Cardax,
Inc., and Subsidiary
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
For
the three-months
|
|
|
For
the nine-months
|
|
|
|
ended
September 30,
|
|
|
ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES,
net
|
|
$
|
321,861
|
|
|
$
|
11,160
|
|
|
$
|
496,088
|
|
|
$
|
11,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF GOODS SOLD
|
|
|
149,207
|
|
|
|
5,717
|
|
|
|
222,056
|
|
|
|
5,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
172,654
|
|
|
|
5,443
|
|
|
|
274,032
|
|
|
|
5,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
192,533
|
|
|
|
213,275
|
|
|
|
695,691
|
|
|
|
595,757
|
|
Research
and development
|
|
|
112,494
|
|
|
|
87,735
|
|
|
|
316,861
|
|
|
|
260,413
|
|
Sales
and marketing
|
|
|
164,748
|
|
|
|
63,375
|
|
|
|
305,478
|
|
|
|
63,375
|
|
Stock
based compensation
|
|
|
58,250
|
|
|
|
116,583
|
|
|
|
142,500
|
|
|
|
498,312
|
|
Depreciation
and amortization
|
|
|
7,388
|
|
|
|
6,619
|
|
|
|
22,189
|
|
|
|
22,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
535,413
|
|
|
|
487,587
|
|
|
|
1,482,719
|
|
|
|
1,439,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(362,759
|
)
|
|
|
(482,144
|
)
|
|
|
(1,208,687
|
)
|
|
|
(1,434,469
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
-
|
|
|
|
-
|
|
|
|
12,598
|
|
|
|
47,082
|
|
Interest
income
|
|
|
676
|
|
|
|
594
|
|
|
|
1,844
|
|
|
|
1,768
|
|
Interest
expense
|
|
|
(1,073
|
)
|
|
|
(888
|
)
|
|
|
(2,790
|
)
|
|
|
(2,307
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other (expenses) income, net
|
|
|
(397
|
)
|
|
|
(294
|
)
|
|
|
11,652
|
|
|
|
46,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before the provision for income taxes
|
|
|
(363,156
|
)
|
|
|
(482,438
|
)
|
|
|
(1,197,035
|
)
|
|
|
(1,387,926
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(363,156
|
)
|
|
$
|
(482,438
|
)
|
|
$
|
(1,197,035
|
)
|
|
$
|
(1,387,926
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER
SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES USED
IN CALCULATION OF NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
100,587,843
|
|
|
|
79,581,511
|
|
|
|
92,513,317
|
|
|
|
73,949,386
|
|
Diluted
|
|
|
100,587,843
|
|
|
|
79,581,511
|
|
|
|
92,513,317
|
|
|
|
73,949,386
|
|
The
accompanying notes are an integral part of these Condensed Consolidated Financial Statements
Cardax,
Inc., and Subsidiary
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For
the nine-months ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,197,035
|
)
|
|
$
|
(1,387,926
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
22,189
|
|
|
|
22,055
|
|
Stock
based compensation
|
|
|
142,500
|
|
|
|
204,083
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(276,303
|
)
|
|
|
-
|
|
Inventories
|
|
|
(43,963
|
)
|
|
|
(25,275
|
)
|
Deposits
and other assets
|
|
|
(74,850
|
)
|
|
|
(1,767
|
)
|
Prepaid
expenses
|
|
|
(229
|
)
|
|
|
(19,084
|
)
|
Accrued
payroll and payroll related expenses
|
|
|
(25,720
|
)
|
|
|
270,763
|
|
Accounts
payable and accrued expenses
|
|
|
55,979
|
|
|
|
78,770
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,397,432
|
)
|
|
|
(858,381
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Increase
in patents
|
|
|
(16,137
|
)
|
|
|
(24,131
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(16,137
|
)
|
|
|
(24,131
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from the issuance of common stock
|
|
|
4,013,456
|
|
|
|
800,000
|
|
Proceeds
from the exercise of warrants
|
|
|
40,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
4,053,456
|
|
|
|
800,000
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
2,639,887
|
|
|
|
(82,512
|
)
|
|
|
|
|
|
|
|
|
|
CASH
AT THE BEGINNING OF THE PERIOD
|
|
|
158,433
|
|
|
|
323,410
|
|
|
|
|
|
|
|
|
|
|
CASH
AT THE END OF THE PERIOD
|
|
$
|
2,798,320
|
|
|
$
|
240,898
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of accrued payroll and payroll related expenses into stock options
|
|
$
|
-
|
|
|
$
|
227,784
|
|
Conversion
of accounts payable into stock options
|
|
$
|
-
|
|
|
$
|
66,445
|
|
Conversion
of accounts payable into restricted stock
|
|
$
|
44,700
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
2,790
|
|
|
$
|
2,249
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these Condensed Consolidated Financial Statements
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
1 – COMPANY BACKGROUND
Cardax
Pharmaceuticals, Inc. (“Holdings”) was incorporated in the State of Delaware on March 23, 2006.
Holdings
was formed for the purpose of developing a platform of proprietary, exceptionally safe, small molecule compounds for large unmet
medical needs where oxidative stress and inflammation play important causative roles. Holdings’ platform has application
in arthritis, metabolic syndrome, liver disease, and cardiovascular disease, as well as macular degeneration and prostate disease.
