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, 2020

 

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) 

 

Securities registered pursuant to Section 12(b) of the Act: None

 

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. 

 

Class   Outstanding at November 12, 2020
Common Stock, $0.001 par value per share   97,187,673 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, 2020 and December 31, 2019 (Unaudited) 1
       
    Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (Unaudited) 2
       
    Statement of Changes in Stockholders’ Equity (Deficit) for the nine months ended September 30, 2020 and 2019 (Unaudited) 3
       
    Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (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 21
       
  Item 4. Controls and Procedures 21
       
PART II - OTHER INFORMATION
 
  Item 1. Legal Proceedings 22
       
  Item 1A. Risk Factors 22
       
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
       
  Item 3. Defaults Upon Senior Securities 22
       
  Item 4. Mine Safety Disclosures 22
       
  Item 5. Other Information 22
       
  Item 6. Exhibits 23
       
SIGNATURES 24

  

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, 2020

  

BIOXYTRAN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2020, AND DECEMBER 31, 2019

(UNAUDITED)

 

    September 30,
2020
    December 31, 2019  
ASSETS                
Current assets:                
Cash   $ 633     $ 169,628  
Other receivable           50,000  
Total current assets     633       219,628  
                 
Total assets   $ 633     $ 219,628  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                
Current liabilities:                
Accounts payable and accrued expenses   $ 221,057     $ 71,932  
Accounts payable related party     259,135       96,000  
                 
Loan payable     8,115        
Convertible notes payable, net of premium and discount     1,604,856       850,983  
Total current liabilities     2,093,163       1,018,915  
                 
Total liabilities     2,093,163       1,018,915  
                 
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; 97,184,673 issued and outstanding as of September 30, 2020, and 86,475,673 issued and outstanding as of December 31, 2019     97,185       86,476  
Additional paid-in capital     1,722,724       1,355,542  
Accumulated deficit     (3,912,439 )     (2,241,305 )
Total stockholders’ equity (deficit)     (2,092,530 )     (799,287 )
                 
Total liabilities and stockholders’ equity (deficit)   $ 633     $ 219,628  

  

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, 2020 AND 2019

(UNAUDITED)

 

    Three months ended     Nine months ended  
    September 30,
2020
    September 30,
2019
    September 30,
2020
    September 30,
2019
 
Operating expenses:                        
General and administrative   $ 114,448     $ 850,319     $ 492,400     $ 1,131,803  
Total operating expenses     114,448       850,319       492,400       1,131,803  
                                 
Loss from operations     (114,448 )     (850,319 )     (492,400 )     (1,131,803 )
                                 
Other (expenses):                                
Interest expense     (86,593 )     (10,002     (919,677 )     (26,891 )
Amortization of debt discount, incl issuance of warrants     (1,000     (13,794     (259,057 )     (37,124 )
Total other (expenses)     (87,593 )     (23,796     (1,178,734 )     (64,015 )
                                 
Net loss before provision for income taxes     (202,041 )     (874,115 )     (1,671,134 )     (1,195,818 )
                                 
Provision for income taxes                        
                                 
NET LOSS   $ (202,041 )   $ (874,115 )   $ (1,671,134 )   $ (1,195,818 )
                                 
Loss per common share, basic and diluted   $ (0.00 )   $ (0.01 )   $ (0.00 )   $ (0.01 )
                                 
Weighted average number of common shares outstanding, basic and diluted     97,105,293       85,198,032       92,169,035       85,138,310  

  

See the accompanying notes to these unaudited condensed consolidated financial statements

 

2

 

  

BIOXYTRAN, INC.

CONDENSED CONSOLIDATED CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(UNAUDITED)

 

                Additional              
    Common Stock     Paid in Capital     Accumulated     Total Stockholders’  
    Shares     Amount     Common     Deficit     Equity (Deficit)  
December 31, 2018     85,103,673     $ 85,104     $ 72,412     $ (382,830 )   $ (225,314 )
                                         
Issuance of warrants                 45,361             45,361  
Debt premium on convertible note                 (343,796 )           (343,796 )
Debt premium accretion                 60,268             60,268  
Net Loss                       (191,409 )     (191,409 )
March 31, 2019     85.103,673       85,104       (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 )

  

                Additional              
    Common Stock     Paid in Capital     Accumulated     Total Stockholders’  
    Shares     Amount     Common     Deficit     Equity (Deficit)  
December 31, 2019     86,475,673     $ 86,476     $ 1,355,542     $ (2,241,305 )   $ (799,287 )
                                         
