See the accompanying notes to these unaudited
condensed consolidated financial statements
See the accompanying notes to these unaudited
condensed consolidated financial statements
See the accompanying notes to these unaudited
condensed consolidated financial statements
See the accompanying notes to these unaudited
condensed consolidated financial statements
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2019 AND 2018
(UNAUDITED)
NOTE 1 – BACKGROUND AND ORGANIZATION
Business Operations
Bioxytran, Inc. (the “Company”)
is an early-stage pharmaceutical company focused on the development, manufacture and commercialization of therapeutic drugs designed
to address hypoxia in humans, which is a lack of oxygen to tissues, in a safe and efficient manner. If it is not addressed, lack
of oxygen to tissues, or hypoxia, results in necrosis, which is the death of cells comprising body tissue. Necrosis cannot be reversed.
Our lead drug candidate, code named BXT-25, is an oxygen-carrying small molecule consisting of bovine hemoglobin stabilized with
a co-polymer with intended applications to include treatment of hypoxic conditions in the brain resulting from stroke, and hypoxic
conditions in wounds to prevent necrosis and to promote healing. The Company’s initial focus is the treatment of hypoxic
conditions in the brain resulting from stroke, and hypoxic conditions in wounds to prevent necrosis and to promote healing. We
believe that ours is a novel approach that will result in the creation of safe drug alternatives to existing therapies for effectively
addressing hypoxic conditions in humans. Our drug development efforts are guided by specialists in co-polymer chemistry and other
disciplines, and we intend to supplement our efforts with input from a scientific and medical advisory board whose members are
leading physicians.
Organization
Bioxytan, Inc. was organized on October
5, 2017 as a Delaware corporation, with a taxing structure for U.S. federal and state income tax as a C-Corporation with 95,000,000
authorized common shares with a par value of $0.0001, and 5,000,000 preferred shares with a par value of $0.0001. On September
21, 2018, the Company went under a reorganization in form of a reverse merger and is currently registered as a Nevada corporation
with a taxing structure for U.S. federal and state income tax as a C-Corporation with 300,000,000 authorized common shares with
a par value of $0.001, and 50,000,000 preferred shares with a par value of $0.001
Basis of Presentation
The summary of significant accounting policies
presented below is designed to assist in understanding the Company’s consolidated financial statements. Such financial statements
and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity.
These accounting policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”)
in all material respects and have been consistently applied in preparing the accompanying financial statements. The Company has
not earned any revenue from operations since inception. The Company chose December 31st as its fiscal year end.
The accompanying unaudited financial statements
have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or
omitted in accordance with such rules and regulations. The information furnished in the interim financial statements includes normal
recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation
of such financial statements. Although management believes the disclosures and information presented are adequate to make the information
not misleading, it is suggested that these interim financial statements be read in conjunction with the Company’s audited
financial statements and notes thereto included in its Form 10-K for the year ended December 31, 2018. Operating results for the
nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December
31, 2019.
Principles of Consolidation
The accompanying consolidated financial
statements include the accounts of Bioxytran, Inc. a Nevada Corporation and its wholly owned subsidiary, Bioxytran, Inc. of Delaware
(collectively, the “Company”). All intercompany accounts have been eliminated upon consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A summary of the significant accounting
policies applied in the preparation of the accompanying financial statements follows.
Cash
For purposes of the Statement of Cash Flows,
the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during
the reporting period. Significant estimates include the fair value of the Company’s stock, stock-based compensation and the
valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
Net Loss per Common Share, basic and
diluted
The Company computes earnings (loss) per
share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common
share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted
earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially
dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.
There
are 416,666 warrants and 293,000 options outstanding at September 30, 2019 (Note 6), as well as 463,000 common shares that have
been allocated to short-term liabilities for future issuance (see Stock-Based Compensation below). There are 208,333 warrants
outstanding at December 31, 2018. These potentially dilutive securities are not presented in the attached financial statements,
as their effect would be anti-dilutive.
