U.S. 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 March 31, 2022

 

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 000-54296

     

axim_10qimg2.jpg

     

AXIM Biotechnologies, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

27-4029386

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

6191 Cornerstone Court, E. Suite 114 San Diego, CA92121

(Address of principal executive offices) 

  

(858) 923-4422

(Registrant’s telephone number, including area code) 

 

__________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report) 

 

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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.

 

Large

accelerated

Filer

Accelerated

Filer

Non-accelerated filer

(Do not check if smaller

reporting company)

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 ☒

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ☐      No ☐

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 154,251,782 of common stock, par value $0.0001 per share, outstanding as of May 20, 2022.

   

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

AXIM BIOTECHNOLOGIES, INC.

 

 

 

Page

 

Condensed Consolidated Balance Sheet as of March 31, 2022 (unaudited) and December 31, 2021

 

3

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three months periods ended March 31, 2022 and 2021 (unaudited)

 

4

 

 

 

 

 

Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the three ended March 31, 2022 and 2021 (unaudited)

 

5

 

 

 

 

 

Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)

 

6

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited).

 

7

 

 

 
2

Table of Contents

 

AXIM BIOTECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

408,043

 

 

452,963

 

Prepaid expenses

 

 

69,734

 

 

 

163,561

 

Inventory

 

 

20,089

 

 

 

20,089

 

Total current assets

 

 

497,866

 

 

 

636,613

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation

 

 

108,894

 

 

 

116,810

 

 

 

 

 

 

 

 

 

 

Other Assets:

 

 

 

 

 

 

 

 

Notes receivable- related party

 

 

104,524

 

 

 

104,268

 

Patents (net of accumulated amortization of $12,775 and $7,409; respectively)

 

 

237,225

 

 

 

242,591

 

Licenses (net of accumulated amortization of $221,963 and $128,718; respectively)

 

 

4,048,037

 

 

 

4,141,282

 

 

 

 

 

 

 

 

 

 

Security deposit

 

 

5,000

 

 

 

5,000

 

Operating lease right-of-use asset

 

 

62,904

 

 

 

76,871

 

Total other assets

 

 

4,457,690

 

 

 

4,570,012

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

5,064,450

 

 

5,323,435

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

880,332

 

 

909,458

 

Derivative liability

 

 

2,054,769

 

 

 

-

 

Lease liability obligations

 

 

57,920

 

 

 

56,871

 

Due to shareholder

 

 

180

 

 

 

180

 

Due to first insurance funding

 

 

-

 

 

 

32,873

 

Convertible note payable (including accrued interest of $0 and $16,919

 

 

-

 

 

 

1,126,919

 

 

 

 

 

 

 

 

 

 

Promissory note (including accrued interest of $43,823 and $44,041, respectively) (see note 7)

 

 

368,041

 

 

 

454,693

 

Total current liabilities

 

 

3,361,242

 

 

 

2,580,994

 

 

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Deferred tax liability

 

 

-

 

 

 

-

 

Convertible note payable (including accrued interest of $208,427 and $209,685, respectively) net of unamortized debt discount of $1,895,035 and $605,639, respectively (see note 11)

 

 

812,870

 

 

 

761,604

 

Convertible note payable - related party (including accrued interest of $309,037 and $299,037, respectively)

 

 

4,309,037

 

 

 

4,299,037

 

Lease liability obligations

 

 

4,984

 

 

 

20,000

 

Total long-term liabilities

 

 

5,126,891

 

 

 

5,080,641

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

8,488,133

 

 

 

7,661,635

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 5,000,000 shares authorized;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series B Convertible Preferred Stock, $0.0001 par value 500,000 shares designated,

 

 

0

 

 

 

0

 

Series C Convertible Preferred Stock, $0.0001 par value 500,000 shares designated,

 

 

0

 

 

 

0

 

500,000 and 500,000 shares issued and outstanding, respectively

 

 

50

 

 

 

50

 

 

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 300,000,000 shares authorized 151,501,782 and 138,099,981 shares issued and outstanding, respectively

 

 

15,151

 

 

 

13,811

 

Additional paid in capital

 

 

56,395,057

 

 

 

51,000,166

 

Common stock to be issued

 

 

135,000

 

 

 

4,530,000

 

Accumulated deficit

 

 

(59,968,941 )

 

 

(57,882,227 )

TOTAL STOCKHOLDERS' DEFICIT

 

 

(3,423,683 )

 

 

(2,338,200 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

5,064,450

 

 

5,323,435

 

 

See accompanying notes to these unaudited condensed consolidated financial statements

 

 
3

Table of Contents

 

AXIM BIOTECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 For the

 

 

 For the

 

 

 

 Three Months Ended

 

 

 Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Revenues

 

$ -

 

 

$ 32,649

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

44,193

 

 

 

100,953

 

Selling, general and administrative

 

 

982,235

 

 

 

793,346

 

Depreciation and amortization

 

 

106,527

 

 

 

6,350

 

 

 

 

 

 

 

 

 

 

Total operating expenses from continuing operations

 

 

1,132,955

 

 

 

900,649

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

 

(1,132,955 )

 

 

(868,000 )

 

 

 

 

 

 

 

 

 

Other (income) expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(256 )

 

 

(256 )

Change in fair value of derivative liability

 

 

(587,077 )

 

 

-

 

Income from grants from government

 

 

-

 

 

 

(90,000 )

Amortization of debt discount

 

 

35,591

 

 

 

21,827

 

Gain on extinguishment of debt

 

 

(16,904 )

 

 

-

 

Interest expense

 

 

1,522,405

 

 

 

60,332

 

Total other expenses (income)

 

 

953,759

 

 

 

(8,097 )

 

 

 

 

 

 

 

 

 

Loss before provision of income tax

 

 

(2,086,714 )

 

 

(859,903 )

Provision for income tax

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

 

(2,086,714 )

 

 

(859,903 )

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

-

 

 

 

(4,633 )

 

 

 

 

 

 

 

 

 

NET LOSS

 

$ (2,086,714 )

 

$ (864,536 )

 

 

 

 

 

 

 

 

 

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$ (2,086,714 )

 

$ (864,536 )

 

 

 

 

 

 

 

 

 

Loss per share from continuing operations

 

 

 

 

 

 

 

 

Basic

 

$ (0.01 )

 

$ (0.01 )

Diluted

 

$ (0.01 )

 

$ (0.01 )

 

 

 

 

 

 

 

 

 

Loss per share from discontinued operations

 

 

 

 

 

 

 

 

Basic

 

$ -

 

 

$ -

 

Diluted

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

 

 

 

Basic

 

$ (0.01 )

 

$ (0.01 )

Diluted

 

$ (0.01 )

 

$ (0.01 )

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic and diluted

 

 

147,163,570

 

 

 

125,909,597

 

 

See accompanying notes to these unaudited condensed consolidated financial statements

 

 
4

Table of Contents

 

AXIM BIOTECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Preferred Stock

 

 

Series A Convertible

Preferred Stock

 

 

Series B Convertible

Preferred Stock

 

 

Series C Convertible

Preferred Stock

 

 

Common Stock to be

 

 

Additional

Paid In

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Issued

 

 

Capital

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

125,327,579

 

 

$ 12,533

 

 

 

0

 

 

$ 0

 

 

 

0

 

 

$ 0

 

 

0

 

 

$

0

 

 

 

500,000

 

 

$ 50

 

 

$ 201,974

 

 

$ 43,201,186

 

 

$ (41,849,922 )

 

$ 1,565,821

 

Common stock to be issued for purchase of shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

168,500

 

 

 

 

 

 

 

 

 

 

 

168,500

 

Common stock issued against common stock to be issued received in py

 

 

108,965

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(66,974 )

 

 

66,963

 

 

 

 

 

 

 

-

 

Common stock issued for severance payable of discontinued operations

 

 

379,463

 

 

 

38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

224,963

 

 

 

 

 

 

 

225,001

 

Common stock and warrants issued for cash

 

 

1,712,500

 

 

 

171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

433,829

 

 

 

 

 

 

 

434,000

 

Stock based compensation- stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

99,742

 

 

 

 

 

 

 

99,742

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(864,536 )

 

 

(864,536 )

Balance at March 31, 2021

 

 

127,528,507

 

 

 

12,753

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

500,000

 

 

 

50

 

 

 

303,500

 

 

 

44,026,683

 

 

 

(42,714,458 )

 

 

1,628,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

138,099,981

 

 

 

13,811

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

500,000

 

 

 

50

 

 

 

4,530,000

 

 

 

51,000,166

 

 

 

(57,882,227 )

 

 

(2,338,200 )

Common stock issued under s-1

 

 

4,000,000

 

 

 

400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

594,470

 

 

 

 

 

 

 

594,870

 

Common stock issued against common stock to be issued purchase of atd

 

 

7,000,000

 

 

 

700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,270,000 )

 

 

4,269,300

 

 

 

 

 

 

 

-

 

Common stock issued against common stock to be issued received in PY

 

 

166,667

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,000 )

 

 

24,983

 

 

 

 

 

 

 

-

 

Common stock issued stock purchase agreements

 

 

976,870

 

 

 

98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

104,902

 

 

 

 

 

 

 

105,000

 

Common stock issued for services

 

 

802,115

 

 

 

80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(100,000 )

 

 

179,420

 

 

 

 

 

 

 

79,500

 

Cashless exercise stock options

 

 

282,759

 

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28 )

 

 

 

 

 

 

-

 

Stock issued on settlement of debt

 

 

173,390

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,927

 

 

 

 

 

 

 

32,944

 

Stock based compensation - stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

188,917

 

 

 

 

 

 

 

188,917

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,086,714 )

 

 

(2,086,714 )

Balance at March 31, 2022

 

 

151,501,782

 

 

 

15,151

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

500,000

 

 

 

50

 

 

 

135,000

 

 

 

56,395,057

 

 

 

(59,968,941 )

 

 

(3,423,683 )

  

See accompanying notes to these unaudited condensed consolidated financial statements

 

 
5

Table of Contents

  

AXIM BIOTECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

For the

 

 

For the

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31, 2022

 

 

March 31, 2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

(2,086,714 )

 

(864,536 )

Less: (Loss) gain from discontinued operations

 

 

-

 

 

 

(4,633 )

Loss from continuing operations

 

 

(2,086,714 )

 

 

(859,903 )

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

7,916

 

 

 

6,350

 

Stock based compensation

 

 

188,918

 

 

 

99,740

 

Amortization of prepaid insurance/expense

 

 

93,828

 

 

 

23,370

 

Amortization of debt discount

 

 

35,591

 

 

 

21,827

 

Common stock issued for services

 

 

79,500

 

 

 

-

 

Amortization of intangible assets

 

 

98,611

 

 

 

-

 

Loss on extinguishment of debt

 

 

11,068

 

 

 

-

 

Change in fair value of derivative liability

 

 

(587,077 )

 

 

-

 

Non-cash interest expense

 

 

1,316,846

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Changes in operating assets & liabilities:

 

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable

 

 

-

 

 

 

(32,870 )

Increase in interest receivable

 

 

(256 )

 

 

(257 )

(Increase) decrease in prepaid expenses

 

 

-

 

 

 

67,991

 

(Increase) decrease in inventory

 

 

-

 

 

 

(20,181 )

Increase in accounts payable and accrued expenses

 

 

138,052

 

 

 

133,105

 

Net cash provided by (used in) operating activities from continuing operations

 

 

(703,717 )

 

 

(560,828 )

Net cash provided by (used in) operating activities from discontinued operations

 

 

-

 

 

 

(4,633 )

Net cash provided by (used in) operating activities

 

 

(703,717 )

 

 

(565,461 )

 

 

 

 

 

 

 

 

 

CASH FLOW FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

-

 

 

 

(19,639 )

Net cash provided by (used in) investing activities from continuing operations

 

 

-

 

 

 

(19,639 )

Net cash provided by (used in) investing activities from discontinued operations

 

 

-

 

 

 

-

 

Net cash provided by (used in) investing activities

 

 

-

 

 

 

(19,639 )

 

 

 

 

 

 

 

 

 

CASH FLOW FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Common stock issued under registration statement on Form S-1

 

 

594,870

 

 

 

-

 

Common stock issued under SPA

 

 

105,000

 

 

 

602,502

 

Repayment of first insurance funding

 

 

(32,873 )

 

 

(25,369 )

Proceeds from convertible notes

 

 

1,325,000

 

 

 

-

 

Repayment of convertible notes

 

 

(1,243,200 )

 

 

-

 

Repayment of promissory note

 

 

(90,000 )

 

 

-

 

Net cash provided by (used in) continuing financing activities

 

 

658,797

 

 

 

577,133

 

Net cash provided by (used in) discontinued financing activities

 

 

-

 

 

 

-

 

Net cash provided by (used in) financing activities

 

 

658,797

 

 

 

577,133

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(44,920 )

 

 

(7,967 )

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

452,963

 

 

 

457,181

 

Cash and cash equivalents at end of period

 

408,043

 

 

449,214

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

CASH PAID DURING THE PERIOD FOR:

 

 

 

 

 

 

 

 

Interest

 

$ -

 

 

$ -

 

Income taxes - net of tax refund

 

$ -

 

 

$ -

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Common stock issued against common stock to be issued

 

$

125,000

 

 

$

66,974

 

Common stock issued for severance

 

$

 

 

 

$

225,000

 

Initial derivative liability at issuance of notes

 

$

2,641,846

 

 

$

-

 

Initial debt discount at issuance of notes

 

$

1,325,000

 

 

$

-

 

Convertible note converted to common stock

 

$

32,944

 

 

$

-

 

Common stock issued on cashless exercise of options

 

$

28

 

 

$

-

 

Common stock issued against Common stock to be issued for acquisition

 

$

4,270,000

 

 

$

-

 

 

See accompanying notes to these unaudited condensed consolidated financial statements

   

 
6

Table of Contents

  

AXIM BIOTECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

 

NOTE 1: ORGANIZATION

 

The Company was originally incorporated in Nevada on November 18, 2010, as Axim International Inc. On July 24, 2014, the Company changed its name to AXIM Biotechnologies, Inc. to better reflect its business operations. The Company’s principal executive office is located at 6191 Cornerstone Court E suite 114 San Diego Ca 92121. On August 7, 2014, the Company formed a wholly owned Nevada subsidiary named Axim Holdings, Inc. This subsidiary will be used to help facilitate the anticipated activities planned by the Company. On May 11, 2015 the Company acquired a 100% interest in CanChew License Company a Nevada incorporated licensing Company, through the exchange of 5,826,706 shares of its common stock. In October 2017 the company formed a wholly owned subsidiary in the Netherlands for purposes of holding pharmaceutical licenses as required by the Netherlands regulations and laws. On October 16, 2018, the Company formed a wholly owned disregarded entity Marina Street, LLC as part of improvement of internal control over cash management and bank activities.

 

On March 17, 2020, the Company acquired Sapphire Biotech, Inc., (“Sapphire’) which is research and Development Company that has a mission to improve global cancer care through the development of proprietary therapeutics for inhibiting cancer growth and metastasis. Sapphire is also developing a line of novel diagnostics for early cancer detection, response to treatment, and recurrence monitoring. Additionally, with the onset of the COVID-19 pandemic, the Company decided to begin creating COVID-19 rapid diagnostic tools, including multiple first-in-class COVID-19 neutralizing antibody tests and other innovations.

 

Sapphire’s operations are located in the Greater San Diego Area.

 

COVID-19 impact and related risks

 

The ongoing global outbreak of COVID-19, and the various attempts throughout the world to contain it, have created significant volatility, uncertainty and disruption. In response to government directives and guidelines, health care advisories and employee and other concerns, A number of the Company’s employees have had to work remotely from home and those on site have had to follow the Company’s social distance guidelines, which could impact their productivity. COVID-19 could also disrupt the Company’s operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who cannot effectively work remotely but who elect not to come to work due to the illness affecting others in the Company’s office or laboratory facilities, or due to quarantines.

 

 
7

Table of Contents

 

Because of COVID-19, travel, visits, and in-person meetings related to The Company’s business have been severely curtailed or canceled and the Company has instead used on-line or virtual meetings to meet with potential customers and others.

 

In addition to operational adjustments, the consequences of the COVID-19 pandemic have led to uncertainties related to The Company’s business growth and ability to forecast the demand for its diagnostic testing and resulting revenues.

 

The full extent to which the COVID-19 pandemic and the various responses to it might impact The Company’s business, operations and financial results will depend on numerous evolving factors that are not subject to accurate prediction and that are beyond The Company’s control.

 

Changes to the Company’s Board of Directors

 

On January 4, 2022, Mauricio Gatto Bellora tendered his resignation as a member of the Company’s Board of Directors, and the Company on that date accepted his resignation. Mr. Bellora’s decision to resign was not the result of any disagreement with the Company.

 

On January 6, 2022, the record holder of 500,000 shares of the Company’s Series C Preferred Stock, representing 100% of the 500,000 shares of Series C Preferred Stock issued and outstanding, which shares are entitled to cast a vote for election of up to four Series C Directors, whether by shareholder meeting (annual or special) or by written consent, acting pursuant to Section 78.320 of the Nevada Revised Statutes and Article III, Section 3 of the Company’s Amended and Restated Bylaws, consented by written consent in lieu of a meeting appointing Blake N. Schroeder to fill the director seat vacated by the resignation of Mauricio Javier Gatto Bellora.

 

Mr. Blake N. Schroeder, 42, began his career with a commercial litigation law firm in Salt Lake City, Utah. Beginning in 2008, Schroeder focused on the sale and marketing of natural products and opening international marketplaces to those products. From 2008 to 2014 Mr. Schroeder served in various capacities at MonaVie, LLC developing international business plans and growing international businesses. From August 2014 to February 2016, Mr. Schroeder served as the Chief Operating Officer of For evergreen International, where he was responsible for global operation and sales of the multinational organization, including oversight of a global supply chain. From 2021 to the present, Mr. Schroeder has served as the Chief Executive Officer and Chairman of the Board of Medical Marijuana, Inc. From 2016 to the present, Mr. Schroeder serves as the chief executive officer of Kannaway USA, LLC, a wholly owned subsidiary of Medical Marijuana, Inc. Medical Marijuana, Inc. is one of the Company’s largest shareholders holding approximately 16.4% of the Company’s common stock, as of January 10, 2022. Mr. Schroeder holds a B.S. in Finance from Utah State University and a law degree from Syracuse University College of Law.

 

Changes in the Business

 

On March 7, 2022, the Company announced that is has shifted its focus for its rapid COVID-19 Neutralizing Antibody (“Nab”)(NAb) Test to become For Research Use Only (“RUO”). The test will provide researchers an important tool for COVID-19 research and is not intended for use in diagnostic procedures. The Company has also entered a separation agreement with Empowered Diagnostics, LLC following the FDA recall of Empowered’s products, including the NabNAb test.

 

 
8

Table of Contents

 

NOTE 2: ACQUISITION OF INTELLECTUAL PROPERTY OF ADVANCED TEAR DIAGNOSTIC, LLC.

 

AXIM entered into two substantially contemporaneous transactions to acquire patents and 510(K) Licenses from Advanced Tear Diagnostics, LLC (the “Seller”) (collectively, the “Asset Acquisition”) for a total amount of $4,520,000.

 

The first transaction occurred on July 29, 2021, in which AXIM purchased five patents (the “Patents”) from the Seller for $250,000 (which includes assuming and paying $30,000 of the Seller’s liabilities). The bulk of the purchase price ($210,000) was in a note that requires seven equal monthly payments of $30,000, which payment started on September 3, 2021.

 

The second transaction occurred on August 26, 2021, in which AXIM purchased certain eye disease diagnostic technology, which consisted of a 510(K) license for Lactoferrin, a biomarker for dry eye disease and a 510(K) license for IgE, a biomarker for allergic ocular reaction (collectively, the “510(K) Licenses”). The purchase price for the 510(K) Licenses was $4,270,000, which price was paid by issuing to the Seller 7 million shares of AXIM restricted common stock.

 

Together, the Patents and the 510(K) Licenses constitute the acquired technology asset (the “Technology Asset”), which for accounting purposes, are considered one unit of account. We are amortizing the Technology Asset ratably over the 11.54 average remaining life of the Patents.

 

In accordance with FASB’s requirements for accounting for business combinations (FASB Accounting Standards Codification, Topic 805, Business Combinations (“Topic 805”)), since all of the value of this acquisition resides in one asset, the Technology Asset, we have accounted for this transaction as the acquisition of an asset. The seller had not been able to commercialize or complete development of the Technology Asset prior to the asset acquisition and AXIM has established an Ophthalmology Division to commercialize and market the diagnostic technology. In an asset acquisition, the total purchase price of the transaction, including transaction expenses, is allocated to the assets acquired based on the fair value of the assets acquired. In our acquisition of the Technology Asset, the total amount of the purchase price was allocated to the Technology Asset.

 

NOTE 3: BASIS OF PRESENTATION:

 

The consolidated financial statements of AXIM Biotechnologies, Inc. (formerly Axim International, Inc.) as of March 31, 2022, and 2021 have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”).

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Axim Biotechnologies, Inc. and its wholly owned subsidiaries Axim Holdings, Inc., Marina Street LLC, Axim Biotechnologies (the Netherland Company) and Sapphire Biotech, Inc. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated upon consolidation.

 

NOTE 4: GOING CONCERN

 

The Company’s consolidated financial statements have been presented assuming that the Company will continue as a going concern. As shown in the consolidated financial statements, the Company has negative working capital of $2,863,375 and has an accumulated deficit of $59,968,941, has cash used in operating activities of continuing operations $703,717. The Company extinguished its old debt and entered in debt exchange agreement. On April 16, 2018, the Company entered into a Stock Purchase Agreement and sold 1,945,000 shares of our common stock registered under the Registration Statement on Form S-3 declared effective by the Securities and Exchange Commission on September 14, 2017. On March 11, 2019 the company issued shares in accordance with an SPA dated August 1, 2018 which the amount reduced due to shareholder by $400,000. During the year ended December 31, 2021, the Company raised additional capital of $1,610,538 through Stock Purchase Agreements. This capital provides funds for research, development, and ongoing operations. The Company intends to raise substantial 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. That will raise a doubt about the ability of the Company to continue as a going concern. The consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.

 

 
9

Table of Contents

 

NOTE 5: SIGNIFICANT ACCOUNTING POLICIES

 

Use of estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during reporting periods. Actual results could differ from these estimates. Significant estimates are assumptions about collection of accounts receivable, useful life of intangible assets and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate and expected dividend rate.