Issuance of warrants                 145,438             145,438  
Exercise of warrants     750,000       750       (750 )            
Options issued and vested - 2010 Plan                 5,004             5,004  
Shares issued - 2010 Plan     656,000       656       149,841             150,497  
Debt premium on convertible note                 (937,007 )           (937,007 )
Debt premium accretion                 104,568             104,568  
Shares issued for conversion of principal and accrued interest     350,000       350       33,782             34,132  
Net Loss                       (540,495 )     (540,495 )
March 31, 2020     88,231,673       88,232       856,418       (2,781,800 )     (1,837,150 )
                                         
Options issued and vested - 2010 Plan                     691               691  
Shares issued - 2010 Plan     8,800,000       8,800                   8,800  
Debt premium accretion                 856,560             856,560  
Net loss                       (928,598 )     (928,598 )
June 30, 2020     97,031,673       97,032       1,713,669       (3,710,398 )     (1,899,697 )
                                         
Options issued and vested - 2010 Plan                 6,838             6,838  
Shares issued to BoD - 2010 Plan     3,000       3       567             570  
Shares issued to Consultants - 2010 Plan     150,000       150       1,650             1,800  
Net Loss                       (202,041 )     (202,041 )
September 30, 2020     97,184,673     $ 97,185     $ 1,722,724     $ (3,912,439 )   $ (2,092,530 )

  

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, 2020 AND 2019

(UNAUDITED) 

 

    Nine Months Ended  
    September 30,
2020
    September 30,
2019
 
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net loss   $ (1,671,133 )   $ (1,195,818 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
Amortization of debt discount, incl. issuance of warrants     259,057       37,124  
Default fee convertible notes     666,456        
Stock-based compensation expense     174,200       840,438  
Changes in operating assets and liabilities:                
Other receivable     50,000        
Accounts payable and accrued expenses     150,125       83,721  
Accounts payable related party     163,135       (10,900 )
Net cash used in operating activities     (208,161 )     (245,435 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Net cash used in investing activities            
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from Loan     8,114        
Proceeds from sale of common stock           20,000  
Proceeds from issuance of convertible notes payable     264,000       222,250  
Repayment of convertible notes payable     (232,948 )      
Net cash provided by financing activities     39,166       242,250  
                 
Net increase (decrease) in cash     (168,995 )     (3,185
Cash, beginning of period     169,628       36,411  
Cash, end of period   $ 633     $ 33,226  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                
Interest paid   $ 91,362     $  
Income taxes paid   $     $  
NON-CASH INVESTING & FINANCING ACTIVITIES                
Issuance of warrants   $ 145,438     $ 45,361  
Debt discount on convertible note   $     $ (27,042 )
Debt premium on convertible note   $ (937,007 )   $ 426,296  
Accretion of debt premium to additional paid-in capital   $ 961,128     $ (323,769
Common shares issued for the conversion of principal and accrued interest   $ 34,132     $ 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, 2020 AND 2019

(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. Our novel approach is intended to 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, 2019, 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 (the "SEC"), including the instructions to Form 10-Q and Regulation S-X. 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, 2019. Operating results for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

 

5

 

  

Basic and Diluted Earnings per Share

 

Pursuant to the authoritative guidance, basic net income and net loss per share are computed by dividing the net income and net loss by the weighted average number of common shares outstanding. Diluted net income and net loss per share is the same as basic net income and net loss per share when their inclusion would have an anti-dilutive effect due to our continuing net losses.

 

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 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

 

As of September 30, 2020, the Company had cash of $633 and a negative working capital of $2,092,530. As of September 30, 2020, the Company has not yet generated any revenues, and has incurred cumulative net losses of $3,912,439. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

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 2020, 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.

 

The Company is supplementing its disclosure previously disclosed in the Company's annual report on Form 10-K for the year ended December 31, 2019 and its subsequent quarterly reports on Form 10-Q with the following disclosure: Potential Impact of the COVID-19 Pandemic in December 2019, a strain of novel coronavirus (now commonly known as COVID-19) was reported to have surfaced in Wuhan, China. COVID-19 has since spread rapidly throughout many countries, and, on March 12, 2020, the World Health Organization declared COVID-19 to be a pandemic. In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, Canada and China, have imposed unprecedented restrictions on travel, and there have been business closures and a substantial reduction in economic activity in countries that have had significant outbreaks of COVID-19. COVID-19 may have a future material impact on our results of operation with respect to product development and clinical trials. However, significant uncertainty remains as to the potential impact of the COVID-19 pandemic on our operations, and on the global economy as a whole. It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels. We do not yet know the full extent of any impact on our business or our operations, however, we will continue to monitor the COVID-19 situation closely, and we intend to follow health and safety guidelines as they evolve.