Holdings’ current primary focus is on the development of astaxanthin technologies. Astaxanthin is a naturally occurring
marine compound that has robust anti-oxidant and anti-inflammatory activity.
In
May of 2013, Holdings formed a 100% owned subsidiary company called Cardax Pharma, Inc. (“Pharma”). Pharma was formed
to maintain Holdings’ operations going forward, leaving Holdings as an investment holding company.
On
November 29, 2013, Holdings entered into a definitive merger agreement (“Merger Agreement”) with Koffee Korner Inc.,
a Delaware corporation (“Koffee Korner”) (OTCQB:KOFF), and its wholly owned subsidiary (“Koffee Sub”),
pursuant to which, among other matters and subject to the conditions set forth in such Merger Agreement, Koffee Sub would merge
with and into Pharma. In connection with such merger agreement and related agreements, upon the consummation of such merger, Pharma
would become a wholly owned subsidiary of Koffee Korner and Koffee Korner would issue shares of its common stock to Holdings.
At the effective time of such merger, Holdings would own a majority of the shares of the then issued and outstanding shares of
common stock of Koffee Korner.
On
February 7, 2014, Holdings completed its merger with Koffee Korner, which was renamed to Cardax, Inc. (the “Company”)
(OTCQB:CDXI). Concurrent with the merger: (i) the Company received aggregate gross cash proceeds of $3,923,100 in exchange for
the issuance and sale of an aggregate 6,276,960 of shares of the Company’s common stock, together with five year warrants
to purchase an aggregate of 6,276,960 shares of the Company’s common stock at $0.625 per share, (ii) the notes issued on
January 3, 2014, in the outstanding principal amount of $2,076,000 and all accrued interest thereon, automatically converted into
3,353,437 shares of the Company’s common stock upon the reverse merger at $0.625 per share, together with five year warrants
to purchase 3,321,600 shares of common stock at $0.625 per share, (iii) the notes issued in 2013, in the outstanding principal
amount of $8,489,036 and all accrued interest thereon, automatically converted into 14,446,777 shares of the Company’s common
stock upon the reverse merger at $0.625 per share, together with five year warrants to purchase 14,446,777 shares of common stock
at $0.625 per share, (iv) stock options to purchase 15,290,486 shares of Holdings common stock at $0.07 per share were cancelled
and substituted with stock options to purchase 6,889,555 shares of the Company’s common stock at $0.155 per share, (v) additional
stock options to purchase 20,867,266 shares of the Company’s common stock at $0.625 per share were issued, and (vi) the
notes issued in 2008 and 2009, in the outstanding principal amounts of $55,000 and $500,000, respectively, and all accrued interest
thereon, were repaid in full. The assets and liabilities of Koffee Korner were distributed in accordance with the terms of a spin-off
agreement on the closing date.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
1 – COMPANY BACKGROUND (continued)
The
share exchange transaction was treated as a reverse acquisition, with Holdings and Pharma as the acquirers and Koffee Korner and
Koffee Sub as the acquired parties. Unless the context suggests otherwise, when the Company refers to business and financial information
for periods prior to the consummation of the reverse acquisition, the Company is referring to the business and financial information
of Holdings and Pharma. Under accounting principles generally accepted in the United States of America (“U.S. GAAP”)
guidance Accounting Standards Codification (“ASC”) No. 805-40,
Business Combinations – Reverse Acquisitions
,
the Acquisition has been treated as a reverse acquisition with no adjustment to the historical book and tax basis of the Company’s
assets and liabilities.
On
August 28, 2014, the Company entered into an Agreement and Plan of Merger (the “Holdings Merger Agreement”) with its
principal stockholder, Holdings, pursuant to which Holdings would merge with and into the Company (the “Holdings Merger”).
On September 18, 2015, the Company filed a Form S-4 with the SEC in contemplation of the Holdings Merger. There would not be any
cash consideration exchanged in the Holdings Merger. Upon the closing of the Holdings Merger, the stockholders of Holdings would
receive an aggregate number of shares and warrants to purchase shares of the Company’s common stock equal to the aggregate
number of shares of the Company’s common stock that were held by Holdings on the date of the closing of the Holdings Merger.
The Company’s restricted shares of common stock held by Holdings would be cancelled upon the closing of the Holdings Merger.
Accordingly, there would not be not any change to the Company’s fully diluted capitalization due to the Holdings Merger.
On
November 24, 2015, the Holdings Merger Agreement was amended and restated (the “Amended Holdings Merger Agreement”).
Under the terms of Amended Holdings Merger Agreement, the shares of common stock, par value $0.001 per share of Holdings and the
shares of all other issued and outstanding capital stock of Holdings that by their terms were convertible or could otherwise be
exchanged for shares of Holdings common stock, would be converted into and exchanged for the Company’s shares of Common
Stock in a ratio of approximately 2.2:1. In addition, the Company would grant Holdings’ option and warrant holders warrants
to purchase the Company’s warrants at the same stock conversion ratio. On November 24, 2015, the Company filed an amendment
to the Form S-4 with the SEC and on December 29, 2015, the Form S-4 was declared effective by the SEC.