Stock Based Compensation
The Company measures the cost of
services received in exchange for an award of equity instruments based on the fair value of the award on the grant date
Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of
operations, as if such amounts were paid in cash. As of September 30, 2019, there were 293,000 outstanding stock options with
a fair market value of $228,058 and 108,000 shares issued with a fair market value of $34,600 at the time of award. An
additional 463,000 shares with a fair Market Value of $532,418 at the time of award, had not yet been issued on September 30,
2019, and are allocated to Current Liabilities (Note 4). At December 31, 2018, there were no outstanding stock options, nor
any shares awarded.
Research and Development
The Company accounts for research and development
costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”).
Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and
development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has
been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research
and development costs related to both present and future products are expensed in the period incurred. During the nine months ended
September 30, 2019 and September 30, 2018 the Company did not incur significant research and development expenses.
Fair Value
Accounting Standards Codification subtopic
825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments.
The carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected
in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial
assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements
together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit
risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise
only available information pertinent to fair value has been disclosed.
The Company follows Accounting Standards
Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification
subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments
and certain other items at fair value.
Recent Accounting Pronouncements
There were various updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to a have a material impact on the Company’s financial position, results of operations or cash flows.
NOTE 3 – GOING CONCERN AND MANAGEMENT’S
LIQUIDITY PLANS
As of September
30, 2019, the Company had cash of $33,226 and a negative working capital of $1,180,640. As of September 30, 2019, the Company has
not yet generated any revenues, and has incurred cumulative net losses of $1,578,648. These conditions raise substantial doubt
about the Company’s ability to continue as a going concern.
During the nine
months ending September 30, 2019, the Company has raised a net of $222,250 from issuance of debt in form of convertible notes,
and $20,000 in cash proceeds from the issuance of common stock. There were no funds raised during the same period in 2018. The
Company is aware that its current cash on hand will not be sufficient to fund its projected operating requirements through the
month of December 2019 and is pursuing alternative opportunities to funding.
The Company intends
to raise additional capital through private placements of debt and equity securities, but there can be no assurance that these
funds will be available on terms acceptable to the Company, or will be sufficient to enable the Company to fully complete its development
activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement
a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital
is raised to support further operations. There can be no assurance that such a plan will be successful.
Accordingly, the
accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company
as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying
amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement
values. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
NOTE 4 – ACCOUNTS PAYABLES AND
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
On September 30, 2018, there was no Accrued
Expenses in Accounts Payables to related parties. On December 31, 2018 there was $10,900 in form of payroll and advanced expenses.
The following table represents the major
components of accounts payables and accrued expenses and other current liabilities at September 30, 2019 and December 31, 2018:
|
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Accounts Payables related party
|
|
$
|
-
|
|
|
$
|
10,900
|
|
Professional fees
|
|
|
72,603
|
|
|
|
19,175
|
|
Interest
|
|
|
17,113
|
|
|
|
3,722
|
|
Taxes
|
|
|
-
|
|
|
|
400
|
|
Other Accounts Payables
|
|
|
2,453
|
|
|
|
150
|
|
Un-issued shares liability
|
|
|
532,418
|
|
|
|
-
|
|
Convertible Note Payables
|
|
|
589,279
|
|
|
|
227,378
|
|
Total
|
|
$
|
1,213,866
|
|
|
$
|
261,725
|
|
NOTE 5 – CONVERTIBLE NOTES PAYABLE
As long as the following convertible notes
remain outstanding, the Company cannot amend its charter in any matter that materially effects rights of noteholders, repay or
repurchase more than de minimis number of shares of common stock other than conversion or warrant shares, repay or repurchase all
or any portion of any indebtedness, or pay cash dividends.
Auctus Note #1
On October 24, 2018 (the “Date
of Issuance”) the Company issued a convertible promissory note (the “Auctus Note #1”) with a face value
of $250,000, maturing on October 23, 2019, and a stated interest of 8% to a third-party investor. The Auctus Note #1 is convertible
into common stock of the Company, par value $.001 per share (the “Common Stock”) at any time after the earlier of:
(i) 180 days from the date of the Auctus Note #1, or (ii) upon effective date of a registration statement. The conversion price
of the Auctus Note #1 is equal to the lesser of: (i) the lowest trading price for the twenty-day period prior to the date of the
Auctus Note #1 or (ii) 65% of the average of the three lowest trading prices during the twenty days prior to a conversion notice
on the applicable trading market or the closing bid price on the applicable trading market. The Auctus Note #1 was funded on October
29, 2018, when the Company received proceeds of $222,205, after disbursements for the lender’s transaction costs, fees and expenses
which in aggregate resulted in a total discount of $27,795 to be amortized to interest expense over the life of the Auctus Note
#1.
