Item
1A. Risks Factors.
An
investment in our common stock involves substantial risks, including the risks described below. You should carefully consider
the risks described below before purchasing our common stock. The risks highlighted here are not the only ones that we may face.
For example, additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur could also
impair our operations. If any of the risks or uncertainties described below or any such additional risks and uncertainties actually
occur, our business, prospects, financial condition or results of operations could be negatively affected, and you might lose
all or part of your investment.
Risks
Related to Our Business
Our
plan relies upon our ability to obtain additional sources of capital and financing. If the amount of capital we are able to raise
from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may
be required to cease operations.
To
become and remain profitable, we must succeed in developing and commercializing products that generate significant income. This
will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials
of our drug candidates, discovering additional drug candidates, obtaining regulatory approval for these drug candidates, manufacturing,
marketing and selling any products for which we may obtain regulatory approval, and establishing and managing our collaborations
at various stages of each candidate’s development. We are only in the preliminary stages of these activities. We may never
succeed in these activities and, even if we do, may never generate income that is significant enough to achieve profitability.
Because
of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict
the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the
U.S. Food and Drug Administration, or FDA, or the European Medicines Agency, or EMA, to perform studies in addition to those currently
expected, or if there are any delays in completing our clinical trials or the development of any of our drug candidates, our expenses
could increase, and revenue could be further delayed.
Even
if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure
to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our
business, maintain the research and development efforts that will be initially funded by the proceeds of our currently effective
public offering, diversify our product offerings or even continue our operations. A decline in the value of our company could
also cause you to lose all or part of your investment.
We
have incurred losses since our inception and expect to incur losses for the foreseeable future and may never achieve or maintain
profitability.
As
of December 31, 2019, we have incurred losses since inception and have an accumulated deficit of $2,241,305 and, we had approximately
$169,628 of cash on hand. The report of our independent registered public accountants as of and for period ending December 31,
2019, contained an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our ability
to continue as a going concern is dependent upon our ability to generate revenue and raise capital from financing transactions.
Management anticipates that our cash resources are not sufficient to continue operations until additional cash investments are
secured. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from
the development of its new business opportunities. There can be no assurance that we will be successful in accomplishing its objectives.
Without such additional capital, we may be required to curtail or cease operations.
We
have a limited operating history, which makes it difficult to evaluate our current business and future prospects.
We
are a company with limited operating history, and our operations are subject to all of the risks inherent in establishing a new
business enterprise. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications
and delays frequently encountered in connection with the formation of a new business, the development of new technologies or those
subject to clinical testing, and the competitive and regulatory environment in which we will operate. We may never obtain FDA
or EMA approval of our products in development and, even if we do so and are also able to commercialize our products, we may never
generate revenue sufficient to become profitable. Our failure to generate revenue and profit would likely cause our securities
to decrease in value or become worthless.
We
will require additional financing to implement our business plan, which may not be available on favourable terms or at all,
and we may have to accept financing terms that would place restrictions on us.
We believe that we must raise not less than $2,700,000 in addition
to current cash on hand to be able to continue our business operations for approximately the next 15 months and repay the convertible
notes in the aggregate principal amount of $886,000 (the “Convertible Notes”) outstanding on the date hereof; however,
funding at any level lower than $10,000,000 will delay the development of our technology and business. In addition, one of our
convertible notes, which was subsequently paid off, in the principal amount of $250,000 must be paid by February 25, 2020 or it
will be in default. We are attempting to refinance that convertible note. We will need to continue to conduct significant research,
development, testing and regulatory compliance activities for BXT-25, together with projected general and administrative expenses,
we expect will result in operating losses for the foreseeable future. We may not be able to obtain equity or debt financing on
acceptable terms or at all to implement our growth strategy. As a result, adequate capital may not be available to finance our
current development plan, take advantage of business opportunities or respond to competitive pressures. If we are unable to raise
additional funds, we may be forced to curtail or even abandon our business plan.
Until
such time, if ever, as we can generate substantial product income, we expect to finance our cash needs through a combination of
equity offerings, debt financings and license and collaboration agreements. To the extent that we raise additional capital through
the sale of equity or convertible debt securities, the ownership interest of existing stockholders will be diluted, and the terms
of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. In addition,
the terms of any future financings may impose restrictions on our right to declare dividends or on the manner in which we conduct
our business. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting
or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring
dividends, or making acquisitions or significant asset sales.
If
we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with
third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug
candidates or grant licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock.
Our
products are based on novel, unproven technologies.
Our
drug candidates in development are based on novel, unproven technologies using proprietary co-polymer compounds in combination
with similar FDA approved drug for veterinary use. Co-polymers are difficult to synthesize, and we may not be able to synthesize
co-polymer that will be usable as delivery vehicles for the anti-hypoxia drugs we are working with or other therapeutics we intend
to develop. Clinical trials are expensive, time-consuming and may not be successful. They involve the testing of potential therapeutic
agents, or effective treatments, in humans, typically in three phases, to determine the safety and efficacy of the products necessary
for an approved drug. Many products in human clinical trials fail to demonstrate the desired safety and efficacy characteristics.
Even if our products progress successfully through initial or subsequent human testing, they may fail in later stages of development.
We may engage others to conduct our clinical trials, including clinical research organizations and, possibly, government-sponsored
agencies. These trials may not start or be completed as we forecast or may not achieve desired results.
Clinical
drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience
delays in completing, or ultimately be unable to complete, the development and commercialization of our drug candidates.
Our
drug candidate is unproven, and its risk of failure is high. It is impossible to predict when or if our current or any future
drug candidates will receive regulatory approval or prove effective and safe in humans. Before obtaining marketing approval from
regulatory authorities for the sale of any drug candidate, we must conduct extensive clinical trials and, in the case of BXT-25,
first complete preclinical development, to demonstrate the safety and efficacy of our drug candidates in humans. Clinical testing
is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failed clinical
trial can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of
the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover,
preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed
their drug candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing
approval of their products.
We
may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to
receive marketing approval or commercialize our drug candidates, including:
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regulators or institutional
review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective
trial site;
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we may experience
delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective
trial sites;
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clinical trials
of our drug candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct
additional clinical trials or abandon product development programs;
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the number of patients
required for clinical trials of our drug candidates may be larger than we anticipate, enrollment in these clinical trials
may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate;
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our third-party
contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner,
or at all;
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we may have to suspend
or terminate clinical trials of our drug candidates for various reasons, including a finding that the participants are being
exposed to unacceptable health risks;
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regulators or institutional
review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including
noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
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the cost of clinical
trials of our drug candidates may be greater than we anticipate;
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the supply or quality
of our drug candidates or other materials necessary to conduct clinical trials of our drug candidates may be insufficient
or inadequate;
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our drug candidates
may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional
review boards to suspend or terminate the trials; and
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regulators may revise
the requirements for approving our drug candidates, or such requirements may not be as we anticipate.
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If
we are required to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently contemplate,
if we are unable to successfully complete clinical trials of our drug candidates or other testing, if the results of these trials
or tests are not positive or are only modestly positive or if there are safety concerns, we may:
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be delayed in obtaining
marketing approval for our drug candidates;
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not obtain marketing
approval at all, which would seriously impair our viability;
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obtain marketing
approval in some countries and not in others;
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obtain approval
for indications or patient populations that are not as broad as we intend or desire;
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obtain approval
with labeling that includes significant use or distribution restrictions or safety warnings;
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be subject to additional
post-marketing testing requirements; or
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have the product
removed from the market after obtaining marketing approval.
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We
plan to initiate pre-clinical studies of BXT-25. However, we cannot provide any assurance that we will successfully initiate or
complete those planned trials and be able to initiate any other clinical trials for BXT-25 or any of our future drug candidates.
The results of our clinical trials could yield negative or ambiguous results. Such results could adversely affect future development
plans, collaborations and our stock price.
Our
product development costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether
any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on
schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have
the exclusive right to commercialize our drug candidates or allow our competitors to bring products to market before we do, potentially
impairing our ability to successfully commercialize our drug candidates and harming our business and results of operations.
A
fast track, breakthrough therapy or other designation by the FDA may not actually lead to a faster development or regulatory review
or approval process.
We
may seek fast track, breakthrough therapy or similar designation for our drug candidates. If a drug is intended for the treatment
of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition,
the drug sponsor may apply for FDA fast track designation. The FDA has broad discretion whether or not to grant this designation,
and even if we believe a particular drug candidate is eligible for this designation, we cannot assure you that the FDA would decide
to grant it. Even if we do receive fast track designation, we may not experience a faster development process, review or approval
compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that the designation is no
longer supported by data from our clinical development program.
Additionally,
we may in the future seek a breakthrough therapy designation for some of our product candidates that reach the regulatory review
process. A breakthrough therapy is a drug candidate that is intended, alone or in combination with one or more other drugs, to
treat a serious or life-threatening disease or condition, and that, as indicated by preliminary clinical evidence, may demonstrate
substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment
effects observed early in clinical development. Drugs designated as breakthrough therapies by the FDA are eligible for accelerated
approval and increased interaction and communication with the FDA designed to expedite the development and review process.
As
with fast track designation, designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we
believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and may
determine not to grant such a designation. Even if we receive a breakthrough therapy designation for any of our product candidates,
the designation may not result in a materially faster development process, review or approval compared to conventional FDA procedures.
Further, obtaining a breakthrough therapy designation does not assure or increase the likelihood of the FDA’s approval of
the applicable product candidate. In addition, even if one or more of our product candidates qualifies as a breakthrough therapy,
the FDA could later determine that those products no longer meet the conditions for the designation or determine not to shorten
the time period for FDA review or approval.
We
will rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing
to meet deadlines for the completion of such trials.
