Notes To Interim Financial Statements
(Unaudited)
1 - INTERIM FINANCIAL STATEMENTS
The accompanying interim financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2017, and for all periods presented herein, have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these interim financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2016 audited financial statements. The results of operations for the period ended March 31, 2017 are not necessarily indicative of the operating results for the full year.
2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
3 SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Companys management believes that these recent pronouncements will not have a material effect on the Companys financial statements.
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ACCUREXA INC.
Notes To Interim Financial Statements
(Unaudited)
Cash and Cash Equivalents
Cash equivalents comprise of certain highly liquid instruments with a maturity of three months or less when purchased.
4 PREPAID ASSETS
On February 18, 2015, the Company entered into a consulting agreement (Agreement) with the Capital Communications Group (Consultant) under which the Consultant assists the Company in its efforts to gain greater recognition and awareness among relevant investors in the public capital markets on a non-exclusive basis. In connection with the Agreement, the Company issued a four-year Warrant (Warrant) to the Consultant under which the Consultant is entitled to purchase from the Company up to 200,000 shares of the Companys Common Stock (Warrant Shares) at an exercise price of $0.50 per Share (Exercise Price). The Warrant is exercisable, in whole or in part, during the term commencing on the issuance date of the Warrant on February 18, 2015 and ending on February 18, 2019 (the Exercise Period). The 200,000 Warrant Shares are valued at $527,500 based on the Black-Scholes formula and are amortized on a straight-line basis over the 24-month term of the Agreement.
5 INTANGIBLE ASSETS
On August 11, 2015 (Effective Date), the Company entered into an exclusive license agreement (ACL License) with Accelerating Combination Therapies LLC (ACL) in regards to the exclusive licensing of the issued U.S. Patent No. 8,895,597 B2
Combination of Local Temozolomide with Local BCNU
(Patent Rights). Under the ACL License, the Company paid ACL a license issue fee of 1,000,000 shares of the Companys common stock. The 1,000,000 shares of common stock are valued at $1.13 per share, equal to the publicly traded share price on the Effective Date, are capitalized in the amount of $1,130,000, and amortized over an expected patent life of 15 years.
6 FIXED ASSETS
The Company has purchased equipment to support the development of its prototype device which are capitalized in the amount of $112,776 as fixed assets on the Companys balance sheet. The equipment is amortized on a straight-line basis over 5 years.
7- CONVERTIBLE NOTES
On July 25, 2013, the Company entered into a secured convertible note (Note) under which the Company received $350,000 from the convertible note holder (Holder) and is obligated to pay to the Holder the full principal amount after 36 months from the date of the Note, plus an interest at the rate of 10.0% per year payable at the end of each year from the date of the Note. The Note was extended for 12 months on July 25, 2016. The Holder has the right to convert the Note, in whole or in part, into shares of common stock of the Company (Common Stock) at a fixed rate of $0.50 per share (the Conversion Price) at any time. The Company may prepay the Note in whole or in part at any time for cash. The Company prepaid the Note in whole on January 24, 2017. The Note agreement was filed on August 14, 2013 as an exhibit to Form 10-Q for the three months ended June 30, 2013.
On July 15, 2014, the Company entered into a secured convertible note (Note) under which the Company received $20,000 from the convertible note holder (Holder) and is obligated to pay to the Holder the full principal amount after 36 months from the date of the Note. The Holder has the right to convert the Note, in whole or in part, into shares of common stock of the Company (Common Stock) at
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ACCUREXA INC.
Notes To Interim Financial Statements
(Unaudited)
a "Variable Conversion Price" of 50% multiplied by the Market Price (representing a discount rate of 50%). Market Price means the average of the Closing Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. The Company may prepay the Note in whole or in part at any time for cash on 15 business days prior written notice, subject to the right of the Holder to convert into shares of Common Stock of the Company prior to any prepayment. The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $20,000. The aggregate beneficial conversion feature was accreted and charged to interest expense in the amount of $1,667 as of March 31, 2017, and will be amortized until July 15, 2017.