Additionally, the variable conversion rate
component requires that the Auctus Note #1 be valued at its stock redemption value (i.e., “if-converted” value)
pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the undiscounted face value being
deemed a premium to be added to the principal balance and accreted to additional paid-in capital over the life of the Auctus Note
#1. As such, the Company recorded a premium of $343,796 as a reduction to additional paid-in capital based on a discounted “if-converted” rate
of $0.20 per share (lowest trading price during the 20 days preceding the note’s issuance), which computed to 1,211,828 shares
of ‘if-converted’ common stock with a redemption value of $593,796 due to $0.49 per share fair market value of the Company’s stock
on the Auctus Note #1’s date of issuance. Debt discount amortization is recorded as interest expense, while debt premium accretion
is recorded as an increase to additional paid-in capital. During the nine months ended September 30, 2019, the Company amortized
$20,853 debt discount to operations as interest expense, and accreted $306,820 of premium to additional paid-in capital.
Along with the Auctus Note #1, on the Date
of Issuance the Company issued 208,333 Common Stock Purchase Warrants (the “Warrants”), exercisable immediately
at a fixed exercise price of $0.60 with an expiration date of October 23, 2023. The Company has determined that the Warrants
are exempt from derivative accounting and were valued at $101,937 on the Date of Inception using the Black Scholes Options Pricing
Model. Assumptions used for the Black Scholes Options Pricing Model include (1) stock price of $0.49 per share, (2) exercise
price of $0.60 per share, (3) term of 5 years, (4) expected volatility of 251% and (5) risk free interest rate of 2.51%. The
note proceeds of $250,000 were then allocated between the fair value of the Auctus Note #1 ($250,000) and the Warrants ($101,937),
resulting in a debt discount of $72,412. As the warrants were exercisable immediately, this debt discount was amortized in
its entirety to interest expense on the Date of Issuance.
Auctus Note #2
On February 25, 2019, the Company entered
into a $250,000 Senior Secured Promissory Note (“the Auctus Note #2”), dated February 25, 2019 at an interest rate
of 8% per annum, maturing on February 24, 2020 (the “Maturity Date”). Issuance fees totaling $27,750 were recorded
as a debt discount, resulting in net proceeds of $222,250. The Auctus Note #2 is convertible into common stock of the Company,
par value $.001 per share (the “Common Stock”) at any time after the earlier of: (i) 180 days from the date of the
Auctus Note #2 or (ii) upon effective date of a new registration statement. The conversion price of the Auctus Note #2 is equal
to the lesser of: (i) the lowest trading price for the twenty-day period prior to the date of the Auctus Note #2 or (ii) 65% of
the average of the three lowest trading prices during the twenty days prior to a conversion notice on the applicable trading market
or the closing bid price on the applicable trading market. The Company may prepay the Auctus Note #2 at any time at a rate of 120%
of outstanding principal and interest during the first 90 days it is outstanding and 130% of outstanding principal and interest
for the next 90 days thereafter. Thereafter the prepayment amount increases 5% for each thirty-day period until 270 days from the
issue date at which time it is fixed at 150% of the outstanding principal and interest on the Auctus Note #2.
Additionally, the variable conversion rate
component requires that the Auctus Note #2 be valued at its stock redemption value (i.e., “if-converted” value) pursuant
to ASC 480, Distinguishing Liabilities from Equity, with the excess over the undiscounted face value being deemed a premium to
be added to the principal balance and accreted to additional paid-in capital over the life of the Auctus Note #2. As such, the
Company recorded a premium of $82,500 as a reduction to additional paid-in capital based on a discounted “if-converted”
rate of $0.20 per share (lowest trading price during the 20 days preceding the note’s issuance), which computed to 1,250,000 shares
of ‘if-converted’ common stock with a redemption value of $332,500 due to $0.266 per share fair market value of the Company’s stock
on the Auctus Note #2’s date of issuance. Debt discount amortization is recorded as interest expense, while debt premium accretion
is recorded as an increase to additional paid-in capital. During the nine months ended September 30, 2019, the Company amortized
$16,271 debt discount to operations as interest expense, and accreted $16,949 of premium to additional paid-in capital.