We
intend to use third-party clinical research organizations, or CROs, to conduct our planned clinical trials and do not plan to
independently conduct clinical trials of BXT-25 or any future drug candidates. We rely on third parties, such as CROs, clinical
data management organizations, medical institutions and clinical investigators, to conduct and manage our clinical trials. These
agreements might terminate for a variety of reasons, including a failure to perform by the third parties. If we need to enter
into alternative arrangements, that would delay our product development activities.
Our
reliance on these third parties for research and development activities reduces our control over these activities but does not
relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted
in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with
regulatory standards, commonly referred to as good clinical practices, or GCPs, for conducting, recording and reporting the results
of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality
of trial participants are protected. Other countries’ regulatory agencies also have requirements for clinical trials with
which we must comply. We also are required to register ongoing clinical trials and post the results of completed clinical trials
on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines,
adverse publicity and civil and criminal sanctions.
Furthermore,
these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties
do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with
regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals
for our drug candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our drug candidates.
We
also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure
on the part of our distributors could delay clinical development or marketing approval of our drug candidates or commercialization
of our products, producing additional losses and depriving us of potential product revenue.
If
we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals
could be delayed or prevented.
We
may not be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a sufficient
number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the
United States, such as the EMA. In addition, some of our competitors have ongoing clinical trials for drug candidates that treat
the same indications as our drug candidates, and patients who would otherwise be eligible for our clinical trials may instead
enroll in clinical trials of our competitors’ drug candidates.
Patient
enrollment is affected by other factors including:
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the severity of
the disease under investigation;
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the patient eligibility
criteria for the study in question;
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the perceived risks
and benefits of the drug candidate under study;
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the efforts to facilitate
timely enrollment in clinical trials;
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our payments for
conducting clinical trials;
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the patient referral
practices of physicians;
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the ability to monitor
patients adequately during and after treatment; and
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the proximity and
availability of clinical trial sites for prospective patients.
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We
are unable to forecast with precision our ability to enroll patients. Our inability to enroll a sufficient number of patients
for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether.
Enrollment delays in our clinical trials may result in increased development costs for our drug candidates, which would cause
the value of our company to decline and limit our ability to obtain additional financing.
If
serious adverse or unacceptable side effects are identified during the development of our drug candidate or we observe limited
efficacy, we may need to abandon or limit our development of some of our drug candidate.
If
our drug candidate is associated with undesirable side effects in clinical trials, have limited efficacy or have characteristics
that are unexpected, we may need to abandon their development or limit development to more narrow uses or subpopulations in which
the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
We have not commenced pre-clinical trials of BXT-25, which even if it proves successful, may later be found to cause side effects
that will prevent further development of the compounds.
Even
if our drug candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients,
third-party payers and others in the medical community necessary for commercial success.
Even
if our drug candidate receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians,
patients, third-party payers and others in the medical community. If our drug candidate does not achieve an adequate level of
acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance
of our drug candidate, if approved for commercial sale, will depend on a number of factors, including:
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their efficacy, safety and other potential advantages
compared to alternative treatments;
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our ability to offer them for sale at competitive
prices;
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their convenience and ease of administration
compared to alternative treatments;
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the willingness of the target patient population
to try new therapies and of physicians to prescribe these therapies;
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the strength of marketing and distribution support;
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the availability of third-party coverage and
adequate reimbursement for our drug candidate;
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the prevalence and severity of their side effects;
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any restrictions on the use of our products
together with other medications;
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interactions of our products with other medicines
patients are taking; and
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inability of certain types of patients to take
our products.
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If
we are unable to address and overcome these and similar concerns, our business and results of operations could be substantially
harmed.
If
we are unable to establish effective sales, marketing and distribution capabilities or enter into agreements with third parties
with such capabilities, we may not be successful in commercializing our drug candidate if and when they are approved.
We
do not have a sales or marketing infrastructure and have limited experience in the sale, marketing or distribution of our products.
To achieve commercial success for any product for which we obtain marketing approval, we will need to successfully establish and
maintain relationships with third parties to perform sales and marketing functions.
Factors
that may inhibit our efforts to commercialize our products on our own include:
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our inability to
recruit, train and retain adequate numbers of effective sales and marketing personnel;
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the inability of
sales personnel to obtain access to or educate physicians on the benefits of our products;
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the lack of complementary
products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more
extensive product lines;
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unforeseen costs
and expenses associated with creating an independent sales and marketing organization;
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inability to obtain
sufficient coverage and reimbursement from third-party payors and governmental agencies; and
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inability to obtain
sufficient coverage and reimbursement from third-party payors and governmental agencies.
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We
will rely on third parties to sell, market and distribute our drug candidate. We may not be successful in entering into, or maintaining,
arrangements with such third parties or may be unable to do so on terms that are favorable to us. In addition, our product revenues
and our profitability, if any, may be lower if we rely on third parties for these functions than if we were to market, sell and
distribute any products that we develop ourselves. We likely will have little control over such third parties, and any of them
may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales,
marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be
successful in commercializing our drug candidate.
If
we are unable to convince physicians as to the benefits of our proposed products, we may incur delays or additional expense in
our attempt to establish market acceptance.
Broad
use of our proposed products may require physicians to be informed regarding our proposed products and the intended benefits.
Inability to carry out this physician education process may adversely affect market acceptance of our proposed products. We may
be unable to timely educate physicians regarding our proposed products in sufficient numbers to achieve our marketing plans or
to achieve product acceptance. Any delay in physician education may materially delay or reduce demand for our products. In addition,
we may expend significant funds toward physician education before any acceptance or demand for our proposed products is created,
if at all.
We
face substantial competition, which may result in others discovering, developing or commercializing competing products before
or more successfully than we do.
The
development and commercialization of new drug products is highly competitive. We face competition with respect to BXT-25 and will
face competition with respect to any drug candidates that we may seek to develop or commercialize in the future, from major pharmaceutical
companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical
and biotechnology companies that currently market and sell products or are pursuing the development of products in the field of
oxygen therapeutics for the treatment of a variety of conditions and any of such products may target the stroke. Potential competitors
also include academic institutions, government agencies and other public and private research organizations that conduct research,
seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.
A
substantial number of the companies against which we are competing or against which we may compete in the future have significantly
greater financial resources, established presence in the market and expertise in research and development, manufacturing, preclinical
testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions
in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number
of our competitors.
Smaller
and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements
with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific, sales
and marketing and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well
as in acquiring technologies complementary to, or necessary for, our programs.
Our
commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective,
have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors
also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could
result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability
to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.
We
may be unable to compete in our target marketplaces, which could impair our ability to generate revenues, thus causing a material
adverse impact on our results of operations.
Our
success depends upon our ability to retain key executives and to attract, retain, and motivate qualified personnel, and the loss
of these persons could adversely affect our operations and results.
We
are highly dependent on the principal members of our management, scientific and clinical team, including Dr. David Platt, our
Chairman, President and Chief Executive Officer and Ola Soderquist, our Chief Financial Officer. We don’t have a “key
person” insurance for any of Dr. Platt or Mr. Soderquist and even if such policies were to be obtained, such insurance policies
may not adequately compensate us for the loss of their services.
The
loss of the services of any of our executive officers or of any members of our scientific and medical advisory board, could impede
the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement
our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period
of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully
develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we
may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous
pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific
and clinical personnel from universities and research institutions. In addition, we rely and expect to continue to rely to a significant
degree on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development
and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments
under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue
to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.
Our
lack of operating experience may cause us difficulty in managing our growth which could lead to our inability to implement our
business plan.
We
have limited experience in marketing and the selling of pharmaceutical products. Any growth will require us to expand our management
and our operational and financial systems and controls. If we are unable to do so, our business and financial condition would
be materially harmed. If rapid growth occurs, it may strain our operational, managerial and financial resources.
We
will depend on third parties to manufacture and market our products and to design trial protocols, arrange for and monitor the
clinical trials, and collect and analyze data.
We
do not have, and do not now intend to develop, facilities for the manufacture of any of our products for clinical or commercial
production. In addition, we are not a party to any long-term agreement with any of our suppliers, and accordingly, we have our
products manufactured on a purchase-order basis from one of two primary suppliers. We will need to develop relationships with
manufacturers and enter into collaborative arrangements with licensees or have others manufacture our products on a contract basis.
We expect to depend on such collaborators to supply us with products manufactured in compliance with standards imposed by the
FDA and foreign regulators.
Moreover,
as we develop products eligible for clinical trials, we contract with independent parties to design the trial protocols, arrange
for and monitor the clinical trials, collect data and analyze data. In addition, certain clinical trials for our products may
be conducted by government-sponsored agencies and will be dependent on governmental participation and funding. Our dependence
on independent parties and clinical sites involves risks including reduced control over the timing and other aspects of our clinical
trials.
We
are exposed to product liability, pre-clinical and clinical liability risks which could place a substantial financial burden upon
us, should we be sued.
Our
business exposes us to potential product liability and other liability risks that are inherent in the testing, manufacturing and
marketing of pharmaceutical formulations and products. Such claims may be asserted against us. In addition, the use in our clinical
trials of pharmaceutical formulations and products that our potential collaborators may develop and the subsequent sale of these
formulations or products by us or our potential collaborators may cause us to bear a portion of or all product liability risks.
A successful liability claims, or series of claims brought against us could have a material adverse effect on our business, financial
condition and results of operations.
Since
we do not currently have any FDA-approved products or other formulations, we do not currently have any other product liability
insurance covering commercialized products. We may not be able to obtain or maintain adequate product liability insurance, when
needed, on acceptable terms, if at all, or such insurance may not provide adequate coverage against our potential liabilities.
Furthermore, our potential partners with whom we intend to have collaborative agreements, or our future licensees may not be willing
to indemnify us against these types of liabilities and may not themselves be sufficiently insured or have sufficient liquidity
to satisfy any product liability claims. Claims or losses in excess of any product liability insurance coverage that may be obtained
by us could have a material adverse effect on our business, financial condition and results of operations.
