See accompanying notes to the condensed financial
statements.
See accompanying notes to the condensed financial
statements.
See accompanying notes to the condensed financial
statements.
See accompanying notes to the condensed financial
statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Company Background
Overview
Aditxt, Inc. (“Aditxt” or the “Company”),
formerly known as Aditx Therapeutics, Inc., was incorporated in the State of Delaware on September 28, 2017, and the Company’s headquarters
are located in Richmond, VA. The Company is a biotech innovation company with a mission of prolonging life and enhancing its quality by
improving the health of the immune system.
The Company is developing biotechnologies specifically
focused on improving the health of the immune system through immune reprogramming and monitoring. The Company’s immune reprogramming
technologies are currently at the pre-clinical stage and are designed to retrain the immune system to induce tolerance with an objective
of addressing rejection of transplanted organs, autoimmune diseases, and allergies. The Company’s immune monitoring technologies
are designed to provide a personalized comprehensive profile of the immune system, and the Company plans to utilize them in its upcoming
reprogramming clinical trials to monitor subjects’ immune response before, during and after drug administration.
Reverse Stock Split
On September 13, 2022, the Company effectuated
a 1 for 50 reverse stock split (the “Reverse Split”). The Company’s stock began trading on a split-adjusted basis effective
on the Nasdaq Stock Market on September 14, 2022. There was no change to the number of authorized shares of the Company’s common
stock. All shares amounts referenced in this report are adjusted to reflect the Reverse Split.
Offerings
On August 31, 2021, the Company completed a registered
direct offering (“August 2021 Offering”). In connection therewith, the Company issued 91,667 shares of common stock,
at a purchase price of $120.00 per share, resulting in gross proceeds of approximately $11.0 million. In a concurrent private
placement, the Company issued warrants to purchase up to 91,667 shares. The warrants have an exercise price of $126.50 per
share and are exercisable for a five-year period commencing six months from the date of issuance. The warrants exercise
price was subsequently repriced to $75.00. In addition, the Company issued a warrant to the placement agent to purchase up to 4,584 shares
of common stock at an exercise price of $150.00 per share.
On October 18, 2021, the Company entered into
an underwriting agreement with Revere Securities LLC, relating to the public offering (the “October 2021 Offering”) of 56,667 shares
of the Company’s common stock (the “Shares”) by the Company. The Shares were offered, issued, and sold at a price to
the public of $75.00 per share under a prospectus supplement and accompanying prospectus filed with the SEC pursuant to an effective
shelf registration statement filed with the SEC on Form S-3 (File No. 333-257645), which was declared effective by the SEC on July 13,
2021. The October 2021 Offering closed on October 20, 2021 for gross proceeds of $4.25 million. The Company utilized a portion of
the proceeds, net of underwriting discounts of approximately $3.91 million from the October 2021 Offering to fund certain obligations
under the Credit Agreement. (See Note 4)
On December 6, 2021, we completed a public offering
for net proceeds of $16.0 million (the “December 2021 Offering”). As part of the December 2021 Offering, we issued 164,929 units
consisting of shares of the Company’s common stock and warrant to purchase shares of the Company’s common stock and 166,572 prefunded
warrants. The warrant issued as part of the units had an exercise price of $57.50 and the prefunded warrants had an exercise price
of $0.001. On June 15, 2022, the Company entered an agreement with a holder of certain warrants in the December 2021 Offering. (See Note
10)
On September 20, 2022, we completed a public offering
for net proceeds of $18.1 million (the “September 2022 Offering”). As part of the September 2022 Offering, we issued 1,224,333
of shares of the Company’s common stock, pre-funded warrants to purchase 2,109,000 shares of common stock, and warrants to purchase
3,333,333 shares of the Company’s common stock. The warrants had an exercise price of $6.00 and the pre-funded warrants had
an exercise price of $0.001.
Risks and Uncertainties
The Company has a limited operating history and
is in the very early stages of generating revenue from intended operations. The Company’s business and operations are sensitive
to general business and economic conditions in the U.S. and worldwide along with local, state, and federal governmental policy decisions.
A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include: changes
in the biotechnology regulatory environment, technological advances that render our technologies obsolete, availability of resources for
clinical trials, acceptance of technologies into the medical community, and competition from larger, more well-funded companies. These
adverse conditions could affect the Company’s financial condition and the results of its operations.
On January 30, 2020, the World Health Organization
declared the COVID-19 novel coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020,
declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel,
and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and
actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of
many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last
and what the financial impact will be to the Company, it is reasonably possible that future capital raising efforts and additional development
of our technologies may be negatively affected.
NOTE 2 – GOING CONCERN ANALYSIS
Management Plans
The Company was incorporated on September 28,
2017 and has not generated significant revenues to date. During the nine months ended September 30, 2022, the Company had a net loss of
$19,466,710 and negative cash flow from operating activities of $15,672,032. As of September 30, 2022, the Company’s cash balance
was $9,244,876. The Company has $67.3 million of remaining availability, subject to regulatory requirements, to raise future
funds pursuant to an effective shelf registration statement filed with the SEC on Form S-3 declared effective on July 13, 2021. However,
SEC regulations limit the amount of funds we can raise during any 12-month period pursuant to our effective shelf registration statement
on Form S-3. We are currently subject to General Instruction I.B.6 to Form S-3, or the Baby Shelf Rule, and the amount of funds we can
raise through primary public offerings of securities in any 12-month period using our shelf registration statement on Form S-3 is limited
to one-third of the aggregate market value of the voting and non-voting common stock held by non-affiliates. We are currently limited
by the Baby Shelf Rule as of the filing of this Quarterly Report, until such time as our public float exceeds $75 million. In addition
to the shelf registration, the Company has the ability to raise capital from equity or debt through private placements or public offerings
pursuant to a registration statement on Form S-1. We may also secure loans from related parties. However, factors such as stock price,
volatility, trading volume, market conditions, demand and regulatory requirements may adversely affect the Company’s ability to
raise capital in an efficient manner.