Along with the the Auctus Note #2, on the
Date of Issuance the Company issued 208,333 Common Stock Purchase Warrants (the “Warrants”), exercisable immediately
at a fixed exercise price of $0.60 with an expiration date of February 24, 2024. The Company has determined that the Warrants
are exempt from derivative accounting and were valued at $55,417 on the Date of Inception using the Black Scholes Options Pricing
Model. Assumptions used for the Black Scholes Options Pricing Model include (1) stock price of $0.27 per share, (2) exercise
price of $0.60 per share, (3) term of 5 years, (4) expected volatility of 358% and (5) risk free interest rate of 2.48%. The
Auctus Note #2 proceeds of $250,000 were then allocated between the fair value of the Auctus Note #2 ($250,000) and the Warrants
($55,417), resulting in a debt discount of $45,361. As the warrants are exercisable immediately, this debt discount was amortized
in its entirety to issuance of warrants (other expenses) on the Date of Issuance.
Convertible notes
payable consists of the following at September 30, 2019 and December 31, 2018:
|
|
September 30,
2019
|
|
|
December 31,
2018
|
|
Principal balance
|
|
$
|
500,000
|
|
|
$
|
250,000
|
|
Unamortized debt discount
|
|
|
(13,248
|
)
|
|
|
(22,622
|
)
|
Unamortized debt premium
|
|
|
102,527
|
|
|
|
-
|
|
Outstanding, net of debt discount and premium
|
|
$
|
589,279
|
|
|
$
|
227,378
|
|
NOTE 6 – STOCKHOLDERS’ EQUITY
At
a Board of Director’s Meeting on July 30, 2018, the Company authorized a reverse split that resulted in a reduction of the
number of outstanding and issued shares of both common and preferred stock so that after the split became effective on August 13,
2018, the shares of both common and preferred stock were reduced to 1 share for each 30 shares currently issued and outstanding.
The effect on the Balance Sheet is a transfer of value from stock value at par to Additional Paid-in Capital. As
a result of the one (1) for thirty (30) reverse stock split, the Company will continue to be authorized to issue 300,000,000 shares
of Common Stock, and 50,000,000 shares of Preferred Stock. The reverse split
has been retroactively applied to all periods presented.
Preferred stock
As of September 30, 2019, no preferred
shares have been designated or issued.
Common stock
On May 30, 2019, 25,000 shares of common
stock were issued as a result of conversion of accrued interest on the Auctus Note #1 at $0.20 per share for a total of $5,000.
For details, see Convertible Note Payable under Note 3.
On July 18, 2019, 25,000 shares of common
stock were issued as a result of conversion of accrued interest on the Auctus Note #1 at $0.20 per share for a total of $5,000.
For details, see Convertible Note Payable under Note 3.
On August 20, 2019, 20,000 shares of common
stock were sold and issued from the active S-1 at $1 per share for a total of $20,000.
On August 22, 2019, 25,000 shares of common
stock were issued as a result of conversion of accrued interest on the Auctus Note #1 at $0.20 per share for a total of $5,000.
For details, see Convertible Note Payable under Note 3.
Between November 2, 2018, and May 17, 2019,
108,000 shares were awarded with an average cost per share of $0.32, under the 2010 Stock Plan for a total value of $34,600. The
shares were issued on September 3, 2019. For details, see Shares Awarded and Issued under Note 5.
As of September 30, 2019, the Company has
85,306,673 shares of common stock issued and outstanding.
Common Stock Options/Warrants
On February 25, 2019 the Company issued
208,333 Warrants as part of a convertible note agreement. The warrants total value allocated to debt discount was $45,361. For
details, see Convertible Note Payable under Note 3.