 

Operating lease

 

We lease property under various operating leases which are disclosed on our Balance sheet in accordance with ASC 842

 

Risks and uncertainties

 

The Company operates in a dynamic and highly competitive industry and is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturer and contract research organizations, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows; ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.

 

Products developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that the products will receive the necessary approvals, or that any approved products will be commercially viable. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval, it could have a materially adverse impact on the Company. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

 

 
10

Table of Contents

 

 

Beginning in late 2019, the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, has evolved into a global pandemic. The extent of the impact of the coronavirus outbreak on the Company’s business will depend on certain developments, including the duration and spread of the outbreak and the extent and severity of the impact on the Company’s clinical trial activities, research activities and suppliers, all of which are uncertain and cannot be predicted. At this point, the extent to which the coronavirus outbreak may materially impact the Company’s financial condition, liquidity or results of operations is uncertain. The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company may require additional funds to commercialize its products. The Company is unable to entirely fund these efforts with its current financial resources. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and operations.

 

There have been no material changes in the accounting policies from those disclosed in the financial statements and the related notes included in the Form 10-K.

 

Cash equivalents

 

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of March 31, 2022, the Company had no cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company had no uninsured balances at March 31, 2022 and December 31, 2021. The Company has never experienced any losses related to these balances.

 

Accounts Receivable

 

It is the Company’s policy to review accounts receivable at least on a monthly basis for conductibility and follow up with customers accordingly. Covid19 has slowed collection as our customers are in a mandated pause. We do not have geographic concentration of customers.

 

Concentrations

 

At December 31, 2021, there was no accounts receivable. For the year ended December 31, 2021, one customer accounted for 21% of total revenue. There was no revenue for the three months ending March 31, 2022.

 

Property and equipment

 

Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using straight-line method over the estimated useful life. New assets and expenditures that extend the useful life of property or equipment are capitalized and depreciated. Expenditures for ordinary repairs and maintenance are charged to operations as incurred. The Company’s property and equipment relating to continuing operations consisted of the following at March 31, 2022 and December 31, 2021, respectively, and none related to discontinued operations.

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Equipment of continuing operations

 

$ 175,283

 

 

$ 175,283

 

Less: accumulated depreciation

 

$ 66,389

 

 

$ 58,473

 

 

 

$ 108,894

 

 

$ 116,810

 

 

Depreciation expense was $7,916 and $6,350 for the three months ended March 31, 2022 and 2021, respectively.

 

 
11

Table of Contents

 

 

Intangible Assets

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. We conduct an impairment analysis for goodwill annually in the fourth quarter or more frequently if indicators of impairment exist or if a decision is made to sell or exit a business. Significant judgments are involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others. The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill.

 

We first may assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test included in U.S. GAAP. To the extent our assessment identifies adverse conditions, or if we elect to bypass the qualitative assessment, goodwill is tested using a quantitative impairment test.

 

Impairment of Indefinite-Lived Intangible Assets

 

For indefinite-lived intangible assets such as in-process research and development (IPRD), we conduct an impairment analysis annually in the fourth quarter or more frequently if indicators of impairment exist. We first perform a qualitative assessment to determine if it is more likely than not that the carrying amount of each of the in-process research and development assets exceeds its fair value. The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows. If we determine it is more likely than not that the fair value is less than its carrying amount of the in-process research and development assets, a quantitative assessment is performed. The quantitative assessment compares the fair value of the in-process research and development assets to its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized for the excess.

 

We elected to perform a quantitative assessment of indefinite-lived intangible assets and determined that the fair value of the goodwill and IPRD related to the Sapphire acquisition was less than its carrying amount and that in-process research and development were fully impaired

 

The Company’s intangible assets relating to continuing operations and discontinued operations consisted of the following at March 31, 2022 and December 31, 2021, respectively

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Patents

 

250,000

 

 

250,000

 

Licenses

 

 

4,270,000

 

 

 

4,270,000

 

 

 

 

4,520,000

 

 

 

4,520,000

 

 

 

 

 

 

 

 

 

 

Less: accumulated amortization

 

 

234,739

 

 

 

136,127

 

 

 

$

  4,285,261

 

 

$ 4,383,873

 

 

 
12

Table of Contents

 

 

Estimated aggregate amortization expense for each of the five succeeding years ending December 31 is as follows:

 

 

 

 2022

 

 

2023

 

 

2024

 

 

2025

 

 

2026 and thereafter

 

Amortization expense 

 

$ 295,838

 

 

$ 394,450

 

 

$ 394,450

 

 

$ 394,450

 

 

$ 2,806,073

 

 

Amortization expense recorded for the three months ended March 31, 2022 and 2021 was $98,612 and $0; respectively.

 

The Company recognized and impairment charge of $2,458,233 and $5,848,219 related to Goodwill and IPRD; respectively in 2021.

 

Goodwill and Intangible assets were impaired resulting in a net impairment loss in 2021 of $5,966,452, resulting from an FDA decision not to approve our COVID test.

 

Revenue Recognition

 

The Company follows the guidance contained in Topic 606 (FASB ASC 606). The core principle of Topic 606 (FASB ASC 606) is that an entity should recognize revenue to depict the transfer of goods of services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revenue recognition guidance contained in Topic 606, to follow the five-step revenue recognition model along with other guidance impacted by this standard: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transportation price; (4) allocate the transportation price; (5) recognize revenue when or as the entity satisfies a performance obligation. All revenue was from operations that were divested.

 

Revenues are recognized when title for goods is transferred; non-refundable fees and proceeds from irrevocable agreements recognized when inflows or other enhancements of assets of the Company are received.

 

Revenues from continuing operations recognized for three months ended March 31, 2022 and 2021 amounted to $0 and $32,649, respectively. Revenues from discontinued operations recognized for three months ended March 31, 2022 and 2021 amounted to $0 and $0, respectively.

 

Collaboration Revenue

 

Revenue recognition for collaboration agreements will require significant judgment. The Company’s assessments and estimates are based on contractual terms, historical experience and general industry practice. Revisions in these values or estimations have the effect of increasing or decreasing collaboration revenue in the period of revision.

 

On August 21, 2020, the Company entered into a Distribution, License and Supply Agreement (“License Agreement”) with Empowered Diagnostics, LLC (“Empowered Diagnostics”). The License Agreement provides Empowered Diagnostics with a right to commercialize The Company’s products worldwide with the exception of Mexico.

 

Under the License Agreement, the company is responsible for applying for and obtaining necessary regulatory approvals in the US and EU, as well as marketing, sales and distribution of the products. Empowered Diagnostics will pay a transfer price for all licensed products, and upon achievement of certain regulatory and sales milestones, the Company may receive payments from Empowered Diagnostics equal to 8% of the monthly gross revenue. Agreement continues until terminated by mutual consent or uncorrected breach.

 

This agreement with Empowered Diagnostics was terminated in February 2022 The Company did not recognize any revenue from this agreement,

 

Grant Income

 

In 2021 the Company has received government grants to drive its research and development efforts. Through these government grants, the government has provided funding for the Company to perform research and development activities which will assist in developing its products. The Company believes the government entities funding these grants are interested in the Company advancing its underlying technologies through research activities and not providing incentives for hiring employees or building facilities that would suggest that the grant monies are not for specific research activities.

 

 
13

Table of Contents

 

 

In determining how to classify the monies received under government grants, the Company acknowledges that there is no specific guidance under US GAAP and that the FASB and AICPA have often drawn upon the guidance in IAS 20 for classification. In considering the alternatives provided by IAS 20 for the presentation of these grants in the Company’s financial statements, the Company believes that recognizing the government grant proceeds as a component of other revenue is a better reflection of the economics of the arrangements as the Company earns the funding through the performance of research and development which is not one of the Company’s primary business activities or central to its operations. The Company believes that presenting research and development funding from government grants, as other revenue provides consistency in our financial reporting. The Company also believes that this presentation clearly presents to users of its financial statements in one line the Company’s sources of funding from these grants. The Company notes that there are no contingencies associated with the receipt of or ability to retain the funds under the grant, other than undertaking and performing the related research and development activities.

 

The Company recognizes funds received from contractual research and development services and from government grants as other revenue. These contracts and grants are not considered an ongoing major and central operation of the Company’s business. Our Income from Grants from Government for the three months ended March 31, 2022 and 2021 was $0 and $90,000, respectively.

 

Cost of Sales

 

Cost of sales includes the purchase cost of products sold and all costs associated with getting the products to the customers including buying and transportation costs. Cost of sales all related to discontinued operations.

 

Shipping Costs

 

Shipping and handling costs billed to customers will be recorded in sales. Shipping costs incurred by the company are recorded in general and administrative expenses. Shipping costs all related to discontinued operations.

 

Fair Value Measurements

 

The Company applies the guidance that is codified under ASC 820-10 related to assets and liabilities recognized or disclosed in the financial statements at fair value on a recurring basis. ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

The Company’s financial instruments are cash and cash equivalents, accounts receivable, accounts payable, notes payable, and long-term debt. The recorded values of cash and cash equivalents and accounts payable approximate their fair values based on their short-term nature. The recorded values of notes payable and long-term debt approximate their fair values, as interest approximates market rates.

 

ASC 820-10 clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. ASC 820-10 requires valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

 

Fair Value Hierarchy

 

Inputs to Fair Value Methodology

Level 1

 

Quoted prices in active markets for identical assets or liabilities

Level 2

 

Quoted prices for similar assets or liabilities; quoted markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the financial instrument; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from, or corroborated by, observable market information

Level 3

 

Pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption is unobservable or when the estimation of fair value requires significant management judgment

 

 
14

Table of Contents

 

 

All items required to be recorded or measured on a recurring basis are based upon Level 3 inputs.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement

 

The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company.

 

The Company’s acquired goodwill with a carrying amount of $2,458,233 were written down to zero, resulting in an impairment charge of $2,458,233, which was included in earnings for the period.

 

In-process Research and Development with a carrying amount of $5,848,219 was written down to its implied fair value of zero, resulting in an impairment charge of $5,848,219, which was included in earnings for the period.

 

Items recorded or measured at fair value on a recurring basis in the accompanying condensed consolidated financial statements consisted of the following items as of March 31, 2022

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Derivative liabilities

 

$ 2,054,769

 

 

$ -

 

 

$ -

 

 

$ 2,054,769

 

 

Convertible Instruments

 

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities.”

 

Professional standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instruments are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional Convertible Debt Instrument.”

 

 
15

Table of Contents

 

 

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

 

ASC 815-40 provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

 

Income Taxes

 

The Company follows Section 740-10, Income tax (“ASC 740-10”) Fair Value Measurements and Disclosures of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.

 

The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including reversals of any existing taxable temporary differences, projected future taxable income, tax planning strategies, and the results of recent operations. If the Company determines that it would be able to realize a deferred tax asset in the future in excess of any recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

 

No amounts were accrued for the payment of interest and penalties as of March 31, 2022 and December 31, 2021 respectively. The Company is not aware of any uncertain tax positions that could result in significant additional payments, accruals, or other material deviation for the Three Months ended March 31, 2022 and 2021 respectively.

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “Cares Act”) was enacted. The CARES Act included loans and grants to certain businesses, and temporary amendments to the Internal Revenue Code which changed net loss carryforward and back provisions and the business interest expenses limitation. Under the CARES Act provisions, the most relevant income tax considerations to Oncocyte relate to the amounts received under the Paycheck Protection Program loan program and the possible forgiveness of those loans by the SBA.

 

On December 21, 2020, the U.S. president has signed into law the “Consolidated Appropriations Act, 2021” which includes further COVID-19 economic relief and extension of certain expiring tax provisions. The relief package includes a tax provision clarifying that businesses with forgiven PPP loans can deduct regular business expenses that are paid for with the loan proceeds for federal tax purposes. Additional pandemic relief tax measures include an expansion of the employee retention credit, enhanced charitable contribution deductions, and a temporary full deduction for business expenses for food and beverages provided by a restaurant.

 

 
16

Table of Contents

 

 

Concentrations of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company had $0 and $0 allowance for doubtful accounts at March 31, 2022 and 2021, respectively and had $0 accounts receivable at March 31, 2022 and $0 at December 31, 2021, all was related to discontinued operations.

 

Net Loss per Common Share

 

Net loss per common share is computed pursuant to section 260-10-45 Earnings Per Share (“ASC 260-10”) of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding and the member potentially outstanding during each period. In periods when a net loss is experienced, only basic net loss per share is calculated because to do otherwise would be anti-dilutive.

 

There were common share equivalents 45,447,662 at March 31, 2022 and 30,119,877 at December 31, 2021. For the year ended March 31, 2022 these potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share.

 

Stock Based Compensation

 

All stock-based payments to employees and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options, are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the relevant service period. Stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached, or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable the measurement date is the date the award is issued. The Company accounts for stock options issued to non-employees based on the estimated fair value of the awards using the Black-Scholes option pricing model in accordance with ASC 505-50, Equity-Based Payment to Non-employees. Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options vest. The Company believes that the fair value of the stock options is more reliably measurable than the fair value of the services received. Stock options granted to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustments as such options vest and at the end of each reporting period, and the resulting change in value, if any, is recognized in the Company’s statements of operations and comprehensive loss during the period the related services are rendered.

 

Research and Development

 

The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. For the three months ended March 31, 2022 the Company incurred research and development expenses of $44,193 and $100,953 from continuing operations, respectively. For the three months ended March 31, 2022 the Company incurred research and development expenses of $0 and $0 from discontinued operations, respectively. The Company has entered into various agreements with CROs. The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made to CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

 

 
17

Table of Contents

 

 

Recently Issued Accounting Standards

 

Accounting Standards Implemented Since December 31, 2020

 

ASC Update 2021-04

 

Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).

 

The amendments in this Update affect all entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. The amendments in this Update do not apply to modifications or exchanges of financial instruments that are within the scope of another Topic. That is, accounting for those instruments continues to be subject to the requirements in other Topics. The amendments in this Update do not affect a holder’s accounting for freestanding call options.

 

ASC Update No. 2020-10

 

In October 2020, the FASB issued ASC Update No. 2020-10, Codification Improvements. Update No. 2020-10 amends a wide variety of Topics in the Codification in order to improve the consistency of the Codification and the application thereof, while leaving Generally Accepted Accounting Principles unchanged.

ASC Update No. 2020-06

 

In August 2020, the FASB issued ASC Update No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in Update No. 2020-06 simplify the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity

 

Other recent accounting pronouncements issued by the FASB and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

NOTE 6: PREPAID EXPENSES

 

Prepaid expenses consist of the following as of March 31, 2022 and December 31, 2021 respectively:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Prepaid insurance

 

$ 28,263

 

 

$ 59,116

 

Prepaid services

 

 

41,471

 

 

 

104,445

 

 

 

$ 69,734

 

 

$ 163,561

 

 

For the three months ended March 31, 2022 and 2021 the Company recognized amortization of prepaid expense and prepaid insurance of $93,828 and $23,370 respectively.

  

 
18

Table of Contents

 

NOTE 7: PROMISSORY NOTE

 

On December 31, 2019, Sapphire Biotech, Inc. had entered into a Debt Exchange Agreement whereas the Company assumed three (3) loans totaling $128,375 of Debt owned by Sapphire Diagnostics, LLC which had an interest rate of 6% per annum. In the same Debt Exchange Agreement, the Company assumed four (4) additional loans made to Sapphire in 2019, which had an interest rate of 6% per annum. All seven (7) loans totaling $310,000, plus the aggregate interest accrued thereon of $14,218 making the face value of the new note $324,218. As of March 31, 2022 and December 31, 2021 respectively, the principal and accrued interest balances were $368,041 and $363,178 respectively.

 

On July 29, 2021, the Company recorded a $210,000 note payable in conjunction with the acquisition of patents from Advanced Tear Diagnostics LLC. The note balance as of December 31, 2021 is $90,000 with accrued interest of $1,515. The note was paid off February 2022 and has a zero balance as of March 31, 2022

 

NOTE 8: OTHER COMMITMENTS

 

The Company owes $5,000 to the chairman of the board of the Company for a working capital advance of $5,000 made in May of 2014, all was related to discontinued operations.

 

Under an agreement Mr. Changoer received on March 20, 2018 the Company issued 50,000 restrictive shares of its common stock and recorded $235,000 of compensation expenses in the accompanying consolidated financial statements to account for the issuance of the incentive shares. As of March 31, 2022 and December 31, 2021 respectively, the total outstanding balance was $20,000 and $20,000 respectively for consulting fees to Mr. Changoer included in accounts payable.

 

On September 25, 2018, the Company amended Independent Director Compensation agreement. Under the agreement in lieu of the share compensation due to independent director of the Company for his annual service ending May 23, Dr. Philip A. Van Damme shall receive cash compensation of $20,000. Started from August 1, 2019 the company has been paying monthly clinical trial fee of $5,000. As of March 31, 2022 and December 31, 2021 respectively, the total outstanding balance was $-0- and $0, respectively included in accounts payable.

 

Effective January 1, 2019 the company entered into a thirty-months consulting agreement with the chairman of the board which pays a monthly consulting fee of $20,000. The company has also been paying a monthly bonus fee of 15,000; this additional fee is on a month-to-month basis at the discretion of management. As of March 31, 2022 and December 31, 2021 respectively, the total outstanding balance was $40,000 and $40,000 respectively for consulting fees included in accounts payable.

 

On May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc., a Nevada corporation (the “Company”), entered into an Agreement (the “Separation Agreement”) by and among the Company, CanChew License Company (“CanCo”), CanChew Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad Foundation, US (collectively, the “Sanammad Parties”), pursuant to which, among other matters as described herein, Drs. Anastassov and Van Damme and Mr. Changoer resigned as members of the Company’s Board of Directors.

  

 
19

Table of Contents

 

Pursuant to the Separation Agreement, the Company transferred and assigned to an entity designated by Dr. Anastassov all of the Company’s cannabis-related intellectual property other than the inventions and discoveries described in that certain cannabis-related patent application filed by the Company’s wholly-owned subsidiary, Sapphire Biotech, Inc. (water-soluble cannabinoid molecules). The Company also transferred 100% of its interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set forth above, any and all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in its entirety.

 

In addition, in consideration for the payment by the Company of $65,000, the Company purchased 100% of the issued and outstanding 500,000 shares of Series B Preferred Stock held by the Sanammad Parties. Such shares shall be retired to treasury of the Company. The Sanammad Parties also agreed to forfeit and assign back to treasury, for no consideration, a total of 18,570,356 shares of the Company’s common stock.

 

In addition, each of Drs. Anastassov and Van Damme and Mr. Changoer have agreed to subject the shares of the Company’s common stock held by each of them to lock-up and leak-out restrictions, as follows: they shall not sell shares for a period of 12 months following the Effective Date and, thereafter, subject to a daily volume limitation of 5%, on an aggregate basis among them.

 

Further, the Company terminated the Consulting Agreement of Dr. Anastassov and the Employment Agreements for each of Dr. Van Damme and Mr. Changoer. In connection with the termination of Dr. Anastassov’s Consulting Agreement, the Company agreed to pay severance in the amount of $35,000 for March 2020 and $20,000 per month thereafter through July 2021 (the termination date contemplated by the Consulting Agreement). Commencing for the April 2020, the Company may, in its sole discretion, pay the $20,000 severance obligation by the issuance of shares of the Company’s common stock registered pursuant to the Registration Statement on Form S-8 filed with the Commission on May 29, 2015 (“S-8 Shares”). If the gross cash proceeds from the sale of any S-8 Shares issued in lieu of cash severance is less than $20,000, as determined 20 days after issuance of such S-8 Shares, then the Company has agreed to issue additional shares that would serve to “true-up” the value of the shares to the $20,000 monthly severance obligation; provided, however, that if 30 days after the date the severance payment is due the gross proceeds from the sale of S-8 Shares is less than $20,000, the Company must pay the shortfall in cash. In addition, for each month that Dr. Anastassov is entitled to receive severance, he shall receive S-8 Shares in an amount equal to the lesser of (a) 150,000 S-8 Shares, or (b) S-8 Shares valued at $15,000 based upon the closing price of the Company’s common stock as of the due date of the severance payment obligation. In connection with the termination of the Employment Agreements of Dr. Van Damme and Mr. Changoer, Mr. Changoer’s severance payments shall be $20,000 per month for 12 months, commencing April 2020 (paid in arrears) and Dr. Van Damme’s severance payments shall be $5,000 per month for 12 months, similarly commencing April 2020 and paid in arrears. The Company has the right to pay each of Dr. Van Damme’s and Mr. Changoer’s monthly severance payments in S-8 shares in lieu of cash subject to the same terms and restrictions (including true-up terms) as set forth above for Dr. Anastassov. As of March 31, 2022, the accrued severance payment was $40,000 to Dr. Anastassov, $20,000 to Mr. Changoer included in accounts payable.

 

The Company retains the right to prepay the severance obligations to Drs. Anastassov and Mr. Changoer, without penalty.

 

No claims were alleged by the Company against any party, and no claims were alleged against the Company. However, in connection with the transactions described above, the parties entered into a general mutual release of all claims.

 

NOTE 9: RELATED PARTY TRANSACTIONS

 

Related Party

 

The Company has an employment agreement with Catalina Valencia at a rate of $15,000 per month commencing March 17, 2020. The agreement can be terminated with 30 days’ notice by either party

 

The company has a consulting agreement with Glycodots LLC whereby it will provide the services of Dr. Sergei A. Svarovsky at a rate of $15,000 per month commencing March 17, 2020. The agreement can be terminated with 30 days’ notice by either party.

  

 
20

Table of Contents

 

Purchase of Promissory Note and Forbearance Agreement

 

Effective May 4, 2020, the Company acquired from TL-66, a California limited liability company (“Seller”), a promissory note issued to Seller by Dr. Anastassov (“Maker”) dated December 1, 2017, with a face value of $350,000 and a remaining balance due of approximately $100,000 (the “Note”). The purchase price for the Note was $100,000 payable by the Company issuing Seller One Million (1,000,000) restricted shares of the Company’s Common Stock. Effective May 6, 2020, the Company and Maker entered into a Forbearance Agreement whereby the Company agreed to forbear from making any collection efforts on the Note for a period of 24 months so long as Maker has not breached the Separation Agreement. Following 24 months, if there has been no breach of the Separation Agreement by Maker, repayment of the Note, including all principal and unpaid interest, will be waived in full. As of May, 4, 2020 the carrying value of the note receivable was $102,567, the value of the common stock to be issued was $135,000, resulting in a loss of $32,433 accounted as loss on debt extinguishment related to discontinued operations. The balance of the Note Receivable as of March 31, 2022 and December 31, 2021 respectively is $102,567 and $102,567 excluding interest accrued thereon of $1,957 and $1,701, respectively.