In
addition, we may be unable to obtain or to maintain clinical trial liability insurance on acceptable terms, if at all. Any inability
to obtain and/or maintain insurance coverage on acceptable terms could prevent or limit the commercialization of any products
we develop.
If
users of our proposed products are unable to obtain adequate reimbursement from third-party payers or if new restrictive legislation
is adopted, market acceptance of our proposed products may be limited, and we may not achieve revenues.
The
continuing efforts of government and insurance companies, health maintenance organizations and other payers of healthcare costs
to contain or reduce costs of health care may affect our future revenues and profitability, and the future revenues and profitability
of our potential customers, suppliers and collaborative partners and the availability of capital. For example, in certain international
markets, pricing or profitability of prescription pharmaceuticals is subject to government control. In the U.S., given recent
federal and state government initiatives directed at lowering the total cost of health care, the U.S. Congress and state legislatures
will likely continue to focus on health care reform, the cost of prescription pharmaceuticals and on the reform of the Medicare
and Medicaid systems. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the announcement
or adoption of such proposals could materially harm our business, financial condition and results of operations.
Our
ability to commercialize our proposed products will depend in part on the extent to which appropriate reimbursement levels for
the cost of our proposed formulations and products and related treatments are obtained by governmental authorities, private health
insurers and other organizations, such as HMOs. Third-party payers are increasingly challenging the prices charged for medical
drugs and services. Also, the trend toward managed health care in the U.S. and the concurrent growth of organizations such as
HMOs, which could control or significantly influence the purchase of health care services and drugs, as well as legislative proposals
to reform health care or reduce government insurance programs, may all result in lower prices for or rejection of our products.
There
are risks associated with our reliance on third parties for marketing, sales and distribution infrastructure and channels.
We
intend to enter into agreements with commercial partners to engage in sales, marketing and distribution efforts around our products
in development. We may be unable to establish or maintain these third-party relationships, or establish new relationships, on
a commercially reasonable basis, if at all. In addition, these third parties may have similar or more established relationships
with our competitors. If we do not enter into or maintain relationships with third parties for the sales and marketing of our
proposed products, we will need to develop our own sales and marketing capabilities. Furthermore, even if engaged, these distributors
may:
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fail to adequately market our products;
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cease operations with little or no notice to
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offer, design, manufacture or promote competing
formulations or products.
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If
we fail to develop sales, marketing and distribution channels, we could experience delays in generating sales and incur increased
costs, which would harm our financial results.
We
will be subject to risks if we seek to develop our own sales force.
If
we choose at some point to develop our own sales and marketing capability, our experience in developing a fully integrated commercial
organization is limited. If we choose to establish a fully integrated commercial organization, we will likely incur substantial
expenses in developing, training and managing such an organization. We may be unable to build a fully integrated commercial organization
on a cost-effective basis, or at all. Any such direct marketing and sales efforts may prove to be unsuccessful. In addition, we
will compete with many other companies that currently have extensive and well-funded marketing and sales operations. Our marketing
and sales efforts may be unable to compete against these other companies. We may be unable to establish a sufficient sales and
marketing organization on a timely basis, if at all.
Risks
Related to Our Industry
We
will need regulatory approvals to commercialize our products as drugs.
In
offering BXT-25, or any other product as a drug, we are required to obtain approval from the FDA to sell our products in the U.S.
and from foreign regulatory authorities to sell our products in other countries. The FDA’s review and approval process is
lengthy, expensive and uncertain. Extensive pre-clinical and clinical data and supporting information must be submitted to the
FDA for each indication for each product candidate to secure FDA approval. Before receiving FDA clearance to market our proposed
products, we will have to demonstrate that our products are safe and effective on the patient population and for the diseases
that are to be treated. Clinical trials, manufacturing and marketing of drugs are subject to the rigorous testing and approval
process of the FDA and equivalent foreign regulatory authorities. The Federal Food, Drug and Cosmetic Act and other federal, state
and foreign statutes and regulations govern and influence the testing, manufacture, labeling, advertising, distribution and promotion
of drugs and medical devices. As a result, regulatory approvals can take a number of years or longer to accomplish and require
the expenditure of substantial financial, managerial and other resources. The FDA could reject an application or require us to
conduct additional clinical or other studies as part of the regulatory review process. Delays in obtaining or failure to obtain
FDA approvals would prevent or delay the commercialization of our product candidates, which would prevent, defer or decrease our
receipt of revenues. In addition, if we receive initial regulatory approval, our product candidates will be subject to extensive
and rigorous ongoing domestic and foreign government regulation.
Data
obtained from clinical trials are susceptible to varying interpretations, which could delay, limit or prevent regulatory clearances.
Data
we obtain from our planned pre-clinical studies and clinical trials will not necessarily predict the results that will be obtained
from later pre-clinical studies and clinical trials. Moreover, pre-clinical and clinical data is susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval. A number of companies in the pharmaceutical industry have suffered significant
setbacks in advanced clinical trials, even after promising results in earlier trials. The failure to adequately demonstrate the
safety and effectiveness of a proposed formulation or product under development could delay or prevent regulatory clearance of
the potential drug, resulting in delays to commercialization, and could materially harm our business. Our clinical trials may
not demonstrate sufficient levels of safety and efficacy necessary to obtain the requisite regulatory approvals for our drugs,
and thus our proposed drugs may not be approved for marketing.
Our
competitive position depends on protection of our intellectual property.
Development
and protection of our intellectual property are critical to our business. All of our intellectual property has been invented and/or
developed or co-developed by Dr. David Platt; and other intellectual property that is important to the development of BXT-25 is
in the public domain. If we do not adequately protect our intellectual property, or if competitors develop technologies incorporating
the same or similar technologies that already are in the public domain, those competitors may be able to practice our technologies.
Our success depends in part on our ability to obtain patent protection for our products or processes in the U.S. and other countries,
protect trade secrets, and prevent others from infringing on our proprietary rights.
Since
patent applications in the U.S. are maintained in secrecy for at least portions of their pendency periods (published on U.S. patent
issuance or, if earlier, 18 months from earliest filing date for most applications) and since other publication of discoveries
in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we are or will be the first
to make the inventions to be covered by our patent applications. The patent position of biopharmaceutical firms generally is highly
uncertain and involves complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent
policy regarding the breadth of claims that it will allow in biotechnology patents.
The
patent applications we file, including applications that will follow the filing of Provisionals, may not issue as patents or the
claims of any issued patents may not afford meaningful protection for our technologies or products. In addition, patents issued
to us or to any future licensors may be challenged and subsequently narrowed, invalidated or circumvented. Patent litigation is
widespread in the biotechnology industry and could harm our business. Litigation might be necessary to protect our patent position
or to determine the scope and validity of third-party proprietary rights, and we may not have the required resources to pursue
such litigation or to protect our patent rights.
Although
we will require our scientific and technical employees and consultants to enter into broad assignment of inventions agreements,
and all of our employees, consultants and corporate partners with access to proprietary information to enter into confidentiality
agreements, these agreements may not be honored. Currently, we do not have any scientific or technical employees.
Products
we develop could be subject to infringement claims asserted by others.
We
cannot assure that products based on our patents or intellectual property that we license from others will not be challenged by
a third-party claiming infringement of its proprietary rights. If we were not able to successfully defend patents that may be
issued to us, that we may acquire, or that we may license in the future, we may have to pay substantial damages, possibly including
treble damages, for past infringement.
We
face intense competition in the biotechnology and pharmaceutical industries.
The
biotechnology and pharmaceutical industries are intensely competitive. We face direct competition from U.S. and foreign companies
focusing on pharmaceutical products, which are rapidly evolving. Our competitors include major multinational pharmaceutical and
chemical companies, specialized biotechnology firms and universities and other research institutions. Many of these competitors
have greater financial and other resources, larger research and development staffs and more effective marketing and manufacturing
organizations, than we do. In addition, academic and government institutions are increasingly likely to enter into exclusive licensing
agreements with commercial enterprises, including our competitors, to market commercial products based on technology developed
at such institutions. Our competitors may succeed in developing or licensing technologies and products that are more effective
or less costly than ours or succeed in obtaining FDA or other regulatory approvals for product candidates before we do. Acquisitions
of, or investments in, competing pharmaceutical or biotechnology companies by large corporations could increase such competitors’
financial, marketing, manufacturing and other resources.
The
market for our proposed products is rapidly changing and competitive, and new drugs and new treatments which may be developed
by others could impair our ability to maintain and grow our business and remain competitive.
The
pharmaceutical and biotechnology industries are subject to rapid and substantial technological change. Developments by others
may render our proposed products noncompetitive or obsolete, or we may be unable to keep pace with technological developments
or other market factors. Technological competition from pharmaceutical and biotechnology companies, universities, governmental
entities and others diversifying into the field is intense and is expected to increase.
As
a pre-revenue company engaged in the development of drug technologies, our resources are limited, and we may experience technical
challenges inherent in such technologies. Competitors have developed or are in the process of developing technologies that are,
or in the future may be, the basis for competition. Some of these technologies may have an entirely different approach or means
of accomplishing similar therapeutic effects compared to our proposed products. Our competitors may develop drugs that are safer,
more effective or less costly than our proposed products and, therefore, present a serious competitive threat to us.
The
potential widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our proposed products,
even if commercialized. Many of our targeted diseases and conditions can also be treated by other medication. These treatments
may be widely accepted in medical communities and have a longer history of use. The established use of these competitive drugs
may limit the potential for our technologies, formulations and products to receive widespread acceptance if commercialized.
Health
care cost containment initiatives and the growth of managed care may limit our returns.
