UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to _____________

 

Commission file number: 001-35027

 

BIOXYTRAN, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   26-2797630
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

233 Needham St., Ste 300, Newton, MA   02464
(Address of principal executive offices)   (Zip Code)

 

617-454-1199

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☒      No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes ☒      No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller Reporting Company
    Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐      No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common   BIXT   OTCQB

 

Class   Outstanding at November 12, 2019
Common Stock, $0.001 par value per share   86,475,673 shares

  

The aggregate market value of the registrant’s voting stock held by non-affiliates June 30, 2019 (based upon the per share closing price of $0.70) was approximately $7,474,227. (10,677,467 shares)

 

 

 

 

 

 

BIOXYTRAN, INC.
FORM 10-Q

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION  
   
  Item 1. Unaudited Condensed Consolidated Financial Statements 1
    Balance Sheets as of September 30, 2019 and December 31, 2018 (Unaudited) 1
    Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (Unaudited) 2
    Statement of Changes in Stockholders’ Deficit for the nine months ended September 30, 2019 and 2018 (Unaudited) 3
    Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (Unaudited) 4
    Notes to Unaudited Condensed Consolidated Financial Statements 5
       
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16
       
  Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
       
  Item 4. Controls and Procedures 20
       
PART II - OTHER INFORMATION
 
  Item 1. Legal Proceedings 21
       
  Item 1A. Risk Factors 21
       
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
       
  Item 3. Defaults Upon Senior Securities 21
       
  Item 4. Mine Safety Disclosures 21
       
  Item 5. Other Information 21
       
  Item 6. Exhibits 22
       
SIGNATURES 23

 

Except as otherwise required by the context, all references in this report to “we,” “us,” “our” or “Company” refer to the consolidated operations of BIOXYTRAN, Inc.

 

i

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Unaudited Condensed Consolidated Financial Statements: BIOXYTRAN, Inc., September 30, 2019

 

BIOXYTRAN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2019 AND DECEMBER 31, 2018

(UNAUDITED)

 

    September 30,
2019
    December 31,
2018
 
ASSETS            
Current assets:            
Cash   $ 33,226     $ 36,411  
Total current assets     33,226       36,411  
                 
Total assets   $ 33,226     $ 36,411  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                
Current liabilities:                
Accounts payable and accrued expenses   $ 92,169     $ 23,447  
Accounts payable related party     -       10,900  
Un-issued shares liability     532,418          
Convertible notes payable (net of discount of $13,248 and $22,622, and premium of $102,527 and $0, respectively)     589,279       227,378  
Total current liabilities     1,213,866       261,725  
                 
Total liabilities     1,213,866       261,725  
                 
Commitments and contingencies     -       -  
                 
Stockholders’ equity (deficit):                
Preferred stock, $0.001 par value; 50,000,000 shares authorized, nil issued and outstanding     -       -  
Common stock, $0.001 par value; 300,000,000 shares authorized; 85,306,673 and 85,103,673 shares issued and outstanding, respectively     85,307       85,104  
Additional paid-in capital     312,701       72,412  
Accumulated deficit     (1,578,648 )     (382,830 )
Total stockholders’ equity (deficit)     (1,180,640 )     (225,314 )
                 
Total liabilities and stockholders’ equity (deficit)   $ 33,226     $ 36,411  

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

1

 

 

BIOXYTRAN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(UNAUDITED)

 

    Three months ended     Nine months ended  
    September 30,
2019
    September 30,
2018
    September 30,
2019
    September 30,
2018
 
Operating expenses:                        
General and administrative   $ 54,242     $ 47,524     $ 289,866     $ 48,469  
Compensation expense     796,077       -       841,937       -  
Total operating expenses     850,319       47,524       1,131,803       48,469  
                                 
Loss from operations     (850,319 )     (47,524 )     (1,131,803 )     (48,469 )
                                 
Other (expenses):                                
Interest expense     (10,002 )     -       (26,891 )     -  
Debt discount amortization     (13,794 )     -       (37,124 )     -  
Total other (expenses)     (23,796 )     -       (64,015 )     -  
                                 
Net loss before provision for income taxes     (874,115 )     (47,524 )     (1,195,818 )     (48,469 )
                                 
Provision for income taxes     -       -       -       -  
                                 
NET LOSS   $ (874,115 )   $ (47,524 )   $ (1,195,818 )   $ (48,469 )
                                 
Loss per common share, basic and diluted   $ (0.01 )   $ (0.00 )   $ (0.01 )   $ (0.00 )
                                 
Weighted average number of common shares outstanding, basic and diluted    

85,198,032

      85,103,673      

85,138,310

      85,103,673  

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

2

 

 

BIOXYTRAN, INC.