 

NOTE 10: DUE TO FIRST INSURANCE FUNDING

 

On June 25, 2020, the Company renewed its D&O insurance policy with total premiums, taxes and fees for $93,357. A cash down payment of $18,671 was paid on July 6, 2020. Under the terms of the insurance financing, payments of $8,546, which include interest at the rate of 4.6% per annum, are due each month for nine months commencing on July 25, 2020.

 

On June 25, 2021, the Company renewed its D&O insurance policy with total premiums, taxes and fees for $98,888. A cash down payment of $24,273 was paid on July 7, 2021. Under the terms of the insurance financing, payments of $1,797, which include interest at the rate of 4.420% per annum, are due each month for nine months commencing on July 25, 2021.

 

The total outstanding due to First Insurance Funding as of March 31, 2022 and December 31, 2021 is $0 and $32,873, respectively.

 

NOTE 11: CONVERTIBLE NOTES PAYABLE

 

The following table summarizes convertible note payable of related party as of March 31, 2022 and December 31, 2021 respectively:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

 

20201

 

Convertible note payable, due on November 1, 2026, interest at 3.5% p.a.

 

$ 4,000,000

 

 

$ 4,000,000

 

Accrued interest

 

 

309,037

 

 

 

299,037

 

Convertible note payable, net

 

$ 4,309,037

 

 

$ 4,299,037

 

 

The interest on this note is payable bi-annually every May 1 and November 1. On May 1, 2019 the Company paid accrued interest of $60,278.

 

In 2020 the Company was authorized to apply the accounts receivable of $75,074 due from Kannaway towards its accrued interest.

 

 
21

Table of Contents

 

On May 1, 2020, the Company agreed to modify its existing convertible note with a principal balance of $4 million, 3.5% interest rate convertible note with the current holder of that note. There were two changes to the existing agreement – (a) the conversion price was reduced from the $1.50 conversion price in the original Note to $0.25 cents in the modified Note and (b) the term of the note was extended from the original maturity date of November 1, 2021, to November 1, 2026. The Company’s stock closed trading on the day of the modification at $0.13 per share. The amendment of this convertible Note was also evaluated under ASC Topic 470-50-40, ”Debt Modifications and Extinguishments.” Based on the guidance, the instruments were determined to be substantially different due to the change in the conversion price being substantial, and debt extinguishment accounting was applied. The fair value of the modified convertible note was not different than the carrying value of the original note as such no extinguishment loss was recorded, The Note prior to the amendment of approximately $4 million, and the fair value of the Note and embedded derivatives after the amendment of approximately $4 million. There were no unamortized debt issuance costs and the debt discount associated with the original 2018 Note.

 

For the three months ended March 31, 2022 and 2021, interest expense was $35,000 and $35,000, respectively.

 

As of March 31, 2022 and December 31, 2021, the balance of secured convertible note was $4,309,037 and $4,299,037 which included $309,037 and $299,037 accrued interest, respectively.

 

The following table summarizes convertible note payable as of March 31, 2022 and December 31, 2021 respectively:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Convertible note payable, due on October 1, 2029, interest at 3.5% p.a.

 

$ 484,478

 

 

$ 484,478

 

Convertible Note Payable, due on October 1, 2022, interest at 6% p.a.

 

 

-

 

 

 

1,110,000

 

Convertible note payable, due on October 1, 2029, interest at 3.5% p.a.

 

 

500,000

 

 

 

500,000

 

Convertible note payable, due on February 10, 2032, interest at 3.0% p. a.

 

 

1,325,000

 

 

 

-

 

Convertible note payable, due on December 31, 2034, interest at 3% p.a.

 

 

190,000

 

 

 

190,000

 

Accrued interest (The accrued interest and principal are both included in the captions titled “convertible note payable” in the balance sheet)

 

 

208,427

 

 

 

209,685

 

Total

 

 

2,707,905

 

 

 

2,494,163

 

Less: unamortized debt discount/finance premium costs

 

 

(1,895,035 )

 

 

(605,639 )

Convertible note payable, net

 

$ 812,870

 

 

$ 1,888,524

 

 

On September 16, 2016, we entered into a convertible note purchase agreement (the “Convertible Note Purchase Agreement” or “Agreement”) with a third-party investor. Under the terms of the Convertible Note Purchase Agreement the investor may acquire up to $5,000,000 of convertible notes from the Company. With various closings, under terms acceptable to the Company and the investor as of the time of each closing. Pursuant to the Agreement, on September 16, 2016 the investor provided the Company with $850,000 secured convertible note financing pursuant to four (4) Secured Convertible Promissory Notes (the “Notes”). Each of the Notes matures on October 1, 2029, and pay 3.5% compounded interest paid bi-annually. The Note are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company common stock at a conversion price equal to $0.2201 per share.

 

As of March 31, 2022 and December 31, 2021 respectively, the balance of secured convertible notes was $577,945 and $573,612, which included $93,467 and $89,134 accrued interest, respectively.

 

On October 20, 2016 a third-party investor provided the Company with $1,000,000 secured convertible note financing pursuant to three (3) Secured Convertible Promissory Notes (the “Notes”). Each of the Notes mature on October 1, 2029 and pay 3.5% compounded interest paid bi-annually. The Notes are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company’s common stock at a fixed conversion price equal of $0.2201 per share. The investor paid cash of $500,000 for one of the Notes and issued to the Company two (2) secured promissory notes of $250,000 each for two (2) Convertible Notes of $250,000 each. The two secured promissory notes issued by the investor (totaling $500,000) as payment for two (2) secured Notes totaling $500,000 mature on February 1, 2017 ($250,000) and March 1, 2017 ($250,000), bear interest at the rate of 1% per annum, are full recourse and additionally secured by 10,486,303 shares of Medical Marijuana, Inc. (Pink Sheets symbol: MJNA) and were valued at $858,828 based upon the closing price of MJNA on October 20, 2016. A debt discount was recorded related to beneficial conversion feature inn connection with this convertible note of $499,318, related to the beneficial conversion feature of the note to be amortized over the life of the note or until the note is converted or repaid. As of March 31, 2022 and December 31, 2021 respectively, this note has not been converted and the balance of secured convertible notes was $596,688 and $592,215, which included $96,688 and $92,215 accrued interest, respectively.

  

 
22

Table of Contents

 

On June 7, 2021 the Company converted $500,000 of the Convertible Note with TL-66-LLC along with the accrued interest of $82,707 into 2,647,464 shares of the Company’s common stock at $0.2201 per share which resulted in a loss on extinguishment of debt of $1,535,264.

 

On December 31, 2019, Sapphire Biotech, Inc. entered into a Convertible Note Purchase Agreement whereas the Company issued a convertible note with a face value of $190,000 with a compounding interest rate of 3% per annum, the interest shall be payable annually beginning on December 31, 2020 until the maturity date of December 31, 2034, at which time all principal and interest accrued thereon shall be due and payable. The Convertible Note is secured by substantially all the Company’s tangible and intangible assets. In addition, the Convertible Note includes various non-financial covenants including the Company may not enter into any agreement, arrangement or understanding of any kind that would result in a transaction, or series of transactions, that would result in the sale of 50% or more of the Company’s capital stock without the prior approval of the holder.

 

Upon issuance, the Convertible Note was convertible into shares of the Company’s common stock at $1.90 per share. At December 31, 2019, the Company determined that the Convertible Note contained a beneficial conversion feature for which a full discount was recorded on the Convertible Note. The fair market value of the Company’s common stock was based upon the estimated per share acquisition price per the pending acquisition of the Company. The discount of $190,000 will be amortized using the effective interest method and will be fully amortized by December 31, 2034.

 

On March 17, 2020 the Company entered into a Share Exchange Agreement (“Agreement”) with Sapphire Biotech, Inc., a Delaware corporation (“Sapphire”) and all of the Sapphire stockholders (collectively, the “Sapphire Stockholders”). Following the closing of the transaction, Sapphire will become a wholly owned subsidiary of AXIM. Under the terms of the Agreement, the Company intends to assume the convertible notes in the principal amounts of $190,000. After the acquisition, the Convertible Note was able to convert 6,000,000 shares of Axim’s common stock. Upon assumption of the note, the Company recorded a beneficial conversion feature of $190,000. As of March 31, 2022 and December 31, 2021, the balance of secured convertible note was $202,841 and $201,416, which included $12,841 and $11,416 accrued interest, respectively.

 

On July 21, 2020 the Company entered into convertible note purchase agreement with Cross & Company, the Company owed to Cross & Company $609,835 of aggregated payments and desired to satisfy the amount due in full by issuing to Cross & Company a convertible promissory note. The convertible note matures on July 21, 2032 and incurred 3.5% compounded interest paid annually. The Note are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company common stock at a conversion price equal to $0.37. Notwithstanding the foregoing, holder shall not be permitted to convert the note, or portion thereof, if such conversion would result in beneficial ownership by holder and its affiliates of more than 4.9% of the debtor’s outstanding common stock as of the date of conversion. The Company determined that that the conversion of the amounts due into a long-term convertible note resulted in a debt extinguishment due to the change in the fair values exceeding 10%. Accordingly, the loss of $823,497 was included in the statement of operations as loss on debt extinguishment. As of March 31, 2022 and December 31, 2021, the balance of secured convertible note was $0 and $0, which included $0 and $0 accrued interest, respectively.

 

The note was converted to 1,725,439 shares which included accrued interest at time of conversion of $28,578 common stock on November 24, 2021 at which time the company recorded loss on conversion expense of $51,763.

  

 
23

Table of Contents

 

On September 27, 2021 the Company entered into convertible note purchase agreement with GS Capital LLC in the amount of $1,110,000. The note had an original issue discount of $100,000, bridge financing fees of $100,000 and legal costs of $30.000, which were amortized to financing cost on the issuance of note. It bears interest at a rate of 6% and matures September 29, 2022. The note is convertible to free trading shares six months after issuance at a conversion price of $0.25 per share subject to a 10 day look back period at time of conversion if the stock is trading at less than $0.25 for more than 5 days then the conversion price will be a 30 percent discount to the average of the two lowest closing prices within the 10 day look back period. As of March 31, 2022 and December 31, 2021, the balance of this convertible note was $0 and $1,126,919, which included $0 and $16,919 accrued interest; respectively.

 

On February 10, 2022, the Company paid in full the remaining balance due on that certain convertible note issued to GS Capital Partners, LLC, face value $1,110,000 (as amended, the “GS Note”). In connection with the repayment, the Company was required to pay accrued interest in the amount of $21,863, by issuing 173,390 restricted shares of the Company’s common stock pursuant to the formula set forth in the GS Note. The shares were issued February 22, 2022 and valued at the closing price on that date at $0.19 per shares which was valued at $32,944 for the accrued interest of $21,863 and the balance $11,081 was recorded as loss on conversion under interest expenses in statement of operation. Also the Company paid $133,200 as penalty for early repayment recorded under interest expenses in statement of operation.

 

Debt Obligations

 

Effective February 10, 2022, The Company issued the following debt obligations in exchange for cash. A portion of the funds received by the Company were used to pay off the GS Capital Partners, LLC note, as discussed below.

 

Short Term Promissory Notes

 

Effective February 10, 2022, the Company issued two short term notes, each having a face amount of $250,000, in exchange for a total of $500,000 in cash (the “Short Term Promissory Notes”). The Short Term Promissory Notes bear interest at the rate of 1.5% per annum and were due and payable on or before March 10, 2022, unless demand for payment is made prior to such date. Both the notes were paid in full in February 2022.

 

Convertible Notes

 

Effective February 10, 2022, the Company issued seven convertible notes to a series of investors having an aggregate face value of $1,325,000 in exchange for $1,325,000 in cash (the “Convertible Notes”). One of the Convertible Notes, face value $25,000, was purchased by Blake N. Schroeder who is a director of the Company.

 

Each of the Convertible Notes is (i) unsecured; (ii) bears interest at a rate of 3% per annum; (iii) matures on February 10, 2032; and (iv) is convertible, in whole or in part, at any time by the holder, into restricted shares of the Company’s common stock at a conversion price equal to the lesser of $0.08125 or 70% of the average of the two lowest closing prices of the Company’s common stock in the ten trading days preceding any particular conversion, provided, the holder is prohibited from converting the convertible note, or portion thereof, if such conversion would result in beneficial ownership by the holder and its affiliates of more than 4.999% of Company’s issued and outstanding common stock as of the date of the conversion. A debt discount was recorded related to beneficial conversion feature in connection with this convertible note of $1,325,000, which to be amortized over the life of the note or until the note is converted or repaid.

 

During the three months ended March 31, 2022 and 2021 respectively, the Company amortized the debt discount on all the notes of $35,591 and $21,827, respectively. As of March 31, 2022 and December 31, 2021, unamortized debt discount was $1,895,035 and $605,639, respectively.

 

 
24

Table of Contents

 

NOTE 12: DERIVATIVE LIABILITIES

 

Upon the issuance of certain convertible note payable having a variable conversion rate, the Company determined that the features associated with the embedded conversion option embedded in the debt, should be accounted for at fair value, as a derivative liability.

 

On February 10, 2022 ie on the date of issuance of derivative instrument, the Company estimated the fair value of the embedded derivatives of $2,641,846 using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 163.09%, (3) risk-free interest rate of 2.03%, and (4) expected life of 10 years. The value of notes $1,325,000 was debited to beneficial conversion feature and the balance $1,316,846 was recorded as non-cash interest expenses under interest expenses in statement of operation.

 

On March 31, 2022, the Company estimated the fair value of the embedded derivatives of $2,054,769 using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 162.72%, (3) risk-free interest rate of 2.32%, and (4) expected life of 9.86 years. The change of $587,077 was recorded as gain on change in fair value of derivative liabilities for the three months ended March 31, 2022.

 

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the three months ended March 31, 2022: 

 

Balance, December 31, 2021 

 

$ -

 

Issuance of convertible note payable  

 

 

2,641,846

 

Mark to market  

 

 

(587,077 )

Balance, March 31, 2022  

 

$ 2,054,769

 

 

 

 

 

 

Gain on change in derivative liabilities for the three months ended March 31, 2022  

 

$ 587,077

 

   

NOTE 13: STOCK INCENTIVE PLAN

 

On May 29, 2015, the Company adopted its 2015 Stock Incentive Plan. Under the Plan the Company may issue up to 10,000,000 S-8 shares to officers, employees, directors or consultants for services rendered to the Company or its affiliates or to incentivize such parties to continue to render services. S-8 shares are registered immediately upon the filing of the Plan and are unrestricted shares that are free-trading upon issuance. On May 20, 2021 the board consent increased the issue up to 20,000,000 shares. As of March 31, 2022 and December 31, 2021 respectively, there were 8,094,046 and 9,806,000 shares available for issuance under the Plan.

 

On May 13, 2020, Alim Seit-Nebi the Chief Technology Officer and Co-Founder of Sapphire Biotechnology was granted the options to purchase 1 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options will vest six months from the date of grant, one third of the options will vest one year from the date of grant, and the remaining one third of the options will vest two years from the date of grant.

 

On May 13, 2020, Dr. Douglas Lake the Chief Clinical Officer and Co-Founder of Sapphire Biotechnology was granted the options to purchase 2 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options will vest six months from the date of grant, one third of the options will vest one year from the date of grant, and the remaining one third of the options will vest two years from the date of grant.

 

On May 13, 2020, Timothy R, Scott the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options vested immediately, one third of the options will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.

 

On May 13, 2020, Robert Cunningham the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options vested immediately, one third of the options will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.

 

 
25

Table of Contents

 

On May 13, 2020, Maurico Bellora the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the purchase price of $0.126 per share. One third of the options vested immediately, one third of the options will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.

 

On September 10, 2020, Noel C. Gillespie the Senior Patent Attorney of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the purchase price of $0.61 per share. One third of the options vested immediately, one third of the options will vest one year from the date of grant, and the remaining one third of the options will vest two years from the date of grant.

 

On August 2, 2021, Bijan Pedram the Senior Scientific of Sapphire Biotechnology was granted the options to purchase 0.1 million shares of Axim common stock under the plan at the purchase price of $0.67 per share. 25% of the Option shares will be vested upon the one anniversary of the vesting commencement day and the balance of the option shares will be vested of thirty-six (36) successive equal monthly in the first anniversary of the vesting commencement day.

 

On August 17, 2021, Jeff Busby the Senior Vice president of Sales of Axim Biotechnology was granted the options to purchase 1 million of shares of Axim common stock under the plan at the purchase price of $0.60 per share. 25% of the Option shares will be vested upon the one anniversary of the vesting commencement day, 25% of the Option shares will be vested upon the two anniversaries of the vesting commencement day, 25% of the Option shares will be vested upon the three anniversary of the vesting commencement day and 25% of the Option shares will be vested upon the four anniversaries of the vesting commencement day.

 

On September 1, 2021, Laura M. Periman Medical advisory board member of Axim Biotechnology was granted the options to purchase 0.1 million of shares of Axim common stock under the plan at the purchase price of $0.64 per share. 50% of the Option shares will be vested upon the one anniversary of the vesting commencement day and 50% of the Option shares will be vested upon the two anniversaries of the vesting commencement day.

 

On September 4, 2021, Kelly K. Nichols Medical advisory Board member of Axim Biotechnology was granted the options to purchase 0.1 million of shares of Axim common stock under the plan at the purchase price of $0.62 per share. 50% of the Option shares will be vested upon the one anniversary of the vesting commencement day and 50% of the Option shares will be vested upon the two anniversaries of the vesting commencement day.

 

On September 8, 2021, Joseph Tauber the Ophthalmic Chief Medical Officer (CMO) of Axim Biotechnology was granted the options to purchase 1 million of shares of Axim common stock under the plan at the purchase price of $0.622 per share. 25% of the Option shares will be vested upon the one anniversary of the vesting commencement day, 25% of the Option shares will be vested upon the two anniversaries of the vesting commencement day, 25% of the Option shares will be vested upon the three anniversary of the vesting commencement day and 25% of the Option shares will be vested upon the four anniversaries of the vesting commencement day.

 

For the three months ended March 31, 2022 and 2021 respectively the Company recorded compensation expense of $188,917 and $99,742 respectively.

 

NOTE 14: STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

The Company has authorized 5,000,000 shares of preferred stock, with a par value of $0.0001 per share. Of the 5,000,000 authorized preferred shares, 4,000,000 are undesignated “blank check” preferred stock. The Company may issue such preferred shares and designate the rights, privileges and preferences of such shares at the time of designation and issuance. As of March 31, 2022, and 2021 there are -0- and -0- shares of undesignated preferred shares issued and outstanding, respectively.

 

There are zero shares issued and outstanding of Series A and Series B Preferred stock as of March 31, 2022.

 

 
26

Table of Contents

 

 

Series C Convertible Preferred Stock

 

On August 17, 2016 the Company designated up to 500,000 shares of a new Series C Convertible Preferred Stock (Series C Preferred Stock). The holders of the Series C Preferred are entitled to elect four members to the Company’s board of directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. Each share of Series C Convertible Preferred is convertible into one share of the Company’s common stock. The Series C Convertible Preferred designation contains a number of protective and restrictive covenants that restrict the Company from taking a number of actions without the prior approval of the holders of the Series C Preferred or the unanimous vote of all four Series C Directors. If at any time there are four Series C Directors, one such director must be independent as that term is defined in the Series C designation. Any challenge to the independence of a Series C Director is a right conferred only upon the holders of the Series B Convertible Preferred Stock and may only be made by the holders of the Series B Convertible Preferred Stock.

 

On August 18, 2016 the Company issued all 500,000 shares of its newly designated Series C Preferred Stock to MJNA Investment Holdings, LLC in exchange for cash of $65,000. As the holders of the Series C Preferred Stock, MJNA Investment Holdings, LLC has designated Dr. Timothy R. Scott, John W. Huemoeller II, Robert Cunningham and Blake Schroeder as their four Series C Directors.

 

On February 20, 2019, MJNA Investment Holdings LLC (“Seller”) sold its 500,000 shares of AXIM Biotechnologies, Inc.’s, a Nevada corporation (the “Company”) Series C Preferred Stock to Juniper & Ivy Corporation, a Nevada corporation (“Purchaser”) for a purchase price of $500,000 (the “Purchase Price”) pursuant to a Preferred Stock Purchase Agreement (the “Purchase Agreement”). Payment of the Purchase Price was made as follows (i) a $65,000 payment made by check payable to Seller, which Purchaser borrowed from an unrelated third-party and which has no recourse against the Series C Preferred Stock or assets of Purchaser (the “Loan”), and (ii) the issuance by Purchaser to Seller of a promissory note, face value, $435,000, which has no recourse against the Series C Preferred Stock or assets of Purchaser (the “Note”). The Company’s Chief Executive Officer John W. Huemoeller II is the President of Purchaser. Mr. Huemoeller provided a personal guaranty for the Loan and the Note.

 

The holders of the Series C Preferred Stock are entitled to elect four members to the Company’s Board of Directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. As a result of this transaction, a change in control has occurred.

   

Common Stock

 

The Company has authorized 300,000,000 shares of common stock, with a par value of $0.0001 per share. As of March 31, 2022 and December 31, 2021, the Company had 151,501,782 and 138,099,981 shares of common stock issued and outstanding, respectively.

 

2022 Transactions:

During January 2022, the Company issued 519,247 shares for cash of gross proceeds of $75,000 pursuant to various stock purchase agreements. The cash was received in the fourth quarter 2021 and first quarter 2022. The Company also issued warrants to purchase an aggregate of 519,247 shares of common stock at an average exercise price of $0.315 per share. The warrants are exercisable within a 3-year period from issuance.

 

 
27

Table of Contents

 

 

In January 2022, the Company issued 7,000,000 shares of its common stock pursuant to its asset acquisition of Advanced Tear Diagnostics which was under common stock to be issued.

 

In January 2022, the Company issued 302,115 of its shares of common stock, valued at $100,000, in exchange for services which have been recorded as a prepaid expense.

 

On January 11, 2022, the company issued 282,759 shares of common stock upon the exercise of 500,000 options at an exercise price of $0.126 a share. This exercise was performed on a cashless basis.

 

In March 2022, the Company issued 624,290 of its shares of common stock pursuant to a stock purchase agreement for cash gross proceeds of $55,000.

 

In March 2022, the Company issued 173,390 shares of its common stock, valued at $32,944, in settlement of interest due to prepayment of a note.