Because of these factors, the Company believes
that this creates substantial doubt with the Company’s ability to continue as a going concern.
The condensed financial statements included in
this report do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the matters discussed herein. The Company’s ability to continue
as a going concern is dependent upon the ability to complete clinical studies and implement the business plan, generate sufficient revenues
and to control operating expenses. In addition, the Company is consistently focused on raising capital, strategic acquisitions and alliances,
and other initiatives to strengthen the Company.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”).
In the opinion of the Company’s management, the accompanying condensed financial statements reflect all adjustments, consisting
of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended September
30, 2022 and September 30, 2021. Although management believes that the disclosures in these unaudited condensed financial statements are
adequate to make the information presented not misleading, certain information and footnote disclosures normally included in condensed
financial statements that have been prepared in accordance U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022. The interim results for the nine
months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ended December 31, 2022 or for
any future interim periods.
Use of Estimates
The preparation of condensed financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenue
and expense during the reporting period. Actual results could differ from those estimates. Significant estimates underlying the condensed
financial statements include the collectability of notes receivable, collectability and reserve on accounts receivable, the reserve on
insurance billing, and the fair value of stock options and warrants.
Fair Value Measurements and Fair Value of
Financial Instruments
The Company adopted Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. ASC Topic 820 clarifies
the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs
used in measuring fair value as follows:
Level 1 - |
Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. |
Level 2 - |
Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
Level 3 - |
Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
The Company did not identify any assets or liabilities
that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.
Due to the short-term nature of all financial
assets and liabilities, their carrying value approximates their fair value as of the balance sheet dates.
Concentrations of Credit Risk
The Company maintains its cash accounts at financial
institutions which are insured by the Federal Deposit Insurance Corporation. At times, the Company may have deposits in excess of federally
insured limits.
Cash and Cash Equivalents
Cash and cash equivalents include short-term,
liquid investments.
Inventory
Inventory consists of laboratory materials and
supplies used in laboratory analysis. We capitalize inventory when purchased. Inventory is valued at the lower of cost or net realizable
value on a first-in, first-out basis. We periodically perform obsolescence assessments and write off any inventory that is no longer usable.
Fixed Assets
Fixed assets are stated at cost less accumulated
depreciation. Cost includes expenditures for furniture, office equipment, laboratory equipment, and other assets. Maintenance and repairs
are charged to expense as incurred. When assets are sold, retired, or otherwise disposed of, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in operations. The costs of fixed assets are depreciated using the
straight-line method over the estimated useful lives or lease life of the related assets.
Intangible Assets
Intangible assets are stated at cost less accumulated
amortization. For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated
useful lives of the related assets. For intangible assets with indefinite lives, the assets are tested periodically for impairment.
Accounts Receivable and Allowance for Doubtful
Accounts
Accounts receivable are stated at the amount management
expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company
determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management.
As of September 30, 2022 and December 31, 2021, there was an allowance for doubtful accounts of $49,233 and zero, respectively.
Revenue Recognition
In accordance with ASC 606 (Revenue From Contracts
with Customers), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects
the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle,
the Company applies the following five steps:
1) |
Identify the contract with a customer |
2) |
Identify the performance obligations in the contract |
3) |
Determine the transaction price |
4) |
Allocate the transaction price to performance obligations in the contract |
5) |
Recognize revenue when or as the Company satisfies a performance obligation |
Revenues reported from services relating to the
AditxtScore™ are recognized when the AditxtScoreTM report is delivered to the customer. The services performed include
the analysis of specimens received in the Company’s CLIA laboratory and the generation of results which are then delivered upon
completion.
The Company recognizes revenue in the following
manner for the following types of customers:
Client Payers:
Client payers include physicians or other entities
for which services are billed based on negotiated fee schedules. The Company principally estimates the allowance for credit losses for
client payers based on historical collection experience and the period of time the receivable has been outstanding.
Cash Pay:
Customers are billed based on established patient
fee schedules or fees negotiated with physicians on behalf of their patients. Collection of billings is subject to credit risk and the
ability of the patients to pay.
Insurance:
Reimbursements from healthcare insurers are based
on fee for service schedules. Net revenues recognized consist of amounts billed net of contractual allowances for differences between
amounts billed and the estimated consideration the Company expects to receive from such payers, collection experience, and the terms of
the Company’s contractual arrangements.
Leases
Under Topic 842 (Leases), operating lease expense
is generally recognized evenly over the term of the lease. The Company has operating leases consisting of office space, laboratory space,
and lab equipment.
Leases with an initial term of twelve months or
less are not recorded on the balance sheet. We combine the lease and non-lease components in determining the lease liabilities and right
of use (“ROU”) assets.
Stock-Based Compensation
The Company accounts for stock-based compensation
costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation
expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense
recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant
date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled
during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and
over the nonemployee’s period of providing goods or services.
Patents
The Company incurs fees from patent licenses,
which are expensed as incurred. During the nine months ended September 30, 2022 and September 30, 2021, the Company incurred patent licensing
fees for the patents of $256,589 and $76,245, respectively.
Research and Development
We incur research and development costs during
the process of researching and developing our technologies and future offerings. We expense these costs as incurred unless such costs
qualify for capitalization under applicable guidance. During the nine months ended September 30, 2022 and September 30, 2021, the Company
incurred research and development costs of $4,186,842 and $3,340,247, respectively.