CONDENSED CONSOLIDATED CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018,

(UNAUDITED)

 

    Common Stock     Preferred Stock     Additional
Paid in Capital
    Accumulated     Total  
    Shares     Amount     Shares     Amount     Common     Deficit     Equity  
Authorized     300,000,000               50,000,000                                  
December 31, 2017     85,103,673     $ 85,104       -     $ -     $ -     $ (86,413 )   $ (1,309 )
                                                         
Net loss                                             (945 )     (945 )
June 30, 2018     85,103,673       85,104       -       -       -       (87,083 )     (1,979 )
                                                         
Net loss                                             (275 )     (275 )
June 30, 2018     85,103,673       85,104       -       -       -       (87,358 )     (2,254 )
                                                         
Net loss                                             (47,524 )     (47,524 )
September 30, 2018     85,103,673       85,104       -       -       -       (134,882 )     (49,778 )
                                                         
Issuance of warrants                                     45,361               45,361  
Debt premium                                     (343,796 )             (343,796 )
Debt premium accretion                                     60,268               60,268  
Net loss                                             (191,409 )     (191,409 )
March 31, 2019                                     (165,755 )     (574,239 )     (654,890 )
                                                         
Debt premium accretion                                     123,276               123,276  
Shares issued for conversion of accrued interest     25,000       25                       4,975               5,000  
Net loss                                             (130,294 )     (130,294 )
June 30, 2019     85,128,673       85,129       -       -       (37,504 )     (704,533 )     (656,908 )
                                                         
Options issued - 2010 Plan                                     228,058               228,058  
Shares issued - 2010 Plan     108,000       108                       34,492               34,600  
Debt premium                                     (82,500 )             (82,500 )
Debt premium accretion                                     140,225               140,225  
Shares issued for conversion of accrued interest     50,000       50                       9,950               10,000  
Shares issued for cash     20,000       20                       19,980               20,000  
Net loss     -       -       -       -       -       (874,115 )     (874,115 )
September 30, 2019     85,306,673     $ 85,307       -     $ -     $ 312,701     $ (1,578,648 )   $ (1,180,640 )

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

3

 

 

BIOXYTRAN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(UNAUDITED)

 

    Nine Months Ended  
    September 30,
2019
    September 30,
2018
 
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net loss   $ (1,195,818 )   $ (48,469 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Amortization of debt discount     37,124       -  
Stock-based compensation expense     840,438       -  
Changes in operating assets and liabilities:                
Accounts payable and accrued expenses     83,722       45,262  
Accounts payable related party     (10,900 )     5,928  
Net cash provided by (used) in operating activities     (245,435 )     2,721  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Net cash used in investing activities     -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from sale of common stock     20,000       -  
Proceeds from issuance of convertible notes payable     222,250       -  
Net cash provided by financing activities     242,250       -  
                 
Net increase (decrease) in cash     (3,185 )     2,721  
Cash, beginning of period     36,411       110  
Cash, end of period   $ 33,226     $ 2,831  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                
Interest paid   $ -     $ -  
Income taxes paid   $ -     $ -  
NON-CASH INVESTING & FINANCING ACTIVITIES                
Debt discount on convertible note   $ 37,124     $ -  
Debt premium on convertible note   $ 426,296     $ -  
Accretion of debt premium to additional paid-in capital   $ (323,769 )   $ -  
Common shares issued for the conversion of accrued interest   $ 15,000     $ -  

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

4

 

 

BIOXYTRAN, INC.

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.

 

5

 

 

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.

 

6

 

 

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.

 

7

 

 

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.  

 

8

 

 

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.

 

9

 

 

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.

 

10

 

 

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.