The following table summarizes the Company’s
common stock warrant and options activity for the nine months ended September 30, 2019 and the year ended December 31, 2018:
|
|
|
|
|
Weighted
Average
|
|
|
Weighted-
Average Remaining
|
|
|
|
Warrants/
Options
|
|
|
Exercise
Price
|
|
|
Expected
Term
|
|
Outstanding as of January 1, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
208,333
|
|
|
|
0.60
|
|
|
|
5.0
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of December 31, 2018
|
|
|
208,333
|
|
|
$
|
0.60
|
|
|
|
4.8
|
|
Granted
|
|
|
208,333
|
|
|
|
0.60
|
|
|
|
5.0
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of September 30, 2019
|
|
|
416,666
|
|
|
$
|
0.60
|
|
|
|
4.2
|
|
Between May 1 and July 9, 2019, 293,000
options were awarded under the 2010 Stock Option Plan. The options were issued on September 3, 2019. The options total fair value
at the time of award was $228,058. For details, see Stock options granted under Note 5.
The following table summarizes the Company’s
common stock warrant and options activity for the nine months ended September 30, 2019 and the year ended December 31, 2018:
|
|
|
|
|
Weighted
Average
|
|
|
Weighted-
Average Remaining
|
|
|
|
Warrants/
Options
|
|
|
Exercise
Price
|
|
|
Expected
Term
|
|
Outstanding as of January 1, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
293,000
|
|
|
|
1.01
|
|
|
|
3.0
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of September 30, 2019
|
|
|
293,000
|
|
|
$
|
1.01
|
|
|
|
2.9
|
|
NOTE 7 – STOCK OPTION PLAN AND
STOCK-BASED COMPENSATION
During the year ended December 31, 2010,
the Company adopted a stock option plan entitled “The 2010 Stock Plan” (2010 Plan) under which the Company may grant
Options to Purchase Stock, Stock Awards or Stock Appreciation Rights up to 15% of common stock, automatically adjusted on January
1 each year. As of December 31, 2018, there were no outstanding awards under the 2010 Plan. As of September 30, 2019, there were
293,000 outstanding stock options with a fair market value of $228,058 and 108,000 shares issued with a fair market value of $34,600
at the time of award. An additional 463,000 shares with a fair Market Value of $532,418 at the time of award, had not yet been
issued on September 30, 2019, and are allocated to Current Liabilities (Note 4). At December 31, 2018, there were no outstanding
stock options, nor any shares awarded.
Under the terms of the stock plans, the
Board of Directors shall specify the exercise price and vesting period of each stock option on the grant date. Vesting of the options
is typically immediate and the options typically expire in five years. Stock Awards may be directly issued under the Plan (without
any intervening options). Stock Awards may be issued which are fully and immediately vested upon issuance.
Shares Awarded and Issued:
On November 2, 2018, the Company granted
4,000 shares with a fair market value of $0.51 to four members of the Company Board as compensation for their contribution in the
Company’s Board of Directors, for a total of $2,040. The shares were issued on September 13, 2019.
On March 11, 2019 the Company granted 100,000
shares with a fair market value of $0.27, to a consultant as compensation for their work with the Company’s IR, for a total
of $26,600. The shares were issued on September 4, 2019.
On May 17, 2019, the Company granted 4,000
shares with a fair market value of $1.49 to four members of the Company Board as compensation for their contribution in the Company’s
Board of Directors, for a total of $5,960. The shares were issued on September 13, 2019.
Shares Awarded, but not yet Issued:
On November 6, 2018, the Company granted
1,000 shares with a fair market value of $0.52 to one member of the Audit Committee as compensation for his contribution in this
Company Committee, for a total of $520.
On November 29, 2018, the Company granted
4,000 shares with a fair market value of $1.00 to four members of the Audit Committee as compensation for his contribution in this
Company Committee, for a total of $4,000.
On March 7, 2019, the Company granted 3,000
shares with a fair market value of $0.27 to three members of the Audit Committee as compensation for his contribution in this Company
Committee, for a total of $810.
