NOTES
TO FINANCIAL STATEMENTS
(unaudited)
NOTE
1 – ORGANIZATION AND NATURE OF BUSINESS
Company
Background
Overview
Aditx Therapeutics, Inc. (“Aditxt”
or the “Company”) was incorporated in the State of Delaware on September 28, 2017 and our headquarters are located
in Mountain View, CA. The Company is a life sciences company with a mission of prolonging life and enhancing its quality by improving
the health of the immune system.
We
are developing biotechnologies specifically focused on improving the health of the immune system through immune reprogramming
and monitoring. Our immune reprogramming technologies are currently at the pre-clinical stage and are designed to retrain the
immune system to induce tolerance with an objective of addressing rejection of transplanted organs, autoimmune diseases, and allergies.
Our immune monitoring technologies are designed to provide a personalized comprehensive profile of the immune system and we plan
to utilize them in our upcoming reprogramming clinical trials to monitor subjects’ immune response before, during and after
drug administration.
Offerings
On July 2, 2020, the Company completed
its initial public offering (“IPO”). In connection therewith, the Company issued 1,226,668 Units (the “Units”),
excluding the underwriters’ option to cover overallotments, at an offering price of $9.00 per Unit, resulting in gross proceeds
of approximately $11.0 million. The Units issued in the IPO consisted of one share of common stock, one Series A warrant, and one
Series B warrant. The Series A warrants originally had an exercise price of $9.00 and a term of 5 years. In addition, the Company
issued a Unit Purchase Option at an exercise price of $11.25 per unit to the underwriters to purchase up to 67,466 units, with
each unit consisting of (i) one share of common stock and (ii) one Series A Warrant. On August 19, 2020 the Company modified the
exercise price of the Series A Warrants from $9.00 per share to $4.50 per share. The term of the Series A Warrants was not modified.
The Series B warrants have an exercise price of $11.25 per share, a term of 5 years and contain a cashless exercise option upon
certain criteria being met. As of September 30, 2020, substantially all of the Series B warrants issued in the IPO have been exercised
pursuant to a cashless provision therein.
On September 10, 2020, the Company completed
a follow-on public offering (“September 2020 Offering”). In connection therewith, the Company issued 2,400,000 Units
(the “Follow-On Units”), excluding the underwriters’ option to cover overallotments, at an offering price of
$4.00 per Follow-On Unit, resulting in gross proceeds to the Company of approximately $9.6 million. The Follow-On Units issued
in the September 2020 Offering consisted of one share of common stock (or Series A Preferred Stock for investors who would own
more than 4.99% of the Company if they invested in common stock), one Series A-1 warrant, and one Series B-1 warrant. The Series
A-1 warrants have an exercise price of $3.19 per share and a term of 5 years. The Series B-1 warrants have exercise price of $5.00
per share, a term of 5 years and contain a cashless exercise option upon certain criteria being met. In addition, the Company issued
a warrant to the underwriters to purchase up to 60,000 shares of common stock at an exercise price of $5.00 per share. Subsequent
to quarter end, substantially all of the Series B-1 warrants issued in the September 2020 Offering have been exercised pursuant
to a cashless provision therein.
Risks
and Uncertainties
The
Company has a limited operating history and has not generated revenue from intended operations. The Company’s business and
operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, and federal
governmental policy decisions. A host of factors beyond the Company’s control could cause fluctuations in these conditions.
Adverse conditions may include: changes in biotechnology regulatory environment, technological advances that render our technologies
obsolete, availability of resources for clinical trials, acceptance of technologies into the medical community, and competition
from larger, more well-funded companies. These adverse conditions could affect the Company’s financial condition and the
results of its operations.
On
January 30, 2020, the World Health Organization declared the COVID-19 novel coronavirus outbreak a “Public Health Emergency
of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate
the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain
types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to
continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in
which the Company operates. While it is unknown how long these conditions will last and what the financial impact will be to the
Company, it is reasonably possible that future capital raise efforts and additional development of our technologies may be negatively
affected.