 

In March 2022, the company issued 500,000 of its shares of common stock, valued at $79,500 in exchange for services related to the arrangement of meetings and conferences.

 

The Company also issued 4,000,000 shares of its common stock January thru March of 2022 for cash of $594,870 pursuant to an equity purchase agreement, dated on May 14, 2021, which shares were registered pursuant to that S-1 Registration Statement filed by the Company with the SEC on May 14, 2021, and declared effective by the SEC on June 22, 2021.

 

2021 Transactions:

 

Common Stock

 

On December 13, 2021 the company entered into an agreement where it will issue $100,000 of stock in exchange for services to be rendered under a consulting agreement, currently shown as stock to be issued.

 

On November 7, 2021 the company issued 1,725,439 of its shares in settlement of a debt of 638,412 including accrued interest of $28,578.

 

During the period between May 14, 2021 and December 31, 2021 the Company issued total 500,000 shares valued $129,274 pursuant to the Company’s Registration Statement on Form S-1. The Company received $129,274 in cash.

 

On October 12, 2021 the Company issued 118,000 shares to GS capital valued at $57,466 pursuant to services rendered in obtaining financing.

 

On October 18, 2021 the company issued 175,000 shares of its common stock valued at $52,500 pursuant to a stock purchase agreement.

 

During the year ended December 31, 2021, the company issued 196,438 shares of common stock upon the exercise of 300,000 options at an exercise price of $0.126 a share. This exercise was performed on a cashless basis.

 

On July 29, 2021 the Company issued 122,000 restricted shares of its common stock to third party valued at $50,000 pursuant to the stock purchase agreement. The cash was received in 2021.

 

During August and September 2021 the Company issued 1,060,715 commons shares and warrants to purchase 1,060,715 shares of common stock at an exercise price of $0.60 for gross cash proceeds of $297,000 pursuant to various Warrant Stock purchase agreements. The cash was received in the third quarter ending 2021. Warrants are exercisable within a 3-year period from issuance.

 

During July and September 2021 the company issued 1,415,554 restricted shares of its common stock valued at $1,111,900 to third parties for certain services, recorded as consulting fees.

  

 
28

Table of Contents

 

 

In September 2021 the company issued 262,400 restricted shares of its common stock valued at $129,724 pursuant to S-1 Agreement to third party for cash, recorded as subscription receivable.

 

Pursuant to its purchase of Advanced Tear Diagnostics, LLC the company has recorded 7,000,000 shares of its common stock to be issued valued at $4,270,000.

 

On May 14, 2021, The Company entered into the Equity Purchase Agreement with Cross, pursuant to which we have the right to “put,” or sell, up to $10,000,000 worth of shares of our common stock to Cross. As provided in the Equity Purchase Agreement, we may require Cross to purchase shares of our common stock from time to time by delivering a put notice to Cross specifying the total number of shares to be purchased (such number of shares multiplied by the purchase price described below, the “Investment Amount”); provided there must be a minimum of ten trading days between delivery of each put notice. We may determine the Investment Amount, provided that such amount may not be more than 500% of the average daily trading volume in dollar amount for our common stock during the five trading days preceding the date on which we deliver the applicable put notice, unless waived by Cross in its sole discretion. Additionally, such amount may not be lower than $10,000 or higher than $1,000,000. Cross will have no obligation to purchase shares under the Equity Line to the extent that such purchase would cause Cross to own more than 4.99% of our issued and outstanding shares of common stock.

 

In June 2021 the company issued 500,000 restricted shares of its common stock valued at $332,500 pursuant to S-1 Agreement to third party recorded as subscription receivable. Actual proceeds were $228,812. The difference of $103,688 was adjusted to additional paid in capital and was calculated in accordance with the S-1 agreement.

 

During April, May and June 2021 the company issued 2,647,464 restricted shares of its common stock valued at $2,117,971 pursuant to conversion of convertible note and accrued interest of $582,707 (Note 12) with a loss on extinguishment of debt $1,535,264.

 

During April, May and June 2021 the Company issued 1,234,113 shares for cash of gross proceed of $402,500 pursuant to various Warrant Stock purchase agreements. The cash was received in the second quarter ending 2021. Out of these 519,828 shares of common stock valued at $152,500 was adjusted with common stock to be issued of prior period. The company also issued warrants to purchase 175,000 shares of common stock at an exercise price of $0.75 and 714,285 shares of common stock at an exercise price of $0.80. Warrants are exercisable within a 3 year period from issuance.

 

During April, May and June 2021 the company issued 1,114,351 restricted shares of its common stock valued at $792,389 to third parties for certain services, recorded as consulting fees.

 

During March 2021 the Company issued 1,712,500 shares for cash of gross $434,000 pursuant to various Stock purchase agreements. The cash was received in the first quarter ending 2021. The company also issued warrants to purchase 900,000 shares of common stock at an exercise price of $0.75. Warrants are exercisable within a 3 year period from issuance.

 

Company paid finders fees of $20,000 in cash during this period for capital raise and will also issue shares equaling $16,000 in market value, which was issued during the year ended December 31, 2021.

 

On March 18, 2021 the company issued 488,428 restricted shares of its common stock valued at $291,974 to third parties for certain services, recorded as consulting fees. Out of these 108,965 shares of common stock valued at $66,974 was adjusted with common stock to be issued of prior year.

 

NOTE 15: STOCK OPTIONS AND WARRANTS

 

Options to purchase common stock are granted at the discretion of the Board of Directors, a committee thereof or, subject to defined limitations, an executive officer of the Company to whom such authority has been delegated. Options granted to date generally have a contractual life of ten years.

   

 
29

Table of Contents

 

The stock option activity for three months ended March 31, 2022 and year ended December 31, 2021 respectively is as follows:

 

 

 

Options

Outstanding

 

 

Weighted

Average

Exercise Price

 

Outstanding at December 31, 2020

 

 

10,300,000

 

 

$ 0.36

 

Granted

 

 

2,960,715

 

 

 

0.60

 

Exercised

 

 

(300,000 )

 

 

0.35

 

Expired or canceled

 

 

(2,000,000 )

 

 

0.75

 

Outstanding at December 31, 2021

 

 

10,960,715

 

 

$ 0.37

 

Granted

 

 

-

 

 

 

-

 

Exercised

 

 

(500,000 )

 

 

0.37

 

Balance March 31, 2022

 

 

10,460,715

 

 

$ 0.37

 

 

The following table summarizes the changes in options outstanding, option exercisability and the related prices for the shares of the Company’s common stock issued to employees and consultants under a stock option plan at March 31, 2022:

 

As of March 31, 2022

   

 

 

 

Options Outstanding

 

 

Options Exercisable

 

Weighted

Average

Exercise

Price ($)

 

 

Number

Outstanding

 

 

Weighted

Average

Remaining

Contractual Life

(Years)

 

 

Weighted

Average

Exercise

Price ($)

 

 

Number

Exercisable

 

 

Weighted

Average

Exercise

Price ($)

 

$

0.37

 

 

 

10,460,715

 

 

 

8.2

 

 

$ 0.37

 

 

 

9,295,402

 

 

$ 0.37

 

 

As of December 31, 2021 

 

 

 

 

Options Outstanding

 

 

Options Exercisable

 

Weighted

Average

Exercise

Price ($)

 

 

Number

Outstanding

 

 

Weighted

Average

Remaining

Contractual Life

(Years)

 

 

Weighted

Average

Exercise

Price ($)

 

 

Number

Exercisable

 

 

Weighted

Average

Exercise

Price ($)

 

$

0.36

 

 

 

10,960,715

 

 

 

8.5

 

 

$ 0.37

 

 

 

8,094,046

 

 

$ 0.37

 

 

 
30

Table of Contents

 

The Company determined the value of share-based compensation for options vested using the Black-Scholes fair value option-pricing model with the following weighted average assumptions:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Expected life (years)

 

 

10

 

 

 

10

 

Risk-free interest rate (%)

 

 

1.74

 

 

 

1.74

 

Expected volatility (%)

 

 

190

 

 

 

190

 

Dividend yield (%)

 

 

-

 

 

 

-

 

Weighted average fair value of shares at grant date

 

$ 1.74

 

 

$ 1.74

 

 

For the three months ended March 31, 2022 and 2021 stock-based compensation expense related to vested options was $188,917 and $99,742 respectively.

 

Warrants

 

The following table summarizes warrant activity during the year ended December 31, 2021 and the three months ended March 31, 2022:

 

 

 

Number of Warrants

 

 

Weighted Average Exercise Price

 

Outstanding at December 31, 2020

 

 

-

 

 

$ -

 

Granted

 

 

3,025,000

 

 

 

0.71

 

Forfeited/Cancelled

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

Outstanding at December 31, 2021

 

 

3,025,000

 

 

$ 0.71

 

Granted

 

 

519,247

 

 

 

0.31

 

Exercised

 

 

 

 

 

 

 

 

Outstanding at March 31, 2022

 

 

3,544,247

 

 

 

0.68

 

 

All outstanding warrants are exercisable at March 31, 2022 and there was no unrecognized stock-based compensation expense related to warrants.

 

NOTE 16: DISCONTINUED OPERATIONS

 

During May 2020 the Company decided to discontinue most of its operating activities pursuant to the Separation Agreement entered into by and among the Company, CanChew License Company (“CanCo”), CanChew Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad Foundation, US (collectively, the “Sanammad Parties”). (see Note 1).

    

Pursuant to the terms of the Purchase Agreement dated as of May 6, 2020, Sanammad Parties agreed to acquire from the Company substantially all of its assets and its wholly-owned subsidiaries and to assume certain liabilities and its wholly-owned subsidiaries. Sanammad Parties agreed to pay a purchase price of $2,609,100 reflected in amount due Canchew were deemed paid in full. The sale, which was completed on May 6, 2020, did not include the Company’s cash and certain other excluded assets and liabilities.

 

The results of operations associated with the assets sold have been reclassified into discontinued operations for periods prior to the completion of the transaction.

     

As of March 31, 2022 and December 31, 2021 respectively, the Company has nil asset and liabilities of the discontinued operations in the unaudited condensed consolidated balance sheet in accordance with the provision of ASC 205-20.

  

 
31

Table of Contents

 

Loss from Discontinued Operations

 

In 2020, the sale of the majority of the assets and liabilities related to the Sanammad parties represents a strategic shift in the Company’s business. For this reason, the results of operations related to the assets and liabilities held for sale for all periods are classified as discontinued operations.

  

The following is a summary of the results of operations related to the assets and liabilities held for sale (discontinued operations) for the three months ended March 31, 2022 and 2021 respectively:

 

 

 

March 31,

2022

 

 

March 31,

2021

 

Net sales

 

$ -

 

 

$

 

Total expenses

 

$ -

 

 

$ 4,633

 

Gain from sale of asset and liability

 

$ -

 

 

$

 

Other (loss) income

 

$ -

 

 

$

 

(Loss) income from discontinued operations

 

$ -

 

 

$ (4,633 )

 

The following is a summary of net cash provided by or used in operating activities, investing activities and financing activities for the assets and liabilities held for sale (discontinued operations) for the three months ended March 31, 2022 and 2021 respectively:

  

 

 

March 31,

2022

 

 

March 31,

2021

 

Net (loss) income from discontinued operations

 

$ -

 

 

$ (4,633 )

 

 

 

 

 

 

 

 

 

Adjustment of non-cash activities

 

 

-

 

 

 

-

 

Decrease in accounts receivable

 

 

-

 

 

 

-

 

Increase in inventory

 

 

-

 

 

 

-

 

Increase in accounts payable and accrued expenses

 

 

-

 

 

 

-

 

Net cash provided by (used in) operating activities

 

$ -

 

 

$ (4,633 )

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

$ -

 

 

$ -

 

Net cash provided by (used in) financing activities

 

$ -

 

 

$ -

 

 

As of March 31, 2022 and December 31, 2021 respectively, the Company has nil asset and liabilities of the discontinued operations in the unaudited condensed consolidated balance sheet in accordance with the provision of ASC 205-20.

 

NOTE 17: COMMITMENT AND CONTINGENCIES

 

On January 2, 2019 the Company entered into the term of Executive’s employment agreement, at a base salary of $10,000 per month with John W. Huemoeller II to serve as its Chief Executive Officer. The Company and Executive acknowledge and agree that Executive’s employment hereunder shall at all times be “at will,” which means that either Executive may resign at any time for any reason or for no reason, and that the Company may terminate Executive’s employment at any time for any reason or for no reason, in either case, subject to the applicable provisions of this Agreement. In further consideration for Executive’s services and subject to the approval of the Board, Executive will be granted an option to purchase 2,000,000 shares of the Company’s common stock (the “Option Shares”). The option will be subject to the terms and conditions applicable to stock options granted under the Company’s 2015 Stock Incentive Plan, as amended from time to time (the “Plan”), and as described in the Plan and the stock option agreement, which Executive will be required to sign. 50% of the Option Shares shall vest on the date of grant and the remaining 50% of the Option Shares shall vest on the 12- month anniversary of the grant date, subject to Executive’s continued employment by the Company. The exercise price per share will be equal to the fair market value per share on the date of grant, as determined by the last closing price of the Company’s common stock the day prior to grant. Beginning in October 2019, the board decided to increase CEO base salary to $35,000 per month.

    

 
32

Table of Contents

 

 

On April 24, 2017 the company entered into an employment agreement with Robert Malasek, its Chief Financial Officer and Secretary. The agreement does not have a set term and may be terminated at any time by the Company or Mr. Malasek with proper notice. The shares were issued in the 1st quarter 2018. Beginning in October 2019, the board ratified to increase CFO base salary to $3,000 per month.

 

Industry Sponsored Research Agreement— Sapphire entered into the Industry Sponsored Research Agreement (“SRA”) effective February 7, 2020 to test and confirm the inhibitory activity of SBI-183 (exclusively licensed on January 13, 2020) and SBI-183 analogs, including those synthesized by the Company. The testing will include cell-based in vitro assays, NMR binding studies and testing to determine if SBI-183 enhances the activity of cytotoxic drugs in vitro. Animal studies will also be conducted under the SRA. Specifically, SBI-183 analogs will be evaluated in a mouse model of triple negative breast cancer using human tumor xenografts. The work will be performed over a period of one year with the total cost of the SRA totaling $150,468 paid prior to acquisition. For the year December 31, 2021, the Company recorded research and development expenses of $284,869.

 

On August 5, 2020 Sapphire was awarded a $395,880 phase I Small Business Innovation Research (SBIR) grant by the National Cancer Institute (NCI). The grant will support continued development of novel small molecules that inhibit the enzymatic activity of Quiescin Sulfhydryl Oxidase I (QSOX1) based on a lead compound. QSOX1 is a tumor-derived enzyme that is important for cancer growth, invasion and metastasis. Sapphire is conducting this research with technology it has exclusively licensed from Skysong Innovations, LLC, the intellectual property management company for Arizona State University. Sapphire will subcontract tumor biology work for evaluating analog inhibitors for QSOX1 to Dr. Doug Lake’s laboratory at Arizona State University and Mayo Clinic Arizona. Grant income received for the years ended 2021 was $279,981. There was nil in 2022.

 

On August 25, 2020 we signed an exclusive licensing, manufacturing and distribution agreement with Empowered Diagnostics LLC to execute the high-volume production of our rapid point-of-care diagnostic test. AXIM and Empowered have completed the technology transfer and Empowered Diagnostics has built out their production facility to be able to manufacture millions of our neutralizing antibody tests for COVID-19 per month. In exchange for this license Empowered will pay Axim a royalty on net sales on all licensed products sold by Empowered covered by this license which global with the exception of Mexico.

 

This agreement was cancelled in February, 2022.

 

Operating Lease

 

Lease Agreement—On March 3, 2020, Sapphire entered into a 3-year lease agreement (“Lease”) to relocate to a larger space within the same business park. The new space totals 1,908 square feet with monthly base rent in the 1st year $4,713, 2nd year $4,854 and 3rd year $5,000 at implicit interest rate of 6%. Upon commencement of the Lease on April 25, 2020, the previous lease will expire.

 

Operating Leases - Right of Use Assets and Purchase Commitments Right of Use Assets

 

 
33

Table of Contents

 

We have operating leases for office space that expire through 2023. Below is a summary of our right of use assets and liabilities as of March 31,2022.

 

Right-of-use assets

 

$ 62,904

 

 

 

 

 

 

Lease liability obligations, current

 

$ 57,920

 

Lease liability obligations, noncurrent

 

 

4,984

 

Total lease liability obligations

 

$ 62,904

 

 

 

 

 

 

Weighted-average remaining lease term

 

1.125 years

 

 

 

 

 

 

Weighted-average discount rate

 

6

 

The following table summarizes the lease expense for the Three Months ended March 31, 2022 and 2021 respectively:

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

Operating lease expense

 

$ 14,562 *

 

$ 14,139

 

Short-term lease expense

 

 

7,660

 

 

 

3,213

 

Total lease expense

 

$ 22,222

 

 

$ 17,352

 

 

*We recorded $22,222 of operating lease expense this includes $7,660 of maintenance charges and month to month lease.

 

Approximate future minimum lease payments for our right of use assets over the remaining lease periods as of March 31, 2022, are as follows:

 

2022

 

$ 44,853

 

2023

 

 

20,000

 

Total minimum payments

 

 

64,853

 

Less: amount representing interest

 

 

(1,949 )

Total

 

$ 62,904

 

 

Litigation

 

As of December 31, 2021, and this report issuing date, the Company is not a party to any pending material legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. To the knowledge of management, no director, executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent of the Company’s Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

   

NOTE 18: SUBSEQUENT EVENTS

 

Common Stock Issuances

 

During April and May 2022 the company issued 2,750,000 shares of common stock pursuant to an S-1 for cash of $122,498. Cash has not yet been received for the last million shares issued and is not included in the total of $122,498.

  

 
34

Table of Contents

  

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

 

WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the Securities and Exchange Commission (the “SEC”). You may read and copy any document we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549, U.S.A. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC’s internet site at http://www.sec.gov.

 

On our Internet website, http://www.aximbiotech.com, we post the following recent filings as soon as reasonably practicable after they are electronically filed with or furnished to the SEC: our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

 

When we use the terms “AXIM”, “Company”, “we”, “our” and “us” we mean Axim Biotechnologies, Inc., a Nevada corporation, and its consolidated subsidiaries, taken as a whole, as well as any predecessor entities, unless the context otherwise indicates.

 

FORWARD LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q, the other reports, statements, and information that the Company has previously filed with or furnished to, or that we may subsequently file with or furnish to, the SEC and public announcements that we have previously made or may subsequently make include, may include, or may incorporate by reference certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and that are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that Act. To the extent that any statements made in this report contain information that is not historical, these statements are essentially forward-looking. Forward-looking statements can be identified by the use of words such as “anticipate”, “estimate”, “plan”, “project”, “continuing”, “ongoing”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, marketability of our products; legal and regulatory risks associated with trading publicly; our ability to raise additional capital to finance our activities; the future trading of our common stock; our ability to operate as a public company; our ability to protect our proprietary information; general economic and business conditions; the volatility of our operating results and financial condition; our ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed from time to time in our filings with the SEC, or otherwise.

 

Information regarding market and industry statistics contained in this report is included based on information available to us that we believe is accurate. It is generally based on industry and other publications that are not produced for purposes of securities offerings or economic analysis. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. We do not undertake any obligation to publicly update any forward-looking statements. As a result, investors should not place undue reliance on these forward-looking statements.

 

Business

 

Overview

 

Axim Biotechnologies, Inc., a Nevada corporation, is a leading developer of diagnostic healthcare solutions serving to enhance the health of people. Through the development of diagnostic solutions that quickly and accurately diagnose various diseases, our products allow healthcare workers to quickly test and treat at the point-of-care, which leads to improved patient outcomes and provides numerous economic benefits to the healthcare system.

  

35

 

Axim’s core competencies include development of rapid lateral flow immunoassays, reagents and monoclonal antibody development for such assays. Our current products fall into these categories:

 

(1) SARS-CoV-2 neutralizing antibody tests;

 

(2) Eye Health, wherein we acquired two FDA cleared 510(k) tests for dye eye disease and have internally developed a third assay; and

 

(3) Oncology, where we licensed from Mayo Clinic and Arizona State University Quiescin Sulfhydryl Oxidase 1 (“QSOX1”), an important enzyme for cancer growth, invasion and metastasis.

 

Additional tests are currently in development as part of our focus on maintaining a robust product pipeline that can deliver future growth.

 

Our principal executive office is located at 6191 Cornerstone Court, E. Suite 114, San Diego, CA 92121. Our telephone number is (858) 923-4422 and our website is www.aximbiotech.com. Unless expressly noted, none of the information on our website is part of this Report.  Our common stock is quoted on the OTCQB Marketplace operated by the OTC Markets Group, Inc., under the ticker symbol “AXIM.”

 

Historical Business Operations

 

We were originally incorporated in the State of Nevada on November 18, 2010, under the name AXIM International, Inc. On July 24, 2014, we changed our name to AXIM Biotechnologies, Inc.

 

The Company’s historical business operations focused on the research, development and production of pharmaceutical, nutraceutical and cosmetic products based upon our proprietary technologies. This business and its related intellectual property were divested by the Company in May 2020.

 

In March 2020, we acquired Sapphire Biotech, Inc. (“Sapphire”), a diagnostic healthcare solutions company, changing our business operations.

 

Acquisition of Sapphire Biotech, Inc.

 

On March 17, 2020, we entered into a Share Exchange Agreement with Sapphire and all of its stockholders, pursuant to which, upon closing of the transaction, we: (i) acquired 100% of Sapphire’s outstanding capital, consisting of 100,000,000 shares of common stock; and (ii) assumed all of the outstanding debt of Sapphire. The outstanding debt included two convertible notes in the principal amounts of $310,000 and $190,000, respectfully.

 

In exchange for 100% of the issued and outstanding shares of Sapphire, we issued an aggregate of 54,000,000 newly issued shares of Company common stock to Sapphire’s existing stockholders (the “Share Exchange”). As a result of the Share Exchange, Sapphire became a wholly owned subsidiary of the Company, which has resulted in consolidated financial reporting by the Company to include the results of Sapphire.

 

Acquisition of Advanced Tear Diagnostics, LLC technology

 

On August 26, 2021, we purchased certain eye disease diagnostic technology from Advanced Tear Diagnostics, LLC, a Delaware Limited Liability Company (“Advanced Tear”), consisting of a 510(K) license for Lactoferrin, a biomarker for dry eye disease and a 510(K) license for IgE, a biomarker for allergic ocular reaction (collectively, the “510(K) Licenses”). The purchase price for the 510(K) Licenses was $4,270,000, which price was paid by issuing 7,000,000 restricted shares of Company common stock to Advanced Tear.