On May 10,2019 the Company granted 3,000
shares with a fair market value of $1.00 to three members of the Audit Committee as compensation for his contribution in this Company
Committee, for a total of $3,000.
On June 11, 2019 the Company granted 250,000
shares with a fair market value of $1.39 to a Financial Advisory Board Member for his contribution in the Company’s Advisory
Board, for a total of $347,500.
On July 16, 2019 the Company granted 100,000
shares with a fair market value of $1.00 to a Financial Advisory Board Member for his contribution in the Company’s Advisory
Board, for a total of $100,000.
On July 15, 2019 the Company granted 100,000
shares with a fair market value of $0.75 to a Financial Advisory Board Member for his contribution in the Company’s Advisory
Board, for a total of $75,000.
On August 9, 2019, the Company granted
2,000 shares with a fair market value of $0.80 to two members of the Audit Committee as compensation for his contribution in this
Company Committee, for a total of $1,600.
The fair value of stock awards granted
for the nine months ended September 30, 2019 was calculated based on stocks trading value at the date earned.
|
|
Shares
|
|
|
Fair Value
per Share
|
|
|
Weighted
Average
Market
Value
per Share
|
|
Shares Granted as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Shares Granted
|
|
|
571,000
|
|
|
|
0.27 - 1.49
|
|
|
|
0.99
|
|
Shares Issued
|
|
|
108,000
|
|
|
|
0.27 - 1.49
|
|
|
|
0.32
|
|
Shares Granted not Issued as of September 30, 2019
|
|
|
463,000
|
|
|
$
|
0.75 - 1.39
|
|
|
$
|
1.15
|
|
For the three and nine months ended September
30, 2019, the Company recorded stock-based compensation expense of $34,600 and $34,600, respectively, in connection with share-based
payment awards. The Company did not record any recorded stock-based compensation expense during 2018. The granted, but not yet
registered 463,000 shares for a total of $532,418 were allocated to Current Liabilities. See Un-issued shares liability under Note
4.
Stock options granted:
On May 1, 2019, the Company granted 45,000
three-year options at an exercise price of $1.21, to a Medical Advisory Board Member for his contribution in the Company’s
Advisory Board. The options total fair value at the time of award was $44,820. The options were issued on September 3, 2019.
On July 1, 2019 the Company granted 3,000
three-year options at an exercise price of $1.09 to a Medical Advisory Board Member for his contribution in the Company’s
Advisory Board. The options total fair value at the time of award was $2,447. The options were issued on September 3, 2019.
On August 1, 2019 the Company granted 45,000
three-year options at an exercise price of $1.10 a Medical Advisory Board Member for his contribution in the Company’s Advisory
Board. The options total fair value at the time of award was $39,731. The options were issued on September 3, 2019.
On July 9, 2019 the Company granted 200,000
three-year options at an exercise price of $0.95 to two Financial Advisory Board Members for their contribution in the Company’s
Advisory Board. The options total fair value at the time of award was $141,060. The options were issued on September 13, 2019.
The fair value of stock options granted
and revaluation of non-employee consultant options for the nine months ended September 30, 2019 was calculated with the following
assumptions:
|
|
2019
|
|
Risk-free interest rate
|
|
|
1.68 - 2.31
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Volatility factor (weekly)
|
|
|
126.89
|
%
|
Expected life of option
|
|
|
3 years
|
|
For the three and nine months ended September
30, 2019, the Company recorded compensation expense of $228,058 and $228,058, respectively, in connection with awarded stock options.
The Company did not record any awarded option valuation as compensation expense during 2018. As of September 30, 2019, there was
no unrecognized compensation expense related to non-vested stock option awards.