On
December 30, 2015, the Company completed its merger with Holdings, pursuant to the Amended Holdings Merger Agreement. At closing,
Holdings merged with and into the Company, with the Company surviving the Holdings Merger. Pursuant to the Amended Holdings Merger
Agreement, there was not any cash consideration exchanged in the Holdings Merger. Upon the closing of the Holdings Merger, the
stockholders of Holdings received an aggregate number of shares and warrants to purchase shares of Company common stock equal
to the aggregate number of shares of Company common stock that were held by Holdings on the date of the closing of the Holdings
Merger. The Company’s restricted shares of common stock held by Holdings were cancelled upon the closing of the Holdings
Merger. Accordingly, there was not any change to the Company’s fully diluted capitalization due to the Holdings Merger.
The
Company is engaged in the develop
m
ent,
m
a
rketing,
and distribution of consumer
health
products in the United States. The Company’s
first commercial product, ZanthoSyn®, is a physician recommended anti-inflammatory supplement for health and longevity that
features astaxanthin with optimal absorption and purity. The Company sells ZanthoSyn® primarily through e-commerce and wholesale
channels. As a second generation product, the Company is developing CDX-085, its patented astaxanthin derivative for highly
concentrated astaxanthin product applications. The Company also plans to pursue pharmaceutical applications of astaxanthin
and related compounds. The safety and efficacy of the Company’s products have not been directly evaluated in clinical
trials or confirmed by the FDA.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
1 – COMPANY BACKGROUND (continued)
Going
concern matters
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying condensed consolidated
financial statements, the Company incurred a net loss of $363,156 and $1,197,035 for the three and nine months ended September
30, 2017, respectively, and a net loss of $482,438 and $1,387,926 for the three and nine-months ended September 30, 2016, respectively.
The Company has incurred losses since inception resulting in an accumulated deficit of $57,130,897 as of September 30, 2017, and
has had negative cash flows from operating activities since inception. The Company expects that its marketing program for ZanthoSyn®
will continue to focus on outreach to physicians, healthcare professionals, retail personnel, and consumers, and anticipates
further losses in the development of its business. As a result of these and other factors, management has determined there is
substantial doubt about the Company’s ability to continue as a going concern.
In
addition to the $4,053,456 raised in the nine-months ended September 30, 2017, the Company plans to raise additional capital
to carry out its business plan. The Company’s ability to raise additional capital through future equity and debt securities
issuances is unknown. Obtaining additional financing, the successful development of the Company’s contemplated plan of operations,
and its transition, ultimately, to profitable operations are necessary for the Company to continue operations. The ability to
successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern.
The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these
uncertainties.
Basis
of presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and
regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. In the opinion
of the Company’s management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting
of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended September
30, 2017 and 2016. Although management believes that the disclosures in these unaudited condensed consolidated financial statements
are adequate to make the information presented not misleading, certain information and footnote disclosures normally included
in financial statements that have been prepared in accordance U.S. GAAP have been condensed or omitted pursuant to the rules and
regulations of the SEC.
The
condensed consolidated financial statements include the accounts of Cardax, Inc., and its wholly owned subsidiary, Cardax Pharma,
Inc., and its predecessor, Cardax Pharmaceuticals, Inc., which was merged with and into Cardax, Inc., on December 30, 2015. All
significant intercompany balances and transactions have been eliminated in consolidation.
Accounts
receivable
Accounts
receivable of $276,303 and $0 for as of September 30, 2017 and December 31, 2016, respectively, consists of amounts due from sales
of consumer health products.
It
is the Company’s policy to provide for an allowance for doubtful collections based upon a review of outstanding receivables,
historical collection information, and existing economic conditions. Normal receivables are due 60 days after the issuance of
the invoice. Receivables past due more than 90 days are considered delinquent. Delinquent receivables are written off based on
individual credit evaluation and specific circumstances of the customer. There was no allowance as of September 30, 2017 and December
31, 2016.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories
are stated at the lower of cost or market. Cost is determined using the average cost method. Market is defined as sales price
less cost to dispose and a normal profit margin. Inventory costs include third party costs for finished goods. The Company utilizes
contract manufacturers and receives inventory in finished form.
The
Company provides a reserve against inventory for known or expected inventory obsolescence. The reserve is determined by specific
review of inventory items for product age and quality that may affect salability. There were no reserves for inventory as of September
30, 2017 and December 31, 2016.
Revenue
recognition
The
Company recognizes revenue from the sale of its products through e-commerce and wholesale channels when the transfer of title
and risk of loss occurs. For shipments with terms of FOB Shipping Point, revenue is recognized upon shipment. For shipments with
terms of FOB Destination, revenue is recognized upon delivery.
Sales
returns and allowances are recorded as a reduction to sales in the period in which sales are recorded. The Company records shipping
charges and sales tax gross in revenues and cost of goods sold. Sales discounts and other adjustments are recorded at the time
of sale.
Cost
of goods sold
Cost
of goods sold is comprised of costs to manufacture or acquire products sold to customers, direct and indirect distribution costs,
and other costs incurred in the sale of goods.
Shipping
and handling costs
Shipping
and handling costs are included in cost of goods sold. Shipping and handling costs were $1,053 and $7,436 for the three and nine-months
ended September 30, 2017, respectively, and $630 for the three and nine-months ended September 30, 2016.
Sales
and use tax
Revenues,
as presented on the accompanying income statement, include taxes collected from customers and remitted to governmental authorities.