NOTE
2 – GOING CONCERN ANALYSIS
Management
Plans
The
Company was incorporated on September 28, 2017 and has not generated revenues to date. During the nine months ended September
30, 2020, the Company had a net loss of $4,468,102 and cash of $13,715,534. The Company will be conducting medical research and
development, and the time at which the Company will begin generating revenue is unknown. The Company believes, however, that the
funds raised by the IPO and the September 2020 Offering will be sufficient to fund the Company’s operation for at least
the next 12 months. Because of these factors, the Company believes that this alleviates issues in connection with the Company’s
ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will
continue as a going concern.
The financial statements included in this
report do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the matters discussed herein. While we believe in the viability
of our strategy to generate sufficient revenue, control costs and raise additional funds when necessary, there can be no assurances
to that effect. The Company’s ability to continue as a going concern is dependent upon the ability to complete clinical
studies and implement the business plan, generate sufficient revenues and to control operating expenses.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited 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 (“SEC”). In the opinion of the Company’s management, the accompanying 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, 2020 and 2019. Although management believes that the disclosures in
these unaudited 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 or omitted pursuant
to the rules and regulations of the SEC.
The accompanying unaudited financial statements
should be read in conjunction with the Company’s financial statements for the year ended December 31, 2019, which contain
the audited financial statements and notes thereto, included in the Company’s Prospectus, dated September 1, 2020, filed
with the SEC pursuant to Rule 424(b). The interim results for the nine months ended September 30, 2020 are not necessarily indicative
of the results to be expected for the year ended December 31, 2020 or for any future interim periods.
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 disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those
estimates. Significant estimates underlying the financial statements include the fair value of stock options and warrants.
Fair
Value Measurements and Fair Value of Financial Instruments
The
Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level
1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level
2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived
from or corroborated by observable market data.
Level
3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information.
The
Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance
with ASC Topic 820.
Due
to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the
balance sheet dates.
Concentrations
of Credit Risk
The
Company maintains its cash accounts at financial institutions which are insured by the Federal Deposit Insurance Corporation.
At times, the Company may have deposits in excess of federally insured limits.
Cash
and Cash Equivalents
Cash
and cash equivalents include short-term, liquid investments. As of September 30, 2020 and December 31, 2019, $12,760,084 and $0
was invested in the J.P. Morgan U.S. Government Money Market Fund, respectively.
Fixed
Assets
Fixed
assets are stated at cost less accumulated depreciation. Cost includes expenditures for furniture, office equipment, laboratory
equipment, and other assets. Maintenance and repairs are charged to expense as incurred. When assets are sold, retired, or otherwise
disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in
operations. The cost of fixed assets are depreciated using the straight-line method over the estimated useful lives of the related
assets. Depreciation expense was $2,796 for the three and nine months ended September 30, 2020 and zero for the three and nine
months ended for September 30, 2019.
Offering
Costs
The
Company accounts for offering costs in accordance with ASC 340, Other Assets and Deferred Costs. Prior to the completion of an
offering, offering costs were capitalized as deferred offering costs on the balance sheet. The deferred offering costs are netted
against the proceeds of the offering in stockholders’ equity (deficit) or the related debt, as applicable. Costs related
to unsuccessful offerings are expensed.
Leases
Under
Topic 842, operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases
consisting of office and laboratory space with remaining lease terms of 46 months. Rent and Lease costs were $46,698 and $23,731
for the nine months ended September 30, 2020 and 2019. There was no sublease rental income for the nine months ended September
30, 2020 and 2019. Rent and Lease costs were $43,573 and $9,467 for the three months ended September 30, 2020 and 2019. There
was no sublease rental income for the three months ended September 30, 2020 and 2019.
Leases
with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed
after the adoption of Topic 842, we combine the lease and non-lease components in determining the lease liabilities and right
of use (“ROU”) assets.
Our
lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined
based on information available at lease commencement date for purposes of determining the present value of lease payments. We
used the incremental borrowing rate on September 30, 2020 and December 31, 2019 for all leases that commenced prior to that date.