 

Accordingly, the accompanying consolidated 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 consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

 

6

 

 

NOTE 3 – ACCOUNTS PAYABLES AND ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

On September 30, 2020, there was $259,135 in accounts payable to related parties in the form of payroll and accrued expenses. On December 31, 2019 there was $96,000 in accounts payable to related parties.

 

The following table represents the major components of accounts payables and accrued expenses and other current liabilities at September 30, 2020 and December 31, 2019:

 

    September 30,
2020
    December 31,
2019
 
Accounts payable related party (1)   $ 259,135     $ 96,000  
Professional fees     45,261       42,963  
Interest     175,543       14,374  
Payroll taxes           7,344  
Other accounts payable     253       7,251  
ASC 480 debt premium           24,121  
Loan payable (2)     8,115        
Convertible notes payable     1,604,856       826,862  
Total   $ 2,093,163     $ 1,018,915  

 

   
(1) $108,575 to each the CFO and the CEO for 17 months of salary and $41,985 to the Executive VP for 5 months of salary and advanced expenses for the period ending September 30 2020, while for the period ending December 31, 2019 there was $48,000 to each the CFO and the CEO for 8 months of salary.
(2) A non-interest loan of $8,115 was given by a potential investor.

 

NOTE 4 – CONVERTIBLE NOTES PAYABLE

 

As long as the following convertible notes remain outstanding, the Company is restricted from incurring any indebtedness or liens, except as permitted (as defined), and 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, 2019 (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, 2020, 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, 2019, 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 amortized 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 $0.21 per share (65% of the average of the three lowest trading prices 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 amortization is recorded as an increase to additional paid-in capital.

 

7

 

 

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. Upon cashless conversion on March 12, 2020 an additional 166,667 warrants were issued for a market value of $66,363.

 

The Auctus Note #1 was paid off on October 24, 2019, and the warrants were exercised on March 12,2020 

 

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. For the nine months ending at September 30, 2020, the Company amortized $4,647 debt discount to operations as interest expense, and accreted $24,121 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 323% and (5) risk free interest rate of 2.56%.  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 interest expense on the Date of Issuance. Upon cashless conversion on March 12, 2020 an additional 166,667 warrants were issued for a market value of $66,364.

 

The Auctus Note #2 was paid off on February 20, 2020, and the warrants were exercised on March 12,2020.

 

8

 

 

Current notes convertible

 

In the period January 1 to March 18, 2020 the Company entered into five contracts totaling $356,100 Senior Secured Promissory Note (“the Notes”), at an interest rate of 4-8% per annum, maturing in one year from issuance (the “Maturity Date”). Issuance fees totaling $50,100 were recorded as a debt discount, resulting in net proceeds of $306,000. 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 Notes or (ii) upon effective date of a new registration statement. The conversion price of the Notes is equal to the lesser of : (i) the lowest trading price for the twenty-day period prior to the date of the Notes 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 Notes 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 Notes.

 

The Company also issued five-year warrants with cashless exercise provisions to purchase shares of Common Stock of the Company at an exercise price of $2.00 per share with cashless exercise provisions. For the nine months ending at September 30, 2020, the Company issued 72,000 warrants, resulting in an amortized debt discount of $12,711. There were no warrants issued in the three-month period ending at September 30, 2020.

 

Default on notes convertible

 

On April 16, 2020, SEC ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading of BIXT is suspended for the period April 16 through April 29, 2020.

 

As a result of the SEC ordered suspension the Company defaulted on outstanding Convertible Notes; resulting in an increase of the interest to 21% and the principal to increase to 168% of principal loan amount. The convertible debt increased by $666,456 to $1,604,856 while the interest accrual increased to approximately $28,563/month, amounting to $175,543 at date of September 30, 2020. At the default date, April 16, 2020, remaining debt discount of $76,265 was amortized to interest expense and the remaining debt premium of $856,560 was accredited to additional paid-in capital.

 

9

 

 

A summary of the outstanding notes at September 30, 2020, are as follows:

 

Debtor   Date of
Issuance
  Default
Date
  Principal
Amount
    Default Penalty     Default Interest    