On January 12, 2015, the Company and the Lim Development Group (Consultant) entered into a consulting agreement (Agreement). Under the Agreement, the Company also issued a promissory note (Note) in the amount of $200,000 and at an interest rate of 5.00% per annum to the Consultant. The Note was fully assumed by CNMRGS Inc. under the sublicense agreement that the Company entered with CNMRGS Inc. on January 31, 2017. A full description of the sublicense agreement was filed as exhibit 10.21 to the Form 8-K as of February 3, 2017.
8 CONVERTIBLE PREFERRED STOCK
On June 22, 2015, the Company closed a private placement of 2,250 shares of the Company's convertible preferred stock for gross proceeds to the Company of $2,250,000 and net proceeds of $1,993,500. The convertible preferred stock is convertible into shares of common stock of the Company at a conversion price of $1.25 per share. The Preferred Stock has no dividend rights or liquidation preference. If dividends are declared on the Common Stock, the holders of the Preferred Stock shall be entitled to participate in such dividends on an as-converted-to-common stock basis. The Company recorded a beneficial conversion feature of $1,980,000 based on the fair value of the common stock and the conversion rate as of the date of the offering. This amount was recorded as a deemed distribution during the period of the offering.
9 - WARRANTS
In connection with the private placement of 2,250 shares of the Company's convertible preferred stock on June 22, 2015, we issued to the investors warrants to purchase up to 1,800,000 shares of common stock. The warrants have an exercise price of $1.50 per share and are exercisable for 4 years. We also issued an aggregate of 162,000 warrants that were similar to the warrants issued to investors and are exercisable at $1.50 per share for 4 years, to our placement agent and its designees.
The following is a summary of the status of all of the Companys stock warrants as of March 31, 2017 and changes during the periods ended on that date:
|
|
| |
|
Number
of Warrants
|
|
Weighted-Average
Exercise Price
|
Outstanding at January 1, 2017
|
2,162,000
|
|
$ 1.41
|
Granted
|
-
|
|
$ 0.00
|
Exercised
|
-
|
|
$ 0.00
|
Cancelled
|
-
|
|
$ 0.00
|
Outstanding at March 31, 2017
|
2,162,000
|
|
$ 1.41
|
Warrants exercisable at March 31, 2017
|
2,162,000
|
|
$ 1.41
|
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ACCUREXA INC.
Notes To Interim Financial Statements
(Unaudited)
10 - FORM S-1 REGISTRATION STATEMENT
On July 6, 2015, the Company filed a Form S-1 registration statement that relates to the offer and resale of up to 3,762,000 shares of the Companys common stock, par value $0.0001 per share, by the selling stockholders (Selling Stockholders) listed in the Form S-1 registration statement (Selling Stockholders), issuable to such stockholders upon the conversion of shares of the Companys preferred stock or exercise of an aggregate of 1,800,000 warrants which the Company sold to investors in a private placement, or exercise of an aggregate of 162,000 warrants which the Company issued to its placement agent. In that private placement the Company sold an aggregate of 2,250 shares of its Series A convertible preferred stock, par value $0.0001 per share (Preferred Stock) for gross proceeds to the Company of $2,250,000. Each share of the Preferred Stock is convertible into 800 shares of the Companys common stock (Common Stock) which results in an effective conversion price of $1.25 per share. The Preferred Stock has no dividend rights or liquidation preference. If dividends are declared on the Common Stock, the holders of the Preferred Stock shall be entitled to participate in such dividends on an as-converted-to-common stock basis. In addition, in the private placement the Company issued to the investors warrants (Investor Warrants) to purchase up to 1,800,000 shares of Common Stock. The Warrants have an exercise price of $1.50 per share and are exercisable through June 21, 2019. The shares of the Companys common stock issuable on exercise of the Investor Warrants are registered under the Companys Form S-1. H.C. Wainwright & Co., LLC (Placement Agent) acted as the exclusive placement agent for the placement of the Companys Preferred Stock and Investor Warrants. The Placement Agent purchased securities in the offering on the same terms and conditions as the other investors. In addition, the Placement Agent and its designees received an aggregate of 162,000 warrants to purchase the Companys common stock at a price of $1.50 per share through June 21, 2019 (Agent Warrants). The shares underlying the Agent Warrants are registered under the Companys Form S-1. The Company will not receive any proceeds from the sale of shares sold by the Selling Stockholders or from the conversion of Preferred Stock. However, the Company will receive proceeds of $1.50 per share upon the exercise of any Investor Warrants or Agent Warrants. The Companys Form S-1 registration statement became effective on August 10, 2015.