Basic and Diluted Net Loss per Common Share
Basic loss per common share is computed by dividing the net loss by
the weighted average number of shares of common stock outstanding for each period. Diluted loss per share is computed by dividing the
net loss by the weighted average number of shares of common stock outstanding plus the dilutive effect of shares issuable through the
common stock equivalents. The weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion
would be anti-dilutive. As of September 30, 2022, 44,712 stock options, 10,556 unvested restricted stock units,
and 5,522,224 warrants were excluded from dilutive earnings per share as their effects were anti-dilutive. As of September 30,
2021, 42,860 stock options, 28,576 unvested restricted stock units and 205,280 warrants were excluded from dilutive
earnings per share as their effects were anti-dilutive.
Recent Accounting Pronouncements
The FASB issues ASUs to amend the authoritative
literature in ASC. There have been several ASUs to date, including those above, that amend the original text of ASC. Management believes
that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or
(iv) are not expected to have a significant impact on our condensed financial statements.
NOTE 4 – NOTE RECEIVABLE
Cellvera Global Note Receivable
On August 25, 2021, the Company entered into a
letter of intent (“the LOI”) to acquire AiPharma Global Holdings LLC, a Delaware limited liability company, which subsequently
changed its name to Cellvera Global Holdings LLC (“Cellvera Global”) which is commercializing COVID-19 antiviral oral therapy.
Key terms of the proposed transaction as stated in the Letter of Intent included: the completion of a proposed $6.5 million secured
loan from the Company to Cellvera Global by August 31, 2021, as well as the issuance of such number of shares of the Company’s common
stock that yields 50% of the number of the Company’s outstanding shares post-closing of the transaction. The acquisition is
subject to the satisfaction of numerous conditions, including satisfactory due diligence, the negotiation and execution of definitive
agreements and other closing conditions, including board and shareholder approval and approval by Nasdaq of the listing of shares proposed
to be issued in the transaction. The Company and Cellvera Global agreed to an exclusivity period until September 30, 2021 (the “Exclusivity
Period”), with a view to settling the definitive agreement. On September 30, 2021, the parties entered into a letter agreement pursuant
to which they agreed to extend the Exclusivity Period until October 4, 2021.
On December 28, 2021, we entered into a Share
Exchange Agreement with Cellvera Global f/k/a AiPharma Global, pursuant to which we (i) will acquire 9.5% of the issued and outstanding
equity interests in Cellvera Global in exchange for the issuance of 96,324 shares of our common stock of Aditxt and a cash payment of
$250,000, at an initial closing upon the satisfaction or waiver of certain conditions to closing; and (ii) acquire the remaining 90.5%
of the issued and outstanding equity interests in Cellvera Global in exchange for the issuance of 798,560 shares of our common stock and
a cash payment of $250,000 at a secondary closing upon the satisfaction or waiver of certain conditions to closing. Additionally,
we may elect to raise additional capital due to market conditions or strategic considerations.
In connection with the contemplated acquisition
with Cellvera Global, the Company entered into a secured credit agreement dated August 27, 2021 (the “Credit Agreement”)
with Cellvera Global and certain affiliated entities (collectively, the “Borrower”), pursuant to which the Company made a
secured loan to Cellvera Global in the principal amount of $6.5 million (the “Loan”). The Loan was funded on August 31,
2021, following the closing of the Company’s August 2021 Offering. The Loan bears interest at a rate of 8% per annum and matured
on November 30, 2021. The Loan is secured by certain accounts receivable and other assets of Cellvera Global and certain of its affiliates.
The Credit Agreement also contains certain covenants that prohibit Cellvera Global from incurring additional indebtedness, incurring liens
or making any dispositions of its property.
On October 18, 2021, the Company entered
into the first amendment to the Credit Agreement with Cellvera Global and certain affiliated entities (the “Credit Agreement Amendment”),
pursuant to which the Company agreed to increase the amount which Cellvera Global was permitted to borrow under the Credit Agreement by
$8.5 million to an aggregate of $15.0 million, of which $6.5 million was outstanding prior to entering the Credit Agreement Amendment.
The Company agreed to fund such additional borrowings, as requested by Cellvera Global, by advancing 70% of any amounts received by the
Company from the exercise of existing warrants or any other capital raises, including the October Offering. As of December 31, 2021,
an additional $8.0 million was advanced under the Credit Agreement for a total of $14.5 million.
The Credit Agreement was amended on multiple occasions,
for which the final amendment was signed on December 31, 2021, extending the Loan’s maturity date to January 31, 2022.
The Company determined that Cellvera Global may
not have the ability to repay the note receivable. Accordingly, the Company recognized a full impairment of $14.5 million as of December
31, 2021.
Forbearance Agreement:
On January 31, 2022, the Company’s $14.5 million
loan to Cellvera Global became fully due and payable under the Credit Agreement. On February 14, 2022, the Company entered into a Forbearance
Agreement and Seventh Amendment to Credit Agreement (the “Forbearance Agreement”) with Cellvera Global.
Pursuant to the Forbearance Agreement, the Company
agreed to forbear from exercising its rights and remedies against Cellvera Global and certain affiliated guarantor parties until the earlier
of (i) June 30, 2022 or (ii) the date of occurrence of any event of default under the Forbearance Agreement (the “Forbearance Period”).
Given that the parties continue to conduct due diligence in connection with the Share Exchange Agreement, the Company and Cellvera Global
also agreed that should the initial closing occur under the Share Exchange Agreement, the existing event of default will be waived. Under
the Forbearance Agreement, the Company and Cellvera Global also agreed to certain amendments to the Credit Agreement, including, but not
limited to: (i) the delivery by the Borrower of certain financial statements and forecasts, and (ii) certain regularly scheduled payments
to be made by Cellvera Global to the Company during the Forbearance Period. As of the date of filing of this Quarterly Report, the regularly
scheduled payments under the Forbearance Agreement have not been made, and the note receivable remains fully impaired.