Warrants

Issued

    Term     Exercise
Price
    Amortization
of Warrants
    Accrued Interest  
GS Capital   10/30/2019   4/16/2020   $ 125,000     $ 65,808       24 %     50,000       5     $ 2.00     $ 23,867     $ 23,158  
Power Up #1   10/24/2019   4/16/2020     106,000       114,224       22 %                             26,279  
Peak One   10/23/2019   4/16/2020     120,000       36,000       18 %     50,000       5       2.00       21,606       12,848  
Tangiers   10/23/2019   4/16/2020     106,300       48.261       18 %     50,000       5       2.00       21,116       16,830  
FirstFire   11/20/2019   4/16/2020     125,000       65,541       24 %     50,000       5       2.00       17,979       22,950  
Power Up #2   12/30/2019   4/16/2020     54,600       57,185       22 %                             12,544  
EMA Financial   01/10/2020   4/16/2020     125,000       127,658       24 %     50,000       5       2.00       5,948       29,073  
Crown Bridge   02/20/2020   4/16/2020     55,000       28,015       15 %     22,000       5       2.00       6,763       6,041  
Power Up #3   02/19/2020   4/16/2020     56,600       58,039       22 %                             12,259  
Power Up #4   03/18/2020   4/16/2020     64,900       65,725       22 %                             13,651  
            $ 938,400     $ 666,456               272,000                     $ 97,279     $ 175,543  

 

Convertible notes payable consists of the following at September 30, 2020 and December 31, 2019:

 

    September 30,
2020
    December 31,
2019
 
Principal balance   $ 938,400     $ 886,900  
Default penalty     666,456        
Unamortized debt discount           (60,038 )
Unamortized debt premium           24,121  
Outstanding, net of debt discount and premium   $ 1,604,856     $ 850,983  

 

NOTE 5 – STOCKHOLDERS’ EQUITY

 

At a Board of Director’s Meeting on July 30, 2019, the Company authorized a reverse stock 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, 2019, 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, 2020, and December 31, 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.

 

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.

 

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.

 

On January 3, 2020, 100,000 shares of common stock were issued as a result of conversion of accrued interest and principal on the Auctus Note #2 for a total of $12,000.

 

On February 18, 2020, 250,000 shares of common stock were issued as a result of conversion of accrued interest and principal on the Auctus Note #2 for a total of $22,132.

 

On March 12, 2020, 750,000 of common stock were issued in exchange for 416,666 warrants with cashless exercise, originating from Auctus Notes #1 and #2.

 

For the nine months ending September 30, 2020, 9,609,000 shares were awarded with an average cost per share of $0.01, under the 2010 Stock Plan for a total value of $161,667. The Company recorded $34,600 in stock-based compensation for 108,000 issued shares in the nine months ended September 30, 2019. For details, see Shares Awarded and Issued under Note 6.

 

10

 

 

At September 30, 2020, the Company had 97,184,673 shares of common stock issued and outstanding. At December 31, 2019 there were 86,475,673 shares of common stock issued and outstanding.

 

Common Stock Warrants

 

During the nine months ending September 30, 2020 the Company awarded 405,334 warrants, valued at $145,438, and 750,000 shares of common stock were issued in a cashless exercise. During the nine months ending September 30, 2019 the Company awarded 208,333 warrants valued at $45,361.

 

The following table summarizes the Company’s common stock warrant activity for the nine months ended September 30, 2020 and September 30, 2019:

 

          Weighted Average     Weighted-
Average Remaining
 
    Warrants     Exercise
Price
    Expected
Term
 
Outstanding as of January 1, 2019     208,333     $ 0.60       4.6  
Granted     208,333       0.60       4.9  
Exercised                  
Forfeited/Canceled                  
Outstanding as of September 30, 2019     416,666     $ 0.60       4.7  
                         
Outstanding as of January 1, 2020     616,666     $ 1.05       4.0  
Granted     405,334       0.36       0.9  
Exercised     (750,000 )            
Forfeited/Canceled                  
Outstanding as of September 30, 2020     272,000     $ 2.00       4.2  

 

During the nine months ending September 30, 2020, the Company awarded 144,000 options under the 2010 Stock Plan, with a fair market value of $12,533. The Company recorded a compensation expense of $228,058 for 293,000 options issued during the nine months ended September 30, 2019.

 

11

 

 

NOTE 6 – 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 January 1, 2019, there were no outstanding awards under the 2010 Plan. As of January 1, 2020, there were 341,000 outstanding stock options with a fair market value of $257,143 and 1,127,000 shares issued with a fair market value of $864,551 at the time of award.

 

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 January 1, 2020 the Company granted 250,000 shares with a fair market value of $0.285/share at the time of award, to a consultant for assistance with the Companies PR work, for a total of $71,250.

 

On January 31, 2020 the Company granted two subcontractors a total of 200,000 shares with a fair market value of $0.14/share at the time of award, as compensation for their work with the Company’s marketing efforts, for a total of $28,000.

 

On March 18, 2020 the Company granted 200,000 shares with a fair market value of $0.245/share at the time of award, to a consultant for assistance with the Companies PR work, for a total of $49,000.