In determining this rate, which is used to determine the present value of future lease payments, we estimate the rate of interest
we would pay on a collateralized basis, with similar payment terms as the lease and in a similar economic environment.
Lease
Costs
|
|
Nine
Months Ended
September 30,
2020
|
|
|
Nine
Months Ended
September 30,
2019
|
|
Components
of total lease costs:
|
|
|
|
|
|
|
|
|
Operating
lease expense
|
|
$
|
46,698
|
|
|
$
|
-
|
|
Total
lease costs
|
|
$
|
46,698
|
|
|
$
|
-
|
|
Lease
Positions as of September 30, 2020
ROU
lease assets and lease liabilities for our operating leases were recorded in the balance sheet as follows:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Right
of use asset – short term
|
|
$
|
324,289
|
|
|
$
|
-
|
|
Right
of use asset – long term
|
|
|
870,311
|
|
|
|
-
|
|
Total
assets
|
|
$
|
1,194,600
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Operating
lease liabilities – short term
|
|
$
|
326,904
|
|
|
$
|
-
|
|
Operating
lease liabilities – long term
|
|
|
865,081
|
|
|
|
-
|
|
Total
lease liability
|
|
$
|
1,191,985
|
|
|
$
|
-
|
|
Lease
Terms and Discount Rate
Weighted
average remaining lease term (in years) – operating lease
|
|
|
3.83
|
|
Weighted
average discount rate – operating lease
|
|
|
8.00
|
%
|
The
future minimum lease payments under the leases are as follows:
2020
(remainder)
|
|
$
|
84,536
|
|
2021
|
|
|
342,500
|
|
2022
|
|
|
352,958
|
|
2023
|
|
|
363,416
|
|
2024
|
|
|
215,551
|
|
Total
future minimum lease payments
|
|
|
1,358,961
|
|
Less:
Lease imputed interest
|
|
|
166,976
|
|
Total
|
|
$
|
1,191,985
|
|
Stock-Based
Compensation
The
Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which
requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards
that are ultimately expected to vest. Stock based compensation expense recognized includes the compensation cost for all stock-based
payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions
of ASC 718. ASC. 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation
is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing
goods or services.
Patents
The
Company incurs fees from patent licenses. During the nine months ended September 30, 2020 and 2019, the Company had a licensing
fee for the patents of $258,635 and $18,071, respectively.
Research
and Development
We
incur research and development costs during the process of researching and developing our technologies and future offerings. Our
research and development costs mainly consist of licensing costs. We expense these costs as incurred unless such costs qualify
for capitalization under applicable guidance.
Basic
and Diluted Net Loss per Common Share
Basic loss per common share is computed
by dividing the net loss by the weighted average number of shares of common stock outstanding for each period. Diluted loss per
share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding plus the dilutive
effect of shares issuable through the common stock equivalents. The weighted-average number of common shares outstanding excludes
common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2020, 1,110,000 stock options and
6,237,296 warrants were excluded from dilutive earnings per share as their effects were anti-dilutive. As of September 30, 2019,
2,205,000 stock options and 2,632,456 warrants were excluded from dilutive earnings per share as their effects were anti-dilutive.
Recent
Accounting Pronouncements
In February 2016, FASB issued Accounting Standards Update (“ASU”)
2016-02: Leases (Topic 842). The new guidance generally requires an entity to recognize on its balance sheet operating and financing
lease liabilities and corresponding right-of-use assets. The standard will be effective for the first interim period within annual
reporting periods beginning after December 15, 2018 and early adoption is permitted. The new standard requires a modified retrospective
transition for existing leases to each prior reporting period presented. The Company has elected to early adopt this standard.
This standard will be effective for the interim period beginning July 1, 2020. The adoption of this standard is not expected to
have a significant impact our financial statements other than the presentation of right of use asset and lease liability
on the balance sheet.
The
FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, including those above, that
amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are
technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our financial statements.
NOTE
4 – RELATED PARTY TRANSACTIONS
The Company’s Chief Executive Officer
(“CEO”) has provided certain periods of service without payment. As of September 30, 2020 and December 31, 2019, the
CEO is owed $0 and $309,500, respectively, related to compensation. During the three months ended September 30, 2020, the Company
issued 38,055 Units consisting of one share of common stock and one Series A warrant and one Series B warrant to settle $342,500
in accrued compensation.