On April 4, 2022, the Company and Cellvera Global
entered into a Forbearance Agreement and Eighth Amendment to the Credit Agreement (the “April Forbearance Agreement”) pursuant
to which among other things (i) the Company agreed to extend the forbearance period until the earlier of March 31, 2023 or the date of
occurrence of any event of default under the April Forbearance Agreement, (ii) Cellvera Global shall be permitted to factor certain receivables,
and (iii) certain conforming changes were made relating to the Revenue Sharing Agreement (as defined below). In connection with the Forbearance
Agreement, the Company entered into a series of security agreements with Cellvera Global (the “Security Agreements”) and certain
affiliated entities pursuant to which Cellvera Global enhanced the Company’s security interest in connection with the Credit Agreement.
In addition, and as a condition to entering into the April Forbearance Agreement, the Company required that Cellvera Global enter into
a Revenue Sharing Agreement (the “Revenue Sharing Agreement”), pursuant to which, among other things, Cellvera Global agreed
to pay the Company a certain portion of its revenues up to the aggregate amount of $30 million. As of the date of filing of this
Quarterly Report, the Company has not received any payments from Cellvera Global pursuant to the Revenue Sharing Agreement.
Concurrently with the execution of the April Forbearance
Agreement and the Revenue Sharing Agreement, the Company and AiPharma Group, Ltd. entered into an Amendment to the Share Exchange Agreement
(the “Share Exchange Amendment”) which amended the Share Exchange Agreement to, among other things: (i) modify the financial
statements required to be delivered by AiPharma Group, Ltd. at the initial closing to include the unaudited financial statements for the
three months ended March 31, 2022 and 2021, (ii) permit the Company to amend its Certificate of Incorporation without the consent of AiPharma
Group, Ltd. in order to effect a reverse stock split of the Company’s common stock, if necessary, in order to maintain its listing
on the Nasdaq Capital Market, and (iii) make certain other conforming changes related to the March Forbearance Agreement and Revenue Sharing
Agreement.
Target Company Note Receivable
On December 10, 2021, the Company entered into
a secured credit agreement dated December 10, 2021 (the “Target Company Credit Agreement”) and signed on December 10, 2021
with the Target Company, pursuant to which the Company made a secured loan to the Target Company in the principal amount of $500,000 (the
“Target Company Loan”) and agreed to make additional secured loans, as requested by the Target Company and approved by the
Company, in an amount not to exceed $4.5 million. The Target Company Loan bears interest at a rate of 8% per annum and mature on December
8, 2022, provided, that the Letter of Intent currently contemplates that the Target Company Loan will be forgivable upon the closing of
the acquisition contemplated by the letter of intent. The Target Company Credit Agreement also contains certain covenants that prohibit
the Target Company from incurring additional indebtedness, entering into any fundamental transactions, issuing any equity interests subject
to certain limited exceptions, or making any dispositions of its property. In connection with the Target Company Credit Agreement, the
Company entered into a Security Agreement with the Target Company, pursuant to which the Target Company granted the Company a security
interest in all of the Target Company’s assets as security for the Target Company Loan.
As of September 30, 2022, the outstanding principal
of the Target Company Loan is $500,000 and the accrued interest on the Loan is $32,438.
Future Receipt Agreements Overpayment
On September 30, 2022, the Company paid off the
Future Receipts Agreement and the Agreement (as defined in Note 8). This resulted in overpayments of $56,572 and $28,800, respectively.
These amounts are reflected as notes receivable and are deemed collectible.
NOTE 5 – FIXED ASSETS
The Company’s fixed assets include the following
on September 30, 2022:
| |
Cost Basis | | |
Accumulated Depreciation | | |
Net | |
Computers | |
$ | 370,029 | | |
$ | (166,635 | ) | |
$ | 203,394 | |
Lab Equipment | |
| 2,497,273 | | |
| (509,267 | ) | |
| 1,988,006 | |
Office Furniture | |
| 56,656 | | |
| (6,784 | ) | |
| 49,872 | |
Other Fixed Assets | |
| 8,605 | | |
| (1,009 | ) | |
| 7,596 | |
Total Fixed Assets | |
$ | 2,932,563 | | |
$ | (683,695 | ) | |
$ | 2,248,868 | |
The Company’s fixed assets include the following
on December 31, 2021:
| |
Cost Basis | | |
Accumulated Depreciation | | |
Net | |
Computers | |
$ | 312,489 | | |
$ | (75,053 | ) | |
$ | 237,436 | |
Lab Equipment | |
| 2,240,252 | | |
| (306,688 | ) | |
| 1,933,564 | |
Office Furniture | |
| 90,757 | | |
| (4,857 | ) | |
| 85,900 | |
Other Fixed Assets | |
| 10,809 | | |
| (412 | ) | |
| 10,397 | |
Total Fixed Assets | |
$ | 2,654,307 | | |
$ | (387,010 | ) | |
$ | 2,267,297 | |
Depreciation expense was $99,980 and $99,857,
for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense was $296,684 and $266,385, for the nine
months ended September 30, 2022 and 2021, respectively. None of the Company’s fixed assets serve as collateral against any loans
as of September 30, 2022 and December 31, 2021, other than those subject to the financed asset liability.