The following table summarizes the Company’s
stock option activity during the nine months ended September 30, 2019:
|
|
Shares
|
|
|
Exercise
Price per
Share
|
|
|
Weighted
Average
Exercise Price
per Share
|
|
Outstanding as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
293,000
|
|
|
|
0.95 - 1.21
|
|
|
|
1.01
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options forfeited/cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of September 30, 2019
|
|
|
293,000
|
|
|
$
|
0.95 - 1.21
|
|
|
$
|
1.01
|
|
The following table summarizes information
about stock options that are vested or expected to vest at September 30, 2019:
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
Exercisable Options
|
|
|
|
|
Exercise
Price
|
|
|
Number of Options
|
|
|
Weighted Average
Exercise Price
Per Share
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Aggregate Intrinsic
Value
|
|
|
Number of Options
|
|
|
Weighted Average Exercise Price Per Share
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Aggregate Intrinsic
Value
|
|
$
|
0.95
|
|
|
|
200,000
|
|
|
$
|
0.95
|
|
|
|
2.95
|
|
|
$
|
-
|
|
|
|
200,000
|
|
|
$
|
0.95
|
|
|
|
2.93
|
|
|
$
|
-
|
|
|
1.09
|
|
|
|
3,000
|
|
|
|
1.09
|
|
|
|
2.75
|
|
|
|
-
|
|
|
|
3,000
|
|
|
|
1.09
|
|
|
|
2.75
|
|
|
|
-
|
|
|
1.10
|
|
|
|
45,000
|
|
|
|
1.10
|
|
|
|
2.84
|
|
|
|
-
|
|
|
|
45,000
|
|
|
|
1.10
|
|
|
|
2.84
|
|
|
|
-
|
|
|
1.21
|
|
|
|
45,000
|
|
|
|
1.21
|
|
|
|
2.58
|
|
|
|
-
|
|
|
|
45,000
|
|
|
|
1.21
|
|
|
|
2.58
|
|
|
|
-
|
|
$
|
1.03-1.21
|
|
|
|
293,000
|
|
|
$
|
1.01
|
|
|
|
2.88
|
|
|
$
|
-
|
|
|
|
293,000
|
|
|
$
|
1.01
|
|
|
|
2.88
|
|
|
$
|
-
|
|
The following table sets forth the status
of the Company’s non-vested stock options as of September 30, 2019 and December 31, 2018:
|
|
Number of
Options
|
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
Non-vested as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
293,000
|
|
|
|
0.78
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
293,000
|
|
|
|
0.78
|
|
Non-vested as of September 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
The weighted-average remaining contractual
life for options exercisable at September 30, 2019 is 2.88 years.
The aggregate intrinsic value for fully
vested, exercisable options was $0 at September 30, 2019. The aggregate intrinsic value of options exercised during the nine months
ended September 30, 2019 was $0 as no options were exercised. The actual tax benefit realized from stock option exercises during
the nine months ended September 30, 2018 was $0 as no options were exercised.
At September 30, 2019 the Company has 11,901,551
options or stock awards available for grant under the 2010 Plan.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Employment contracts
The Company’s executive officers
have entered employment contracts and confidentiality, non-disclosure and assignment of invention agreements. The employment agreements
do not provide for the payment of any compensation to our executive officers but provide for the payment of $100,000 in severance
upon termination of employment without cause and make no provisions for any payment upon a change of control.
Litigation
In the normal course of business, the Company
may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject
to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and
we accrue for adverse outcomes as they become probable and estimable.
NOTE 9 – SUBSEQUENT EVENTS
The Company has evaluated events from September
30, 2019 through the date the financial statements were issued. The events requiring disclosure for this period are as follows;
Options and stock awards granted as
under the 2010 Stock Plan:
On October 1, 2019 the Company granted
3,000 three-year options at an exercise price of $0.73 a Medical Advisory Board Member for his contribution in the Company’s
Advisory Board. The options total fair value at the time of award was $1,635.
On October 3, 2019 the Company issued 463,000
common shares that had been allocated to short-term liabilities for future issuance for a total value of $532,418.
On October 17, 2019 the Company granted
3,000 shares with a fair market value of $0.60 to four members of the Company Board as compensation for their contribution in the
Company’s Board of Directors, for a total of $1,800.
On October 21, 2019 the Company granted 300,000
shares with a fair market value of $0.55 at the time of award, to a consultant as compensation for their work with the Company’s
IR, for a total of $166,283.
On November 1, 2019 the Company granted 45,000
three-year options at an exercise price of $0.61 a Medical Advisory Board Member for his contribution in the Company’s Advisory
Board. The options total fair value at the time of award was $27.450.