Such taxes were $1,535 and $4,170 for the three and nine-months ended September 30, 2017, respectively, and $378 for the
three and nine-months ended September 30, 2016.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent
accounting pronouncements
The
Financial Accounting Standards Board (“FASB”) issued three Accounting Standards Updates (“ASUs”)
in 2016 that affect the guidance in ASU 2014-09,
Revenue from Contracts with Customers
, and are effective upon adoption
of ASU No. 2014-09. The Company is currently evaluating the impact the new revenue recognition guidance will have on its Financial
Statements, including the following ASUs:
|
●
|
In
March 2016, the FASB issued ASU No. 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent
Considerations (Reporting Revenue Gross versus Net)
. This ASU clarifies the implementation guidance on principal versus
agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified
good or service before it is transferred to the customers.
|
|
|
|
|
●
|
In
April 2016, the FASB issued ASU No. 2016-10,
Identifying Performance Obligations and Licensing
. This ASU clarifies
the following two aspects of ASU No. 2014-09: identifying performance obligations and licensing implementation guidance. The
amendment requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects
the consideration that a company expects to be entitled to in exchange for the goods or services. To achieve this principle,
a company must apply five steps including identifying the contract with a customer, identifying the performance obligations
in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing
revenue when (or as) the company satisfies the performance obligations. Additional quantitative and qualitative disclosures
to enhance the understanding about the nature, amount, timing, and uncertainty of revenue and cash flows are also required.
|
|
|
|
|
●
|
In
May 2016, the FASB issued ASU No. 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements
and Practical Expedients
. This ASU makes narrow-scope amendments to ASU No. 2014-09, Revenue from Contracts with Customers,
and provides practical expedients to simplify the transition to the new standard and to clarify certain aspects of the standard.
|
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-02,
Leases
. This ASU requires management to recognize lease assets and lease liabilities for all leases. ASU No.
2016-02 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between
finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital
leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and
operating leases is that under the lessee accounting model, the effect of leases in the statement of comprehensive income and
the statement of cash flows is largely unchanged from previous U.S. GAAP. The guidance in ASU No. 2016-02 is effective for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently assessing
the impact of this ASU on the Company’s consolidated financial statements.
In
March 2016, the FASB issued ASU No. 2016-09,
Compensation - Stock Compensation
. This ASU was issued as part of the FASB’s
simplification initiative focused on improving areas of U.S. GAAP for which cost and complexity may be reduced while maintaining
or improving the usefulness of information disclosed within the financial statements. The amendments focused on simplification
specifically with regard to share-based payment transactions, including income tax consequences, classification of awards as equity
or liabilities, and classification on the statement of cash flows. The guidance in ASU No. 2016-09 is effective for fiscal years
beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The amendments
in this ASU should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating
the impact of this updated standard. The Company does not believe this update will have a significant impact on its consolidated
financial statements.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent
accounting pronouncements (continued)
In
November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 23)
. The amendments of ASU No. 2016-18 require
that a statement of cash flow explain the change during a period in the total of cash, cash equivalents, and amounts generally
described as restricted cash or restricted cash equivalents. The guidance of ASU No. 2016-18 is effective for the Company’s
fiscal years beginning after December 15, 2017, and interim reporting periods within annual reporting periods beginning after
December 15, 2019. The Company is currently evaluating the impact the new statement of cash flow guidance will have on its consolidated
financial statements.
The
Company does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have
a material effect on the consolidated financial statements.
Reclassifications
The
Company has made certain reclassifications to conform its prior periods’ data to the current presentation. These reclassifications
had no effect on the reported results of operations or cash flows.
NOTE
3 – INVENTORIES
Inventories
consist of the following as of:
|
|
September
30, 2017
|
|
|
December
31, 2016
|
|
|
|
(Unaudited)
|
|
|
|
|
Finished
goods
|
|
$
|
54,790
|
|
|
$
|
10,827
|
|
Total
inventories
|
|
$
|
54,790
|
|
|
$
|
10,827
|
|
NOTE
4 – PROPERTY AND EQUIPMENT, net
Property
and equipment, net, consists of the following as of:
|
|
September
30, 2017
|
|
|
December
31, 2016
|
|
|
|
(Unaudited)
|
|
|
|
|
Information
technology equipment
|
|
$
|
31,892
|
|
|
$
|
31,892
|
|
Less
accumulated depreciation
|
|
|
(28,650
|
)
|
|
|
(24,137
|
)
|
Total
property and equipment, net
|
|
$
|
3,242
|
|
|
$
|
7,755
|
|
Depreciation
expense was $1,496 and $4,513, for the three and nine-months ended September 30, 2017, respectively, and $1,508 and $4,660 for
the three and nine-months ended September 30, 2016, respectively.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
5 – INTANGIBLE ASSETS, net
Intangible
assets, net, consists of the following as of:
|
|
September
30, 2017
|
|
|
December
31, 2016
|
|
|
|
(Unaudited)
|
|
|
|
|
Patents
|
|
$
|
432,985
|
|
|
$
|
432,985
|
|
Less
accumulated amortization
|
|
|
(257,951
|
)
|
|
|
(240,275
|
)
|
|
|
|
175,034
|
|
|
|
192,710
|
|
Patents
pending
|
|
|
254,197
|
|
|
|
238,060
|
|
Total
intangible assets, net
|
|
$
|
429,231
|
|
|
$
|
430,770
|
|
Patents
are amortized straight-line over a period of fifteen years. Amortization expense was $5,892 and $17,676 for the three and nine-months
ended September 30, 2017, respectively, and $5,111 and $17,395, for the three and nine-months ended September 30, 2016, respectively.