NOTE 6 – INTANGIBLE ASSETS
The Company’s intangible assets include
the following on September 30, 2022:
| |
Cost Basis | | |
Accumulated Amortization | | |
Net | |
Proprietary Technology | |
$ | 321,000 | | |
$ | (187,250 | ) | |
$ | 133,750 | |
Total Intangible Assets | |
$ | 321,000 | | |
$ | (187,250 | ) | |
$ | 133,750 | |
The Company’s intangible assets include
the following on December 31, 2021:
| |
Cost Basis | | |
Accumulated Amortization | | |
Net | |
Proprietary Technology | |
$ | 321,000 | | |
$ | (107,000 | ) | |
$ | 214,000 | |
Total Intangible Assets | |
$ | 321,000 | | |
$ | (107,000 | ) | |
$ | 214,000 | |
Amortization expense was $26,750 and $26,970 for
the three months ended September 30, 2022 and 2021, respectively. Amortization expense was $80,250 and $80,030 for the nine
months ended September 30, 2022 and 2021, respectively. None of the Company’s intangible assets serve as collateral against any
loans as of September 30, 2022 and December 31, 2021.
NOTE 7 – RELATED PARTY TRANSACTIONS
On January 28, 2022, the Company granted 9,600 restricted
stock units to an officer of the Company pursuant to the Company’s 2021 Equity Incentive Plan. The Company recognized $126,613 in
stock-based compensation for the issuance of these vested and unvested restricted stock units during the period ended September 30, 2022.
(Note 10)
On July 19, 2022, the Company entered into a Subscription
and Investment Representation Agreement with its Chief Executive Officer (the “Purchaser”), pursuant to which the Company agreed
to issue and sell one (1) share of the Company’s Series B Preferred Stock (the “Preferred Stock”), par value $0.001 per
share, to the Purchaser for $20,000 in cash.
On July 19, 2022, the Company filed a certificate
of designation (the “Certificate of Designation”) with the Secretary of State of Delaware, effective as of the time of filing,
designating the rights, preferences, privileges and restrictions of the share of Preferred Stock. The Certificate of Designation provides
that the share of Preferred Stock will have 250,000,000 votes and will vote together with the outstanding shares of the Company’s
common stock as a single class exclusively with respect to any proposal to amend the Company’s Restated Certificate of Incorporation to
effect a reverse stock split of the Company’s common stock. The Preferred Stock will be voted, without action by the holder, on any such
proposal in the same proportion as shares of common stock are voted. The Preferred Stock otherwise has no voting rights except as otherwise
required by the General Corporation Law of the State of Delaware.
The Preferred Stock is not convertible into, or
exchangeable for, shares of any other class or series of stock or other securities of the Company. The Preferred Stock has no rights with
respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale,
dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Preferred Stock will not be entitled
to receive dividends of any kind.
The outstanding share of Preferred Stock shall
be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion
or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing a reverse stock split.
Upon such redemption, the holder of the Preferred Stock will receive consideration of $20,000 in cash. On September 13, 2022, the
share was redeemed.
On July 21, 2022, the Chief Executive Officer
loaned $80,000 to the Company. The loan was evidenced by an unsecured promissory note (the “Promissory Note”). Pursuant
to the terms of the Promissory Note, it will accrue interest at a rate of four and three-quarters percent (4.75%) per annum, the Prime
rate on the date of signing, and is due on the earlier of January 22, 2023, or an event of default.
NOTE 8 – NOTE PAYABLE
On May 27, 2022, the Company entered into an agreement
for the purchase and sale of future receipts (the “Future Receipts Agreement”) with a commercial funding source pursuant to
which the Company agreed to sell to the funder certain future trade receipts in the aggregate amount of $792,000 (the “Future
Receipts Purchased Amount” for gross proceeds to the Company of $550,000, less origination fees of $16,500 and professional
service fees of $13,500. Pursuant to the Future Receipts Agreement, the Company granted the funder a security interest in all of the Company’s
present and future accounts receivable in an amount not to exceed the Future Receipts Purchased Amount. The Purchased Amount shall be
repaid by the Company in 28 weekly installments of approximately $28,000 with the final payment due on December 7, 2022.
As of September 30, 2022, the principal balance
and accrued interest was paid off in full.
On August 31, 2022, the Company entered into an
Agreement for the Purchase and Sale of Future Receipts (the “Agreement”) with a commercial funding source pursuant to which
the Company agreed to sell to the funder certain future trade receipts in the aggregate amount $288,000 (the “Purchased Amount”)
for gross proceeds to the Company of $200,000, less origination fees of $20,000. Pursuant to the Agreement, the Company granted the funder
a security interest in all of the Company’s present and future accounts receivable in an amount not to exceed the Purchased Amount.
The Purchased Amount shall be repaid by the Company in 20 weekly installments of approximately $14,400 with the final payment due on January
18, 2023. In connection with the Agreement, the Company also issued a warrant to purchase 26,667 shares of the Company’s common
stock.
As of September 30, 2022, the principal balance
and accrued interest was paid off in full.
Convertible Note Financing:
On August 4, 2022, the Company entered into a
Securities Purchase Agreement (the “SPA”) with certain accredited investors to purchase $1,277,778 in principal amount 10%
Senior Secured Promissory Notes (the “August 2022 Notes”), resulting in gross proceeds to the Company of $1,150,000, exclusive
of placement agent commission and fees and other offering expenses. In connection therewith, the Company issued, 25,556 shares
of common stock as commitment fees and warrants (the “August 2022 Warrants”) to purchase up to 108,517 shares of the
Company’s common stock.
On August 11, 2022, the Company entered into a
SPA with certain accredited investors to purchase $555,556 in principal amount of August 2022 Notes, resulting in gross proceeds to the
Company of $500,000. In connection therewith, the Company issued 11,112 shares of common stock as commitment fees and August 2022 Warrants
to purchase up to 47,182 shares of the Company’s common stock.
The August 2022 Notes have a maturity date of
twelve (12) months from the date of issuance and are convertible at the option of the Investor at any time prior to maturity in shares
of Common Stock (the “Conversion Shares”) at an initial conversion price of $11.78 per share, subject to adjustments.