On August 11, 2015, the Selling Stockholders converted an aggregate of 375 convertible preferred stock into 300,000 shares of common stock that were issued by the Company to the Selling Stockholders.
On September 1, 2015, the Placement Agent converted an aggregate of 250 convertible preferred stock into 200,000 shares of common stock that were issued by the Company to the Placement Agent.
11 - SUBSEQUENT EVENTS
Resignations
On April 18, 2017, Bryan Lee, PhD resigned as President & Chief Executive Officer, and Director of the Companys Board, effective immediately. Mr. Lees resignation does not arise from any disagreement on any matter relating to the Companys operations, policies or practices, or regarding the general direction of the Company.
On April 18, 2017, Mr. Stefan Moll resigned as Chief Financial Officer, effective immediately. Mr. Molls resignation does not arise from any disagreement on any matter relating to the Companys operations, policies or practices, or regarding the general direction of the Company.
11
ACCUREXA INC.
Notes To Interim Financial Statements
(Unaudited)
On April 18, 2017, Mr. Oliver Jackson resigned as Director of the Companys Board, effective immediately. Mr. Jacksons resignation does not arise from any disagreement on any matter relating to the Companys operations, policies or practices, or regarding the general direction of the Company.
Appointments
On April 18, 2017, the Board of Directors of the Company appointed Ms. Sophia Yaqi Sun as President & Chief Executive Officer, Chief Principal Officer and Director of the Companys Board, effective immediately. Ms. Sun (age 35) is the Senior Vice President of Medisun Holdings Limited (Medisun, together with its subsidiaries and its affiliated companies, collectively, the Medisun Group), and the Vice President of National Investments Fund Limited (NIF). The Medisun Group is a group of companies principally engaged in medical and healthcare related businesses, and is committed to stem cell regenerative and precision medicine industry investments and the commercialization of regenerative and precision medicine technologies. NIF is a company incorporated in the Cayman Islands, the shares of which are listed on the Main Board of The Stock Exchange of Hong Kong Limited. Prior to joining Medisun and NIF, Ms. Sun has worked for Ernest & Young LLP in Beijing and San Francisco, leading audit teams in financial auditing, bad debt evaluation, merger acquisition due diligence for commercial banks. Ms. Sun has obtained her Bachelors degree at University of International Business and Economics in the Peoples Republic of China, and her Master of Business Administration degree at the University of Illinois.
On April 18, 2017, the Board of Directors of the Company appointed Ms. Lisha Huang as Director of the Companys Board, effective immediately. Ms. Huang (age 57) has been a Director of Medisun Holdings Limited and Medisun Group companies since 2014. Prior, Ms. Huang was an Excutive Director of New Sakai Hong Kong Limited, a company incorporated in Hong Kong.
Entry into a Material Definitive Agreement
On April 18, 2017, the Company entered into a license agreement under which Medisun Holdings Limited (Medisun) granted a non-exclusive licence (the Licence) (including access to Medisuns clinical network facilities in the Greater China) to use Medisuns NK (Natural Killer) cell technology to Accurexa for 10 years (the Term) in the United States and the Greater China (Peoples Republic of China, Hong Kong, the Macau Special Administrative Region and Taiwan). Medisun has developed its NK cell technology for the treatment of cancer. The NK cell technology is currently clinically used to treat cancer patients at Medisuns network clinical facilities. The Licence includes Medisuns provision of relevant technical advice and support from time to time required by Accurexa during the Term. In exchange for the License, Accurexa issued 10,000,000 shares of the Companys common stock to Medisun. These shares were issued pursuant to Regulation D under the Securities Act of 1933, as amended, are exempt from registration by reason of Section 4(2) of the Securities Act of 1933, as amended (the Act), and bear an appropriate restrictive legend.
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