 

On February 21, 2020 the Company granted 3,000 shares with a fair market value of $0.439/share to three members of the Audit Committee as compensation for their contribution in the Audit Committee, for a total of $1,317.

 

On March 25, 2020, the Company granted 3,000 shares with a fair market value of $0.31/share to three members of the Company Board as compensation for their contribution in the Company’s Board of Directors, for a total of $930.

 

On May 1, 2020 the Company appointed Mr. Mike Sheikh as EVP of Business Development. Mr. Sheikh was issued 8,800,000 shares with a fair market value of $0.001/share to be equally vested over a period of 3 years, but fully vested upon a change of control. The shares total fair value at the time of the award was $8,800.

 

On July 1, 2020, the Company granted 3,000 shares with a fair market value of $0.19/share to three members of the Company Board as compensation for their contribution in the Board and Committee contribution during the previous quarter, for a total of $570.

 

On August 3, 2020, the Company granted a total of 100,000 shares, to two Medical Consultants for their efforts in validating the Company’s science and potential clinical pathways. The shares total fair value at the time of award was $300.

 

On September 17, 2020, the Company granted a total of 50,000 shares, to a Medical Consultants for his efforts in validating the Company’s science and potential clinical pathways. The shares total fair value at the time of award was $1,500.

 

   

Number of

Shares

    Fair Value
per Share
    Weighted
Average
Market
Value
per Share
 
Shares Issued as of December 31, 2019     1,127,000     $ 0.27 - 1.49     $ 0.77  
Shares Issued     9,609,000       0.001 – 0.44       0.02  
Shares Issued as of September 30, 2020     10,736,000     $ 0.001 - 1.49     $ 0.10  

 

12

 

 

Stock options granted and vested:

 

On January 1, 2020 the Company granted 3,000 three-year options at an exercise price of $0.31 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 $603.

 

On February 1, 2020 the Company granted 45,000 three-year options at an exercise price of $0.15 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 $4,401.

 

On April 1, 2020 the Company granted 3,000 three-year options at an exercise price of $0.32 to a Medical Advisory Board Member for his contribution in the Company’s Advisory Board. The options total fair value at the time of the award was $646.

 

On May 1, 2020 the Company granted 45,000 three-year options at an exercise price of $0.001 to a Medical Advisory Board Member for his contribution in the Company’s Advisory Board. The options total fair value at the time of the award was $45.

 

On July 1, 2020 the Company granted 3,000 three-year options at an exercise price of $0.18/share to a Medical Advisory Board Member for his contribution in the Company’s Advisory Board. The options total fair value at the time of the award was $538.

 

On August 1, 2020 the Company granted 45,000 three-year options at an exercise price of $0.14/share to a Medical Advisory Board Member for his contribution in the Company’s Advisory Board. The options total fair value at the time of the award was $6,300.

 

The fair value of stock options granted and revaluation of non-employee consultant options for the nine months ended September 30, 2020 was calculated with the following assumptions:

 

    2020  
Risk-free interest rate     0.36 – 1.69 %
Expected dividend yield     0 %
Volatility factor (weekly)     340.42 %
Expected life of option     3 years  

 

For the nine months ended September 30, 2020, the Company recorded compensation expense of $12,533 in connection with awarded stock options. The Company recorded a compensation expense of $228,058 for 293,000 options issued during the nine months ended September 30, 2019. As at September 30, 2020, there was no unrecognized compensation expense related to non-vested stock option awards.

 

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2020:

 

    Number of Options     Exercise
Price per
Share
    Weighted
Average
Exercise
Price
per Share
 
Outstanding as of December 31, 2019     341,000     $ 0.61 - 1.21     $ 0.96  
Granted     144,000       0.001 - 0.31       0.11  
Exercised                  
Options forfeited/cancelled                  
Outstanding as of September 30, 2020     485,000     $ 0.001 - 1.21     $ 0.71  

 

13

 

 

The following table summarizes information about stock options that are vested or expected to vest at September 30, 2020:

 

            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
 
$  0.001          45,000     $  0.001                2.58     $          45,000     $  0.001                2.58     $  
  0.15          90,000       0.15                2.33                90,000       0.15                2.33        
  0.20            3,000       0.20                2.75                  3,000       0.20                2.75        
  0.31            3,000       0.31                2.25                  3,000       0.31                2.25        
  0.32            3,000       0.32                2.50                  3,000       0.32                2.50        
  0.73            3,000       0.73                2.00                  3,000       0.73                2.00        
  0.61          45,000       0.61                2.08                45,000       0.61                2.08        
  0.95        200,000       0.95                1.95              200,000       0.95                1.95        
  1.09            3,000       1.09                1.75                  3,000       1.09                1.75        
  1.10          45,000       1.10                1.83                45,000       1.10                1.83        
  1.21          45,000       1.21                1.58                45,000       1.21                1.58        
$ 0.001-1.21       485,000     $ 0.71       2.10     $       485,000     $ 0.71       2.10     $  