 

Also on August 26, 2021, we purchased five patents (the “Patents”) from Advanced Tear for $250,000 (which includes assuming and paying $30,000 of the Advanced Tear liabilities). The bulk of the purchase price ($210,000) was in a note that requires seven equal monthly payments of $30,000, which payment started on September 3, 2021. The note has since been repaid in full.

 

Current Operations Following Acquisition of Sapphire and Advanced Tear’s Assets

 

COVID-19

 

As Sapphire had been a pioneer in the research and development of diagnostic tools for the early screening of cancer cells, our researchers were able to quickly adapt our existing research and technology to create diagnostic tools that screen for COVID-19 neutralizing antibodies. The current need for such an instrument is great, as the pandemic continues to plague the worldwide healthcare landscape.

 

36

 

SARS-CoV-2, the virus responsible for the COVID-19 pandemic, has spread at an alarming rate since the first cases were identified in late 2019 in Wuhan, China. The virus can be transmitted from person-to-person in respiratory secretions from symptomatic or asymptomatic individuals. Since the virus was new to the human population and death rates are 10 to 50-fold higher than other respiratory viruses, the pandemic has placed excessive demands on the global healthcare network. Because initially there were no vaccines or effective antiviral therapies that existed for SARS-CoV-2, efforts to combat this pandemic have been challenging.

 

Polymerase chain reaction (“PCR”) tests that detect active SARS-CoV-2 infection are playing an important role in tracking disease spread, while serological tests that detect antibodies against SARS-CoV-2 are now being used to measure past rates of infection and identify individuals that could be immune to COVID-19. However, not all antibodies are created equal and tests that specifically measure antibodies that neutralize SARS-CoV-2 have not been generally available to healthcare providers or patients.

 

SARS-CoV-2 neutralizing antibodies block binding and entry of the virus into host cells. It is desirable to have high levels of neutralizing antibodies in convalescent plasma used to treat patients fighting COVID-19 so that those antibodies can block the virus from further infecting the host. However, despite convalescing from the disease, not all individuals make high levels of neutralizing antibodies. Therefore, there is a clinical need to measure levels of neutralizing antibodies in COVID-19 convalescent plasma.

 

The most widely used antibody tests on the market today do not specifically identify neutralizing antibodies. Instead, they measure a large family of antibodies that bind to various parts of the virus, but that do not necessarily neutralize it. To address this shortcoming, we developed a patent-pending rapid diagnostic test, which is specifically focused on measuring the levels of functional neutralizing antibodies that prevent SARS-CoV-2 from attaching to human cells. The test is based on blocking the interaction between human cell receptors and the viral spike protein that mimics the virus neutralization process in the body.

 

Why A Neutralizing Antibody Test

 

Our test is a rapid (10-minute) serological diagnostic test that measures SARS-CoV-2 neutralizing antibodies, or Nabs. Our SARS-Cov-2 Neutralizing Antibody (“Nab”) Rapid Test is the first of its kind, and is a rapid lateral flow chromatographic immunoassay intended for the semi-quantitative measurement of neutralizing antibody in human serum or plasma (sodium heparin, potassium and acid dextrose citrate) or fully quantitative with the use of an electronic reader. The test SARS-Cov-2 Neutralizing Antibody Rapid Test measures Nabs within 10 minutes, unlike traditional tests, which require days. Our test kit does not utilize live biological materials and does not require the strict biosafety protocol associated with live virus samples.

 

Specifically, we envision that our test may be used for the following:

 

 

(i)

Measurement of neutralizing antibodies in individuals who have recovered from COVID-19 and/or received a vaccine and to provide an “Immunity Passport” so that they can go back to work and school or participate in social gatherings without risk of infecting others. The primary goal of any vaccine is to induce neutralizing antibody responses that protect vaccine recipients from infection and subsequent disease. As COVID-19 vaccines have been rolling out to the general public, we believe immunity monitoring is starting to play a critical role in determining whether the vaccine is effective, for how long, and when it is time for recipients of the vaccine to get a booster shot. Since immunity to the virus is not anticipated to last forever, the immunity monitoring could continue for many years, even after widespread vaccination throughout the world.

 

 

 

 

 

Additionally, we believe that measuring neutralizing antibodies in vaccine recipients after vaccination may provide greater insight into how vaccine responses hold up over time. That way, when levels of neutralizing antibodies eventually decrease, vaccine recipients will have a sense of when their neutralizing antibodies are unacceptably low and a revaccination is necessary to continue their protection from COVID-19.

 

 

 

 

(ii)

Screening plasma collected from individuals recovered from COVID-19 so that patients fighting COVID-19 can be treated with plasma containing high levels of Nabs. Additionally, Nabs need to be monitored in patients receiving convalescent plasma so that we learn what is an effective therapeutic dose.

 

37

 

Our test is different from neutralizing antibody tests currently available because:

 

 

·

It specifically tests for neutralizing antibodies, which are those needed to fight COVID-19 within the body;

 

 

 

 

·

It can quantitatively measure the amount of neutralizing antibodies a person has;

 

 

 

 

·

Patients get their results in just a few minutes; and

 

 

 

 

·

It is portable.

     

In preclinical research, our test has already been proven to work with 97.8% accurately in plasma and serum and can easily be modified to work on any specific strains of COVID-19; accordingly, we believe that newly-discovered strains will not affect its efficacy. Our test has shown a significantly better statistical correlation with SARS-CoV-2 neutralization assays than the currently available antibody tests. Since the rapid test lends well to conducting live virus-based assays, we believe that it could serve as an effective low-cost alternative to lab-based assays for monitoring large numbers of vaccine recipients for neutralizing antibodies.

 

As our scientific team was hard at work developing our COVID-19 rapid diagnostic tests we were frustrated by the delays and costs caused by lack of supply of a recombinant virus binding protein (“VBP”) for SARS-CoV-2 were essential to our testing. To continue our projects as planned and decrease overall costs, we decided to make our own VBP, which is even more potent than current outsourced options. Our laboratory tests have proven that SARS-CoV-2 receptor binding domain (“RBD”) spike protein binds with our novel VBP. Initial tests also show that our novel VBP is approximately ten times more potent and stable than other VBP options currently on the market. We now develop these core ingredients needed to manufacture test strips in-house, and believe that moving such production in-house provides us with the potential to derive additional revenue and also allows us to control our supply chain. We have already manufactured enough VBP for millions of rapid diagnostic tests.

 

In August 2020, we signed an exclusive licensing, manufacturing and distribution agreement with Empowered Diagnostics, LLC (“Empowered”) to execute the high-volume production of our rapid point-of-care diagnostic test. Together with Empowered, we completed the technology transfer, and Empowered built out their production facility to enable them to manufacture millions of our tests per month. The test was used to complete two human point-of-care clinical trials, and Empowered Diagnostics filed for FDA emergency use approval (“EUA”) of the device on March 24, 2021.

 

On January 28, 2022, the FDA notified Empowered that it was issuing a Class One recall for the test together with Empowered’s antigen test for mislabeling. The FDA also notified Empowered that it would no longer consider EUA’s unless they were fully quantitative and because the test Empowered had filed the EUA for was semi-quantitative it would be denied. As per our agreement, we notified Empowered on February 10, 2022 that we were giving a 30-day cure notice or we would be terminating the agreement. On March 4, 2022, the two companies entered into a separation agreement.

 

On March 6, 2022, we announced that while the Company explores filing one or more EUA’s for point of care and/or at home use, we would begin to offer the test For Research Use Only (“RUO”), as it does not require FDA approval.

 

The test can facilitate research in a variety of areas related to COVID-19, including, diagnostic test development, vaccine and therapeutic development, studies related to immunity and adaptive immune response, and epidemiological research into the control of the virus. The Nab test will allow researchers to assess the efficacy of COVID-19 vaccines and compare effectiveness of naturally acquired vaccine-induced antibody response.

   

38

 

The Company is making two tests available for RUO, including the quantitative measurement of neutralizing antibodies using a reader, which will provide the exact number detected, and a semi-quantitative test for the measurement of neutralizing antibodies, which will identify high, medium, and low neutralization titers.

 

Notwithstanding ongoing monitoring of immune responses, there is an urgent need to fully understand the efficacy of vaccines and to identify what are the correlates of protection. Offering our Nab tests for RUO may help support vaccine efficacy evaluation and herd immunity assessments. In fact, our partner and co-inventor of the test, Dr. Douglas Lake, has already tested hundreds of ASU students and faculty with our Nab test. Dr. Lake has an ongoing correlative study to measure exposure to the SARS-CoV-2 virus at different points in time by measuring and tracking the Nab levels before and after receiving vaccines, and before and after contracting the virus. Dr. Lake and the AXIM team have published numerous tentative reports regarding the correlation between vaccine immunity and natural immunity. Dr. Lake will continue his studies over the course of a year with the objective of determining definitive correlates of protection.

 

About Emergency Use Authorizations (EUAs)

 

The Emergency Use Authorization (“EUA”) authority allows FDA to help strengthen the nation’s public health protections against chemical, biological, radiological, and nuclear threats including infectious diseases, by facilitating the availability and use of medical countermeasures needed during public health emergencies.

 

Under section 564 of the Federal Food, Drug, and Cosmetic Act, when the Secretary of Health and Human Services (“HHS”) declares that an emergency use authorization is appropriate, FDA may authorize unapproved medical products or unapproved uses of approved medical products to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions caused by CBRN threat agents when certain criteria are met, including there are no adequate, approved, and available alternatives. The HHS declaration to support such use must be based on one of four types of determinations of threats or potential threats by the Secretary of HHS, Homeland Security, or Defense.

 

On February 4, 2020, the HHS Secretary determined that there is a public health emergency that has a significant potential to affect national security or the health and security of United States citizens living abroad, and that involves the virus that causes COVID-19.

 

COVID-19 Emergency Use Authorizations for Medical Devices

 

In vitro diagnostic (“IVD”) devices are tests performed on samples taken from the human body, such as swabs of mucus from inside the nose or back of the throat, or blood taken from a vein or fingerstick. IVDs can detect diseases or other conditions and can be used to monitor a person’s overall health to help cure, treat, or prevent diseases.

 

There are several types of SARS-CoV-2 and COVID-19 related IVDs:

 

 

·

Diagnostic Tests: Tests that detect parts of the SARS-CoV-2 virus and can be used to diagnose infection with the SARS-CoV-2 virus. These include molecular tests and antigen tests.

 

 

 

 

·

Serology/Antibody and Other Adaptive Immune Response Tests: Tests that detect antibodies (for example, IgM, IgG) to the SARS-CoV-2 virus or that measure a different adaptive immune response (such as, T cell immune response) to the SARS-CoV-2 virus. These types of tests cannot be used to diagnose a current infection.

 

 

 

 

·

Tests for Management of COVID-19 Patients: Beyond tests that diagnose or detect SARS-CoV-2 virus or antibodies, there are also tests that are authorized for use in the management of patients with COVID-19, such as to detect biomarkers related to inflammation. Once patients are diagnosed with COVID-19 disease, these additional tests can be used to inform patient management decisions.

  

On September 16, 2020, we filed an EUA application with the FDA for measuring COVID-19 neutralizing antibodies in plasma and serum through our first-in-class rapid diagnostic test. We amended the EUA to include positive results from a Biosafety Level 3 (BSL-3) live virus test that positively correlates the rapid 10-minute lateral flow assay test that accurately detects and measures levels of functional COVID-19 neutralizing antibodies in plasma which the FDA demanded.

  

39

 

On March 24, 2020, our manufacturing partner at the time, Empowered Diagnostics, filed an EUA application with the FDA for measuring COVID-19 neutralizing antibodies in whole blood for a Point-of-Care application of our rapid diagnostic test. On November 15, 2021, the FDA announced that it was changing its guidelines for neutralizing antibodies tests and would only accept applications for fully quantitative tests. In January 2022, the FDA informed Empowered it would not approve the EUA. While the Company contemplates filing a new EUA, we have announced that we will begin sale of the test for Research Only Use.

 

Our COVID-19 related product candidates, including our lateral flow diagnostic test for measuring SARS-CoV-2 neutralizing antibodies, are subject to uncertainties relating to product development, regulatory approval and commercialization, and further risks based on the constantly evolving situation affecting the United States and the international community. Even if we are able to commercialize our product candidates, there is no assurance that these candidates would generate revenues or that any revenues generated would be sufficient for us to become profitable or thereafter maintain profitability. Additionally, due to the COVID-19 pandemic the FDA is over-run with EUA applications from thousands of biotech and pharmaceutical companies and could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

 

Eye Health

 

On August 26, 2021, we acquired the intellectual property and the exclusive global rights to market two FDA approved lateral flow assays which utilize a non-invasive, quantitative, point of care human tear test to aid in the diagnosis and selection of therapeutics for the treatment of eye diseases.

 

Currently, we have FDA 510k approval to test Lactoferrin (aqueous deficiency biomarker) and IgE (non-specific allergy biomarker). Our objective is to establish point of care testing for dry eye disease (“DED”) and to establish this modality as the new standard of care. The tests are quick, simple to use, and inexpensive to the clinic. The tests are CMS and private insurance reimbursable.

 

While at one time the tests were sold in numerous eye doctors locations, when the Company acquired the assays they had been mothballed and the Company had to redevelop the tests, reagents and select a quantitative reader. Since the acquisition of the technology, the Company has been successful in redevelopment and is preparing to launch sales.

 

We have signed a supply agreement with Barcelona-based IUL SA (“IUL”) for our iPeak DED readers, which will be deployed for diagnostic testing with a focus on lactoferrin and IgE levels. This state-of-the-art portable reader is a colorimetric lateral flow reader designed to hold different cassette sizes and can read cassettes of up to five strips and seven lines per strip at a time.

 

iPeak is equipped with “Flash Eye” technology based on the principles of machine vision illumination. Its camera captures the image of the test illuminated from LED lights situated in the most studied geometry to achieve a precise and uniform illumination and enhance the colors of any lateral flow test. The iPeak technology also allows for more sensitivity, which is the main success of its application.

 

We evaluated the iPeak readers in the lab against six other comparable products before deciding on IUL’s state-of-the-art products. The new readers will be calibrated with the new test strips and distributed to our Medical Advisory Board (“MAB”) of renowned DED experts for non-clinical field testing on their patients, which includes studying the accuracy and ease of use. These tests are expected to run for a few weeks and the MAB will provide management with data and feedback regarding the test results and any other research findings.

 

The Company’s diagnostic testing process for DED, and specifically for lactoferrin levels as a primary indicator, will include the use of reagent strip samples. These strips will have the patients’ tear sample obtained and applied and then an ophthalmologist or optometrist will run the strips through a reader to determine lactoferrin levels and incidence and severity of DED.

 

Our tests are considered moderately complex by CLIA. This requires the user of the test to obtain a CLIA certificate of compliance. This is done by filing a simple application with CMS. (Form 116). We will assist in the filing to provide an effortless process for the customer. Additionally, we are pursuing a waiver for current and future product offerings and intend to file for the waiver in the second or third quarter of 2022.

  

40

 

To manage and navigate the CLIA compliance, readers, lab testing and field-testing process, we have retained veteran laboratory testing executive Barry Craig as a consultant. In this role, he will manage the Company’s DED lab testing initiative. He has more than 25 years of experience in the clinical laboratory as a Generalist, QA Coordinator, and Microbiology Supervisor. He also served as Lab Coordinator for the Children’s Hospital of Alabama for 12 years. Craig has deep-seated experience in regulatory compliance as the owner of Laboratory Consulting, LLC, and has served as the Regulatory Compliance Consultant for CLIA, the Commission on Office Laboratory Accreditation (“COLA”), and the College of American Pathologists (“CAP”). He has successfully established more than 200 moderate and high complexity laboratories, and is a contributor for several trade publications such as MLO magazine, ADVANCE for Administrators of the Laboratory Magazine, and Physician Office Resource Magazine.

 

We believe that the acquisition of these FDA 510k cleared diagnostic products, along with proven management practices and capital, will allow the business to grow at a rapid pace. Low levels of Lactoferrin confirm inadequate glandular tear production (aqueous deficiency) and high levels of IgE indicate an active ocular allergy. If both biomarkers are normal, the cause of a patient’s dry eye condition could be attributed to evaporative dry eye. So, by performing these two tests, an eye doctor may now precisely know the underlying cause of the tear film disorder, its severity and the appropriate treatment protocol to pursue. In addition, these tests are rapid, accurate, reimbursable, profitable and can be performed by a technician, which allows the physician to be more productive and attend to more patients.

 

Dye Eye Market

 

An estimated 16 million Americans have been diagnosed with DED, but the actual number of Americans suffering from dry eye symptoms is likely much higher. Some reports indicate that nearly half of all U.S. adults experience dry eye signs and symptoms, and 33% of patients in eye care clinics present with complaints about dry eye.

 

DED, though widespread, is under-diagnosed, in part because symptoms do not always correlate with objective signs. It has a highly variable symptom profile at different stages of the disease, and there is often a discordance between signs and symptoms. A patient can have severe symptoms yet show no sign of ocular surface damage, while others have advanced ocular surface damage, yet report no symptoms. This lack of correlation between clinical signs and symptoms of DED makes diagnosing and treating patients a challenge. Often times, inflammation is present before the clinical signs of DED.

 

Currently, our eye business focuses exclusively on ophthalmology and optometry, in the United States, where there are 37,000 optometrists and 19,000 ophthalmologists performing approximately 400,000 medical (dilated) eye exams per day. Of this total, we believe that approximately 20% to 30% would present with symptoms where the Company’s Lactoferrin and IgE tests would be indicated. It is estimated that total US market for our eye care systems could approach 50,000 systems. (USA Only)

 

We have completed development of our immunoassay system, which includes an automated colorimetric photometer reader and two FDA market cleared point-of-care (POC) quantitative diagnostic ophthalmic lab tests. These are:

 

Ocular Lactoferrin )Lf) CPT code 83520 2021 CMS reimbursement $17.27/eye *

 

Ocular Immunoglobulin E (IgE) CPT Code 83520 2021 CMS reimbursement $16.46/eye*

 

Studies indicate that in 2021, 16-49 million Americans had DED, representing 32 - 98 million potential use cases for our POC tests. These tests are not limited to DED diagnostics, but can also be used to determine the lactoferrin and allergic components of tear film prior to:

 

 

·

Contact lens fitting – approximately 45 million people wear contact lens in the US alone (2021).

 

 

 

 

·

LASIK surgery- approximately 718,000 (2020).

 

 

 

 

·

Cataract surgery with lens exchange - approximately 3.8 million (2018).

 

The barrier for entrance into the dry eye space is difficult and requires extensive clinical studies, large capital expense and FDA 510k approval. This process alone can take several years and substantial investment, with no certainty that the product will receive FDA 510k approval.  For this reason, the Company determined that acquiring the two 510k’s would be a favorable strategic decision. 

 

41

 

Business Model

 

Our eye business model will utilize a razor/razor blade model. The two sources of revenue: (1) the sale of readers and (2) sale of disposable tests. It is anticipated. that 95+% of gross profits will be generated from the sale of tests. We have not determined the list price of the readers. Discounts will be offered to purchasing groups, corporate accounts, academic institutions engaged in research or training, and others as deemed appropriate. It is anticipated that the average price for the reader will be slightly above our acquisition costs, while pricing of consumable diagnostic kits will be at roughly half of the CMS published reimbursement floor rate. Current pricing is $2,100 for 100 bilateral test cassettes (200 tests) and provides a margin of approximately 65 - 72%.

 

Market demand for the system is expected to be moderate to begin with until we become a preferred vendor with a large purchasing group or until we are granted a waiver from CLIA. At that time we expect high demand for our system. We also expect high demand for our recently developed MMP-9 quantitative test once we get FDA 510k clearance. While we must compete with other capital equipment expenditures under consideration in any ophthalmic physician’s office, we believe that no other ophthalmic device offers the combination of compelling clinical and financial benefits afforded by our system. The clinical utility of the tests offers important diagnostic precision, differentiation and treatment management direction. Inner-office efficiencies significantly improve the patient flow characteristics, reducing patients in office visit time and greatly reducing physicians chair time with each patient.

 

Financially, for every patient per day tested the physician will receive, on average, $2 in reimbursement for every $1 expended on supplies.

 

CMS and private insurance allow for physicians to retest their patients as often as deemed medically necessary. The average retesting rate for Lactoferrin is 65% ,while the IgE retesting rate is 35%.

 

Dye Eye Disease Competition

 

Currently there are five FDA approved tests for DED:

 

Biomarker

 

Company

 

Type

 

CLIA status

 

 

 

 

 

 

 

Lactoferrin

 

Axim

 

(quantitative analysis)

 

moderate complexity

 

 

 

 

 

 

 

IgE

 

Axim

 

(quantitative analysis)

 

moderate complexity

 

 

 

 

 

 

 

MMP9

 

Quidel

 

(qualitative only)

 

waived

 

 

 

 

 

 

 

Osmolarity

 

TearLab

 

(quantitative analysis)

 

waived

 

 

 

 

 

 

 

Ocular Adenovirus

 

Quidel

 

(qualitative only)

 

waived

 

The preferred clinical analysis is quantitative, giving us an advantage over the competition. Since our reader can interpret many different analytes other than Lf and IgE, it also opens the possibility of additional quantitative test development.

 

New Eye Heath Division Additions

 

On September 15, 2021, we announced that we had appointed Jeffrey A. Busby to Senior Vice President – Business Development. Mr. Busby brings more than 30 years’ experience developing and managing national and international ophthalmic medical device sales and support teams. That experience includes Sr. Regional Management - Alcon Laboratories, Ft. Worth, TX, US Director of Sales VISX, Santa Clara, CA, Director of Global Strategic Accounts, Advanced Medical Optics (AMO) (Canada, Latin America and Europe). Mr. Busby served for eight years as Chief Commercial Officer for Advanced Tear Diagnostics, located in Birmingham, AL, and most recently, Chief Revenue Officer Scanoptix, located in Charlottesville, VA.

  

42

 

In this newly created position, Mr. Busby will be responsible for the launch and commercialization of the Company’s recently announced acquisition of diagnostic technologies for DED that includes two FDA cleared 510(k) authorizations for the commercial sale of two ophthalmic “point of care” diagnostic lab tests -- which are approved for reimbursement by both CMS and private insurance and will be used by both Optometrists and Ophthalmologists.