The August 2022 Warrants are exercisable for a
period of five (5) years from the period commencing on the commencement date (as defined in the August 2022 Warrant) and ending on 5:00
p.m. eastern standard time on the date that is five (5) years after the date of issuance, at an initial exercise price of $11.78, subject
to adjustment provided therein (including cashless exercise).
On August 25, 2022, the Company entered into a
First Amendment and Waiver with the holders of the August 2022 Warrants, pursuant to which the exercise price of the August 2022 Warrants
was reduced to $7.50 per share and the August 2022 Warrants were modified such that they are not exercisable unless and until the Company
obtains stockholder approval of the issuance of any shares of common stock upon exercise of the August 2022 Warrants. On September 16,
2022, the exercise price of the August 2022 Warrants was further adjusted to $6.00 per share.
Convertible Note Financing Follow On:
On September 12, 2022, the Company entered into
a SPA with a certain accredited investor to purchase $555,555 in principal amount of August 2022 Notes, resulting in gross proceeds to
the Company of $500,000. In connection therewith, the Company issued 11,112 shares of common stock as commitment fees and warrants (the
“August 2022 Follow On Warrants”) to purchase up to 74,074 shares of the Company’s common stock.
The August 2022 Follow On Warrants are exercisable
for a period of five (5) years from the period commencing on the commencement date (as defined in the August 2022 Follow On Warrant) and
ending on 5:00 p.m. eastern standard time on the date that is five (5) years after the date of issuance, at an initial exercise price
of $7.50, subject to adjustments.
On September 16, 2022, the exercise price of the
August 2022 Follow On Warrants was adjusted to $6.00 per share.
As of September 30, 2022, the principal balance
of $2,388,889, prepayment penalty of $238,889 and accrued interest of $119,444 relating to the August 2022 Notes was paid off in full.
NOTE 9 – LEASES
Our lease agreements generally do not provide
an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement
date for purposes of determining the present value of lease payments. We used the incremental borrowing rate on September 30, 2022 and
December 31, 2021 for all leases that commenced prior to that date. In determining this rate, which is used to determine the present value
of future lease payments, we estimate the rate of interest we would pay on a collateralized basis, with similar payment terms as the lease
and in a similar economic environment.
Lease Costs
| |
Nine Months Ended September 30, 2022 | | |
Nine Months Ended September 30, 2021 | |
Components of total lease costs: | |
| | |
| |
Operating lease expense | |
$ | 988,381 | | |
$ | 515,956 | |
Total lease costs | |
$ | 988,381 | | |
$ | 515,956 | |
Lease Positions as of September 30, 2022 and
December 31, 2021
ROU lease assets and lease liabilities for our
operating leases are recorded on the balance sheet as follows:
| |
September 30, 2022 | | |
December 31, 2021 | |
Assets | |
| | |
| |
Right of use asset – long term | |
$ | 3,426,746 | | |
$ | 4,097,117 | |
Total right of use asset | |
$ | 3,426,746 | | |
$ | 4,097,117 | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Operating lease liabilities – short term | |
$ | 1,122,869 | | |
$ | 1,145,126 | |
Operating lease liabilities – long term | |
| 2,112,362 | | |
| 2,765,933 | |
Total lease liability | |
$ | 3,235,231 | | |
$ | 3,911,059 | |
Lease Terms and Discount Rate
Weighted average remaining lease term (in years) – operating leases | |
| 1.80 | |
Weighted average discount rate – operating leases | |
| 8.00 | % |
NOTE 10 – STOCKHOLDERS’ EQUITY
Common Stock
On May 24, 2021, the Company increased the number
of authorized shares of the Company’s common stock, par value $0.001 per share, from 27,000,000 to 100,000,000 (the
“Authorized Shares Increase”) by filing a Certificate of Amendment (the “Certificate of Amendment”) to its Amended
and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. In accordance with the General Corporation
Law of the State of Delaware, the Authorized Shares Increase and the Certificate of Amendment were approved by the stockholders of the
Company at the Company’s Annual Meeting of Stockholders on May 19, 2021. On September 13, 2022, the Company effectuated a 1
for 50 reverse stock split (the “Reverse Split”). The Company’s stock began trading at the Reverse Split price effective
on the Nasdaq Stock Market on September 14, 2022. There was no change to the number of authorized shares of the Company’s common
stock.
During the nine months ended September 30, 2022,
the Company issued 16,476 shares of common stock and recognized expense of $253,719 in stock-based compensation for consulting
services. The Company also granted 11,644 Restricted Stock Units and, 15,153 Restricted Stock Units vested which
resulted in the issuance of shares. As a result, the Company recognized expense of $993,462 in stock-based compensation. The stock-based
compensation for shares issued or RSU’s granted during the period were valued based on the fair market value on the date of grant.
The Company issued 58,257 shares in relation to the issuance of notes (See Note 8). The Company issued 1,224,333 shares of common stock
as part of the September 2022 Offering. The Company also issued 1,337,000 shares of common stock as a result of the exercise of prefunded
warrants from the September 2022 Offering.
During the nine months ended September 30, 2021,
the Company issued 1,779 shares of common stock and recognized expense of $238,264 in stock-based compensation for consulting services.
The Company also issued 23,272 shares of common stock upon the exercise of warrants and received $3,718,956 in cash proceeds. The Company
granted 9,300 shares of restricted common stock for employee compensation and recognized expense of $1,443,700 in stock-based compensation.
The Company also granted 28,908 Restricted Stock Units, of which 320 vested and resulted in the issuance of shares, as a result, the Company
recognized expense of $674,265 in stock-based compensation. The Company issued 96,050 shares of common stock for the conversion of a convertible
note. The Company issued 91,667 shares of common stock as part of the August 2021 Offering. The stock-based compensation for shares issued
or RSU’s granted during the period, were valued based on the fair market value on the date of grant.