Our
ability to commercialize our products successfully may be affected by the ongoing efforts of governmental and third-party payers
to contain the cost of health care. These entities are challenging prices of health care products and services, denying or limiting
coverage and reimbursement amounts for new therapeutic products, and for FDA-approved products considered experimental or investigational,
or which are used for disease indications without FDA marketing approval.
Even
if we succeed in bringing any products to the market, they may not be considered cost-effective and third-party reimbursement
might not be available or sufficient. If adequate third-party coverage is not available, we may not be able to maintain price
levels sufficient to realize an appropriate return on our investment in research and product development. In addition, legislation
and regulations affecting the pricing of pharmaceuticals may change in ways adverse to us before or after any of our proposed
products are approved for marketing.
Risks
Related to Our Intellectual Property
If
we are unable to obtain and maintain patent protection for our products, or if the scope of the patent protection obtained is
not sufficiently broad, competitors could develop and commercialize products similar or identical to ours, and our ability to
successfully commercialize our products may be impaired.
Our
plan for the development of BXT-25 is based in part on a technology developed by the Biopure Corporation which separates hemoglobin
from red blood cells. Biopure filed for bankruptcy in 2009 and the technology we use from Biopure is in the public domain. We
plan to apply our proprietary chemistry to break down and augment a bovine hemoglobin molecule producing a co-polymer-based molecule
we call BXT-25. We face competitors and other entities who are engaged in the further development of some or all of that public-domain
technology for the purpose of creating products that may compete directly with our products.
Among
such competitors and other entities is Boston Therapeutics, Inc. (OTCQB: BTHE). Our chairman, David Platt, was founder, and until
April 1, 2015, Chief Executive Officer of Boston Therapeutics; and that entity is a pharmaceutical company focused on developing,
manufacturing and commercializing novel compounds based on complex carbohydrate chemistry to address unmet medical needs in diabetes.
According to its website, products Boston Therapeutics seeks to develop include an anti-necrosis glyco-protein based therapeutic
agent that consists of a stabilized glycoprotein composition containing oxygen-rechargeable iron, targeting both human and animal
tissues and organ systems deprived of oxygen and in need of metabolic support. The Boston Therapeutic development efforts are,
like the efforts of the Company, based in part on Biopure technology that is now in the public domain. While Boston Therapeutics
is focused on medical conditions that are different from the conditions that will be addressed by the Company, and while the Company’s
proprietary technology is very different from the technology under development at Boston Therapeutics at the time of Dr. Platt’s
departure from that entity, a refocus of Boston Therapeutics to treat conditions that are central to the Company’s focus
may make it a direct competitor.
Currently
there are four drugs candidates to treat a stroke. Abciximab from Eli Lilly is a platelet aggregation inhibitor. Clinical trials
show little advantage over placebos and could lead to dangerous side effects, including more bleeding in patients. Cerovive from
AstraZeneca is a Nitrone-based neuro protectant currently in phase III clinical trials which shows no significant benefit over
placebos with respect to changes in neurological impairment as measured by the national institute of health stroke scale. Candesartan,
from AstraZeneca, is an angiotensin receptor blocker which was used to control blood pressure. Its efficacy in stroke patients
still must be proven. Ancod from Knoll Pharmaceuticals is an anti-coagulant that acts by breaking down the fibrinogen. It increases
the risk of hemorrhage similar to those associated with tPA.
Our
success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United
States and other countries with respect to our proprietary products. We seek to protect our proprietary position by filing patent
applications in the United States and abroad related to our drug candidates.
The
patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable
patent applications at a reasonable cost, in a timely manner, or in all jurisdictions. It is also possible that we will fail to
identify patentable aspects of our research and development output before it is too late to obtain patent protection.
The
patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual
questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect
our rights to the same extent as the laws of the United States and we may fail to seek or obtain patent protection in all major
markets. For example, European patent law restricts the patentability of methods of treatment of the human body more than United
States law does. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent
applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some
cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned
patents or pending patent applications, or that we were the first to file for patent protection of such inventions, nor can we
know whether those from whom we license patents were the first to make the inventions claimed or were the first to file. As a
result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending
and future patent applications may not result in patents being issued which protect our technology or products, in whole or in
part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent
laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow
the scope of our patent protection.
Recent
patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and
the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith
Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These include
provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The U.S. Patent and Trademark
Office, or U.S. PTO, recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many
of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions,
only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the
operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding
the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material
adverse effect on our business and financial condition.
Moreover,
we may be subject to a third-party pre-issuance submission of prior art to the U.S. PTO, or become involved in opposition, derivation,
reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the
patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of,
or invalidate our patent rights, allow third parties to commercialize our technology or products and compete directly with us,
without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent
rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it
could dissuade companies from collaborating with us to license, develop or commercialize current or future drug candidates.
Even
if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection,
prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able
to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing
manner.
The
issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged
in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom
to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability
to stop others from using or commercializing similar or identical products, or limit the duration of the patent protection of
our products. Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents
protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio
may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
We
may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming
and ultimately unsuccessful.
Competitors
may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required
to file infringement claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could
provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property. In addition, in
a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe
the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our
patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents
at risk of being invalidated or interpreted narrowly, which could adversely affect us.
Third
parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which
would be uncertain and could have a material adverse effect on the success of our business.
Our
commercial success depends upon our ability to develop, manufacture, market and sell our drug candidates without infringing the
proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical
industries. While no such litigation has been brought against us and we have not been held by any court to have infringed a third
party’s intellectual property rights, we cannot guarantee that our products or use of our products do not infringe third-party
patents. It is also possible that we have failed to identify relevant third-party patents or applications. For example, applications
filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States
remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18
months after the earliest filing, which is referred to as the priority date. Therefore, patent applications covering our products
or technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been
published can, subject to certain limitations, be later amended in a manner that could cover our technologies, our products or
the use of our products.
We
may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with
respect to our products and technology, including inter parties review, interference, or derivation proceedings before the U.S.
PTO and similar bodies in other countries. Third parties may assert infringement claims against us based on existing intellectual
property rights and intellectual property rights that may be granted in the future.
If
we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such
third party to continue developing and marketing our products. However, we may not be able to obtain any required license on commercially
reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors
access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing
technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’
fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our
drug candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we
have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our
business.
Obtaining
and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance
with these requirements.
Periodic
maintenance fees on any issued patent are due to be paid to the U.S. PTO and foreign patent agencies in several stages over the
lifetime of the patent. The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in
many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in
which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss
of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent
application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment
of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter
the market, which would have a material adverse effect on our business.
We
may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property,
or claiming ownership of what we regard as our own intellectual property.
The
employees and consultants we may hire likely will have been previously employed at universities or other biotechnology or pharmaceutical
companies, including our competitors or potential competitors. Although we will try to ensure that our employees and contractors
do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these employees
or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s
former employer. Litigation may be necessary to defend against these claims.
In
addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual
property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement
with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may
not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may
bring against us, to determine the ownership of what we regard as our intellectual property.
If
we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result
in substantial costs and be a distraction to management.
Intellectual
property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even
if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur
significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition,
there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities
analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common
stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for
development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other
resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such
litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from
the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
If
we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In
addition to seeking patents for some of our technology and drug candidates, we also intend to rely on trade secrets, including
unpatented know-how, technology and other proprietary information, to maintain our competitive position. We will seek to protect
these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them,
such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors
and other third parties. We also seek to enter into confidentiality and invention or patent assignment agreements with our employees
and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information,
including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Our trade secrets may also
be obtained by third parties by other means, such as breaches of our physical or computer security systems. Enforcing a claim
that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome
is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade
secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no
right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If
any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be
harmed.
Risks
Relating to Our Currently Effective Public Offering and Ownership of Our Common Stock
Prior
to our currently effective public offering, we had a limited public market for our shares of common stock, and you may not be
able to resell our shares at or above the price you paid, or at all.
Prior
to our currently effective public offering, there was a limited public market for our common stock in the OTCQB market. We intend
to apply for quotation on the NASDAQ through a market maker; however, there can be no assurance that our common stock will ever
be quoted on any Major Equity Exchange. In order to be eligible for trading on the NASDAQ we must a market maker file an application
with NASDAQ to have our common stock quoted on the NASDAQ exchange and remain current in our filings with the Securities and Exchange
Commission. In order to be eligible for the NASDAQ we must have a Stockholders’ Equity of $5 million, a minimum bid price
of $3.00, have at least 300 unrestricted round lot stockholders, each owning at least 100 shares, have a freely traded public
float of at least $15 million and pay initial listing fees. We cannot assure you that an active public market for our common stock
will develop or that the market price of our shares will not decline below the public offering price. The public offering price
of our shares may not be indicative of prices that will prevail in the trading market following our currently effective public
offering.
Because
we are subject to the “Penny Stock” rules, the level of trading activity in our stock may be reduced.
The
Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any listed,
trading equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject
to certain exemptions. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that
prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the
penny stock rules which may increase the difficulty Purchasers may experience in attempting to liquidate such securities.
We
do not expect to pay dividends in the foreseeable future. Any return on investment may be limited to the value of our common stock.
We
do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board
of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your
investment will occur only if our stock price appreciates.
Provisions
in the Nevada Revised Statutes and our Bylaws could make it very difficult for an investor to bring any legal actions against
our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors
or officers in any such actions.