 

On September 21, 2021, we announced that we had appointed Joseph Tauber, MD as Chief Medical Officer and Chairman of our Medical Advisory Board. With over 30 years of clinical experience, Dr. Tauber is an internationally recognized authority in the field of ocular surface diseases including dry eye and meibomitis management. He is an entrepreneurial private practice ophthalmologist with extensive experience as a clinical trials researcher and business consultant to global health product companies and institutional investors. Dr. Tauber has served on numerous scientific advisory boards and as the Ophthalmology representative at institutional investor-focused conferences.

 

Dr. Tauber is the founder and CEO of Tauber Eye Center, a practice focused on corneal disease, uveitis and ocular immunology and complex corneal surgical procedures, as well as Medical Director of Saving Sight, the US’ third largest eye bank. Dr. Tauber has been centrally involved in numerous significant dry eye development projects during the past 25 years. He has served as a Principal Investigator in over 140 multicenter clinical trials, including those that led to the approval of all four medications currently approved by the FDA for the treatment of dry eye – Restasis, Xiidra, Cequa and Eyesuvis. He has been avidly involved in research for nearly three decades, and has served as a principal investigator in over 140 research studies across a broad range of eye conditions, including high-risk corneal transplantation, inflammation and allergic eye diseases, corneal infectious diseases and numerous ocular surface conditions.

 

Dr. Tauber received his doctorate from Harvard Medical School, residency training in internal medicine at Beth Israel Hospital and in ophthalmology at Tufts-New England Medical Center, and fellowship training in Ocular Immunology and in Corneal Diseases and Surgery at the Massachusetts Eye & Ear Infirmary, all in Boston, Massachusetts. Dr. Tauber has also written eight book chapters and over 80 peer-reviewed articles in the fields of ocular surface and immunologic disease for prestigious medical journals as Ophthalmology, Investigative Ophthalmology and Visual Science, Journal of Cataract and Refractive Surgery and Cornea. He has been awarded the Heed Ophthalmic Foundation Fellowship Award and a National Eye Institute Individual NRSA Award.

 

On October 05, 2021, we announced that we had appointed Laura M. Periman, MD to our recently established Medical Advisory Board. Dr. Periman brings 30 years’ experience in medicine, the last 20 of which include her clinical practice specializing in ocular surface disease and DED. Currently, she serves as Founder and Director of Dry Eye Services and Clinical Research of the Seattle-based Periman Eye Institute. Additionally, she has served as a principal investigator in ophthalmic clinical research primarily centered on ocular surface disease innovations including neural stimulation for treating DED, novel topical therapeutics as well as innovative procedures such as IPL, Radiofrequency and more. Dr. Periman is an international lecturer and has also served as a reviewer and editor for various top-tier medical journals, and is a consultant to numerous leading ophthalmic pharmaceutical and medical device companies.

 

Dr. Periman is a board-certified ophthalmologist, fellowship-trained cornea and refractive surgeon. She has published over a dozen peer-reviewed publications, six as first author and has written and presented extensively on the topic of Ocular Surface Disease. Dr. Periman is a manuscript reviewer for “Ophthalmology,” and “Photobiomodulation, Photomedicine and Laser Surgery,” and serves on the editorial boards of “Journal of Dry Eye and Ocular Surface Disease,” “Ophthalmology Management” and “Ocular Surgery News.” She is a member of numerous Scientific Advisory Boards, and frequent presenter for or on behalf of these companies, including: Alcon, Allergan, Avellino, Azura, Eyedetec, Eyevance, Horizon, Johnson &Johnson, Novartis, NuLids, Sight Sciences, Sun, TearLab, and Visant. Dr. Periman completed her Ophthalmology Residency as well as Cornea/Refractive Fellowship at the University of Washington in Seattle. 

 

On October 11, 2021, we announced that we had appointed Henry D. Perry, MD to our recently established Medical Advisory Board. A recipient of the Life Achievement Award from the American Academy of Ophthalmology, Dr. Perry is recognized as one of the US’ leading cornea and refractive surgeons. He serves as Senior Founding Partner, Ophthalmic Consultants of Long Island as well as Chief, Cornea Service, Nassau University Medical Center, New York. He has won numerous Best Doctor awards and was recently recognized as one of the top 150 Ophthalmologists in America by “Newsweek” magazine in 2021.

 

43

 

Dr. Perry is the Senior Founding Partner of Ophthalmic Consultants of Long Island, and Chief, Cornea Service at Nassau University Medical Center, East Meadow, New York. He earned his medical degree with honors from the University of Cincinnati College of Medicine and completed his residency at the Nassau County Medical Center and the University of Pennsylvania Scheie Eye Institute. Dr. Perry went on to earn fellowships in Ophthalmic Pathology at the Armed Forces Institute of Pathology in Washington D.C., and in cornea and external disease at the cornea service of the Massachusetts Eye and Ear Infirmary, Harvard University. He then served two years in the United States Army as Major, Medical Corps at Fort Sam Houston, San Antonio and Fort Dix, New Jersey.

 

Dr. Henry Perry is recognized as one of the leading cornea and refractive surgeons in the US and has written over 200 papers and chapters on corneal and refractive surgery and ophthalmic pathology. He has given over 500 invited lectures around the US and abroad including several named lectureships. He has served as medical director of the Lions Eye Bank for Long Island at Northwell Health since 1987. He serves as Senior Editor for the Journal “Cornea” and is the winner of the Honor Award, Senior Honor Award and Life Achievement Award from the American Academy of Ophthalmology. He has won numerous Best Doctor awards and was recently recognized as one of the top 150 Ophthalmologists in America by “Newsweek” magazine in 2021.

 

On October 20, 2021, we announced that we had appointed Kelly K. Nichols, O.D., M.P.H. and Ph.D. to our Medical Advisory Board. A founding member of the Ocular Surface Society of Optometry, Dr. Nichols currently serves as Dean of the School of Optometry at The University of Alabama at Birmingham. She is an acknowledged expert on DED and Ocular Surface Disease and has been extensively published. She earned her second B.S. and a Doctor of Optometry (“O.D.”) at UC Berkeley, and an M.P.H in biostatistics and a Ph.D. in Vision Science at Ohio State University.

 

Dr. Nichols currently serves as Dean of the School of Optometry at The University of Alabama at Birmingham. She has served extensively on the Executive Board and for the Tear Film and Ocular Surface Society and on each of the steering committees (DEWS, DEWS II, Contact Lens Discomfort, and MGD workshops), and is a founding member of Ocular Surface Society of Optometry. She currently serves as president of the Association for Schools and Colleges of Optometry (ASCO) and secretary of the National Alliance for Eye and Vision Research (NAEVR)/ Alliance for Eye and Vision Research (AEVR). Dr. Nichols is a leading expert in DED who has been on the editorial boards of the journals “Optometry and Vision Science,” and “The Ocular Surface.” Her research encompasses meibomian gland dysfunction, dry eye in menopause, dry eye diagnostics and therapeutics, and tear proteomics and lipidomics. She received her Doctor of Optometry degree from the University of California at Berkeley, completed a residency in ocular disease at Omni Eye Specialists of Colorado, and earned her M.P.H in biostatistics and Ph.D. in vision science at Ohio State University. 

 

On November 02, 2021, we announced that we had appointed Michael E. Stern, MS, Ph.D., to the Company’s Medical Advisory Board. Dr. Stern brings over 30 years of senior scientific, research, academic and executive level expertise with DED and ocular surface disease (“OSD”). Currently, he is a Principal and Chief Science Officer for immunEyze, a boutique contract research organization that performs preclinical and clinical research for OSD indications. Previously, he served for 26 years with Allergan, where he rose to Principal Scientist and Vice-President Inflammation Research and where his work included elucidating the pathophysiology of DED. He is extensively published in leading ocular journals.

 

Dr. Stern has authored over 100 publications, 300 abstracts and several book chapters. Additionally, along with Dr. Stephen Pflugfelder and Dr. Roger Beuerman, he published a book: Dry Eye and Ocular Surface Disorders (2004). He is a member of the Editorial Board of The Ocular Surface, and reviews papers for several professional journals. Dr. Stern has finished a term as Adjunct Associate Professor at Baylor College of Medicine (Houston, Texas) and is currently Co-Director of Ocular Immunology at IOBA (University of Valladolid, Valladolid, Spain). He is also a Visiting Professor of Ophthalmology at the University of Cologne (Germany). He has received the Diaz-Caneja Award and given the Award Lecture at the International Ocular Surface Society. Dr. Stern earned his BS at Purdue University, and an MS and Ph.D. in Physiology/Ophthalmology from Medical College of Wisconsin.

 

44

 

New Quantitative MMP-9 Test

 

On March 8, 2022, we announced that we had successfully developed what we believe to be the first-ever rapid quantitative tear test for MMP-9, an inflammatory biomarker for DED. Matrix metalloproteinase-9 (MMP-9), an inflammatory biomarker consistently elevated in the tears of dry eye patients, may accelerate early diagnosis when detected.

 

The central role of inflammation in OSD is widely recognized, but our ability to measure this in the clinic has been limited to the Quidel InflammaDry test, which measures tear matrix MMP-9 levels and provides a positive/negative result around a threshold of 40ng/ml of MMP-9. This “yes or no” report has clinical value, but it is limited. Currently available MMP-9 testing does not detect a reduction in tear MMP-9 levels until the concentration drops below 40ng/ml and, thus, may miss clinically significant improvement that did not reach that threshold.

 

The clinical benefits of our quantitative tear MMP-9 testing would be a significant advance in the ability to measure the degree of inflammation affecting dry eye patients, allowing for more objective classification of their disease. Equally important would be the ability to measure improvement in control of inflammation that is the goal of many of our therapies for OSD, including pharmaceuticals, thermal pulsation treatments and even light based therapies.

 

We are also in the process of developing additional bio-marker tests that will be done on the existing platform, without the constant need of the clinician to upgrade to a newer platform. The Lateral Flow test reader is software driven and can be programmed to interpret other biomarkers as they are clinically studied and FDA approved. The test uses 0.5 microliters of human tear fluid, that is applied to a disposable lateral flow cassette (one cassette per patient tested). The disposable single use cassette generates a substantial, reoccurring revenue stream for our eye business and our stakeholders.

 

Oncology

 

We acquired Sapphire in order to develop and commercialize a unique therapeutic approach designed to disrupt cancer growth and block metastatic spread. Prior to our acquisition of Sapphire, the Company acquired an exclusive license to the technology around SBI-183, an anti-metastatic compound developed by Dr. Douglas Lake at Mayo Clinic and Arizona State University to inhibit QSOX1. Dr. Douglas Lake is a co-founder of Sapphire.

 

Oncology Strategy

 

We continue to advance our mission of improving global cancer care through the development of novel therapeutics for controlling metastatic cancer spread, and diagnostics for early cancer detection, response to treatment, and for monitoring post-treatment recurrence. We aspire to be the leader in QSOX1-targeted metastatic cancer therapies, and have undertaken the development of a potent QSOX1 inhibitor to be used as a platform drug for a variety of indications.

 

We have been investigating the enzyme Quiescin Sulfhydryl Oxidase 1 (“QSOX1”), a master regulator of extracellular matrix remodeling, and its overexpression by tumor cells. QSOX1 is a tumor-derived enzyme that is important for cancer growth, invasion and metastasis. Overexpression of QSOX1 has been unambiguously linked to promoting tumor invasion and metastasis. One of the Company’s co-founders, Dr. Douglas Lake, has discovered that a small molecule SBI-183 inhibited the enzymatic activity of QSOX1, and as a result, suppressed tumor cell invasion in vitro and metastasis of breast tumor cells in vivo. Through our medicinal chemistry efforts, we synthesized multiple structural analogs of SBI-183 and unveiled SPX-1009 as a lead compound that demonstrated ten-fold improvement in suppressing invasion and metastasis in several cancer models.

 

Through our medicinal chemistry efforts, we have synthesized multiple structural analogs of SBI-183, and we unveiled SPX-1009 as a lead compound that demonstrated ten-fold improvement in suppressing invasion and metastasis in several cancer models.

 

We believe that our therapeutic drug development strategy targeting the metastatic spread is a unique, novel and pioneering approach to saving lives. Our near-term objective is to demonstrate the ability of our lead anti-QSOX1 drug candidates to suppress tumor growth and metastasis and to advance them into pre-clinical studies.

 

We believe that Sapphire is the first to discover the over-expression of QSOX1 as a biomarker for cancer in blood. We have filed a patent application claiming many discoveries related to QSOX1, including a rapid diagnostic test, which we have developed into a lateral flow device capable of measuring levels of QSOX1. Our equivalent of a liquid biopsy test is a non-invasive, rapid blood test that will measure QSOX1 over-expression. Liquid biopsy refers to the process of testing the blood for the presence of a disease biomarker. Most so-called “liquid biopsy” companies test blood for circulating tumor cells (“CTCs”) and DNA sequences. The disease biomarker we test for is an enzyme. We seek to prove that measuring QSOX1 over-expression, even before the tumor is formed, will enable detection of cancer at an earlier stage than liquid biopsy companies whose tests detect the CTC’s and DNA, usually after the tumor is formed and is shedding cells.

  

45

 

On January 13, 2020, Sapphire entered into an agreement with Skysong Innovations, LLC (“Skysong”) for an exclusive license to technology relating to SBI-183, an anti-metastatic compound suppressing tumor cell growth and blocking metastasis. As consideration for the license agreement, the Company agreed to grant Skysong (as licensing agent for Mayo Clinic Ventures and Arizona State University) 80,000 shares of Sapphire, which converted into 4,800,000 shares of Axim Biotechnologies, Inc., upon the merger.

 

Effective February 7, 2020, Sapphire entered into an Industry Sponsored Research Agreement (“SRA”) to test and confirm the inhibitory activity of SBI-183 and SBI-183 analogs, including those synthesized by the Company. The testing included cell-based in vitro assays, NMR binding studies and testing to determine if SBI-183 enhances the activity of cytotoxic drugs in vitro. Animal studies were also be conducted under the SRA. Specifically SBI-183 analogs will be evaluated in a mouse model of triple negative breast cancer using human tumor xenografts.

 

On August 11, 2020, Sapphire was awarded a $395,880 phase I Small Business Innovation Research (“SBIR”) grant by the National Cancer Institute (“NCI”). The 12-month grant supported the continued development of novel small molecules that inhibit the enzymatic activity of QSOX1 based on our lead compound SPX-1009.

 

Funded by the SBIR, we have made significant progress with the development of additional analogs of SPX-1009 and have synthesizing derivative compounds with improved anti-metastatic action. We have synthesized and screened more than 200 derivatives of SPX-1009, yielding a compound with significantly increased anti-metastatic inhibition. Recent medicinal chemistry efforts resulted in SPX-184 compound that showed much higher activity than SPX-1009 in 3D invasion assays with MDA-MB-231cell line (MD Anderson cancer line). SPX-184 is up to 50 times more potent than SPX-1009 and constitutes a unique composition. Since it is not an analyte of SPX-1009, SPX-184 is not covered under the license with Skysong Innovations.

 

We continue to advance our mission of developing novel therapeutics for controlling metastatic cancer spread, and diagnostics for early cancer detection, response to treatment, and for monitoring post-treatment recurrence. With Phase I of the SBIR now completed, we are preparing to seek a Phase II grant, seeking $1 million in grant funding from the National Cancer Institute/National Institutes of Health to further develop SPX-184. In addition to seeking additional grant funding to further our cancer research and development program, our strategies include potential partnering with a pharmaceutical company active in cancer therapeutic and/or licensing the technology so that it can be commercialized.

 

Milestones 2020 to Date

 

On January 13, 2020, Sapphire entered into an agreement with Skysong for an exclusive license to technology relating to SBI-183, an anti-metastatic compound suppressing tumor cell growth and blocking metastasis.

 

On February 6, 2020, Sapphire signs an SRA with Arizona State University to conduct in vitro testing and in vivo pre-clinical animal studies re cancer inhibitory agents that will prevent metastases.

 

On March 18, 2020, we announced the acquisition of Sapphire.

 

On March 24, 2020, Sapphire announced the completion of in-vitro studies on the new compound, SPX-1009, proving ten-fold greater inhibition of tumor metastasis than parent compound SBI-183 following testing of over 80 analogs.

 

On March 27, 2020, Sapphire signed an agreement with TD2 to initiate animal studies to evaluate the efficacy of SPX-1009 as an anti-metastatic treatment and to measure levels of QSOX1 as a potential companion diagnostic test.

 

On July 15, 2020, we announced the development of a rapid diagnostic test measuring levels of functional neutralizing antibodies that are believed to prevent SARS-CoV-2 from entering the host cells. Unlike currently available serological COVID-19 tests that detect an antibody response to the virus, our rapid 10-minute test measures a specific subpopulation of antibodies to block binding of the virus to host cell receptors. While there are expensive, time consuming laboratory tests that measure neutralizing antibodies, our test differs in that it is a portable, low cost, rapid point-of-care test with results in 10 minutes. Status: Ongoing

 

On August 5, 2020, we announced the development, patent filing and EAU filing of NeuCovix-HT™, a high throughput (“HT”) patent-pending diagnostic test that measures levels of functional antibodies in plasma or serum that neutralize SARS-CoV-2, the virus that causes COVID-19. Unlike current serology tests for COVID-19 that qualitatively detect antibodies to the virus, NeuCovix-HT™ quantitatively measures functional antibodies that block binding of the virus to host cell receptors.

  

46

 

On August 11, 2020, Sapphire was awarded a $395,880 phase I SBIR grant by the NCI. The grant has supported the continued development of novel small molecules that inhibit the enzymatic activity of QSOX1 based on a lead compound. QSOX1 is a tumor-derived enzyme that is important for cancer growth, invasion and metastasis.

 

On August 24, 2020, we signed an exclusive limited licensing, manufacturing and distribution agreement with Empowered Diagnostics LLC (“Empowered Diagnostics”) for high volume production of our rapid diagnostic test measuring levels of functional neutralizing antibodies that are believed to prevent SARS-CoV-2 from entering the host cells. The agreement has since been terminated.

 

On September 16, 2020, we filed the EUA application with the FDA for measuring COVID-19 neutralizing antibodies in plasma and serum through its first-in-class rapid diagnostic test. On January 2022, the FDA notified us that the priorities for testing had changed in favor of quantitative measurement of neutralizing antibodies Accordingly, the Company’s EUA for the qualitative test would no longer be considered.

 

On September 22, 2020, we announced that the United States Patent and Trademark Office (“USPTO”) had issued the Company a new Notice of Allowance for a patent (Application No. 15/748,784) on anti-neoplastic compounds and methods targeting QSOX1, an enzyme important for tumor cell growth, invasion and metastasis.

 

On September 29, 2020, we announced that we had filed a provisional patent for a first-in-class face mask that captures and deactivates SARS-CoV-2, the coronavirus responsible for the ongoing COVID-19 pandemic.

 

On December 31, 2020, we announced that we had filed a provisional patent for a recombinant VBP for SARS-CoV-2, the coronavirus responsible for the current COVID-19 pandemic, and are now manufacturing the VBP. As a result, we no longer need to rely on outside protein supply to continue our research and can greatly cut down on our manufacturing costs.

 

On December 3, 2020, we announced the development and patent filing for an enzyme-linked immunosorbent assay (“ELISA”)-based diagnostic test for the detection of SARS‐CoV-2 neutralizing antibodies.

 

On February 3, 2021, we announced the initiation of clinical trials for ImmunoPass, our rapid point-of-care test that semi-quantitatively measures levels of neutralizing antibodies to COVID-19.

 

On March 8, 2021, we announced that we had successfully completed point-of-care clinical trials on our much awaited ImmunoPass rapid test that semi-quantitatively measures levels of COVID-19 neutralizing antibodies to help understand COVID-19 immunity, validate vaccine’s effectiveness and estimate how long the vaccine will be effective in patients.

 

On March 24, 2021, the Company, through Empowered Diagnostics, filed an EAU application with the FDA for measuring COVID-19 neutralizing antibodies in whole blood for a Point-of-Care rapid diagnostic test. This relationship has been terminated.

 

On August 03, 2021, we announced that the Company has signed a Binding Term Sheet to acquire the technology for the testing of Dry Eye Disease (DED), including two FDA clearances for the commercial sale of two ophthalmic diagnostic lab tests. The transaction closed on August 26, 2021.

 

On March 6, 2022, we announced that while the Company explores filing one or more EUA’s for point of care and/or at home use, it would begin to sell the Company’s neutralizing antibody (“Nab”) rapid test For Research Use Only (“RUO”) as it does not require FDA approval.

 

On March 8, 2022, we announced that we had successfully developed what we believe to be the first-ever rapid quantitative tear test for MMP-9, an inflammatory biomarker for Dry Eye Disease. Matrix metalloproteinase-9 (MMP-9), an inflammatory biomarker consistently elevated in the tears of dry eye patients, may accelerate early diagnosis when detected.

 

47

 

Anticipated Expenses

 

During the next twelve months we anticipate incurring costs related to: (i) filing Exchange Act reports, (ii) contractual obligations, (iii) clinical trials, (iv) continued research and development, and (v) inventory to launch sales of dye eye products.

 

INTELLECTUAL PROPERTY

 

OVERVIEW:

 

Category

Issued

Patent

Provisional

Patent Applications

 

 

 

QSOX-1

1

11

SARS-CoV-2

 

12

EYE Health

 

2

EIS Platform

 

5

 

I. QSOX1-RELATED INVENTIONS.

 

QSOX1 (Quiescin Sulfhydryl Oxidase 1) is an enzyme that is over-expressed in multiple tumor types. Genetically silencing QSOX1 in tumors slows their growth, migration, invasion and metastasis. Based on these findings, the inventors of the inventions described below tested libraries of chemical compounds for the ability to inhibit QSOX1. Several inhibitors of the QSOX1 enzyme were identified. Initially, SBI-183 was identified and animal studies confirmed its ability to suppress tumor growth. The inventors subsequently developed an entire library of analogs of the parent compound, SBI-183, detailed in several inventions below to identify compounds with greater inhibitory activity. These compounds have the potential to be developed into therapeutic treatments for metastasis and to be used in conjunction with other neoplastic treatments, such as chemotherapy.

 

Included in the group of QSOX1-related inventions below is the identification of a specific splice variant of QSOX1, identified as QSOX1-L, as a unique Biomarker for the detection of certain tumors overexpressing QSOX1. This biomarker formed the basis for the invention relating to a Rapid Diagnostic Test for certain cancers.