Preferred Stock
The Company is authorized to issue 3,000,000 shares
of preferred stock, par value $0.001 per share. There were no shares of preferred stock outstanding as of September 30, 2022 and
December 31, 2021, respectively.
Issuance of Series B Preferred Stock:
On July 19, 2022, the Company entered into a Subscription
and Investment Representation Agreement with its Chief Executive Officer (the “Purchaser”), pursuant to which the Company agreed
to issue and sell one (1) share of the Company’s Series B Preferred Stock (the “Preferred Stock”), par value $0.001 per
share, to the Purchaser for $20,000 in cash.
On July 19, 2022, the Company filed a certificate
of designation (the “Certificate of Designation”) with the Secretary of State of Delaware, effective as of the time of filing,
designating the rights, preferences, privileges and restrictions of the share of Preferred Stock. The Certificate of Designation provides
that the share of Preferred Stock will have 250,000,000 votes and will vote together with the outstanding shares of the Company’s
common stock as a single class exclusively with respect to any proposal to amend the Company’s Restated Certificate of Incorporation to
effect a reverse stock split of the Company’s common stock. The Preferred Stock will be voted, without action by the holder, on any such
proposal in the same proportion as shares of common stock are voted. The Preferred Stock otherwise has no voting rights except as otherwise
required by the General Corporation Law of the State of Delaware.
The Preferred Stock is not convertible into, or
exchangeable for, shares of any other class or series of stock or other securities of the Company. The Preferred Stock has no rights with
respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale,
dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Preferred Stock will not be entitled
to receive dividends of any kind.
The outstanding share of Preferred Stock shall be redeemed in whole,
but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion or (ii) automatically
upon the effectiveness of the amendment to the Certificate of Incorporation implementing a reverse stock split. Upon such redemption,
the holder of the Preferred Stock will receive consideration of $20,000 in cash. On September 13, 2022, the share was redeemed.
Stock-Based Compensation
In October 2017, our Board of Directors adopted
the Aditx Therapeutics, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan provides for the grant of equity
awards to directors, employees, and consultants. The Company is authorized to issue up to 2,500,000 shares of our common
stock pursuant to awards granted under the 2017 Plan. The 2017 Plan is administered by our Board of Directors, and expires ten years after
adoption, unless terminated earlier by the Board of Directors. All shares of our common stock pursuant to awards under the 2017 Plan
have been awarded.
On February 24, 2021, our Board of Directors adopted
the Aditx Therapeutics, Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for grants of nonqualified
stock options, incentive stock options, stock appreciation rights, restricted stock and restricted stock units, and other stock-based
awards (collectively, the “Awards”). Eligible recipients of Awards include employees, directors or independent contractors
of the Company or any affiliate of the Company. The Compensation Committee of the Board of Directors (the “Committee”) will
administer the 2021 Plan. A total of 60,000 shares of common stock, par value $0.001 per share, of the Company may be issued
pursuant to Awards granted under the 2021 Plan. The exercise price per share for the shares to be issued pursuant to an exercise of a
stock option will be no less than one hundred percent (100%) of the Fair Market Value (as defined in the 2021 Plan) of a share of Common
Stock on the date of grant. The 2021 Plan was submitted and approved by the Company’s stockholders at the 2021 annual meeting of
stockholders, held on May 19, 2021.
During the nine months ended September 30, 2022
and 2021, the Company granted no new options.
The following is an analysis of the stock option
grant activity under the Plan:
Vested and Nonvested Stock Options | |
Number | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Life | |
Outstanding December 31, 2021 | |
| 44,710 | | |
$ | 170.00 | | |
| 6.74 | |
Granted | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Expired or forfeited | |
| - | | |
| - | | |
| - | |
Outstanding September 30, 2022 | |
| 44,710 | | |
$ | 170.00 | | |
| 5.99 | |
Nonvested Stock Options | |
Number | | |
Weighted- Average Exercise Price | |
Nonvested on December 31, 2021 | |
| 9,063 | | |
$ | 108.50 | |
Granted | |
| - | | |
| - | |
Vested | |
| (6,088 | ) | |
| 110.23 | |
Forfeited | |
| - | | |
| - | |
Nonvested on September 30, 2022 | |
| 2,975 | | |
$ | 105.71 | |
The Company recognized stock-based compensation
expense related to options granted and vesting expense of $660,191 during the nine months ended September 30, 2022, of which $472,156 is
included in general and administrative expenses and $188,035 is included in research and development expenses in the accompanying
statements of operations. The remaining value to be expensed is $310,887 with a weighted average vesting term of 0.88 years
as of September 30, 2022. The Company recognized stock-based compensation expense related to options issued and vesting of $616,781 during
the nine months ended September 30, 2021, which $556,817 is included in general and administrative expenses and $59,964 is included in
research and development expenses in the accompanying statements of operations.
Warrants
During the nine months ended September 30, 2022
the Company issued 6,423,456 warrants. During the nine months ended September 30, 2021, the Company issued 113,750 warrants.
For the nine months ended September 30, 2022,
the fair value of each warrant granted was estimated using the assumption and/or factors in the Black-Scholes Model as follows:
Exercise price | |
$ | 7.50-20.00 | |
Expected dividend yield | |
| 0 | % |
Risk free interest rate | |
| 2.55%-3.47 | % |
Expected life in years | |
| 5.00-5.50 | |
Expected volatility | |
| 147%-165 | % |
For the nine months ended September 30, 2021,
the fair value of each warrant issued was estimated using the assumption ranges and/or factors in the Black-Scholes Model as follows:
Exercise price | |
$ | 200.00 | |
Expected dividend yield | |
| 0 | % |
Risk free interest rate | |
| 0.17%-0.42 | % |
Expected life in years | |
| 3.00-5.00 | |
Expected volatility | |
| 154%-159 | % |
The risk-free interest rate assumption for warrants
granted is based upon observed interest rates on the United States Government Bond Equivalent Yield appropriate for the expected term
of warrants.
