.81 millionthe aggregate, received shares of common stock of the Company representing 2% of the Company’s fully diluted equity as of the date of payment of Subsequent Equity Payment. The Company will use issue such Equity Payments within seventy-three days after the attainment of the applicable Market Capitalization Target. Mr. Pier shall remain eligible to receive additional equity-based compensation awards as the Company may grant from 15 accredited investorstime to time.
The Company entered into a consulting agreement with Alpha IR Group, LLC to provide consulting, investor relations, and corporate and transaction communication related services. The initial term of the consulting agreement was for $0.381 millionthree months beginning March 1, 2022, and the Company agreed to pay compensation equal to the sum of $50,000 payable in cash. There were no warrants attached to these shares.
Critical Accounting Estimates
Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted accounting principles. Thosein the United States of America. The preparation of these consolidated financial statements and related disclosures requires us to make estimates and assumptionsjudgments that affect the reported amounts of assets, liabilities, expenses, and related disclosure of contingent assets and liabilities. We evaluate, on an ongoing basis, our estimates and judgments, including those related to the useful life of the assets. We base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported revenues and expenses.that are not readily apparent from other sources. Actual results could varymay differ from these estimates.
The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the estimatesresults that we report in our consolidated financial statements. The Securities and Exchange Commission (the “SEC”), considers an entity’s most critical accounting policies to be those policies that are used. Theboth most important to the portrayal of a company’s financial condition and results of operations and those that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain at the time of estimation.
We believe the following critical accounting policies, among others, require significant areas requiring management’sjudgments and estimates and assumptions relateused in the preparation of our interim consolidated financial statements.
Our significant accounting policies are described in more detail in the notes to determiningour consolidated financial statements for the fair value of stock-based compensation, fair value of shares issued for services andfiscal year ended December 31, 2022, included in the determination of percentage of completion in connectionCompany’s Annual Report filed on Form 10-K with the recognitionSEC on April 14, 2023.
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Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unaudited consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Pursuant to Item 305(e) of profit on customer contracts.
Evaluation of Disclosure Controls and Procedures
The Company maintains “disclosure controls and procedures (asprocedures” as defined in RuleRules 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of the Exchange Act)1934, as of the end of the period covered by this report. Based onamended (the “Exchange Act”), that evaluation, the Chief Executive Officer and Principal Financial Officer have concluded that, as of June 30, 2010, these disclosure controls and procedures were ineffectiveare designed to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i)is recorded, processed, summarized and reported within the time periods specified in the Commission’s ruleSEC’s rules and forms;forms, and (ii)that such information is accumulated and communicated to ourthe Company’s management, including ourits Chief Executive Officer and PrincipalChief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating the Company’s disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and the Company necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2023, and concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2023, due to a material weakness in the Company’s internal control over financial reporting.
The Company has an ineffective control environment due to a lack of internal resources with expertise to determine entries and disclosures related to some of the Company’s more complex equity transactions. Management believes this lack of internal expertise has been historically mitigated by continuing to retain consultants with this expertise when needed. The Company expects that this material weakness will be further remediated with future capital raises.
Changes in Internal Control Over Financial Reporting
There have beenwere no material changes in the Company’s internal control over financial reporting that occurred(as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation during the first fiscal quarter ended March 31, 2023 that have materially affected, or that are reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.
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PART II—II – OTHER INFORMATION
The Company is not a party to any pending legal proceedings to which we areproceeding, nor is the Company’s property the subject of a party or to which any of our property is subject, nor are there any such proceedings known to be contemplated by governmental authorities.pending legal proceeding. None of ourthe Company’s directors, officers or affiliates isare involved in a proceeding adverse to our business or has a material interest adverse to ourthe Company’s business.
As a smaller reporting company, the Company is not required to disclose material changes to the risk factors that were contained in the Company’s Form 10 registration statement originally filed with the SEC on February 12, 2020, as amended (the “Form 10”). However, in light of the recent coronavirus (COVID-19) pandemic, set forth below is a risk factor relating to COVID-19. Other than as set forth below, as of the filing date of this Quarterly Report on Form 10-Q, there have been no material changes fromto the risk factors faced by the Company from those previously disclosed in Part I, Item 1A in our Annual Report onthe Form 10-K for 2009, which is incorporated herein by reference, for the three months ended June 30, 2010.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Not applicable.
None.
| 31.1 | Section 302 Certification of Principal Executive | |
| 31.2 | ||
| 32.1 | ||
| Section | ||
| 101.INS | Inline XBRL Instance Document * | |
| Inline XBRL Taxonomy Extension Schema Document * | ||
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document ** | |
| 101.LAB | Inline XBRL Taxonomy Labels Linkbase Document * | |
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document ** | |
| 101.DEF | Inline XBRL Definition Linkbase Document * | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document)* |
| * | Filed herewith. |
| ** | This certification is being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, |
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Date: August 14, 2023
| By: | /s/ Federico Pier | |
| Federico Pier | ||
| Chief Executive Officer and Executive Chairman of the Board | ||
| (Principal Executive Officer) | ||
| By: | /s/ Jeffery Wright | |
| Jeffery Wright | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and | ||
| Principal Accounting Officer) | ||
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