The Company’s Chief Innovation Officer
(“CIO”) has provided certain periods of service without payment. As of September 30, 2020 and December 31, 2019, the
CIO is owed $0 and $377,000, respectively, related to compensation. During the three months ended September 30, 2020, the Company
issued 47,222 Units consisting of one share of common stock, one Series A warrant, and one Series B warrant to settle $425,000
in accrued compensation.
Effective July 10, 2020, the Board of Directors appointed the
Company’s Chief Operations Officer (“COO”). Prior to the appointment, the COO was an independent operations consultant
and had provided certain periods of service without payment. As of September 30, 2020 and December 31, 2019, the COO is owed $0
and $275,000, respectively, related to compensation. During the three months ended September 30, 2020, the Company issued 35,555
Units consisting of one share of common stock, one Series A warrant, and one Series B warrant to settle $320,000 in accrued compensation.
On
March 21, 2019, the Company entered into a note with a related party. The note had a principal of $10,000, a maturity date of
September 21, 2019, and an interest rate of 4% per year. During the three months ended September 30, 2020, this note was paid
in full.
During
the nine months ended September 30, 2020, the Company assumed $11,980 of liabilities from a related party in exchange for the
return of 5,990 shares of the Company’s common stock.
NOTE
5 – STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred
Stock
The
Company is authorized to issue 3,000,000 shares of preferred stock, par value $0.001 per share.
Common
Stock
The
Company is authorized to issue 27,000,000 shares of common stock, par value $0.001 per share.
During the nine months ended September
30, 2020, the Company issued 330,916 shares of common stock and recognized expense of $1,312,930 in stock compensation for consulting
services. The Company also issued 3,740,753 shares of commons stock for the exercise of warrants and received $210,546 for the
exercise of the warrants. The Company issued 1,250,000 shares of common stock for the exercise of 1,250,000 shares of Series A
Preferred Stock. The Company issued 146,818 shares of common stock for the settlement of accounts payable and issued 62,500 shares
of common stock for the settlement of debt. The Company issued 1,226,668 shares of common stock related to the IPO and issued
1,150,000 shares of common stock related to the September 2020 Offering. The stock compensation for the period was valued based
on prior private placements or based on management’s estimates of value immediately prior to the IPO and the value of the
shares based on public information post IPO.
During
nine months ended September 30, 2019, the Company issued 20,500 shares of common stock for services and recognized expense of
$82,000 in stock compensation, issued 106,475 shares of common stock for $370,177 in cash, net of offering costs, and received
100,803 shares of the Company’s common stock in exchange for the assumption of $201,605 in liabilities. Shares issued for
compensation were valued based on the price which common shares were being sold in the above private placements.
Reverse
Stock Split
On
June 29, 2020, the Company effectuated a 1-for-2 reverse stock split of its issued and outstanding shares of common stock by filing
a certificate of amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of
Delaware. Accordingly, all share and per share amounts for all periods presented in the accompanying financial statements and
notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split.
Stock-Based
Compensation
In
October 2017, our Board of Directors adopted the Aditx Therapeutics, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). The
2017 Plan provides for the grant of equity awards to employees, and consultants. Up to 2,500,000 shares of our common stock
may be issued pursuant to awards granted under the 2017 Plan. The 2017 Plan is administered by our Board of Directors, and expires
ten years after adoption, unless terminated earlier by the Board.
During the nine months ended September
30, 2020, the Company granted 7,500 stock options with an exercise price of $11.00 per share vesting on issuance. The total grant
date fair value was determined to be $27,799.