The
Company has capitalized costs for several patents that are still pending. In those instances, the Company has not recorded any
amortization. The Company will commence amortization when these patents are approved.
The
Company owns 21 issued patents, including 14 in the United States and 7 others in China, India, Japan, and Hong Kong. These patents
will expire during the years of 2023 to 2028, subject to any patent term extensions of the individual patent. The Company has
5 foreign patent applications pending in Europe, Canada, and Brazil.
NOTE
6 – STOCKHOLDERS’ DEFICIT
Self-directed
stock issuance
During
the year ended December 31, 2016, the Company sold securities in a self-directed offering in the aggregate amount of $1,121,000
at $0.08 per unit. Each unit consisted of 1 share of restricted common stock (14,012,500 shares), a five-year warrant to purchase
1 share of restricted common stock (14,012,500 warrant shares) at $0.08 per share, a five-year warrant to purchase 1 share of
restricted common stock (14,012,500 warrant shares) at $0.12 per share, and a five-year warrant to purchase 1 share of restricted
common stock (14,012,500 warrant shares) at $0.16 per share.
During
the nine-months ended September 30, 2017, the Company sold securities in a self-directed offering in the aggregate amount of $179,000
and $3,744,456 at $0.08 and $0.12, respectively, per unit. Each $0.08 unit consisted of 1 share of restricted common stock (2,237,500
shares), a five-year warrant to purchase 1 share of restricted common stock (2,237,500 warrant shares) at $0.08 per share, a five-year
warrant to purchase 1 share of restricted common stock (2,237,500 warrant shares) at $0.12 per share, and a five-year warrant
to purchase 1 share of restricted common stock (2,237,500 warrant shares) at $0.16 per share. Each $0.12 unit consisted of 1 share
of restricted common stock (31,453,788 shares) and a five-year warrant to purchase 1 share of restricted common stock (31,453,788
warrant shares) at $0.12 per share.
Equity
purchase agreement
On
July 13, 2016, the Company entered into an equity purchase agreement (the “EPA”) and a registration rights agreement
with an investor. Pursuant to the terms of the EPA, the Company has the right, but not the obligation, to sell shares of its common
stock to the investor on the terms specified in the EPA. On the date of the EPA, the Company issued 1,500,000 shares to the investor.
The total fair value of this stock on the date of grant was $106,500. These shares were fully vested upon issuance.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
6 – STOCKHOLDERS’ DEFICIT (continued)
Equity
purchase agreement (continued)
During
the three and nine-months ended September 30, 2017, the Company sold 0 and 567,644, respectively, shares of common stock for $0
and $60,000, respectively, pursuant to the EPA.
Payable
settlement
On
May 3, 2017, the Company settled a payable in the amount of $44,700 with a previously engaged broker dealer through the issuance
of securities at $0.08 per unit. Each unit consisted of 1 share of restricted common stock (558,750 shares), a five-year warrant
to purchase 1 share of restricted common stock (558,750 warrant shares) at $0.08 per share, a five-year warrant to purchase 1
share of restricted common stock (558,750 warrant shares) at $0.12 per share, and a five-year warrant to purchase 1 share of restricted
common stock (558,750 warrant shares) at $0.16 per share.
NOTE
7 – STOCK GRANTS
Director
stock grants
In
2016, the Company granted its independent directors an aggregate of 468,254 shares of restricted common stock in the Company.
The total fair value of this stock on the date of grant was $41,666. These shares were fully vested upon issuance.
During
the three and nine-months ended September 30, 2017, the Company granted its independent directors an aggregate of 95,109 and 418,025,
shares of restricted common stock in the Company respectively. The total fair value of this stock on the date of grant
was $43,750 and $93,750 for the three and nine-months ended September 30, 2017, respectively. These shares were fully vested upon
issuance.
The
Company recognizes the expense related to these grants ratably over the requisite service period. Total stock compensation expense
recognized as a result of these grants were $43,750 and $93,750 for the three and nine-months ended September 30, 2017, respectively,
and $4,166 and $29,166 for the three and nine-months ended September 30, 2016, respectively.
Consultant
stock grant
On
April 10, 2017, the Company granted a consultant 100,000 shares of restricted common stock valued at $0.23 per share. These shares
are subject to a risk of forfeiture and vest quarterly in arrears commencing on April 1, 2017. The Company recognized $5,750 and
$11,500 in stock based compensation related to this grant during the three and nine-months ended September 30, 2017, respectively.
On
August 8, 2017, the Company granted a consultant 100,000 shares of restricted common stock valued at $0.175 per share. These shares
are subject to a risk of forfeiture and vest 25% upon grant and quarterly in arrears thereafter commencing on September 1, 2017.