Members
of our board of directors and our officers will have no liability for breaches of their fiduciary duty of care as a director or
officer, except in limited circumstances, pursuant to provisions in the Nevada Revised Statutes and our Bylaws as authorized by
the Nevada Revised Statutes. Specifically, Section 78.138 of the Nevada Revised Statutes provides that a director or officer is
not individually liable to the company or its shareholders or creditors for any damages as a result of any act or failure to act
in his or her capacity as a director or officer unless it is proven that (1) the director’s or officer’s act or failure
to act constituted a breach of his or her fiduciary duties as a director or officer and (2) his or her breach of those duties
involved intentional misconduct, fraud or a knowing violation of law. This provision is intended to afford directors and officers
protection against and to limit their potential liability for monetary damages resulting from suits alleging a breach of the duty
of care by a director or officer. Accordingly, you may be unable to prevail in a legal action against our directors or officers
even if they have breached their fiduciary duty of care. In addition, our Bylaws allow us to indemnify our directors and officers
from and against any and all costs, charges and expenses resulting from their acting in such capacities with us. This means that
if you were able to enforce an action against our directors or officers, in all likelihood, we would be required to pay any expenses
they incurred in defending the lawsuit and any judgment or settlement they otherwise would be required to pay. Accordingly, our
indemnification obligations could divert needed financial resources and may adversely affect our business, financial condition,
results of operations and cash flows, and adversely affect prevailing market prices for our common stock.
Future
sales of substantial amounts of the shares of common stock by existing shareholders could adversely affect the price of our common
stock.
If
our existing shareholders sell substantial amounts of the shares following our currently effective public offering, the market
price of our common stock could fall. Such sales by our existing shareholders might make it more difficult for us to issue new
equity or equity-related securities in the future at a time and place we deem appropriate. The shares of common stock offered
in our currently effective public offering will be eligible for immediate resale in the public market without restrictions. All
remaining shares, which are currently held by our existing shareholders, may be sold in the public market in the future subject
to the lock-up agreements and the restrictions contained in Rule 144 under the Securities Act. If any existing shareholders sell
a substantial amount of shares, the prevailing market price for our shares could be adversely affected.
The
market price of our Common Stock may be subject to fluctuation and you could lose all or part of your investment.
Our
currently effective public offering price has been arbitrarily determined by us and may not be indicative of prices that will
prevail in the trading market. The price of our shares may decline following our currently effective public offering. The stock
market in general has been, and the market price of our ordinary shares in particular will likely be, subject to fluctuation,
whether due to, or irrespective of, our operating results and financial condition. The market price of our shares may fluctuate
as a result of a number of factors, some of which are beyond our control, including, but not limited to:
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actual or anticipated
variations in our and our competitors’ results of operations and financial condition;
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market acceptance
of our products;
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the mix of products
that we sell and related services that we provide;
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changes in earnings
estimates or recommendations by securities analysts, if our shares are covered by analysts;
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development of technological
innovations or new competitive products by others;
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announcements of
technological innovations or new products by us;
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failure by us to
achieve a publicly announced milestone;
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delays between our
expenditures to develop and market new or enhanced products and the generation of sales from those products;
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developments concerning
intellectual property rights, including our involvement in litigation;
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regulatory developments
and the decisions of regulatory authorities as to the approval or rejection of new or modified products;
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changes in the amounts
that we spend to develop, acquire or license new products, technologies or businesses;
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changes in our expenditures
to promote our products;
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our sale or proposed
sale, or the sale by our significant shareholders, of our shares or other securities in the future;
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changes in key personnel;
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success or failure
of our research and development projects or those of our competitors;
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the trading volume
of our Shares; and
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general economic
and market conditions and other factors, including factors unrelated to our operating performance.
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These
factors and any corresponding price fluctuations may materially and adversely affect the market price of our shares and result
in substantial losses being incurred by our investors. In the past, following periods of market volatility, public company shareholders
have often instituted securities class action litigation. If we were involved in securities litigation, it could impose a substantial
cost upon us and divert the resources and attention of our management from our business.
The
financial and operational projections that we may make from time to time are subject to inherent risks.
The
projections that we provide herein or our management may provide from time to time (including, but not limited to, those relating
to potential peak sales amounts, clinical and regulatory timelines, production and supply matters, commercial launch dates, and
other financial or operational matters) reflect numerous assumptions made by management, including assumptions with respect to
our specific as well as general business, regulatory, economic, market and financial conditions and other matters, all of which
are difficult to predict and many of which are beyond our control. Accordingly, there is a risk that the assumptions made in preparing
the projections, or the projections themselves, will prove inaccurate. There may be differences between actual and projected results,
and actual results may be materially different from than those contained in the projections. The inclusion of the projections
in this Annual Report on Form 10-K should not be regarded as an indication that we, our management, or their representatives considered
or consider the projections to be a guaranteed prediction of future events, and the projections should not be relied upon as such.
An
investment in our company may involve tax implications, and you are encouraged to consult your own advisors as neither we nor
any related party is offering any tax assurances or guidance regarding our company or your investment.
The
formation of our company, as well as an investment in our company generally, involves complex federal, state and local income
tax considerations. Neither the Internal Revenue Service nor any State or local taxing authority has reviewed the transactions
described herein, and may take different positions than the ones contemplated by management. You are strongly urged to consult
your own tax and other advisors prior to investing, as neither we nor any of our officers, directors or related parties is offering
you tax or similar advice, nor are any such persons making any representations and warranties regarding such matters.
Our
ability to use our net operating loss carry-forwards and certain other tax attributes may be limited.
Under
Section 382 of the Internal Revenue Code of 1986, as amended, referred to as the Internal Revenue Code, if a corporation undergoes
an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year
period), the corporation’s ability to use its pre-change net operating loss carry-forwards and other pre-change tax attributes
(such as research tax credits) to offset its post-change income may be limited. We may also experience ownership changes in the
future as a result of subsequent shifts in our stock ownership, including as a result of the completion of our currently effective
public offering when it is taken together with other transactions we may consummate in the succeeding three-year period. As a
result, if we earn net taxable income, our ability to use our pre-change net operating loss carry-forwards to offset U.S. federal
taxable income may be subject to limitations, which potentially could result in increased future tax liability to us.
Our
Certificate of Incorporation permits “blank check” preferred stock, which can be designated by our Board of Directors
without stockholder approval.
We
have 50,000,000 authorized shares of preferred stock. The shares of our preferred stock may be issued from time to time in one
or more series, each of which shall have a distinctive designation or title as is determined by our Board of Directors prior to
the issuance of any shares thereof. The preferred stock may have such voting powers, full or limited, or no voting powers, and
such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions
thereof as adopted by the Board of Directors. Because the Board of Directors is able to designate the powers and preferences of
the preferred stock without the vote of a majority of our stockholders, stockholders will have no control over what designations
and preferences our preferred stock will have. If preferred stock is designated and issued, then depending upon the designation
and preferences, the holders of the preferred stock may exercise voting control over us. As a result, our stockholders will have
no control over the designations and preferences of the preferred stock and as a result the operations of our company.]
Our
management collectively owns a substantial majority of our common stock.
Collectively,
our officers, our directors and 5 other stockholders own or exercise voting and investment control of approximately 98% of our
outstanding common stock. As a result, investors may be prevented from affecting matters involving our company, including:
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the composition
of our Board of Directors and, through it, any determination with respect to our business direction and policies, including
the appointment and removal of officers;
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any determinations
with respect to mergers or other business combinations;
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our acquisition
or disposition of assets; and
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our corporate financing
activities.
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Furthermore,
this concentration of voting power could have the effect of delaying, deterring or preventing a change of control or other business
combination that might otherwise be beneficial to our stockholders. This significant concentration of share ownership may also
adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in a company
that is controlled by a small number of stockholders.
If
we fail to establish and maintain an effective system of internal control or disclosure controls and procedures are not effective,
we may not be able to report our financial results accurately and timely or to prevent fraud. Any inability to report and file
our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.
Effective
internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the
Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal controls over financial reporting and, depending
on our future growth, may require our independent registered public accounting firm to annually attest to our evaluation, as well
as issue their own opinion on our internal controls over financial reporting. The process of implementing and maintaining proper
internal controls and complying with Section 404 is expensive and time consuming. We cannot be certain that the measures we will
undertake will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore,
if we are able to rapidly grow our business, the internal controls that we will need may become more complex, and significantly
more resources will be required to ensure our internal controls remain effective. Failure to implement required controls, or difficulties
encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If
our auditors or we discover a material weakness in our internal controls, the disclosure of that fact, even if the weakness is
quickly remedied, could diminish investors’ confidence in our financial statements and harm our stock price. In addition,
non-compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension of trading,
ineligibility for future listing on one of the Nasdaq Stock Markets or national securities exchanges, and the inability of registered
broker-dealers to make a market in our common stock, which may reduce our stock price.
If
securities or industry analysts do not publish research or reports about us, our business or our market, or if they make and then
change their recommendations regarding our common stock adversely, the price of our common stock and trading volume could decline.
The
trading market for our common stock, should it develop, may be influenced by the research and reports that securities or industry
analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their
recommendation regarding our common stock adversely, or provide more favourable relative recommendations about our competitors,
the price of our common stock would likely decline. If any analyst who may cover us was to cease coverage of our company or fail
to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of
our common stock or trading volume to decline.
In
making your investment decision, you should understand that we have not authorized any other party to provide you with information
concerning us or our currently effective public offering.
You
should carefully evaluate all of the information in this Annual Report on Form 10-K before investing in our company. We may receive
media coverage regarding our company, including coverage that is not directly attributable to statements made by our officers,
that incorrectly reports on statements made by our officers or employees, or that is misleading as a result of omitting information
provided by us, our officers or employees. We have not authorized any other party to provide you with information concerning us
or our currently effective public offering, and you should not rely on this information in making an investment decision.
Risks
Related to the Note Financings
Common
Stock that we issue upon conversion of the promissory note will dilute our existing stockholders and depress the market price
of our common stock.