The Company determined the expected volatility
assumption for warrants granted using the historical volatility of comparable public companies’ common stock. The Company will continue
to monitor peer companies and other relevant factors used to measure expected volatility for future warrant grants, until such time that
the Company’s common stock has enough market history to use historical volatility.
The dividend yield assumption for warrants granted
is based on the Company’s history and expectation of dividend payouts. The Company has never declared nor paid any cash dividends
on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
The Company recognizes warrant forfeitures as
they occur as there is insufficient historical data to accurately determine future forfeitures rates.
A summary of warrant issuances are as follows:
Vested and Nonvested Warrants | |
Number | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Life | |
Outstanding December 31, 2021 | |
| 601,400 | | |
$ | 83.50 | | |
| 4.38 | |
Granted | |
| 6,497,530 | | |
| 4.71 | | |
| 4.90 | |
Exercised | |
| (1,516,419 | ) | |
| 0.89 | | |
| - | |
Expired or forfeited | |
| (60,312 | ) | |
| 38.33 | | |
| - | |
Rounding for Reverse Split | |
| 25 | | |
| - | | |
| - | |
Outstanding September 30, 2022 | |
| 5,522,224 | | |
$ | 11.93 | | |
| 4.80 | |
Nonvested Warrants | |
Number | | |
Weighted- Average Exercise Price | |
Nonvested on December 31, 2021 | |
| 92,567 | | |
$ | 75.50 | |
Granted | |
| 6,497,530 | | |
| 4.71 | |
Vested | |
| (6,016,340 | ) | |
| 5.00 | |
Forfeited | |
| (55,000 | ) | |
| 20.00 | |
Nonvested on September 30, 2022 | |
| 518,757 | | |
$ | 11.45 | |
The Company recognized stock-based compensation
expense related to warrants granted and vesting expense of $609,748 during the nine months ended September 30, 2022, of which $105,049 is
included in general and administrative and $504,699 is included in sales and marketing in the accompanying Statements of Operations. The
Company recognized stock-based compensation expense related to warrants granted and vesting expense of $163,637 during the nine months
ended September 30, 2021, which is included in general and administrative in the accompanying Statements of Operations. The remaining
value to be expensed is zero as of September 30, 2022. The weighted average vesting term is zero as of September 30, 2022.
On June 15, 2022, the Company entered an agreement
with a holder of certain of the Series C Warrants (the “Holder”). Pursuant to the agreement, the Holder has agreed to
exercise in cash 179,419 of its Series C Warrants at a reduced exercise price of $7.50 per Share (reduced from $57.50 per share), for
gross proceeds to the Company of approximately $1.35 million. As an inducement to such exercise, the Company has agreed to reduce the
exercise price of the Holder’s remaining Series C Warrants to purchase up to 49,153 Shares from $57.50 to $12.395 per share, which
will be non-exercisable for a period of six months following the closing date. The modification of this exercise price resulted in an
increase of $344,158 to the fair value of the Series C Warrants. This modification was an inducement on the transaction and as such was
recoded to equity resulting in no net change to additional paid in capital. In addition, the Company issued to the Holder a new warrant
to purchase up to 407,991 shares of the Company’s common stock at an exercise price of $12.395 per share, which will be non-exercisable
for a period of six months following issuance date and have a term of five and one-half years. This inducement resulted in a total
increase of $3,759,044 to the fair value of the warrants.
Restricted Stock Units
A summary of Restricted Stock Units (“RSUs”)
issuances are as follows:
Nonvested RSUs | |
Number | | |
Weighted Average Price | |
Nonvested December 31, 2021 | |
| 15,565 | | |
$ | 96.00 | |
Granted | |
| 11,644 | | |
| 22.74 | |
Vested | |
| (15,153 | ) | |
| 68.20 | |
Forfeited | |
| (1,500 | ) | |
| 77.42 | |
Nonvested September 30, 2022 | |
| 10,556 | | |
$ | 57.87 | |
The Company recognized stock-based compensation
expense related to RSUs granted and vesting expense of $993,462 and $674,265 during the nine months ended September 30, 2022
and September 30, 2021, respectively, of which, $707,904 is included in general and administrative and $285,558 is included
in research and development in the accompanying Statements of Operations. The remaining value to be expensed is $551,684 with a weighted
average vesting term of 0.57 years as of September 30, 2022.
During the nine months ended September 30, 2022, the Company granted
a total of 11,644 RSUs. As of September 30, 2022, 15,513 RSUs vested and the Company issued 15,153 shares of
common stock for the 15,153vested RSUs.
NOTE 11 – INCOME TAXES
The Company has incurred losses since inception.
During the nine months ended September 30, 2022, the Company did not provide any provision for income taxes as the Company incurred losses
during such period. The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting
for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected
future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that
will be in effect when the differences are expected to reverse. In assessing the need for a valuation allowance, the Company has considered
both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely than not”
standard. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative
losses. Based on the Company’s review of this evidence, the Company has recorded a full valuation allowance for its net deferred
tax assets as of September 30, 2022.
As of September 30, 2022, the Company did not
have any amounts recorded pertaining to uncertain tax positions.
NOTE 12 – SUBSEQUENT EVENTS
Redemption of Series B Preferred Stock
On October 7, 2022, the Company paid $20,000 in
consideration for the one share of Preferred Stock which was redeemed on September 13, 2022.
Repayment of Promissory Note
On October 7, 2022, the Company fully repaid the
$80,000 Promissory Note and $812 of accrued interest to its Chief Executive Officer. The Chief Executive Officer and the Company entered
the Promissory Note on July 21, 2022.