 

The following table sets forth the status of the Company’s non-vested stock options as of September 30, 2020 and December 31, 2019:

 

      Number of
Options
    Weighted-
Average
Grant-Date
Fair Value
 
Non-vested as of December 31, 2019           $  
Granted       144,000       0.11  
Forfeited              
Vested       (144,000 )     0.11  
Non-vested as of September 30, 2020           $  

 

The weighted-average remaining estimated life for options exercisable at September 30, 2020 is 2.10 years.

 

The aggregate intrinsic value for fully vested, exercisable options was $0 at September 30, 2020 and 2019. The aggregate intrinsic value of options exercised for the nine months ended at September 30, 2020 and 2019 was $0 as no options were exercised.

 

At September 30, 2020 the Company has 1,530,151 options or stock awards available for grant under the 2010 Plan.

 

NOTE 7 – 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.

 

14

 

 

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.

 

On June 5, 2020 the Supreme Court of the State of New York, County of Nassau, issued a commencement of Action based on behalf of Power Up Lending Group, Ltd (“Power Up” or the “Claimant”). The Claimant request that due to the default of their note requesting a judgment for an amount of not less than $420,750. Among other claims Power Up asserts that the Company willfully failed to maintain the trading status, and manipulated its stock in its efforts to defraud the public and its investors by making false press statements and the like. The Company is denying any wrong-doing. However, the full requested amount has been included in the default calculation of the convertible debt.

 

NOTE 8 – SUBSEQUENT EVENTS

 

Stock options and shares granted under the 2010 Stock Plan:

 

On October 1, 2020, the Company granted 3,000 shares with a fair market value of $0.02/share to three members of the Company Board as compensation for their contribution in the Board and Committee contribution during the previous quarter, for a total of $60.

 

On October 1, 2020 the Company granted 3,000 three-year options at an exercise price of $0.05/share to a Medical Advisory Board Member for his contribution in the Company’s Advisory Board. The options total fair value at the time of the award was $135.

 

On November 1, 2020 the Company granted 45,000 three-year options at an exercise price of $0.18/share to a Medical Advisory Board Member for his contribution in the Company’s Advisory Board. The options total fair value at the time of the award was $5,792.

 

The Company’s management has evaluated events occurring after September 30, 2020 through the date the financial statements were issued and did not identify any further subsequent events requiring disclosure.

 

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 two years ended December 31, 2019 included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 18, 2020. 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 $3,700,000, we will have sufficient working capital to repay the ten convertible notes and develop our business over the next approximately 15 months. At funding raised that is significantly less than $3,700,000, we can likely repay the ten convertible notes 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. 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.

 

The Company is also pursuing their work with a second drug candidate, BXT-10, a complex polysaccharide derived from pectin that binds to, and blocks the activity of galectin-1, a type of galectin. Galectins are a member of a family of proteins in the body called lectins. These proteins interact with carbohydrate sugars located in, on the surface of, and in between cells. This interaction causes the cells to change behavior, including cell movement, multiplication, and other cellular functions. The interactions between lectins and their target carbohydrate sugars occur via a carbohydrate recognition domain, or CRD, within the lectin. Galectins are a subfamily of lectins that have a CRD that bind specifically to ß-galactoside sugar molecules. Galectins have a broad range of functions, including regulation of cell survival and adhesion, promotion of cell-to-cell interactions, growth of blood vessels, regulation of the immune response and inflammation. During viral infections galectins are upregulated and downregulated based on the type of virus.

 

The Company plans to file a pre-investigational new drug application for BXT-10 for the treatment of mild to moderate COVID-19 patients. However, we cannot provide any assurance that we will successfully initiate or complete those planned trials and be able to initiate any other clinical trials for BXT-10 or any of our future drug candidates.

 

The accompanying consolidated 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 4 of the financial statements, the Company has currently ten convertible loans outstanding at a total value of $938,400 maturing between 10/22/2020 and 3/18/2021, in order to finance the Company until we start raising equity. As a result of the ten-day SEC suspension of April 16. 2020, the notes entered into default and the principal owed is currently $1,604,856, including default penalties. As shown in the accompanying consolidated financial statements, the Company had an accumulated deficit of $3,912,439 as of September 30, 2020. The accumulated deficit as of December 31, 2019 was $2,241,305.

 

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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.