The Company recognized $8,750 in stock based compensation related to this grant during the three and nine-months ended September
30, 2017.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
8 – STOCK OPTION PLANS
On
February 7, 2014, the Company adopted the 2014 Equity Compensation Plan. Under this plan, the Company may issue options to purchase
shares of common stock to employees, directors, advisors, and consultants. The aggregate number of shares that may be issued under
this plan is 30,420,148. On April 16, 2015, the majority stockholder of the Company approved an increase in the Company’s
2014 Equity Compensation Plan by 15 million shares.
Under
the terms of the 2014 Equity Compensation Plan and the 2006 Stock Incentive Plan (collectively, the “Plans”), incentive
stock options may be granted to employees at a price per share not less than 100% of the fair market value at date of grant. If
the incentive stock option is granted to a 10% stockholder, then the purchase or exercise price per share shall not be less than
110% of the fair market value per share of common stock on the grant date. Non-statutory stock options and restricted stock may
be granted to employees, directors, advisors, and consultants at a price per share, not less than 100% of the fair market value
at date of grant. Options granted are exercisable, unless specified differently in the grant documents, over a default term of
ten years from the date of grant and generally vest over a period of four years.
A
summary of stock option activity is as follows:
|
|
Options
|
|
|
Weighted
average
exercise
price
|
|
|
Weighted
average
remaining
contractual
term
in years
|
|
|
Aggregate
intrinsic
value
|
|
Outstanding
January 1, 2016
|
|
|
34,167,354
|
|
|
$
|
0.47
|
|
|
|
6.57
|
|
|
$
|
974,066
|
|
Exercisable
January 1, 2016
|
|
|
34,167,354
|
|
|
$
|
0.47
|
|
|
|
6.57
|
|
|
$
|
974,066
|
|
Canceled
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
6,156,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(3,501,965
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
December 31, 2016
|
|
|
36,821,969
|
|
|
$
|
0.41
|
|
|
|
5.94
|
|
|
$
|
301,273
|
|
Exercisable
December 31, 2016
|
|
|
36,771,969
|
|
|
$
|
0.41
|
|
|
|
5.94
|
|
|
$
|
299,273
|
|
Canceled
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
961,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(145,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
September 30, 2017
|
|
|
37,638,427
|
|
|
$
|
0.41
|
|
|
|
5.30
|
|
|
$
|
5,168,809
|
|
Exercisable
September 30, 2017
|
|
|
36,838,427
|
|
|
$
|
0.41
|
|
|
|
5.20
|
|
|
$
|
5,168,809
|
|
The
aggregate intrinsic value in the table above is before applicable income taxes and represents the excess amount over the exercise
price option recipients would have received if all options had been exercised on September 30, 2017, based on a valuation
of the Company’s stock for that day.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
8 – STOCK OPTION PLANS (continued)
A
summary of the Company’s non-vested options for the nine-months ended September 30, 2017 and year ended December 31, 2016
are presented below:
Non-vested
at January 1, 2016
|
|
-
|
|
Granted
|
|
|
6,156,580
|
|
Vested
|
|
|
(6,106,580
|
)
|
Forfeited
|
|
|
-
|
|
Non-vested
at December 31, 2016
|
|
|
50,000
|
|
Granted
|
|
|
961,458
|
|
Vested
|
|
|
(161,458
|
)
|
Forfeited
|
|
|
-
|
|
Non-vested
at September 30, 2017
|
|
|
800,000
|
|
The
Company estimates the fair value of stock options granted on each grant date using the Black-Scholes option valuation model and
recognizes an expense ratably over the requisite service period. The range of fair value assumptions related to options issued
were as follows for the periods ended:
|
|
September
30, 2017
|
|
|
December
31, 2016
|
|
|
|
(Unaudited)
|
|
|
|
|
Dividend
yield
|
|
|
0.0
%
|
|
|
|
0.0
%
|
|
Risk-free
rate
|
|
|
1.89%
- 2.07%
|
|
|
|
0.80%
- 1.03%
|
|
Expected
volatility
|
|
|
221%
- 232%
|
|
|
|
141% - 225%
|
|
Expected
term
|
|
|
5
- 7 years
|
|
|
|
5
years
|
|
The
expected volatility was calculated based on the historical volatilities of publicly traded peer companies, determined by the Company,
and the historical volatility of the Company. The risk-free interest rate used was based on the U.S. Treasury constant maturity
rate in effect at the time of grant for the expected term of the stock options to be valued. The expected dividend yield was zero,
as the Company does not anticipate paying a dividend within the relevant timeframe. Due to a lack of historical information needed
to estimate the Company’s expected term, it was estimated using the simplified method allowed. In calculating the number
of options issued in lieu of pay during the year ended December 31, 2016, the Company used assumptions comparable to December
31, 2015, with a 20-day weighted average stock price.
The
Company records forfeitures as they occur and reverses compensation cost previously recognized, in the period the award is forfeited,
for an award that is forfeited before completion of the requisite service period.