During
the nine months ended September 30, 2019, the Company granted 700,000 stock options with exercise prices of $4.00 per share vesting
on issuance. The total grant date fair value was determined to be $2,495,556. For all periods presented, the fair value of each
stock option granted was estimated using the Black-Scholes assumption ranges and or factors as follows:
Exercise
price
|
|
$ 4.00-11.00
|
|
|
Expected
dividend yield
|
|
0
|
%
|
|
Risk
free interest rate
|
|
0.39%-2.65
|
%
|
|
Expected
life in years
|
|
2.54-7.27
|
|
|
Expected
volatility
|
|
141-146
|
%
|
|
The
risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities
appropriate for the expected term of stock options.
The
expected term of stock options is calculated using either the simplified method for employee options which takes into consideration
the contractual life and vesting terms of the options, unless the options are expected to vest in which case the contractual term
of the options.
The
Company determined the expected volatility assumption for options granted using the historical volatility of comparable public
companies’ common stock. The Company will continue to monitor peer companies and other relevant factors used to measure
expected volatility for future stock option grants, until such time that the Company’s common stock has enough market history
to use historical volatility.
The
dividend yield assumption for options granted is based on the Company’s history and expectation of dividend payouts. The
Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash
dividends in the foreseeable future.
Management
estimated the fair value of common stock by looking at a market approach which takes into consideration past sales of stock to
third parties and Company developments to date.
The
Company recognizes stock option forfeitures as they occur as there is insufficient historical data to accurately determine future
forfeitures rates.
The
following is an analysis of the stock option grant activity under the Plan:
|
|
|
|
|
Weighted
Average
|
|
|
Weighted
Average
|
|
Stock
Options
|
|
Number
|
|
|
Exercise
Price
|
|
|
Remaining
Life
|
|
Outstanding
December 31, 2019
|
|
|
1,102,500
|
|
|
$
|
4.00
|
|
|
|
7.77
|
|
Granted
|
|
|
7,500
|
|
|
|
11.00
|
|
|
|
4.47
|
|
Expired
or forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding
September 30, 2020 (unaudited)
|
|
|
1,110,000
|
|
|
$
|
4.05
|
|
|
|
7.00
|
|
Nonvested
Options
|
|
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
Nonvested
at December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
7,500
|
|
|
|
11.00
|
|
Vested
|
|
|
(7,500
|
)
|
|
|
11.00
|
|
Expired
or forfeited
|
|
|
-
|
|
|
|
-
|
|
Nonvested
at September 30, 2020 (unaudited)
|
|
|
-
|
|
|
$
|
-
|
|
The
Company recognized compensation expense related to options issued and vesting of $27,799 during the nine months ended September
30, 2020, which is included in general and administrative expenses in the accompanying statements of operations. There is no additional
expense to be recognized on previously granted options as of September 30, 2020. The Company recognized compensation expense related
to options issued and vesting of $2,513,826 during the period ended September 30, 2019, which is included in general and administrative
expenses in the accompanying statements of operations.
Warrants
A
summary of warrant issuances are as follows:
|
|
Number
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Life
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
December 31, 2019
|
|
|
1,382,478
|
|
|
|
4.44
|
|
|
|
2.84
|
|
Granted
|
|
|
8,786,381
|
|
|
|
6.30
|
|
|
|
5.00
|
|
Expired
or forfeited
|
|
|
(190,810
|
)
|
|
|
8.12
|
|
|
|
-
|
|
Exercised
|
|
|
(3,740,753
|
)
|
|
|
7.53
|
|
|
|
-
|
|
Outstanding
September 30, 2020 (unaudited)
|
|
|
6,237,296
|
|
|
$
|
5.10
|
|
|
|
4.30
|
|
Nonvested
Warrants
|
|
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
Nonvested at December 31, 2019
|
|
|
200,000
|
|
|
|
4.00
|
|
Granted
|
|
|
65,000
|
|
|
|
6.30
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
Expired or forfeited
|
|
|
(65,000
|
)
|
|
|
4.00
|
|
Nonvested at September 30, 2020 (unaudited)
|
|
|
200,000
|
|
|
$
|
4.30
|
|
The
warrants granted for compensation are valued using similar inputs as noted in the stock options section above, with the exception
of the expected life which is the contractual life.