 

The Company is supplementing its disclosure previously disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2019 and its subsequent quarterly reports on Form 10-Q with the following disclosure: Potential Impact of the COVID-19 Pandemic in December 2019, a strain of novel coronavirus (now commonly known as COVID-19) was reported to have surfaced in Wuhan, China. COVID-19 has since spread rapidly throughout many countries, and, on March 12, 2020, the World Health Organization declared COVID-19 to be a pandemic. In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, Canada and China, have imposed unprecedented restrictions on travel, and there have been business closures and a substantial reduction in economic activity in countries that have had significant outbreaks of COVID-19. COVID-19 may have a future material impact on our results of operation with respect to product development and clinical trials. However, significant uncertainty remains as to the potential impact of the COVID-19 pandemic on our operations, and on the global economy as a whole. It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels. We do not yet know the full extent of any impact on our business or our operations, however, we will continue to monitor the COVID-19 situation closely, and we intend to follow health and safety guidelines as they evolve.

 

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, 2020

 

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, 2020 were $114,448, while for the three months ended September 30, 2019, they were $850,319. The components of G&A expenses are as follows:

 

  - Payroll and related expenses for the three months ended September 30, 2020 were $54,000, while there was no payroll recorded for the three months ended September 30, 2019.

 

  - Costs for legal, accounting and other professional services for the three months ended September 30, 2020 were $18,780, while they were $22,441 for the three months ended September 30, 2019. The decrease was due to reduced use of external corporate counsel.

 

  - There was no Marketing expense for the three months ended September 30, 2020, while there  were $8,989 for the three months ended September 30, 2019. The decrease was due to reduction of promotional activities in the third quarter of 2020.

 

  - Stock-based compensation mounted to $9,208 for the three months ended September 30, 2020. The stock-based compensation for the three months ended September 30, 2019 was $795,076. The decrease was due to a declining stock value as we have not yet returned to OTC:BB.

 

  - The remaining miscellaneous G&A expenses totaled $32,460 for the three months ended September 30, 2020, as compared to $23,812 for the three months ended September 30, 2019. The increase was due to the corporate pension plan.

 

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Interest Expense and Amortization of Debt Discount and Premium

 

During the three months ended September 30, 2020, the Company recorded $1,000 in amortization of debt discount to interest expense. The interest for the convertible notes outstanding amounted to $86,593. 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 convertible notes outstanding amounted to $10,002. The increased costs are due to the default of outstanding notes on April 16,2020, as a result of the 10-day trading suspension imposed by the SEC.

 

Net Loss

 

The Company generated a net loss for the three months ended September 30, 2020 of $202,041. In comparison, for the three months ended September 30, 2019, the Company generated a net loss of $874,115. The increased loss is mainly linked to current quarter costs for legal, accounting and other professional services for documentation 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.

 

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

 

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, 2020 were $492,399, while for the nine months ended September 30, 2019, they were $1,131,803. The components of G&A expenses are as follows:

 

  - Payroll and related expenses for the nine months ended September 30, 2020 were $138,000, as compared to $48,000 for the nine months ended September 30, 2019. The difference was due to the hire of an additional manager on May 1, 2020.

 

  - Costs for legal, accounting and other professional services for the nine months ended September 30, 2020 were $37,728, as compared to $125,884 for the nine months ended September 30, 2019. The decrease was due to reduced use of external corporate counsel.

 

  - Sales and marketing expense for the nine months ended September 30, 2020 were $34,027, as compared to $54,958 for the nine months ended September 30, 2019. The decrease was due to the web-site build-up in 2019.

 

  - Stock-based compensation mounted to $174,200 for the nine months ended September 30, 2020. The stock-based compensation for the nine months ended September 30, 2019 was $795,076. The decrease was due to a declining stock value as we have not yet returned to OTC:BB.

 

  - The remaining miscellaneous G&A expenses totaled $107,444 for the nine months ended September 30, 2020, as compared to $107,885 for the nine months ended September 30, 2019.

 

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Interest Expense and Amortization of Debt Discount and Premium

 

During the nine months ended September 30, 2020, the Company recorded $961,128 of premium accretion to additional paid-in capital, and $259,057 in amortization of debt discount (including $145,438 in warrant amortization), as compared to, $323,769 of premium accretion and a debt discount amortization of $82,485 (including warrant amortization of $45,361) for the nine months ended September 30, 2019. The interest for the convertible notes outstanding amounted to $919,677 (including a pre-pay fee of $91,362 for the early payment of a convertible note and the default penalty of $666,456), as compared to $26,891 for the nine months ended September 30, 2019. The increased costs are mainly linked to current quarter costs for legal, accounting and other professional services, as well as the amortization of debt discounts applied to warrants issued in connection with convertible debt and the related loan fees.