On November 8, 2019 the Company granted 3,000
shares with a fair market value of $0.65 to four members of the Company Board as compensation for their contribution in the Company’s
Board of Directors, for a total of $1,950.
On November 11, 2019 the Company signed
an Investor Relations (“IR”) agreement with FON Consulting LLC (“FON”). As part of the contract the Company
granted FON 250,000 shares with a fair market value of $0.51 at the time of award, as compensation for their work with the Company’s
IR, for a total of $127,500.
Common shares issued
On October 8, 2019, 50,000 shares of common
stock were issued as a result of conversion of principal as well as accrued interest on the Auctus Note #1 at $0.20 per share for
a total of $10,000. For details, see Convertible Note Payable under Note 3.
On November 8, 2019, 100,000 shares of common
stock were issued as a result of conversion of accrued interest on the Auctus Note #2 at $0.12 per share for a total of $12,000.
For details, see Convertible Note Payable under Note 3.
Other subsequent events
In the period October 23, 2019 through November
8, 2019, the Company entered into four separate Secured Promissory Note Agreements (“SPA”) with a face value of $457,300,
and received net proceeds of $412,500. The Notes are convertible into common stock of the Company, par value $.001 per share (the
“Common Stock”) at any time after the earlier of: (i) 180 days from the date of the Note or (ii) upon effective date
of a registration statement. The conversion price of the Notes is equal to 65% of the lowest trading price at close during the
twenty days prior to a conversion notice. The debt discount of $44,800 is amortized over the duration of the loans. One of the
SPA’s includes an option to raise an additional $350,000 in convertible notes. The Debentures permit the Company to pre-pay
its obligations at a premium prior to maturity.
Further, the Company issued five-year warrants
with cashless exercise provisions to purchase a total of 150,000 shares of Common Stock of the Company at an exercise price of
$2.00 per share with cashless exercise provisions to three of the Lenders. The Company has determined that the Warrants are exempt
from derivative accounting. The note proceeds of $457,300 were then allocated between the fair value of the Notes ($457,300) and
the Warrants ($82,200), resulting in a debt discount of resulting in a fully amortized debt discount of $66,589. As the warrants
were exercisable immediately, this debt discount was amortized in its entirety to interest expense on the Date of Issuance.
The proceeds from these Notes were used
to pay off the Auctus #1 Note, maturing on October 24,2019, and for working capital. For details, see Convertible Note Payable
under Note 3.
Debtor
|
|
Date of
Issuance
|
|
Maturity
Date
|
|
Principal
Amount
|
|
|
Net
Received
|
|
|
Interest
|
|
|
Warrants
Issued
|
|
|
Term
|
|
|
Exercise
Price
|
|
|
Amortization
of Warrants
|
|
|
Debt
Discount
|
|
GS Capital Partners LLC
|
|
10/30/2019
|
|
10/29/2019
|
|
$
|
125,000
|
|
|
$
|
109,500
|
|
|
|
4
|
%
|
|
|
50,000
|
|
|
|
5
|
|
|
$
|
2.00
|
|
|
$
|
23,867
|
|
|
$
|
15,500
|
|
Power Up Lending Group Ltd.
|
|
10/24/2019
|
|
10/23/2020
|
|
|
106,000
|
|
|
|
100,000
|
|
|
|
8
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,000
|
|
Peak One Opportunity Fund, L.P.
|
|
10/23/2019
|
|
10/22/2020
|
|
|
120,000
|
|
|
|
103,000
|
|
|
|
0
|
%
|
|
|
50,000
|
|
|
|
5
|
|
|
|
2.00
|
|
|
|
21,606
|
|
|
|
17,000
|
|
Tangiers Global, LLC
|
|
10/23/2019
|
|
10/22/2020
|
|
|
106,300
|
|
|
|
100,000
|
|
|
|
8
|
%
|
|
|
50,000
|
|
|
|
5
|
|
|
|
2.00
|
|
|
|
21,116
|
|
|
|
6,300
|
|
|
|
|
|
|
|
$
|
457,300
|
|
|
$
|
412,500
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
$
|
66,589
|
|
|
$
|
44,800
|
|