 

11

 

 

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.

 

12

 

 

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     $ -  

 

13

 

 

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.

 

14

 

 

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  

 

15

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis is based on, and should be read in conjunction with, the audited financial statements and the notes thereto for the period since the inception of the Company through December 31, 2018 included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 13, 2019. This discussion contains forward-looking statements. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so, except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

 

Overview

 

We do not currently have sufficient capital resources to fund operations. To stay in business and to continue the development of our products, we will need to raise additional capital through public or private sales of our securities, debt financing or short-term bank loans, or a combination of the foregoing. We believe that if we can raise $2,700,000 in our currently effective public offering, we will have sufficient working capital to repay the two Auctus Notes and develop our business over the next approximately 15 months. At funding raised that is significantly less than $2,700,000, we can likely repay the Auctus Note and continue to develop our business over the same 15-month period, but funding at that level will delay the development of our technology and business.

 

Bioxytran, Inc. is headquartered in Newton, Massachusetts. The Company’s initial product pipeline is focused on developing and commercializing therapeutic molecules for stroke and wound healing. BXT-25 will be designed to be an injectable anti-necrosis drug specifically designed to treat a person immediately after that person suffers an ischemic stroke. The drug is designed to be injected intravenously to travel to the lungs to pick up oxygen molecules to carry to the brain. Like a red blood cell, the drug will cross the blood brain barrier, which is a protective semi-permeable membrane allowing some material to cross but preventing others from crossing. BXT-25 will be designed to diffuse oxygen into the brain tissues. We expect the BXT-25 molecule to be 5,000 times smaller than a red blood cell.

 

Our second product, BXT-252, will be designed to be an injectable anti-necrosis drug specifically designed to treat a wound that does not heal because limited amount of oxygen reaching the wound. As is the case with BXT-25, we believe that BXT-252 will enable the delivery of oxygen to tissue in conditions in which red blood cells do not, enabling wound healing by addressing the necrosis problem.

 

On September 3, 2019, the Company upgraded its listing to OTCQB from OTC(Pink).

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has limited resources and operating history. As described in Note 3 of the financial statements, on October 24, 2018, we issued the first of a two-tranche 8% convertible promissory note of $250,000 in gross proceeds (The Auctus Note #1). On February 25, 2019, we issued the second tranche 8% convertible promissory note of $250,000 in gross proceeds (the Auctus Note #2), in order to finance the Company until we start raising equity. As shown in the accompanying financial statements, the Company had an accumulated deficit of $1,587,648 as of September 30, 2019. The accumulated deficit as of December 31, 2018 was $382,830.

 

The future of the Company is dependent upon its ability to obtain financing to develop its new business opportunities and support the cost of the drug development including clinical trials and regulatory submission to the FDA.

 

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Management plans to seek additional capital through private placements and public offerings of its common stock. There can be no assurance that the Company will be successful in accomplishing its objectives. Without such additional capital or the establishment of strategic relationships with established pharmaceutical companies, the Company may be required to cease operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue operations.

 

Results of Operations for the three months ended September 30, 2019

 

We are a start-up company. Historically, Bioxytran was engaged in formation, fund raising and identifying and consulting with the scientific community regarding the development, formulation and testing of its products.

 

General and Administrative

 

General and administrative (G&A) expenses for the three months ended September 30, 2019 were $54,242, while for the three months ended September 30, 2018, they were $47,524. The Company only started its activities in October 2018. The components of G&A expenses are as follows:

 

- There were no expenses for payroll for the three months ended September 30, 2019 and 2018, respectively. 

 

- Costs for legal, accounting and other professional services for the three months ended September 30, 2019 were $28,441, while the expenses for professional services for the three months ended September 30, 2018 were $42,375.

 

- Sales and marketing expense for the three months ended September 30, 2019 were $2,986, while there were no expenses for professional services for the three months ended September 30, 2018.

 

- The remaining miscellaneous G&A expenses totaled $22,815 for the three months ended September 30, 2019, as compared to $5,149 for the three months ended September 30, 2018.

 

Other operative expenses consist of compensation expenses that for the three months ended September 30, 2019 were $796,077, while there were no expenses for compensation expenses for the three months ended September 30, 2018.