 

Net Loss

 

The Company generated a net loss for the nine months ended September 30, 2020 of $1,671,133. In comparison, for the nine months ended September 30, 2019, the Company generated a net loss of $1,195,818. The increased loss is mainly linked to current quarter costs for legal, accounting and other professional services, as well as the amortization of debt discounts applied to warrants issued in connection with convertible debt and the related loan fees.

 

CASH-FLOWS

 

Net cash used in operating activities was $208,161 and $245,435 for the nine months ended September 30, 2020 and 2019, respectively. The decrease was due to reduced use of professional services.

 

The Company did not engage in any investing activities during the nine months ended September 30, 2020 or 2019.

 

Cash flows from financing activities were $39,166 and $242,250 for the nine months ended September 30, 2020 and 2019, respectively. The significant change was due to repayment of an outstanding convertible note on February 20, 2020.

 

The cash available was $633 and $33,226 in the end of the nine months ended September 30, 2020 and 2019, respectively.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2020, our assets consisted of was $633 in cash. We had total liabilities of $2,093,163, which were all current liabilities, and which consisted of $480,192 in accounts payable and accrued expenses (of which $259,135 was payable to related parties), a short term no-interest loan of $8,115 and $1,604,856 in the form of ten convertible loans currently in default. As a result of defaulting on the notes, the debt premium as well as the debt discounts are fully amortized. The equivalent numbers at December 31, 2019, were $169,628 in cash and total liabilities of $1,018,915, which were all current liabilities, and which consisted of $167,932 in accounts payable and accrued expenses (of which $96,000 was payable to related parties), and $850,983 (which includes unamortized debt premium of $24,121, and which has been netted with unamortized debt discounts totaling $60,038) in the form of seven convertible loans, maturing between February 25, 2020 and 12/30/2020.

 

At September 30, 2020, we had total working capital of negative $2,092,530 and an accumulated deficit of $3.912,439. Comparatively, on December 31, 2019, we had total working capital of negative $799,287 and an accumulated deficit of $2,241,305. We believe that we must raise not less than $3,700,000 in addition to current cash on hand to be able to continue our business operations for approximately the next 15 months and repay the ten convertible notes.

 

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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 ten convertible notes, for a total of $938,400 and of accrued interest for these notes mounting to $175,543, described under Note 4 to the Financial Statements. As a result of the ten-day SEC suspension of April 16. 2020, the notes entered into default and the principal owed is currently $1,604,856, including default penalties.

 

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.

 

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, 2020, (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.

 

On June 5, 2020 the Supreme Court of the State of New York, County of Nassau, issued a commencement of Action based on behalf of Power Up Lending Group, Ltd (“Power Up” or the “Claimant”). The Claimant request that due to the default of their note requesting a judgement for an amount of not less than $420,750. Among other claims, Power Up asserts that the Company willfully failed to maintain the trading status, and manipulated its stock in its efforts to defraud the public and its investors by making false press statements and the like. The Company is denying any wrong-doing.

 

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, 2019.

 

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

 

On April 16, 2020 SEC ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading of BIXT is suspended for the period April 16, through April 29, 2020.

 

The Company’s management is taking all reasonable steps to get the Company traded on the OTCQB exchange again, in accordance with regulations as outlined by the SEC.

 

On May 1, 2020 the Company appointed Mr. Mike Sheikh as EVP of Business Development. Mr. Sheikh is committed on a full-time basis. He currently has a compensation of $6,000 per month. The employment agreement provides 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. Mr. Sheikh was issued 8,800,000 shares to be equally vested over a period of 3 years, but fully vested upon a change of control. The shares total fair value at the time of the award was $8,800.

 

Mr. Mike Sheikh, is a US Air Force Academy graduate and pilot. He has a Bachelor’s of Science in Economics and flew KC-135 tankers and worked as a budget officer in the comptroller’s squadron. He worked for Dean Witter and National Securities as a broker and eventually research analyst. After the brokerage industry, he was a business development officer for a variety of specialty finance companies that did factoring and purchase order financing. He is a long-time Biotech Consultant expertise for public or private biotech companies with disruptive technologies. Mr. Sheikh the founder of Falcon Strategic Research, which focuses on small-cap and micro-cap companies that are not covered by traditional analysts on Wall Street. He is also the founder of an Investor Relations Firm. Mr. Sheikh has also been the interim CFO for various public companies and he is a blog commenter and author at Seeking Alpha and Streetwise Reports. 

 

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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, 2020 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, 2020  By:  /s/ David Platt
    David Platt
    Chief Executive Officer
     
    /s/ Ola Soderquist
    Ola Soderquist
    Chief Financial Officer

  

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