As
of the date of this Annual Report on Form 10-K, we are, based on current market price of $0.285/share, obligated to issue approximately
5,628,000 shares of common stock upon conversion of the currently outstanding Convertible Notes and 2,140,473 shares upon exercise
of the warrants. For the Notes, the shares total is based on $901,274 of currently outstanding principal and unpaid interest and
based upon a conversion price equal to the lesser of (i) the lowest trading price for the twenty-day period prior to the
date of the Note or (ii) 65% of the lowest trading price during the twenty days prior to a conversion notice on the applicable
trading market or the closing bid price on the applicable trading market. The Convertible Notes are limited to converting no more
than 4.99% of our issued an outstanding common stock.
The
total potential issuable shares increase with the inclusion of additional interest and any decrease in our stock price. As of
the date of this Annual Report on Form 10-K, 225,000 shares have been issued pursuant to conversion of the Convertible Notes.
The
issuance of shares upon conversion of the notes will dilute our existing shareholders. The number of common shares issuable by
us upon conversion of the notes is dependent on the trading price of our common shares during the twenty days prior to conversion.
If the price of our stock declines in value, we will be obligated to issue more shares to the note holders which would have a
further dilutive effect on our stock which could depress the market price of our common stock.
The
holders of the notes convertible into our common stock will pay less than the then- prevailing market price for our common stock.
The
notes are convertible at the lesser of (i) the lowest trading price for the twenty-day period prior to the date of the Note or
(ii) 65% of the lowest trading price during the twenty days prior to a conversion notice on the applicable trading market or the
closing bid price on the applicable trading market. As such, the note holders have a financial incentive to sell our common stock
immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market
price. If the noteholders sell shares, the price of our common stock will likely decrease. If our stock price decreases, the noteholders
may have a further incentive to sell the shares of our common stock that they hold. These sales may put further downward pressure
on our stock price and reduce the value of your common shares.
The
price of the Common Stock we are selling under our currently effective public offering is significantly higher than the conversion
price of the Convertible Notes and warrant and the price of our common stock would likely drop to or below the conversion price
of the Notes upon conversion.
In
the event that the Notes converts into common stock, the conversion price is significantly lower than the price at which we are
selling our common stock in our currently effective public offering. As a result, the sale by the Note Holders of our common stock
could drive the market price down to the conversion price as determined at the date of conversion or lower. This could result
in the purchaser of our common stock in our currently effective public offering to immediately loose a substantial portion of
his or her investment.
If
our stock price materially declines, the convertible note holders will have the right to a large number of shares of common stock
upon exchange of amounts due under the notes, which may result in significant dilution.
The
notes have a conversion feature which is based upon 65% of the lowest trading price during the twenty days prior to a conversion
notice on the applicable trading market or the closing bid price on the applicable trading market. If our common stock price materially
declines, we will be obligated to issue a large number of shares upon conversion. This will likely materially dilute existing
shareholders. The potential for such dilutive issuances upon conversion of outstanding notes may depress the price of common stock
regardless of our business performance, and could encourage short selling by market participants, especially if the trading price
of our common stock begins to decrease.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance
Our
board of directors, executive officers and key employees are as follows:
Name
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Age
as of
December 31, 2019
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Position
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David Platt, Ph.D.
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66
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Chief
Executive Officer, Chairman and Director
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Ola Soderquist,
MBA, CPA, CMA
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58
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Chief
Financial Officer, Treasurer, Secretary
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Dale H. Conaway,
D.V.M.
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65
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Director
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Alan M. Hoberman.
Ph.D.
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66
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Director
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Henry J. Esber,
Ph.D.
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81
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Director
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Anders Utter,
MBA
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52
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Director
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David
Platt, Ph.D. is the Chief Executive Officer and Chairman of our Board of Directors. Dr. Platt is a world-renowned expert
in carbohydrate chemistry and has founded three publicly traded companies, creating nearly $1B for investors. He has raised $150M
directly in public markets in the U.S. and has led development of two drug candidates from concept through phase II clinical trials.
Prior to Bioxytran, Inc. Dr. Platt founded Boston Therapeutics Inc. in 2010 (OTC: BTHE) where he served as chief executive officer
from 2010 to April 1, 2015 and as a director from March 2015 to June 8, 2016. From 2001 to 2009, Dr. Platt was a founder, Chief
Executive Officer and Chairman of the Board at Pro-Pharmaceuticals, Inc. (OTC: PRWP and AMEX: PRW, now NASDAQ: GALT). From 1995
to 2000 Dr. Platt was the founder of International Gene Group (NASDAQ: IGGI, GLGS now LPJC). Dr. Platt received a Ph.D. in Chemistry
in 1988 from Hebrew University in Jerusalem. In 1989, Dr. Platt was a research fellow at the Weizmann Institute of Science, Rehovot,
Israel, and from 1989 to 1991, was a research fellow at the Michigan Foundation (re-named Barbara Ann Karmanos Institute). From
1991 to 1992, Dr. Platt was a research scientist with the Department of Internal Medicine at the University of Michigan. Dr. Platt
has published peer-reviewed articles and holds many patents, primarily in the field of carbohydrate chemistry. Our board of directors
believes that Dr. Platt’s expertise and experience with public biotech companies, his perspective, depth and background
in chemistry and finance, the capital formation process and leadership experience in public companies provide him with the qualifications
and skills to serve on our board of directors.
Ola
Soderquist, MBA, CPA, CMA, CM&AA has more than 30 years of senior international entrepreneurial management experience
within technology companies. Ola’s managerial experience portfolio includes; Start-ups, Private, Public, Venture Capital
and Private Equity ownership. He has served in CFO and other managerial capacities in multiple industry sectors and companies.
His public company tenures include companies in the Wallenberg Sphere (1986-1996): Industrivarden (OMX:INDU), Electrolux (OMX:ELUX),
Ericsson (NASDAQ:ERIC), Swedish Match (OMX:SWMA) and SKF AB (OMX:SKF), and most recently in Traction (OMX:TRAC) (1996-2001) and
Belden (NYSE: BDC) (2006-2011). His private company experience includes CFO and CAO positions in Proditec, Inc. (2001-2006), LFA
Corp. (2012-2014) and Faria Beede Instruments, Inc. (2014-2016). Ola is a multi-lingual senior finance professional poised to
work globally and cross-functionally, particularly with complex projects involving change management, business integration, systems
implementation, continuous improvement, and process excellence. He obtained a BS and an MSA rom Stockholm School of Economics
and an MBA from Babson College.
Dale
H. Conaway, D.V.M., is a Director of the Company. He is the Chief Veterinary Medical Officer for the Office of Research
Oversight, an office within the Veterans Health Administration under the U.S. Department of Veterans Affairs. From 2001 to 2006,
Dr. Conaway was the Deputy Regional Director (Southern Region). From 2010 to September 15, 2016, Dr. Conaway served as a member
of the board of directors of Boston Therapeutics, Inc.. From 1998 to 2001, Dr. Conaway served as Manager of the Equine Drug Testing
and Animal Disease Surveillance Laboratories for the Michigan Department of Agriculture. From 1994 to 1998, he was Regulatory
Affairs Manager for the Michigan Department of Public Health Vaccine Production Division. Dr. Conaway received a D.V.M. degree
from Tuskegee Institute and an M.S. degree in pathology from the College of Veterinary Medicine at Michigan State University.
Our board of directors believes that Dr. Conway’s expertise and experience as a director in a public biotech company, his
perspective, depth and background in testing and the development of biologic compounds, and his leadership in management provide
him with the qualifications and skills to serve on our board of directors.
Alan
M. Hoberman, Ph.D. is president and CEO of Argus International, Inc., overseeing a staff of scientists and other professionals
who provide consulting services for industry, government agencies, law firms and other organizations, both in the U.S. and internationally.
From 2014 to September 15, 2016 Dr. Hoberman served as a member of the board of directors of Boston Therapeutics, Inc. Between
1991 and 2013 he held a series of positions of increasing responsibility at Charles River Laboratories Preclinical Services (formerly,
Argus Research Laboratories, Inc.), most recently as Executive Director of Site Operations and Toxicology. He currently works
with that organization to design, supervise and evaluate reproductive and developmental toxicity, neurotoxicity, inhalation and
photobiology studies. Dr. Hoberman holds a PhD in toxicology from Pacific Western University, an MS in interdisciplinary toxicology
from the University of Arkansas and a BS in biology from Drexel University. Our board of directors believes that Dr. Hoberman’s
expertise and experience as a director in a public biotech company, his perspective, depth and background in consulting and advising
clients and his experience in the testing and development of biologic compounds, and his leadership in management provide him
with the qualifications and skills to serve on our board of directors.
Henry
J. Esber, Ph.D., a Director of the Company, has been a Principal in Esber D&D consulting since 2005. From 2003 to
2005, Dr. Esber was a Senior Consultant, Business Development at Charles River Labs, Discovery and Development Services. From
2010 to September 11, 2016, Dr. Esber served as a member of the board of directors of Boston Therapeutics, Inc. Dr. Esber has
more than 35 years of experience in the areas of oncology/tumor immunology and immunotherapy as well as strong knowledge in the
field of toxicology and regulatory affairs. Dr. Esber received a B.S. degree in biology/pre-med from the College of William and
Mary, an M.S. degree in public health and parasitology from the University of North Carolina, and a Ph.D. in immunology/microbiology
from West Virginia University Medical Center. Our board of directors believes that Dr. Esber’s expertise and experience
as a director in a public biotech company, his perspective, depth and background in immunology and immunotherapy and toxicology,
and his leadership in business development provide him with the qualifications and skills to serve on our board of directors.