 

Interest Expense and Amortization of Debt Discount and Premium

 

During the three months ended September 30, 2019, the Company recorded $140,225 of premium accretion to additional paid-in capital, and $13,794 in amortization of debt discount to interest expense. The interest for the two convertible notes outstanding amounted to $10,002. There were no expenses for debt discount and interest for the three months ended September 30, 2018. The Company only started its activities in October 2018.

 

Net Loss

 

The Company generated a net loss for the three months ended September 30, 2019 of $874,115. In comparison, for the three months ended September 30, 2018, the Company generated a net loss of $47,524. The increased loss is mainly linked to current quarter costs for legal, accounting and other professional services for the S-1 application and subsequent amendments that were filed with the SEC, as well as the amortization of debt discounts applied to warrants issued in connection with convertible debt and the related loan fees.

 

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Results of Operations for the nine months ended September 30, 2019

 

We are a start-up company. Historically, Bioxytran was engaged in formation, fund raising and identifying and consulting with the scientific community regarding the development, formulation and testing of its products. 

 

General and Administrative

 

General and administrative (G&A) expenses for the nine months ended September 30, 2019 were $289,866, while for the nine months ended September 30, 2018, they were $48,469. The Company only started its activities in October 2018. The components of G&A expenses are as follows:

 

- Payroll and related expenses for the nine months ended September 30, 2019 were $66,958, while there were no expenses for payroll for the nine months ended September 30, 2018. 

 

- Costs for legal, accounting and other professional services for the nine months ended September 30, 2019 were $125,884, while the expenses for professional services for the nine months ended September 30, 2018 were $42,375.

 

- Sales and marketing expense for the nine months ended September 30, 2019 were $54,958, while there were no expenses for professional services for the nine months ended September 30, 2018.

 

- The remaining miscellaneous G&A expenses totaled $42,066 for the nine months ended September 30, 2019, as compared to $6,094 for the nine months ended September 30, 2018.

 

Other operative expenses consist of compensation expenses that for the three months ended September 30, 2019 were $841,937, while there were no expenses for compensation expenses for the three months ended September 30, 2018.

 

Interest Expense, Amortization of Debt Discount and Premium

 

During the nine months ended September 30, 2019, the Company recorded $323,769 of premium accretion to additional paid-in capital, and $37,124 in amortization of debt discount to interest expense. The interest for the two convertible notes outstanding amounted to $26,891. There were no expenses for debt discount and interest for the nine months ended September 30, 2018. The Company only started its activities in October 2018.

 

Net Loss

 

The Company generated a net loss for the nine months ended September 30, 2019 of $1,195,818. In comparison, for the nine months ended September 30, 2018, the Company generated a net loss of $48,469. The increased loss is mainly linked to current quarter costs for legal, accounting and other professional services for the S-1 application and subsequent amendments that were filed with the SEC, as well as the amortization of debt discounts applied to warrants issued in connection with convertible debt and the related loan fees.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2019, our only asset was $33,226 in cash. We had total liabilities of $1,213,866, which were all current liabilities, and which consisted of $92,169 in accounts payable and accrued expenses, 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 and $589,279 in the form of a convertible loan of $250,000, maturing on October 23, 2019, and a second convertible loan of $250,000, maturing on February 24, 2020 (which include, in the aggregate, unamortized debt premium of $102,527, and which has been netted with unamortized debt discounts totaling $13,248). The equivalent numbers at December 31, 2018, were $36,411 in cash and total liabilities of $261,725, which were all current liabilities, and which consisted of $23,447 in accounts payable and accrued expenses, $10,900 in accounts payable to related parties, and $227,378 (net of $22,622 in unamortized debt discounts) in the form of a convertible loan, maturing on October 23, 2019. 

 

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At September 30, 2019, we had total working capital of negative $1,180,640 and an accumulated deficit of $1,578,648. Comparatively, on December 31, 2018, we had total working capital of negative $225,314 and an accumulated deficit of $382,830. We believe that we must raise not less than $2,700,000 in our currently effective public offering in addition to current cash on hand to be able to continue our business operations for approximately the next 15 months and repay the two Auctus Notes.