The
Company recognized compensation expense related to warrants issued and vesting of $223,398 and $947,190 during the nine months
ended September 30, 2020 and 2019, which is included in general and administrative in the accompanying Statements of Operations.
The remaining value to be expensed is $148,472 with a weighted average vesting term of 0.52 years as of September 30, 2020.
During
the nine months ended September 30, 2020, 3,740,753 warrants were exercised for 3,740,753 shares of common stock. The Company
recognized proceeds of $210,546 related to the exercises.
During the three months ended September
30, 2020, the Company issued 60,000 warrants to the underwriters related to the September 2020 Offering. These warrants have an
exercise price of $5.00, a term of five years, and become exercisable beginning on March 1, 2021. The value of these warrants were
both an increase and decrease to additional paid in capital as a cost of the offering for net a zero impact on the financial statements.
NOTE
6 – AGREEMENTS
On July 1, 2020, the Company entered into
an amendment to patent and technology licensing agreement with Loma Linda University (“LLU”), dated March 15, 2018.
Pursuant to the amendment, the Company paid LLU $455,000 within four days of the signing of such amendment. The amendment also
updated the milestone payment dates to be $175,000 on March 31, 2022; $100,000 on March 31, 2024; $500,000 on March 31, 2026;
and $500,000 on March 31, 2027.
During the three months ended September
30, 2020, the Company entered in to three consulting agreements that required the Company to issue a total of 62,000 shares of
the Company’s common stock to the consultants.
NOTE
7 – NOTES PAYABLE
On
April 12, 2018, the Company issued an unsecured promissory note for $35,000 that accrued interest of 4% annually. The note was
due on the earlier of November 12, 2018 or in the event of default, as defined in the agreement. During the three months ended
September 30, 2020, this note was paid in full.
On
July 10, 2018, the Company entered into a bridge loan with a principal of $15,600. The note was due on the earlier of October
8, 2018 or in the event of default, as defined in the agreement. During the three months ended September 30, 2020, this note was
paid in full.
On
July 18, 2018, the Company entered into a bridge loan with a principal of $130,000. The note was due on the earlier of October
16, 2018 or in the event of default, as defined in the agreement. During the three months ended September 30, 2020, this note
was paid in full.
On November 1, 2019, the Company entered
into a bridge loan with a principal of $50,000. This loan did not accrue any interest. The note was due on the earlier of April
28, 2020 or in the event of default, as defined in the agreement. The note was convertible into the same class of securities as
those sold in the public offering with a conversion price of $2.00 per share. During the three months ended September
30, 2020, the note was converted into securities of the Company in full.
On January 10, 2020, the Company entered
into a bridge loan with a principal amount of $75,000. This Note carried an original issue discount of $40,000. This loan did not
accrue any interest. The note was due on the earlier of July 8, 2020 or in the event of default, as defined in the agreement, as
amended. The note was convertible into the same class of securities as those sold in the public offering with a conversion price
of $2.00 per share. During the three months ended September 30, 2020, the note was converted into securities of the Company in
full.
During
the first quarter of 2020, the Company entered into six bridge loans with a total principal amount of $600,000. These notes carried
a total original issue discount of $300,000. The notes were due on the earlier of April 19, 2020 or ten days after the close of
the Company’s IPO. During the three months ended September 30, 2020, these notes were paid in full.
NOTE
8 – SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through the filing of this Form 10-Q and has determined that there have been no events
that have occurred that would require adjustments to the Company’s disclosures in the consolidated financial statements
except for the following:
During
October 2020, the Company entered into a 24 month financing agreement for lab equipment. The aggregate cost of this financing
agreement will be $467,691.
During November 2020, the Company entered
into a 24 month financing agreement for lab equipment. The aggregate cost of this financing agreement will be $215,192.
On October 6, 2020, the Board of Directors
approved the issuance of an aggregate of 40,000 stock options as compensation for the non-employee members of the Board of Directors
under the Company’s 2017 Equity Incentive Plan. The options are subject to certain vesting provisions.
On November 2, 2020 the Compensation Committee approved the
issuance of an aggregate of 883,000 stock options to employees and service providers under the 2017 Equity Incentive Plan.