Anders
N. Utter, has more than 25 years of finance, accounting and management experience in medical devices, consulting and manufacturing
industries in capacities as CFO, Controller and Managing Director. He had progressively increased management experience in the
European Nolato Group and later on in the Amplex Group. Mr. Utter has had a broad business exposure with IFRS and GAAP reporting
as well as with SOX compliance. He has also worked with M&A evaluations, financing and integration as well as more hands-on
manufacturing cost accounting and reporting. He is currently in charge of the finance control at one of General Cable’s
entities. Mr. Utter is and has been serving as a director on boards in both profit as well as non-profit organizations. Mr. Utter
holds an MBA from Babson College and a BA from Uppsala University in Sweden. Our board of directors believes that Mr. Utter’s
expertise and experience as a chief financial officer, his perspective, depth and background in GAAP reporting and SOX compliance,
and his finance, management and accounting experience provide him with the qualifications and skills to serve on our board of
directors.
Our
Directors are elected annually and each holds office until the annual meeting of the shareholders of the Company and until their
respective successors are elected and qualified. Our officers, including any officers we may elect moving forward, will hold their
positions at the pleasure of the Board of Directors, absent any employment agreement. In the event, we employ any additional officers
or directors of the Company, they may receive compensation as determined by the Company from time to time by vote of the Board
of Directors. Vacancies in the Board will be filled by majority vote of the remaining directors or in the event that a sole remaining
Director vacates his position, by our majority shareholders. Our Directors may be reimbursed by the Company for expenses incurred
in attending meetings of the Board of Directors.
Executive
Officers
Set
forth below is information regarding our current executive officers. Except as set forth below, there are no family relationships
between any of our executive officers and our directors. Executive officers are elected annually by our Board of Directors. Each
executive officer holds his office until he resigns or is removed by the Board or his successor is elected and qualified.
Name
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Age
as of December 31,
2019
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Position
|
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Term
as Officer/Director
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David
Platt, Ph.D.
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66
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Chief
Executive Officer, Chairman and Director
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September
2018 to Present
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Ola Soderquist,
MBA, CPA, CMA
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58
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Chief
Financial Officer, Treasurer, Secretary
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September 2018 to
Present
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Biographical
information with respect to Mr. Platt and Mr. Soderquist is set forth above.
Scientific
Advisory Board
We
are establishing a scientific advisory board to advise our management regarding our clinical and regulatory development programs
and other customary matters. Our scientific advisors are experts in various areas of medicine including diabetes and other diseases.
We believe the advice of our scientific advisors is important to the research, development and clinical testing of our products.
Our scientific advisory board is comprised of the following individuals.
Prof.
Avraham Mayevsky, Ph.D. is a worldwide authority in the field of minimal invasive monitoring of tissue and organ physiology.
Prof. Mayevsky is a professor at the Faculty of Life Sciences, Bar-Ilan University, Israel. He founded Vital Medical Ltd. He served
as Head of the Department of Life Sciences and Dean of the Faculty of Natural Sciences at Bar-Ilan University, where he established
a center of tissue physiology. He served as Visiting professor at University of Pennsylvania and Johns Hopkins Medical School
World-recognized expert in tissue physiology, especially in brain metabolism. He published over 150 papers and patents. He has
published over 170 papers in scientific journals and is the author of five patents. Prof. Mayevsky completed PhD from Weizmann
Institute of Science, Rehovot, Israel.
Dr.
Hana Chen-Walden, M.D. is an Endocrinologist and has specialized in regulatory affairs in the pharmaceutical industry
in the US and Europe. Dr. Chen-Walden has more than 35 years of regulatory experience with the EMEA and in individual European
countries. Since 2004 to present, Dr. Chen-Walden consulted for European Clinical and Regulatory Consultancy in medical monitoring,
quality assurance and regulatory input for clinical studies in the fields of oncology, cardiology, diabetes, neurology, respiratory
diseases and medical devices. Dr. Chen Walden received her Doctorate of Medicine from University of Tel Aviv, Israel. Dr. Chen-Walden
has practiced medicine in Germany and France.
Dr.
Juan Carlos Lopez-Talavera, M.D., PhD. has over 20 years of experience in the biopharma industry, with extensive expertise
in liver and gastrointestinal diseases. Most recently, Dr. Lopez-Talavera was Senior Vice President, Head of Medical Affairs and
member of the Executive Team at Intercept Pharmaceuticals. Previously he held positions at AbbVie as Head of Medical Affairs,
Global Research and Development, Bristol Myers Squibb, as Vice President and Global Development Lead, and Roche Laboratories as
Senior Medical Director. Before moving into the industry, Dr. Lopez-Talavera was an Assistant Professor with the Divisions of
Gastroenterology and Hepatology, and Endocrinology and Pathology at the University of Pittsburgh Medical Center, Associate Professor
of Medicine with the Universidad Autónoma de Barcelona and Attending Physician of the Liver Unit at the Hospital General
Universitari Vall D’Hebron in Barcelona.
Medical
Advisory Board
We
are evaluating a Medical Advisory Board that will be comprised of Clinicians and Clinical Research professionals who are interested
in the field of Diabetes or in other subjects related to our product pipeline. The board will provide leadership and expertise
to assist us in designing, executing and implementing our clinically oriented activities in a safe, efficient and professional
manner.
The
Company has established and approved charters for separate audit, compensation and nominating/governance committees of its board
of directors.
Code
of Ethics
A
code of business conduct and ethics is a written standard designed to deter wrongdoing and to promote (a) honest and ethical conduct,
(b) full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements, (c) compliance with
applicable laws, rules and regulations, (d) the prompt reporting violation of the code and (e) accountability for adherence to
the code. We are not currently subject to any law, rule or regulation requiring that we adopt a code of ethics; however, we intend
to adopt one in the near future.
Board
of Directors Independence
Board
of Directors Independence. Our Board of Directors consists of six members. We are not currently subject to any law, rule or regulation
requiring that all or any portion of our Board of Directors include “independent” directors. Four of the members of
the Board of Directors, Dale H. Conaway, Alan Hoberman, Anders Utter and Henry Esber are “independent” as
defined in Section 4200(a)(15) of NASDAQ Stock Market Rules.
Audit
Committee
Our
Board of Directors has established an audit committee, whose members are initially Anders Utter, as Chairman, Alan
Hoberman and Dale Conaway.
Nominating
and Governance Committee
Our
Board of Directors has established a nominating and governance committee, whose initial members are Dale Conaway as Chairman,
Anders Utter and Alan Hoberman.
Compensation
Committee
The
Board of Directors has appointed Alan Hoberman, Chairman, Dale Conaway and Anders Utter to our Compensation Committee.
Board Nomination and Corporate Governance
The Nominating and
Governance Committee of the Board has three members. All members of the committee are non-employee directors of the Company. None
of our executive officers serves on the Nominating and Governance Committee or board of directors of any other company of which
any members of our Nominating and Governance Committee or any of our directors is an executive officer.
Compensation
Committee Interlocks and Insider Participation
The
Compensation Committee of the Board has three members. All members of the committee are non-employee directors of the Company.
None of our executive officers serves on the Compensation Committee or board of directors of any other company of which any members
of our Compensation Committee or any of our directors is an executive officer.
Audit
Committee Report Regarding Audited Financial Statements
The
Audit Committee of the Board is composed of three directors, all of whom are “independent” as defined in Section 4200(a)(15)
of NASDAQ Stock Market Rules. The Audit Committee has prepared the following report on its activities with respect to the Company’s
audited financial statements for the fiscal year ended December 31, 2019 (the “Audited Financial Statements”).
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The
Audit Committee reviewed and discussed the Company’s Audited Financial Statements with management;
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The
Audit Committee discussed with Pinnacle Accountancy Group of Utah (“Pinnacle”), the Company’s independent
registered public accounting firm for fiscal 2019, the matters required to be discussed by the Public Company Accounting Oversight
Board in Rule 3200T;
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The
Audit Committee received from the independent registered public accounting firm the written disclosures regarding auditor
independence, discussed with Pinnacle its independence from the Company and its management: and
|
|
●
|
Based
on the review and discussion referred to above, and in reliance thereon, the Audit Committee determined that the Audited Financial
Statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, for
filing with the U.S. Securities and Exchange Commission.
|
All
members of the Audit Committee concur in this report.
|
Audit
Committee:
|
Anders
Utter (Chairman), Alan Hoberman, Dale Conaway.
|
Indemnification
Agreements
Our
By-laws provide for the indemnification of directors and officers. See “Indemnification of Directors and Officers.”
As of October 1, 2018, Dr. Platt and Mr. Soderquist will receive a monthly compensation of $6,000 each, while our non-employee
Directors will be compensated with 1,000 shares per board and/or committee meeting as of November 2018.
Director
Independence
Four
of the members of the Board of Directors are “independent” as defined under the rules of the as defined in Section
4200(a)(15) of NASDAQ Stock Market Rules.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who own more
than 10% of the issued and outstanding shares of our common stock to file reports of initial ownership of common stock and other
equity securities and subsequent changes in that ownership with the SEC. Officers, directors and greater than ten percent stockholders
are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, we confirm that,
based solely on a review of the copies of such reports furnished to us and written representations except for the Form 3 Initial
Statement of Beneficial Ownership already filed by David Platt, Ola Soderquist and Offer Binder, that no other reports were required,
during the fiscal year ended December 31, 2019 all Section 16(a) filing requirements applicable to our officers, directors and
greater than 10% beneficial owners were complied with.
Item
11. Executive Compensation
The
following table sets forth information concerning all cash all cash and non-cash compensation awarded to, earned by or paid to
the Company’s chief executive officer and chief financial officer, regardless of compensation level. The Company’s
chief executive officer and Chief Financial Officer are the only officers of the Company for whom compensation disclosure is required
pursuant to instruction 1 to Item 402(m)(2) of Regulation S-K.
Summary
Compensation Table
Name
and Principal Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
|
|
|
Total
Compensation
|
|
David
Platt, Chairman of the Board,
|
|
2018
|
|
$
|
18,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
18,000
|
|
Chief
Executive Officer and President
|
|
2019
|
|
$
|
72,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
72,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ola
Soderquist, Chief Financial Officer
|
|
2018
|
|
$
|
18,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
18,000
|
|
|
|
2019
|
|
$
|
72,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
72,000
|
|
Grants
of Plan-Based Awards
There
were no equity or non-equity awards granted to any of our Executive Officers from the Company’s inception through December
31, 2019.