 

A. Anti-Neoplastic Compounds and Methods Targeting QSOX1

 

1. US Provisional Patent Application No. 62/218.732 filed on September 15, 2015

PCT Provisional Patent Application W02017048712A1

US Nonprovisional Application No. 15/748,784 filed on January 30, 2018

 

Patent US 10,894,034 B2 Issued January 19, 2021

 

Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1

Assignee: Mayo Clinic/Arizona State University

Exclusive Licensee: Axim Biotechnologies, Inc.

 

Compounds and methods involving inhibition of the enzymatic activity of QSOX1. The compounds and methods can be used in treatment of neoplastic cells to suppress tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidney and pancreas. Claims include the compound SBI-183 as a neoplastic agent found to inhibit tumor growth, invasion and suppress metastasis of tumors by inactivating QSOX1.

 

a. Continuation US Patent Application 17/124/242 filed on December 16, 2020

 

Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1

Assignee: Mayo Clinic/Arizona State University

Exclusive Licensee: Axim Biotechnologies, Inc.

 

Compounds and methods involving inhibition of the enzymatic activity of QSOX1. The compounds and methods can be used in treatment of neoplastic cells, for example, to suppress tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidney, and pancreas.

  

48

 

2. US Provisional Patent Application No. 62/916,065 filed on October 16, 2019

 

Title: Chemical Compounds that Inhibit QSOX1 for the Treatment of Cancer

Assignees: Arizona State University/Axim Biotechnologies, Inc.

 

Derivatives of the parent compound SBI-183 have been identified as inhibiting the enzymatic activity of QSOX1. These compounds can be used in treatment of neoplastic cells by suppressing tumor growth and invasion in a variety of cancers that overexpress QSOX1, including but not limited to myeloma and cancers of the breast, kidney and pancreas.

 

3. US Provisional Patent Application No. 62/916,067 filed October 16, 2019

 

Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1

Assignees: Arizona State University/Axim Biotechnologies, Inc.

Exclusive Licensee: Axim Biotechnologies, Inc.

 

Compounds that are structurally distinguishable from the compound, SBI-183 are SPX-013 and SPX-014, and have been identified as inhibiting the enzymatic activity of QSOX1. The compounds and methods can be used in treatment of neoplastic cells by suppressing tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidney and pancreas.

 

4. US Provisional Patent Application No. 62/944/283 filed December 5, 2019

 

Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1

Assignees: Arizona State University/Sapphire Biotech, Inc.

Exclusive Licensee: Axim Biotechnologies, Inc.

 

Compounds that are structurally distinguishable from the SBI-183 have been identified as inhibiting the enzymatic activity of QSOX1. One in particular, SPX-1009, also inhibits tumor cell growth, migration and invasion in vitro and metastasis in a mouse model of triple negative breast cancer. This invention concerns analogs of this lead compound SPX-1009. In in vitro testing, the lead compound SPX-1009 and its analogs have been found to be more potent and to have improved pharmacodynamics in mouse models of cancer.

 

5. US Provisional Patent Application No. 62959752 filed January 10, 2020

 

Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1 and Inhibiting Cellular Responses to MET Receptor.

Assignee: Axim Biotechnologies, Inc.

 

Compounds and methods involving inhibition of the enzymatic activity of QSOX1 and methods of inhibiting cellular responses to the MET receptor signaling are disclosed which include administering any one or more compounds or pharmaceutical compositions. The compounds and methods can be used in treatment of neoplastic cells, for example, to suppress tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidney and pancreas. The uniqueness of the invention relates to the combined inhibition of QSOX1 and cellular responses to the MET receptor signaling.

 

B. Unique Biomarker QSOX1-L Identified and Rapid Diagnostic for Various Cancers

 

1. US Provisional Patent Application No. 62/829,556 filed April 4, 2019;

Utility Patent Application No. 16/841,521 filed April 6, 2020

International Patent Application No. PCT/US2020/026936 filed April 6, 2020

 

Title: Systems and Methods for Rapid Diagnostic for Various Cancers

Assignee: Axim Biotechnologies, Inc.

 

QSOX1-L, a splice variant of QSOX1, has been identified as a novel biomarker of bladder cancer and possibly other cancers in serum. Proprietary antibodies have been generated that selectively detect only this variant and not others. QSOX1-L has been used to develop a rapid and cost-effective diagnostic test for bladder and possibly other urologic cancers from urine.

    

49

 

C. Unique Compound SPX-184 Invented and Methods for Neoplastic Cell Growth Inhibition of Tumors and Cancers

 

2. US Provisional Patent Application No. 63/280,553 filed November 17, 2021

 

Title: Compositions, Compounds, and Methods for Neoplastic Cell Growth Inhibition of

Tumors and Cancers

Assignee: Axim Biotechnologies, Inc.

 

The present invention generally relates to compositions, compounds and methods for the treatment of various tumors or cancer and cell growth inhibition utilizing SPX-184.

 

II. SARS-CoV-2-RELATED INVENTIONS

 

A. Rapid Diagnostic Test to Measure Levels of Neutralizing Antibodies to SARS-CoV2

 

1. US Provisional Application No. 63/023,646 filed May 12, 2020

 

Title: Convalescent Plasma Testing and Treatment

Assignee: Axim Biotechnologies, Inc. (Axim) and Arizona State University (ASU)

Exclusive Licensee: Axim Biotechnologies, Inc. (ASU’s Interest) Exclusive Licensee: Empowered Diagnostics, Inc. (Axim’s Interest). License terminated March 4, 2022.

 

The invention refers to a Rapid Test to measure levels of Neutralizing Antibodies to SARS-CoV2. Unlike currently available serological COVID-19 tests that detect an antibody response to the virus, the rapid 10-minute test measures a specific subpopulation of antibodies that block binding of the virus to host cell receptors. In contrast to current tests using live viruses which are time-consuming, expensive and require trained personnel in a tightly controlled laboratory setting to measure neutralizing antibodies, the rapid test is a portable, low cost, rapid point- of-care test that measures levels of neutralizing antibodies in 10 minutes.

 

2. US Provisional Application No. 63/144,454 Filed February 1, 2021; US Provisional Application

No. 63/152,774 Filed February 23, 2021.

 

Title: Rapid LFA Diagnostic Test to Measure Levels of Neutralizing Antibodies to SARS- CoV-2 from Whole Blood

Assignee: Axim Biotechnologies, Inc.

Exclusive Licensee: Empowered Diagnostics, Inc. License terminated March 4, 2022.

 

The invention methods and test kits can be used with any sample in which the presence, absence and/or quantity of neutralizing antibodies (Nabs) to SARS-CoV-2 is desired to be determined, such as for example, serum, plasma, whole blood, saliva, mucous, and other biological fluids. In a particular embodiment, the invention methods and/or kits are used with whole blood.

 

All provisionals referenced in 1. and 2. above relating to the LFA Diagnostic Test were the subject of a conversion into an International Patent Application No. PCT/US2021/032106.

 

3. US Provisional Patent Application No. 63/252,908

 

Filing Date: October 6, 2021

Title: Development of the Engender SAR-Cov2 Recombinant Protein Variants

Assignee: Axim Biotechnologies, Inc.

 

The invention differentiates between antibodies that bind to the virus but do not neutralize and those that do bind and neutralize the virus. COVID-19 vaccines do not induce high levels of neutralizing antibodies in all recipients AXIM’s second generation test provides users with a test that shows if they responded to their COVID-19 vaccine and a semi-quantitative analysis of their neutralizing antibody levels in a single test.

    

50

 

4. US Provisional Patent Application No. 63/275,856

 

Filing Date: November 4, 2021

Title: Tests For Detection of Neutralizing And Non-Neutralizing Antibodies and Related Methods.

 

The invention relates to the detection of the percent neutralizing to non-neutralizing antibodies in a single test. Totality of non-Nab provides information on the presence of general innate immune response Nab test determines serum neutralizing activity. Ratio Nab/Non-Nab provides percent of protective Abs.

 

5. Continuation-in-Part 17/590,353 filed on February 1, 2022 to US Provisional Application 17/319,08 filed on May 12, 2021

 

Title: Assay for Neutralizing Antibody Testing and Treatment

Assignee: Axim Biotechnologies, Inc.

 

The invention diagnostic test is intended for semi-quantitative measurement of neutralizing antibodies in plasma, serum or whole blood of persons who have had recent or prior infection with SARS-CoV2 or have received a COVID-19 vaccine.

 

B. AlphaLisa Assay for High Throughput Detection of Neutralizing Antibodies to SARS-CoV2

 

1. US Provisional Application No. 63/060,635 filed August 3, 2020; US Provisional Application No. 63/061,112 filed August 4, 2020

 

Title: NeuCovix-HT AlphaLisa assay for high throughput detection of Neutralizing Antibodies to SARS-CoV-2

Assignee: Axim Biotechnologies, Inc. and Arizona State University (ASU)

Exclusive Licensee: Axim Biotechnologies, Inc. (ASU’s Interest)

 

The invention refers to an AlphaLisa assay for high throughput (HT) detection of Neutralizing antibodies to SARS-CoV-2. Included in the claims is the HT diagnostic test that measures levels of functional antibodies in plasma or serum that neutralize SARS- CoV-2, the virus that causes COVID19. Unlike current serology tests for COVID 19 that qualitatively detect antibodies to the virus, the HT test quantitatively measures functional antibodies that block binding of the virus to host cell receptors.

 

All provisionals relating to the AlphaLisa Assay have been abandoned due to the Company’s decision that commercialization of this technology is not viable.

 

C. Direct Competitive ELISA for the Detection of SARS-Cov2 Neutralizing Antibodies

 

1. US Provisional Application No. 63/152,807 filed February 23, 2021

 

Title: Direct Competitive ELISA for the Detection of SARS-CoV2 Neutralizing Antibodies

Assignee: Axim Biotechnologies, Inc.

 

The invention relates to a method for rapid detection of SARS-CoV2 Neutralizing Antibodies in one of the following test samples: human or animal serum, plasma, saliva, tear, sweat, exhaled breath condensate. The test sample is mixed with an ACE2 label detection reagent. The sample mixture is incubated, and the quantity of ACE2 label detection reagent bound to the RBD molecules indicates the quantity of SARs-Co2 Neutralizing Antibodies.

 

The provisional relating to the ELISA technology has been abandoned due to the Company’s decision that commercialization of this technology is not viable.

  

51

 

D. ACE2 Variants

 

1. US Provisional Application No. 63/081,811 filed September 22, 2020

 

Title: Super-ACE2 Variants

Assignee: Axim Biotechnologies, Inc.

 

The invention relates to a new variant recombinant protein of ACE2 identified as ACE2-614-Fc (“Super ACE2”), that is more potent and has a longer shelf life and is more stable than wild type ACE2. Super ACE2 variant can be used in a variety of ways as follows:

 

a. Development of competitive assays for neutralizing antibodies that disrupt RBD- ACE2 interaction.

b. Direct assays for virus spike antigens. Super ACE2 acts as a very specific antibody to capture Spike proteins through the RBD domain.

c. Cardio-vascular, blood-pressure and related disorders therapeutic and diagnostic.

d. Anything related to the virus capture such as (i) Mask treatments, (ii) Aerosols, (iii) Sprays and drops, (iv) Ointment and dermal applications, (v) Surfaces

 

E. Facemask Having Enhanced Infectious Agent Capturing and Related Methods

 

1. US Provisional Application No. 63/066,104 filed August 14, 2020;

US Provisional Application No. 63/084,407 filed September 28, 2020

 

Title: Facemask Having Enhanced Infectious Agent Capturing and Related Methods

Assignee: Axim Biotechnologies, Inc.

 

The invention is a facemask with a filtration material and an infectious agent capture-moiety. Infectious agent capture-moiety refers to any compound or biomolecule that can bind to any infectious agent. The filtration material acts as a scaffold to either directly block or impede the flow-through of the infectious agent or to support the infectious agent capture moiety. The infectious agent capture-moiety then functions to directly block or impede the flow-through of an infectious agent. The infectious agent-capture moiety can aerosolized and sprayed or applied onto pre-treated filtration material and can be specific to capture infectious agents, such as SARS-CoV-2. In such embodiments, the facemasks is capable of providing enhanced protection for the user and to others from SARS-CoV2.

 

III. TECHNOLOGY PLATFORM-RELATED INVENTIONS

 

A. Electrical Capacitance/Impedance Spectroscopy

 

1. Title: Imaginary Impedance Approach and Signal Decoupling Algorithm for Multi-Marker Detection Using Electrochemical Impedance Spectroscopy.

U.S. Patent Application Serial No.: 16/495,682 Filed: March 20, 2018

Exclusive License of Advanced Tear Diagnostics, LLC’s (ATD) Interest: Axim Biotechnologies

Co-owned by Arizona State University.

 

Methods for detecting one or more analytes in a sample utilizing Electrochemical Impedance Spectroscopy (EIS) measurement. In one method, analyte detection includes comparing an imaginary impedance measurement to a calibration curve of concentrations for each target analyte. The calibration curve of concentrations for each target analyte is established at an optimal frequency. In another method, a signal decoupling algorithm is utilized for detection of more than one analyte on an electrode.

 

2. Title: Electrochemical Osmolarity or Osmolality Sensor for Clinical Assessment.

 

U.S. Provisional Patent Application Serial No.: 62/455,913. Filed: February 7, 2017 PCT: W02018 148236

Exclusive Licensee of ATD’s Interest: Axim Biotechnologies, Inc.

Co-owned by Arizona State University

 

Osmolality and osmolality sensors and methods utilizing electrochemical impedance to detect changes in impedance to varying salinity concentrations. By way of example, the impedance reported at the specified frequency varies logarithmically with the concentration of sodium chloride subject to the sensor surface. Measurements obtained by the sensors and methods herein are utilized, for example, to differentiate between the clinical stages of dry eye disease (290- 316 mOsm/L) to complement the current diagnostic procedures. Blood serum, urinalysis, and saliva also may be tested and the corresponding osmolarity or osmolality level evaluated for indications of a disease or condition.

   

52

 

3. Title: Point of Care Apparatus and Methods for Analyte Detection Using Electrochemical Impedance Spectroscopy.

 

U.S. Provisional Patent Application: US2021/011778171. PCT/US 2018 03760. Filed: May 4, 2018

Exclusive Licensee of ATD’s Interest: Axim Biotechnologies, Inc.

Co-owned by Arizona State University

 

The presence of analytes can be detected in the bodily fluid using Electrochemical Impedance Spectroscopy (“EIS”) or Electrochemical Capacitance Spectroscopy (“ECS”) in devices, such as handheld point-of-care devices. The devices, as well as systems and methods, utilize using EIS or EIS in combination with an antibody or other target-capturing molecule on a working electrode. Imaginary impedance or phase shift, as well as background subtraction, also may be utilized.

 

4. Title: Point of Care Apparatus and Methods for Detecting Cancer Using Electrochemical Impedance or Capacitance Spectroscopy.

 

U.S. Provisional Patent Application Serial No.: 16/119,989 Filed: August 3, 2018

Exclusive Licensee: Axim Biotechnologies, Inc.

 

The presence of cancer biomarkers or other analytes can be detected in the bodily fluid using EIS or ECS in devices, such as handheld point-of-care devices. The devices, as well as systems and methods, utilize using EIS or ECS in combination with an antibody or other target-capturing molecule on a working electrode. Imaginary impedance or phase shift, as well as background subtraction, also may be utilized.

 

5. Title: Point of Care Apparatus and Methods for Detecting Cancer Using Electrochemical Impedance or Capacitance Spectroscopy.

 

U.S. Patent Application Continuation-in-Part. Serial No.: 16/121,474 Filed: September 4, 2018

Exclusive Licensee: Axim Biotechnologies, Inc.

 

This disclosure is related to detection tools, diagnostics and related methods in volving the use of an electrochemical sensor in conjunction with electrochemical impedance spectroscopy or electrochemical capacitance spectroscopy, and more particularly to using such tools to detect cancer via biomarkers contained in bodily fluids using such detection tools, diagnostics, and related methods. Many different analyte detection devices and systems exist. However, those that can be practically applied in a clinical, point of care or other setting requiring accuracy and reliability are fairly limited and tend to be complex and expensive.

 

IV. EYE HEALTH

 

1. Title: TEAR SAMPLE COLLECTORS, SYSTEMS AND METHODS

 

U.S. Provisional Patent Application No. 63/307,987 filed February 8, 2022.

Exclusive Assignee: Axim Biotechnologies, Inc.

 

Tear fluid analysis contributes to the greater understanding of various ocular and systemic diseases and obtaining adequate samples for tear analysis requires effective collection methods. Most tear sample collectors on the market use capillary designs as tear sample collectors. These designs are intimidating to the patient when a sharp looking object is approaching the eye, are rather difficult to use by untrained personnel and are expensive to manufacture. Quidel InflammaDry is using a wick type tear sample collector that does not have any fill-up indicator and is rather intricate to produce on mass scale. Other prototype sample collectors employ Q-tip designs, filter paper strips (Schirmer’s test) are imprecise, some are difficult to produce en masse. Here we introduce a laminated and looped tear sample collectors that addresses the above problems and that are: 1) Cost-effective to produce on mass scale 2) Features a fill-up indicator (in case of laminated version) 3) Easy to use 4)Soft and non-intimidating to user and patient.

   

53

 

2. Title: TESTS FOR HUMAN MONOMERIC LACRITIN

 

US Patent Application No. 63/301,437 Filed January 20, 2022

Exclusive Licensee: AXIM Biotechnologies, Inc.

 

The invention relates to a Rapid Point of Care test for Human Monomeric Lacritin. Lacritin is a tear protein that, in its monomeric form, autonomously promotes tearing and ocular surface survival. Lacritin is the only identified growth-like factor decreased in tears from patients with ocular surface inflammation resulting from blepharitis, and it is downregulated in contact lens-related dry eye. This provisional describes six different lateral flow assay designs for the detection of monomeric lacritin from human tears to diagnose blepharitis, Sjögren’s syndrome, Dry Eye Disease and other inflammatory conditions or as a companion diagnostics at point of care settings.

 

V. TRADEMARKS

 

We have two trademarks registered with the United States Patent and Trademark Office: Axim (Registration Date: May 19, 2015; and Axim Biotech (Registration Date: May 31, 2016).

 

Market, Customers and Distribution Methods

 

Our focus is on the development of innovative pharmaceutical and diagnostic products. We plan to be an active player in the field of biosciences with our extensive R&D and pipeline of innovative products. Currently, our eye business focuses exclusively on ophthalmology and optometry, in the United States, where there are 37,000 optometrists and 19,000 ophthalmologists performing approximately 400,000 medical (dilated) eye exams per day.

 

Competition

 

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.

 

We face competition from many different sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies, and private and public research institutions. Our commercial opportunities will be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer side effects or are less expensive than any products that we or our collaborators may develop based on the use of our technologies.

 

While we believe that the potential advantages of our new technologies will enable us to compete effectively against other providers of technology for Covid-19 NAb product development and manufacturing, many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, clinical trials, regulatory approvals and marketing approved products than we do. Smaller or early stage companies may also prove to be significant competitors, particularly through arrangements with large and established companies, and this may reduce the value of our technologies. In addition, these third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.

 

The barrier for entrance into the dry eye space is difficult and requires extensive clinical studies, large capital expense and FDA 510k approval. This process alone can take several years and substantial investment, with no certainty that the product will receive FDA 510k approval. It is estimated that as of 2021, the total Company funding necessary to develop a Class II 510k cleared medical device is approximately $30 million. The development and engineering costs comprise approximately $2-5 million of this total. There are many factors that influence these costs, including the need for clinical studies, regulatory pathway and technology complexity.

 

We believe that we are well situated in the Eye Health sector with two 510(k) cleared tests. Additionally, the preferred clinical analysis is quantitative, giving us an advantage over the competition. Since our reader can interpret many different analytes other than Lf and IgE, it also opens the possibility of additional quantitative test development.

  

54

 

Source and Availability of Raw Materials

 

There are a limited number of suppliers for raw materials that we use to manufacture our products and product candidates and there may be a need to assess alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates for clinical trials, and if approved, ultimately for commercial sale. We do not have any control over the process or timing of the acquisition of these raw materials by us.

 

We currently manufacture the majority of our preclinical and Covid-19 testing materials in-house, and use contract manufacturers for the manufacture of some of our product candidates. We may or may not manufacture the products we develop, if any. Our internal manufacturing and contract manufacturers are subject to extensive governmental regulation.

 

In the dye eye segment, we either make our reagents or they are sourced from select suppliers. We use contract manufacturers for the manufacture of our assays and readers.

 

Government Regulation

 

Government authorities in the U.S. (including federal, state and local authorities) and in other countries extensively regulate, among other things, the manufacturing, research and clinical development, marketing, labeling and packaging, storage, distribution, post-approval monitoring and reporting, advertising and promotion, export and import of pharmaceutical products, such as those we are developing. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Moreover, failure to comply with applicable regulatory requirements may result in, among other things, warning letters, clinical holds, civil or criminal penalties, recall or seizure of products, injunction, disbarment, partial or total suspension of production or withdrawal of the product from the market. Any agency or judicial enforcement action could have a material adverse effect on us.

 

Many, if not all of our customers, are covered entities under the Health Insurance Portability and Accountability Act of August 1996 or HIPAA. As part of the operation of our business, we provide reimbursement assistance to certain of our customers and as a result we act in the capacity of a business associate with respect to any patient-identifiable medical information, or PHI, we receive in connection with these services. We and our customers must comply with a variety of requirements related to the handling of patient information, including laws and regulations protecting the privacy, confidentiality and security of PHI. The provisions of HIPAA require our customers to have business associate agreements with us under which we are required to appropriately safeguard the PHI we create or receive on their behalf. Further, we and our customers are required to comply with HIPAA security regulations that require us and them to implement certain administrative, physical and technical safeguards to ensure the confidentiality, integrity and availability of electronic PHI, or EPHI. We are required by regulation and contract to protect the security of EPHI that we create, receive, maintain or transmit for our customers consistent with these regulations. To comply with our regulatory and contractual obligations, we may have to reorganize processes and invest in new technologies. We also are required to train personnel regarding HIPAA requirements. If we, or any of our employees or consultants, are unable to maintain the privacy, confidentiality and security of the PHI that is entrusted to us, we and/or our customers could be subject to civil and criminal fines and sanctions and we could be found to have breached our contracts with our customers. Under the Health Information Technology for Economic and Clinical Health Act, or HITECH Act, and recent omnibus revisions to the HIPAA regulations, we are directly subject to HIPAA’s criminal and civil penalties for breaches of our privacy and security obligations and are required to comply with security breach notification requirements. The direct applicability of the HIPAA privacy and security provisions and compliance with the notification requirements requires us to incur additional costs and may restrict our business operations.