Stock
option exercise
During
the three and nine-months ended September 30, 2017, the Company issued 107,497 shares of common stock in connection with the cashless
exercise of stock options for 100,000 and 45,000 shares of common stock at $0.155 and $0.06, respectively, per share with 37,503
shares of common stock withheld with an aggregate fair market value equal to the aggregate exercise price.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
8 – STOCK OPTION PLANS (continued)
The
Company recognized stock based compensation expense related to options during the:
|
|
Three-months
ended September 30
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
lieu of accrued salaries
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
In
lieu of accrued fees for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Compensation
for services
|
|
|
-
|
|
|
|
-
|
|
|
|
25,000
|
|
|
|
1,750
|
|
Director
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
27,778
|
|
|
|
4,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
-
|
|
|
$
|
-
|
|
|
|
52,778
|
|
|
$
|
5,917
|
|
|
|
Nine-months
ended September 30
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
lieu of accrued salaries
|
|
|
-
|
|
|
$
|
-
|
|
|
|
3,796,385
|
|
|
$
|
227,784
|
|
In
lieu of accrued fees for services
|
|
|
-
|
|
|
|
-
|
|
|
|
1,107,417
|
|
|
|
66,445
|
|
Compensation
for services
|
|
|
50,000
|
|
|
|
3,500
|
|
|
|
25,000
|
|
|
|
1,750
|
|
Director
compensation
|
|
|
161,458
|
|
|
|
25,000
|
|
|
|
1,069,445
|
|
|
|
66,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
211,458
|
|
|
$
|
28,500
|
|
|
|
5,998,247
|
|
|
$
|
362,646
|
|
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
9 – WARRANTS
The
following is a summary of the Company’s warrant activity:
|
|
Warrants
|
|
|
Weighted
average
exercise
price
|
|
|
Weighted
average
remaining
contractual
term
in years
|
|
|
Aggregate
intrinsic
value
|
|
Outstanding
January 1, 2016
|
|
|
47,003,962
|
|
|
$
|
0.46
|
|
|
|
3.49
|
|
|
$
|
2,579,541
|
|
Exercisable
January 1, 2016
|
|
|
47,003,962
|
|
|
$
|
0.46
|
|
|
|
3.49
|
|
|
$
|
2,579,541
|
|
Canceled
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
42,037,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(676,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
December 31, 2016
|
|
|
88,365,036
|
|
|
$
|
0.30
|
|
|
|
3.50
|
|
|
$
|
543,770
|
|
Exercisable
December 31, 2016
|
|
|
88,365,036
|
|
|
$
|
0.30
|
|
|
|
3.50
|
|
|
$
|
543,770
|
|
Canceled
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
39,842,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(798,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(391,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
September 30, 2017
|
|
|
127,018,546
|
|
|
$
|
0.24
|
|
|
|
3.40
|
|
|
$
|
33,412,459
|
|
Exercisable
September 30, 2017
|
|
|
127,018,546
|
|
|
$
|
0.24
|
|
|
|
3.40
|
|
|
$
|
33,412,459
|
|
The
Company estimates the fair value of warrants granted on each grant date using the Black-Scholes option valuation model. The fair
value of warrants issued with debt is recorded as a debt discount and amortized over the life of the debt. The expected volatility
was calculated based on the historical volatilities of publicly traded peer companies, determined by the Company. The risk-free
interest rate used was based on the U.S. Treasury constant maturity rate in effect at the time of grant for the expected term
of the warrants to be valued. The expected dividend yield was zero, as the Company does not anticipate paying a dividend within
the relevant timeframe. The expected warrant term is the life of the warrant.
The
Company did not recognize any stock based compensation expense related to warrants for the three and nine-months ended September
30, 2017 and 2016, respectively.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
9 – WARRANTS (continued)
Warrant
exercise
During
the three and nine-months ended September 30, 2017, the Company issued 233,217 shares of common stock in connection with the cashless
exercise of warrants for 298,000 shares of common stock at $0.10per share with 64,783 shares of common stock withheld with an
aggregate fair market value equal to the aggregate exercise price.
During
the three and nine-months ended September 30, 2017, the Company issued 500,000 shares of common stock in connection with the exercise
of warrants for 500,000 shares of common stock at $0.08 per share in exchange for $40,000.
Warrant
expiration
During
the three and nine-months ended September 30, 2017, warrants to purchase an aggregate of 101,883 and 391,028 shares
of restricted common stock expired.
NOTE
10 – RELATED PARTY TRANSACTIONS
Executive
chairman agreement
As
part of an executive chairman agreement, a director provided services to the Company. This agreement was amended on April 1, 2015.
Under the terms of this amendment, the director received $37,500 in equity instruments issued quarterly in arrears as compensation.
Effective April 1, 2016, the director agreed to suspend any additional equity compensation, until otherwise agreed by the Company.
Effective August 12, 2016, the Company accepted the request for a leave of absence and resignation by the director as Executive
Chairman and member of the Board of Directors.
The
Company incurred $0 and $37,500 in stock based compensation to this director during the three and nine-months ended September
30, 2016, respectively.
The
amount payable to this director was $293,546 as of September 30, 2017 and December 31, 2016.
NOTE
11 – INCOME TAXES
The
Company accounts for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities
are determined based upon the difference between the financial statement carrying amounts and the tax basis of assets and liabilities
and are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected
to be reversed.
The
effective tax rate for the three and nine-months ended September 30, 2017 and 2016, differs from the statutory rate of 34% as
a result of the state taxes (net of Federal benefit) and permanent differences.
The
Company’s valuation allowance was primarily related to the operating losses. The valuation allowance is determined in accordance
with the provisions of ASC No. 740,
Income Taxes
, which requires an assessment of both negative and positive evidence when
measuring the need for a valuation allowance. Based on the available objective evidence and the Company’s history of losses,
management provides no assurance that the net deferred tax assets will be realized. As of September 30, 2017 and December 31,
2016, the Company has applied a valuation allowance against its deferred tax assets net of the expected income from the reversal
of the deferred tax liabilities.