 

Cash-Flows

 

Net cash used in operating activities was $245,435 and a positive $2,721 for the nine months ended September 30, 2019 and 2018, respectively.

 

The Company did not engage in any investing activities during the nine months ended September 30, 2019 or 2018.

 

Cash flows from financing activities were $242,250 and $0 for the nine months ended September 30, 2019 and 2018.

 

The net decrease in cash was $3,185 for the nine months ended September 30, 2019, while there was an increase of $2,721 for the nine months ended September 30, 2018. The Company only started its activities in October 2018.

 

Financing Commitments

 

We have no current commitment from our officers and directors or any of our shareholders, to supplement our operations or provide us with financing in the future. If we are unable to raise additional capital from conventional sources and/or additional sales of stock in the future, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results. In the future, we may be required to seek additional capital by selling debt or equity securities, selling assets, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders. We provide no assurance that financing will be available in amounts or on terms acceptable to us, or at all.

 

Contractual Obligations

 

Our contractual obligations include two convertible notes, each of $250,000, described under Note 3 to the Financial Statements.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

 

CRITICAL ACCOUNTING POLICIES

 

In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the majority of our businesses operate in environments where we pay a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.

 

Stock Based Compensation

 

The Company has share-based compensation plans under which non-employees, consultants and suppliers may be granted restricted stock, as well as options to purchase shares of Company common stock at the fair market value at the time of grant. Stock-based compensation cost is measured by the Company at the grant date, based on the fair value of the award over the requisite service period. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. Grants of stock options and stock to non-employees and other parties are accounted for in accordance with ASC 505.

 

The Company applies ASC 718 for options, common stock and other equity-based grants to its employees and directors. ASC 718 requires measurement of all employee equity-based payment awards using a fair-value method and recording of such expense in the consolidated financial statements over the requisite service period. The fair value concepts have not changed significantly in ASC 718; however, in adopting this standard, companies must choose among alternative valuation models and amortization assumptions. After assessing alternative valuation models and amortization assumptions, the Company will continue using both the Black-Scholes valuation model and straight-line amortization of compensation expense over the requisite service period for each separately vesting portion of the grant.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Item 3 is not applicable to us because we are a smaller reporting company.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) reviewed the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and concluded that as of September 30, 2019, (i) the Company’s disclosure controls and procedures were not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “Commission”), and (ii) the Company’s controls and procedures have not been designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective due primarily to a material weakness in the segregation of duties in the Company’s internal controls.

 

Changes in Internal Controls Over Financial Reporting

 

There were no changes in our internal control over financial reporting identified in connection with our evaluation of these controls as of the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Inherent Limitations on Effectiveness of Controls

 

The Company’s management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

The Company may become involved in certain legal proceedings and claims which arise in the normal course of business. The Company is not aware of any outstanding or pending litigation.

 

Item 1A. Risk Factors

 

There have not been any material changes in the risk factors from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

There were no sales of equity securities sold during the period covered by this Report that were not previously included in a Current Report on Form 8-K.

 

The Company claims an exemption from the registration requirements of the Securities Act of 1933 (the “Securities Act”) for the private placement of these securities pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

None.

 

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Item 6. Exhibits

 

Exhibit No.   Title of Document
     
31.1   Certification of Principal Executive and Financial Officers pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended. *
     
32.1   Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive and Financial Officer). **
     
100   The following financial statements from the Quarterly Report on Form 10-Q of BIOXYTRAN, Inc. for the quarter ended September 30, 2018 formatted in XBRL: (i) Condensed Balance Sheets (unaudited), (ii) Condensed Statements of Operations (unaudited), (iii) Condensed Statements of Cash Flows (unaudited), and (iv) Notes to Condensed Financial Statements (unaudited), tagged as blocks of text. *

 

* Filed as an exhibit hereto.

 

** These certificates are furnished to, but shall not be deemed to be filed with, the Securities and Exchange Commission.

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

 

  BIOXYTRAN, INC.
   
Date: November 13, 2019 By:  /s/ David Platt
    David Platt
    Chief Executive Officer
     
    /s/ Ola Soderquist
    Ola Soderquist
    Chief Financial Officer

 

 

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