 

U.S. Government Regulation

 

Government authorities in the United States and other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing of our product, which is a medical device. In the United States, the FDA regulates medical devices under the Federal Food, Drug, and Cosmetic Act and implementing regulations. Failure to comply with the applicable FDA requirements, both before and after approval, may subject us to administrative and judicial sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, administrative fines or criminal prosecution.

 

Unless exempted by regulation, medical devices may not be commercially distributed in the United States until they have been cleared or approved by the FDA. Medical devices are classified into one of the three classes, Class I, II or III, on the basis of the controls necessary to reasonably assure their safety and effectiveness. Class II devices, which our two test for lactoferrin and IgE are classified are subject to general controls, such as labeling, pre-market notification and adherence to good manufacturing practices. Laboratories or sites that perform our tests need to have a CLIA certificate, be inspected, and must meet the CLIA quality standards.

 

55

 

After a device receives 510(k) clearance, any modification to the device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, would require a new 510(k) clearance or an approval of a Premarket Approval, or PMA. A PMA is the FDA process of scientific or regulatory review to evaluate the safety and effectiveness of Class III medical devices which are those devices which support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Although the FDA requires the manufacturer to make the initial determination regarding the effect of a modification to the device that is subject to 510(k) clearance, the FDA can review the manufacturer’s determination at any time and require the manufacturer to seek another 510(k) clearance or an approval of a PMA. 

 

CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. The regulations promulgated under CLIA establish three levels of in vitro diagnostic tests: (1) waiver; (2) moderately complex; and (3) highly complex. The standards applicable to a clinical laboratory depend on the level of diagnostic tests it performs. A CLIA waiver is available to clinical laboratory test systems if they meet certain requirements established by the statute. Waived tests are simple laboratory examinations and procedures employing methodologies that are so simple and accurate as to render the likelihood of erroneous results negligible or to pose no reasonable risk of harm to patients if the examinations or procedures are performed incorrectly. These tests are waived from regulatory oversight of the user other than the requirement to follow the manufacturer’s labeling and directions for use. We intend to file a waiver application with the FDA for the Axim Eye System.

 

Regardless of whether a medical device requires FDA clearance or approval, a number of other FDA requirements apply to the device, its manufacturer and those who distribute it. Device manufacturers must be registered and their products listed with the FDA, and certain adverse events and product malfunctions must be reported to the FDA. The FDA also regulates the product labeling, promotion and, in some cases, advertising of medical devices. In addition, manufacturers and their suppliers must comply with the FDA’s quality system regulation which establishes extensive requirements for quality and manufacturing procedures. Thus, suppliers, manufacturers and distributors must continue to spend time, money and effort to maintain compliance, and failure to comply can lead to enforcement action. The FDA periodically inspects facilities to ascertain compliance with these and other requirements.

 

Environmental Matters

 

No significant pollution or other types of hazardous emission result from our current operations, and we do not anticipate that our operations will be materially affected by federal, state or local provisions concerning environmental controls. Our costs of complying with environmental, health and safety requirements have not been material. Furthermore, compliance with federal, state and local requirements regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, have not had, nor are they expected to have, any material effect on the capital expenditures, earnings or competitive position of the Company. However, we will continue to monitor emerging developments in this area.

 

Employees

 

As of May 19, 2022, we had six full-time employees and three part-time employees. We also allow and utilize the services of independent contractors. We will be considering the conversion of some of our part-time employees to full-time positions. Management believes that we have a good relationship with our employees.

  

Company Website

 

We maintain a corporate Internet website at: www.aximbiotech.com. The contents of our website are not incorporated in or otherwise to be regarded as part of this Annual Report on Form 10-K.

 

We file reports with the Securities and Exchange Commission (“SEC”), which are available on our website free of charge. These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, “Section 16” filings on Form 3, Form 4, and Form 5, and other related filings, each of which is provided on our website as soon as reasonably practical after we electronically file such materials with or furnish them to the SEC. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company.

  

56

 

Liquidity and Capital Resources

 

We are in our early stages of development and growth, without established records of sales or earnings. We will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or emerging growth companies.

 

As of March 31, 2022, we had cash and cash equivalents of $408,043, working capital deficit of $(2,863,376), and an accumulated deficit of $59,968,941. We estimate our G&A expenses for 2022 to be approximately $3,500,000, which includes projected audit and accounting costs of $250,000. R&D expenses for 2022 will vary based on drug formulation and clinical trial project activity that the Company is engaged in, which in turn is determined by available capital. We do not expect R&D expenditures to exceed $2 million in 2022.

 

We can provide no assurance that the Company can continue to satisfy its cash requirements for at least the next twelve months.

 

We expect to obtain financing through shareholder loans, private placements and/or registered offerings of our securities. Shareholder loans may be without stated terms of repayment or interest. In addition, we may consider taking on long-term or short-term debt from financial institutions in the immediate future. Shareholders loans may be granted from time to time as required to meet current working capital needs. We have no formal agreement that ensures that we will receive such loans. We may exhaust this source of funding at any time.

 

We are dependent upon certain related parties to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, we may not be able to implement our plan of operations. These loans may include terms that may be highly dilutive to existing shareholders.

 

On September 14, 2017, our Registration Statement on Form S-3 was declared effective by the SEC. We issued 7,494,792 shares common stock pursuant to the Company’s Registration Statement on Form S-3 during the year ending December 31, 2020. No shares were issued in 2021 under the S-3.

 

On June 22, 2021, our Registration Statement on Form S-1 was declared effective by the SEC. We issued 1,000,000 shares of Company common stock pursuant to an equity purchase agreement, dated on May 14, 2021, and the Registration Statement on Form S-1 during the year ending December 31, 2021. Subsequent to the year ended December 30, 2021, the Company issued an additional 4,000,000 shares of its common stock for cash of $484,126 pursuant to the equity purchase agreement, which shares were also registered pursuant to the S-1 Registration Statement.

 

During January 2022, the Company issued 519,247 shares for cash of gross proceeds of $75,000 pursuant to various stock purchase agreements. The cash was received in the fourth quarter 2021 and first quarter 2022. The Company also issued warrants to purchase an aggregate of 519,247 shares of common stock at an average exercise price of $0.315 per share. The warrants are exercisable within a three year period from issuance.

 

Effective February 10, 2022, the Company issued two short term notes, each having a face amount of $250,000, in exchange for a total of $500,000 in cash (the “Short Term Promissory Notes”). The Short Term Promissory Notes bear interest at the rate of 1.5% per annum and were due and payable on or before March 10, 2022, unless demand for payment is made prior to such date. Both of the two notes was paid in full on February 14, 2022.

 

Effective February 10, 2022, the Company issued seven convertible notes to a series of investors having an aggregate face value of $1,325,000 in exchange for $1,325,000 in cash (the “Convertible Notes”). One of the Convertible Notes, face value $25,000, was purchased by Blake N. Schroeder who is a director of the Company.

 

Each of the Convertible Notes is (i) unsecured; (ii) bears interest at a rate of 3% per annum; (iii) matures on February 10, 2032; and (iv) is convertible, in whole or in part, at any time by the holder, into restricted shares of the Company’s common stock at a conversion price equal to the lesser of $0.08125 or 70% of the average of the two lowest closing prices of the Company’s common stock in the ten trading days preceding any particular conversion, provided, the holder is prohibited from converting the convertible note, or portion thereof, if such conversion would result in beneficial ownership by the holder and its affiliates of more than 4.99% of Company’s issued and outstanding common stock as of the date of the conversion.

    

57

 

On February 10, 2022, the Company paid in full the remaining balance due on that certain convertible note issued to GS Capital Partners, LLC, face value $1,110,000 (as amended, the “GS Note”). In connection with the repayment, the Company was required to pay accrued interest in the amount of $21,875, by issuing 173,390 restricted shares of the Company’s common stock pursuant to the formula set forth in the GS Note.

 

In March 2022, the Company issued 624,290 of its shares of common stock pursuant to a stock purchase agreement for cash gross proceeds of $55,000.

 

In January 2022 the company issued 7,000,000 of its shares in completion of its agreement with Advanced Tear Diagnostics regarding the purchase of various patents.

 

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. The COVID-19 pandemic, as it was declared by the World Health Organization, has continued to spread and has already caused severe global disruptions. The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.

 

We expect COVID-19, along with the resulting government-imposed restrictions on businesses, to negatively impact our operations due to decreased consumer demand as well as potential production and warehouse limitations which results in an event or condition, before consideration of management’s plans, that could impact our ability to meet future obligations. We believe that our cash and cash equivalents on hand and these cost reduction measures, as needed, will provide sufficient liquidity to fund our operations for the next 12 months from the issuance of the consolidated financial statements.

 

Sources of Capital

 

We expect to sustain our working capital needs through shareholder loans, private placements and/or registered offerings of our securities. Shareholder loans may be without stated terms of repayment or interest. We may consider taking on any long-term or short-term debt from financial institutions in the immediate future. Shareholders loans may be granted from time to time as required to meet current working capital needs. We have no formal agreement that ensures that we will receive such loans. We may exhaust this source of funding at any time.

 

During the next twelve months, we anticipate incurring costs related to:

 

 

(i)

filing Exchange Act reports;

 

(ii)

contractual obligations;

 

(iii)

building inventory of our approved devices;

 

(iii)

clinical trials; and

 

(iv)

continued research and development of our diagnostic tests.

 

We believe we will be able to meet these costs through use of funds in our treasury, deferral of fees by certain service providers and additional amounts, as necessary, to be loaned to or invested in us by our shareholders, management or other investors. As of the date of the period covered by this report, we have limited cash. There are no assurances that we will be able to secure any additional funding as needed. Currently, however our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management’s plan includes obtaining additional funds by equity financing and/or related party advances; however, there is no assurance of additional funding being available.

 

Known Trends or Uncertainties

 

We have seen some consolidation in the pharmaceutical and biotechnology industries during economic downturns. These consolidations have not had a negative effect on us to date; however, should consolidations and downsizing in the industry continue to occur, those events could adversely impact our financial results and business operations going forward.

 

The potential for growth in new markets is uncertain. We will continue to explore these opportunities until such time as we either generate sales or determine that resources would be more efficiently used elsewhere.

 

As discussed in this Annual Report, the world has been affected due to the COVID-19 pandemic. The pandemic has negatively impacted our business in various ways over the last two years, including, more recently, as a result of global supply chain constraints at least partially attributable to the pandemic. Until the pandemic has passed, there remains uncertainty as to the effect of COVID-19 on our business in both the short and long-term.

 

58

 

Inflation

 

Inflation has increased during the periods covered by this Annual Report, and is expected to continue to increase for the near future. Inflationary factors, such as increases in the cost of our products (and components thereof), interest rates, overhead costs and transportation costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future (especially if inflation rates continue to rise) due to supply chain constraints, consequences associated with COVID-19 and the ongoing conflict between Russia and Ukraine, employee availability and wage increases, trade tariffs imposed on certain products from China and increased product pricing due to semiconductor product shortages.

 

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 effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Going Concern

 

The Company’s financial statements have been presented assuming that the Company will continue as a going concern. As shown in the financial statements, the Company has negative working capital of $2,863,376, has an accumulated deficit of $59,968,941, has cash used in continuing operating activities of $703,717 and presently does not have the resources to accomplish its objectives during the next twelve months. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments related to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.

  

The Company may not be able to meet its contractual obligations to Arizona State University regarding ongoing research and maintain its staff at current levels required by various employment agreements.

 

The Company intends to raise additional capital through private placements and/or registered offerings 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.

 

Results of Operations

 

Comparison of the three months ended March 31, 2022 and 2021

 

 

 

March 31,

2022

 

 

March 31,

2021

 

 

$

Change

 

 

%

Change

 

Revenues

 

$

-

 

 

$

32,649

 

 

$

-32,649

 

 

100

%

Gross margin percentage

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Operating expenses

 

 

1,132,955

 

 

 

900,649

 

 

 

232,306

 

 

26

%

Loss from continuing operations

 

 

(1,132,955

)

 

 

(868,000

)

 

 

264,955

 

31

%

Loss from discontinued operations

 

 

 

 

(4,633)

 

 

4,633

 

 

.100

%

Other expenses (income)

 

 

953,759

 

 

 

(8,097

 

 

961,856

 

 

.100

%

Net loss

 

$

(2,086,714

)

 

 

(864,536

)

 

 

1,222,178

 

100

%

 

59

    

Revenue

 

Revenues from continuing operations recognized for the three months ended March 31, 2022 and 2021 amounted to $0 and $32,649, respectively. Revenues from discontinued operations recognized for three  months ended March 31, 2022 and 2021 amounted to $0 and $0.

  

Cost of Revenue from continuing operations recognized for three months ended March, 2022 and 2021 amounted to $-0- and $-0-, respectively. Cost of Revenue from discontinued operations recognized for three months ended March, 2022 and 2021 amounted to, $0 and $0, respectively. The lack of COGS is due to lack of sales of products to customers in 2022 and 2021.

  

Operating Expenses

 

Research and Development Expenses

 

For the three months ended March 31, 2022 and 2021 the Company incurred research and development expenses of $44,193 and $100,953 from continuing operations, respectively.

 

Selling, General and Administrative Expenses

 

Our Selling, General and Administrative expenses for the three months ending March 31, 2022 and 2021 were $982,235 and $793,346, respectively. The increase is primarily due to services in legal, consulting and accounting, advertising and increase in salaries because of the ramping up of activity due to acquisition of Sapphire Biotech on March 2020, and the acquisition of assets from Advanced Tear Diagnostics

 

Depreciation Expenses

 

For the three months ending March 31, 2022 our depreciation expenses were $7,916 as compared to $6,350 for the three months ended March 31, 2021. The increase is primarily due to the purchase of fixed assets

 

Amortization Expenses

 

For the three months ended March 31, 2022 our amortization expenses were $98,611 as compared to $0 for the three months ended March 31, 2021. The increase is primarily due to recognizing the intangible assets as a result of the acquisition of Sapphire Biotech and patents and 510(K) license from advanced Tear Diagnostics, LLC in 2021.

  

Other Income and Expenses

 

Our interest expenses for the three months ended March 31, 2022 and 2021 were $1,522,405 and $60,332, respectively, variance was due to non-cash interest expenses. Gain on extinguishment of debt for the three months ended March 31, 2022 and 2021 were $16,904 and $0 respectively, variance was result of debt exchange. Amortization of debt discount was $35,591 and $21,827 respectively. Income grants from government for the three months ending March 31, 2022 and 2021 were $0 and $90,000 respectively, and the variance was a result of receiving innovation research grants from NCI in 2021.

  

For the Three Months Ended March 31, 2022 and 2021

 

Net Cash Provided by/Used in Operating Activities

 

Net cash used in continuing operating activities and discontinued operating activities was $703,717 and $0, respectively, for the three months ended March 31, 2022, as compared to net cash used of $560,828 and $4,633 for the three months ended March 31, 2021. The cash used in operating activities is primarily attributable to our net loss from operations of $2,086,714 and offset by net changes in the balances of operating assets and liabilities and non-cash expenses. For the three months ended March 31, 2022, stock-based compensation was $188,917, amortization of debt discount was $35,591, common stock issued for service was $79,500, amortization of intangible was $98,611, loss on extinguishment of debt was $11,068, non-cash interest expense was $1,316,846 and this was offset by change in fair value if derivative liability of $587,077. For the three months ended March 31, 2021 these non-cash expenses were stock-based compensation of $99,740 and amortization of $21,827. For the three months ended March 31, 2022 and 2021 the Company recorded increase to accounts payable and accrued expenses of $138,052 and $133,105, respectively, of continuing operating activities.

  

Net Cash provided by Investing Activities

 

Net cash used in (provided by) investing activities during the period ended March 31, 2022 was $0 compared to ($19,639) for the same period in 2021 due to purchase of equipment of $19,639.

  

60

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities during the three months period ended March 31, 2022, was $658,797, and $577,133 for the same period in 2021. The Company has successfully raised significant capital in exchange for its common stock for the three months ended March 31, 2022 and 2021.

  

Critical Accounting Policies

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 4 to our consolidated financial statements.

 

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

 

Research and Development Costs

 

Research and development costs are expensed as incurred. Research and development reimbursements and grants are recorded by us as a reduction of research and development cost

 

Share-Based Payments

 

We estimate the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. We account for forfeitures of stock options as they occur.

 

Income Taxes

 

We use the asset and liability method to calculate deferred taxes. Deferred taxes are recognized based on the differences between the financial reporting and income tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We review deferred tax assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset will be fully realized. A valuation allowance, if necessary, is provided against deferred tax assets, based upon our assessment as to their realization.

 

We recognize tax when the positions meet a “more-likely-than-not” recognition threshold. There were no tax positions for which it is considered reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next year. We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses.

  

61

 

Recently Issued Accounting Standards

 

Note 6 to consolidated financial statements appearing elsewhere in this report includes Recently Issued Accounting Standards.

 

Foreign Currency Transactions

 

Foreign exchange gain (loss) in the three months ended March 31, 2022 was $0 compared to $152  for the same period in 2021. All foreign currency gain (loss) were related to discontinued operations.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

 Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31,2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.

 

Changes in Internal Control Over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31,2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

  

62

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of our business. However, at this time, we are not aware on any material pending, threatened or unasserted claims.

 

Item 1A. Risk Factors.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

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

 

During the period between January 1, 2022, and March 31, 2022, the Company issued total 16,401,801 shares valued $4,612,444 that were not registered under the Securities Act.

 

During the first quarter 2022 the company issued 4,000,000 shares pursuant to an S-3 valued at 594,870.

 

During the First quarter 2022 the company issued 802,115 restricted shares of its common stock valued at $79,500 to third parties for certain services, recorded as advertising and promotion expense and License, permits & Patents, respectively and 173,390 shares valued at $32,944 in settlement of debt.

  

The company issued 1,143,537 shares pursuant to various stock purchase agreements valued at $125,000 the cash was received in 2021 and 2022.

 

The issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act of 1933 and Regulation D as transactions by an issuer not involving any public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. The sales of these securities were made without general solicitation or advertising.

 

The Company intends to use the proceeds from sale of the securities, if any, for the operations, research and development and clinical trials, and working capital.

 

There were no underwritten offerings employed in connection with any of the transactions set forth above.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable

 

Item 5. Other Information.

 

On May 14, 2021, the Company entered into the Equity Purchase Agreement with Cross, pursuant to which we have the right to “put,” or sell, up to $10,000,000 worth of shares of our common stock to Cross. As provided in the Equity Purchase Agreement, we may require Cross to purchase shares of our common stock from time to time by delivering a put notice to Cross specifying the total number of shares to be purchased (such number of shares multiplied by the purchase price described below, the “Investment Amount”); provided there must be a minimum of ten trading days between delivery of each put notice. We may determine the Investment Amount, provided that such amount may not be more than 500% of the average daily trading volume in dollar amount for our common stock during the five trading days preceding the date on which we deliver the applicable put notice, unless waived by Cross in its sole discretion. Additionally, such amount may not be lower than $10,000 or higher than $1,000,000. Cross will have no obligation to purchase shares under the Equity Line to the extent that such purchase would cause Cross to own more than 4.99% of our issued and outstanding shares of common stock.

 

Compensation of Company Directors and Advisory Board Members

 

Our Directors are compensated $5,000 on a quarterly basis plus on each annual anniversary of Board service additional $20,000. Our Directors and Advisory Board Members are reimbursed for reasonable out-of-pocket expenses related to attending board of directors’ meetings and for promoting our business. In the future, we may compensate our Directors for serving on Special Committees and our Advisory Board Members with additional cash or other compensation. From time to time we may request certain members of the board of directors to perform services on our behalf. In such cases, we will compensate the directors for their services at rates no more favorable than could be obtained from unaffiliated parties.

   

63

 

Item 6. Exhibits.

 

Statements

Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021.

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited)

 

Condensed Consolidated Statements of Changes in Shareholders’ Deficit for the three months ended March 31, 2022 and 2021 (unaudited)

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)

 

Notes to Condensed Consolidated Financial Statements (unaudited)

Schedules

All schedules are omitted because they are not applicable, or the required information is shown in the Financial Statements or notes thereto.

 

Please see the below Exhibit Index and the Index to Financial Statements and related notes to financials which follows the signature page to this Quarterly report on Form 10-Q and which is incorporated by reference herein.

  

64

 

Exhibit Index

 

Exhibits

 

Exhibit #

 

Incorporated by Reference

(Form Type)

 

 

Filing Date

 

Filed

with

This

Report

 

 

 

 

 

 

 

 

 

 

 

 

Articles of Incorporation, as filed with the Nevada Secretary of State on November 18, 2010.

 

 

3.1

 

 

10-Q

 

 

11/14/2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificate of Amendment, as filed with the Nevada Secretary of State on July 24, 2014.

 

 

3.2

 

 

10-Q

 

 

11/14/2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amended and Restated (As of August 17, 2016) Bylaws of AXIM Biotechnologies, Inc.

 

 

3.3

 

 

10-Q

 

 

8/22/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificate of Designation of Series B Preferred Stock.

 

 

3.4

 

 

10-Q

 

 

8/22/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificate of Designation of Series C Preferred Stock.

 

 

3.5

 

 

10-Q

 

 

8/22/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Description of Securities

 

 

4.1

 

 

10-K

 

 

 04/15/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Letter of Intent (“Terms Sheet”) dated September 3, 2018, by and between Impression Healthcare Limited and AXIM Biotechnologies, Inc.

 

 

10.1

 

 

10-K (A/1)

 

 

10/30/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exclusivity Agreement dated September 3, 2018, by and between Impression Healthcare Limited and AXIM Biotechnologies, Inc.

 

 

10.2

 

 

10-K (A/1)

 

 

10/30/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amendment #1 to Exclusivity Agreement dated December 11, 2018, by and between Impression Healthcare Limited and AXIM Biotechnologies, Inc.

 

 

10.3

 

 

10-K (A/1)

 

 

10/30/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supply Agreement dated May 31, 2019, by and between Impression Healthcare Limited and AXIM Biotechnologies, Inc.

 

 

10.4

 

 

10-K (A/1)

 

 

10/30/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 1, 2019, License Agreement with CanChew Biotechnologies, LLC.

 

 

10.5

 

 

10-K (A/1)

 

 

05/20/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Purchase Agreement dated May 14, 2021, by and between AXIM Biotechnologies, Inc and Cross & Company

 

 

10.6

 

 

8-K

 

 

05/14/2021