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
11 – INCOME TAXES (continued)
The
Company is subject to taxation in the United States and two state jurisdictions. The preparation of tax returns requires management
to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid
by the Company. Management, in consultation with its tax advisors, files its tax returns based on interpretations that are believed
to be reasonable under the circumstances. The income tax returns, however, are subject to routine reviews by the various taxing
authorities. As part of these reviews, a taxing authority may disagree with respect to the tax positions taken by management (“uncertain
tax positions”) and therefore may require the Company to pay additional taxes.
Management
evaluates the requirement for additional tax accruals, including interest and penalties, which the Company could incur as a result
of the ultimate resolution of its uncertain tax positions. Management reviews and updates the accrual for uncertain tax positions
as more definitive information becomes available from taxing authorities, completion of tax audits, expiration of statute of limitations,
or upon occurrence of other events.
As
of September 30, 2017 and 2016, there was no liability for income tax associated with unrecognized tax benefits. The Company recognizes
accrued interest related to unrecognized tax benefits as well as any related penalties in interest income or expense in its consolidated
statements of operations, which is consistent with the recognition of these items in prior reporting periods.
The
federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally
for three years after they were filed.
NOTE
12 – BASIC AND DILUTED NET LOSS PER SHARE
The
following table sets forth the computation of the Company’s basic and diluted net loss per share for the:
|
|
Three-months
ended September 30, 2017
(Unaudited)
|
|
|
|
Net
Loss
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per
share
amount
|
|
Basic
loss per share
|
|
$
|
(363,156
|
)
|
|
|
100,587,843
|
|
|
$
|
(0.00
|
)
|
Effect
of dilutive securities—Common stock options and warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Diluted
loss per share
|
|
$
|
(363,156
|
)
|
|
|
100,587,843
|
|
|
$
|
(0.00
|
)
|
|
|
Three-months
ended September 30, 2016 (Unaudited)
|
|
|
|
Net
Loss
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per
share
amount
|
|
Basic
loss per share
|
|
$
|
(482,438
|
)
|
|
|
79,581,511
|
|
|
$
|
(0.01
|
)
|
Effect
of dilutive securities—Common stock options and warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Diluted
loss per share
|
|
$
|
(482,438
|
)
|
|
|
79,581,511
|
|
|
$
|
(0.01
|
)
|
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
12 – BASIC AND DILUTED NET LOSS PER SHARE (continued)
|
|
Nine-months
ended September 30, 2017
(Unaudited)
|
|
|
Net
Loss
(Numerator)
|
|
Shares
(Denominator)
|
|
Per
share
amount
|
Basic
loss per share
|
|
$
|
(1,197,035
|
)
|
|
|
92,513,317
|
|
|
$
|
(0.01
|
)
|
Effect
of dilutive securities—Common stock options and warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Diluted
loss per share
|
|
$
|
(1,197,035
|
)
|
|
|
92,513,317
|
|
|
$
|
(0.01
|
)
|
|
|
Nine-months
ended September 30, 2016
(Unaudited)
|
|
|
Net
Loss
(Numerator)
|
|
Shares
(Denominator)
|
|
Per
share
amount
|
Basic
loss per share
|
|
$
|
(1,387,926
|
)
|
|
|
73,949,386
|
|
|
$
|
(0.02
|
)
|
Effect
of dilutive securities—Common stock options and warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Diluted
loss per share
|
|
$
|
(1,387,926
|
)
|
|
|
73,949,386
|
|
|
$
|
(0.02
|
)
|
The
following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share for
the periods presented because including them would have been antidilutive for the periods ended:
|
|
September
30, 2017
|
|
September
30, 2016
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Common
stock options
|
|
|
36,838,427
|
|
|
|
36,738,636
|
|
Common
stock warrants
|
|
|
127,018,546
|
|
|
|
75,842,649
|
|
Total
common stock equivalents
|
|
|
163,856,973
|
|
|
|
112,581,285
|
|
Cardax,
Inc., and Subsidiary
NOTES
TO THE CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS (continued)
NOTE
13 – LEASES
Manoa
Innovation Center
The
Company entered into an automatically renewable month-to-month lease for office space on August 13, 2010. Under the terms of this
lease, the Company must provide a written notice 45 days prior to vacating the premises. Total rent expense under this agreement
as amended was $8,164 and $23,935, for the three and nine-months ended September 30, 2017, respectively, and $7,929 and $23,784
for the three and nine-months ended September 30, 2016, respectively.
NOTE
14 – SUBSEQUENT EVENTS
The
Company evaluated all material events through the date the financials were ready for issuance and noted the following
non-recognized events for disclosure.
In
October 2017, the Company sold securities in a self-directed offering in the aggregate amount of $124,979 at $0.30 per
unit. Each $0.30 unit consisted of 1 share of restricted common stock (416,595 shares) and a five-year warrant to
purchase 1 share of restricted common stock (416,595 warrant shares) at $0.30 per share.
In
October 2017, the Company issued 537,791 shares of common stock in connection with the cashless exercise of stock options for
625,000 shares of common stock at $0.06 per share with 87,209 shares of common stock forfeited for the cashless exercise.
On
November 1, 2017, the Company issued options to purchase 1,000,000 shares of common stock at $0.44 per share to an employee. These
shares vest over a four-year period and expire ten years after the date of grant.
***