Outstanding
Equity Awards at December 31, 2019; Option exercises and vested
There
were no outstanding options or equity awards held by the Company’s Executive Officers at December 31, 2019.
Director
Compensation
All
compensation paid to our employee directors is set forth in the table summarizing executive officer compensation above. Our non-employee
directors currently are entitled to receive 1,000 shares of our common stock for each board and/or committee meeting that they
attend per quarter in arrears. There were 27,000 shares, at a fair market value of $21,668, issued as compensation to the board
in 2019, no stock compensation was issued in 2018. Except for the foregoing, there are currently no agreements in effect entitling
them to compensation.
Employment
Contracts
Our
executive officers have entered into employment contracts and confidentiality, non-disclosure and assignment of invention agreements.
Except for a commitment to pay David Platt and Ola Soderquist $6,000 in monthly compensation, starting in October 2018, the employment
agreements do not provide for the payment of any compensation to our executive officers but provide for the payment of $100,000
(subject to upward adjustment in certain circumstances) in severance upon termination of employment without cause and make no
provisions for any payment upon a change of control. The employment agreements also prohibit the sale of any common stock owned
by our executive officers in the 180 days following the effective date of the Registration Statement initially filed on November
30, 2018. There are no arrangements or plans in which we provide pension, retirement or similar benefits for any of executive
officers or directors. Our executive officers and directors may receive stock options at the discretion of our board of directors
in the future. We do not have any bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid
to any of our executive officers or directors, except that stock options may be granted at the discretion of our board of directors
from time to time.
Compensation
Risk Assessment
We
have formed a Compensation Committee. In setting compensation, the Compensation Committee will consider the risks to the Company’s
stockholders and to achievement of its goals that may be inherent in its compensation programs. The Compensation Committee will
review and discuss its assessment with management and outside legal counsel to confirm that the Company’s compensation programs
are and will be within industry standards and designed with the appropriate balance of risk and reward to align employees’
interests with those of the Company without incenting employees to take unnecessary or excessive risks. We believe our compensation
plans will be appropriately structured consistent with the Company’s status as a pre-revenue start-up enterprise, and will
not be reasonably likely to result in a material adverse effect on the Company.
Securities
Authorized for Issuance under Equity Compensation Plans
Securities
Authorized for Issuance under Equity Compensation Plans
On
January 19, 2010, the Company established a 2010 Employee, Director and Consultant Stock Plan (the “2010 Plan”).
The 2010 Plan was approved by the Company’s board of directors and by the consent of the shareholders owning a majority
of the outstanding shares. The material features of the 2010 Plan are described below.
Administration
A
designated Administrator, or in the absence of such, our Board of Directors’ Compensation Committee or both, in the sole
discretion of our Board, administers the 2010 Plan, which was approved by the Company’s Board of Directors on January 19,
2010. The Board, subject to the provisions of the 2010 Plan, has the authority to determine and designate officers, employees,
directors and consultants to whom awards shall be made and the terms, conditions and restrictions applicable to each award (including,
but not limited to, the option price, any restriction or limitation, any vesting schedule or acceleration thereof, and any forfeiture
restrictions). The Board may, in its sole discretion, accelerate the vesting of awards. The Board of Directors must approve all
grants of Options and Stock Awards issued to our officers or directors.
Types
of Awards
The
2010 Plan is designed to enable us to offer certain officers, employees, directors and consultants of us and our subsidiaries
equity interests in us and other incentive awards in order to attract, retain and reward such individuals and to strengthen the
mutuality of interests between such individuals and our stockholders. In furtherance of this purpose, the 2010 Plan
contains provisions for granting incentive and non-statutory stock options, stock wards and stock appreciation rights.
Stock
Options. A “stock option” is a contractual right to purchase a number of shares of Common Stock at a price determined
on the date the option is granted. The option price per share of Common Stock purchasable upon exercise of a stock option and
the time or times at which such options shall be exercisable shall be determined by the Board at the time of grant. Such option
price shall not be less than 110% of the fair market value of the Common Stock on the date of grant. The option price must be
paid in cash, money order, check or Common Stock of the Company. The Options may also contain at the time of grant,
at the discretion of the Board, certain other cashless exercise provisions.
Options
shall be exercisable at the times and subject to the conditions determined by the Board at the date of grant, but no option may
be exercisable more than ten years after the date it is granted. If the Optionee ceases to be an employee of our company for any
reason other than death, any option granted as an Incentive Stock Option exercisable on the date of the termination of employment
may be exercised for a period of thirty days or until the expiration of the stated term of the option, whichever period is shorter.
In the event of the Optionee’s death, any granted Incentive Stock Option exercisable at the date of death may be exercised
by the legal heirs of the Optionee from the date of death until the expiration of the stated term of the option or six months
from the date of death, whichever event first occurs. In the event of disability of the Optionee, any granted Incentive
Stock Options shall expire on the stated date that the Option would otherwise have expired or 12 months from the date of disability,
whichever event first occurs. The termination and other provisions of a non-statutory stock option shall be fixed by
the Board of Directors at the date of grant of each respective option.
Common
Stock Award. “Common Stock Award” is shares of Common Stock that will be issued to a recipient at the end of a
restriction period, if any, specified by the Board if he or she continues to be an employee, director or consultant of us. If
the recipient remains an employee, director or consultant at the end of the restriction period, the applicable restrictions will
lapse and we will issue a stock certificate representing such shares of Common Stock to the participant. If the recipient ceases
to be an employee, director or consultant of us for any reason (including death, disability or retirement) before the end of the
restriction period unless otherwise determined by the Board, the restricted stock award will be terminated.
Eligibility
The
Company’s officers, employees, directors and consultants of Bioxytran, Inc. are eligible to be granted stock options, and
Common Stock Awards. Eligibility shall be determined by the Board; however, all Options and Stock Awards granted to
officers and directors must be approved by the Board.
Termination
or Amendment of the 2010 Plan
The
Board may at any time amend, discontinue, or terminate all or any part of the 2010 Plan, provided, however, that unless otherwise
required by law, the rights of a participant may not be impaired without his or her consent, and provided that we will seek the
approval of our stockholders for any amendment if such approval is necessary to comply with any applicable federal or state securities
laws or rules or regulations.
Awards
In
2019 there was in total issued 1,127,000 shares and 341,000 stock options awarded and issued from the plan, there were no awards
in 2018. See Note 7 in the financial statements for more details.
Shares
Subject to the 2010 Plan
Subject
to adjustment, the aggregate number of shares of Stock which may be delivered under the 2010 Plan shall not exceed a number equal
to 15% of the total number of shares of Stock outstanding immediately following the Effective Time, assuming for this purpose
the conversion into Stock of all outstanding securities that are convertible by their terms (directly or indirectly) into Stock; provided,
however, that, as of January 1 of each calendar year, commencing with the year 2011, the maximum number of shares of Stock
which may be delivered under the 2010 Plan shall automatically increase by a number sufficient to cause the number of shares of
Stock covered by the 2010 Plan to equal 15% of the total number of shares of Stock then outstanding, assuming for this purpose
the conversion into Stock of all outstanding securities that are convertible by their terms (directly or indirectly) into Stock.
On
December 31, 2019 there are an additional 11,297,551 shares or stock options available to be issued from the 2010 Plan. On December
31, 2018 there were 527,081 shares or stock options available to be issued from the 2010 Plan
Federal
Tax Consequences
The
Federal income tax discussion set forth below is intended for general information only. State and local income tax consequences
are not discussed, and may vary from locality to locality.
Incentive
Stock Options. Incentive stock options granted under the 2010 Plan are designed to qualify for the special tax
treatment for incentive stock options provided for in the Internal Revenue Code (the “Code”). Under the
provisions of the Code, an optionee who at all times from the date of grant until three months before the date of exercise is
an employee of the Company, and who holds the shares of Common Stock obtained upon exercise of his incentive stock option for
two years after the date of grant and one year after exercise, will recognize no taxable income on either the grant or exercise
of such option and will recognize capital gain or loss on the sale of the shares. If such shares are held by the optionee
for the required holding period, the Company will not be entitled to any tax deduction with respect to the grant or exercise of
the option. If such shares are sold by the optionee prior to the expiration of the holding periods described above,
the optionee will recognize ordinary income upon such disposition. Upon the exercise of an incentive stock option,
the optionee will incur an item of tax preference equal to the excess of the fair market value of the shares at the time of exercise
over the exercise price, which may subject the optionee to the alternative minimum tax.
Non-Qualified
Options. Under present Treasury regulations, an optionee who is granted a non-qualified option will not realize taxable income
at the time the option is granted. In general, an optionee will be subject to tax for the year of exercise on an amount of ordinary
income equal to the excess of the fair market value of the shares on the date of exercise over the option price, and the Company
will receive a corresponding deduction. Income tax withholding requirements apply upon exercise. The optionee’s basis in
the shares so acquired will be equal to the option price plus the amount of ordinary income upon which he is taxed. Upon subsequent
disposition of the shares, the optionee will realize capital gain or loss, long-term or short-term, depending upon the length
of time the shares are held after the option is exercised.
Common
Stock Awards. Recipients of shares of restricted Common Stock that are not “transferable” and are subject
to “substantial risk of forfeiture” at the time of grant will not be subject to Federal income taxes until lapse or
release of the restrictions on the shares. The recipient’s income and the Company’s deduction will be equal to the
fair market value of the shares on the date of lapse or release of such restrictions. It has been the Company’s policy to
value the cost of the issuance of said unregistered shares at the then bid price of the stock when issued.
The
issuance of any of our common or preferred stock is within the discretion of our Board of Directors, which has the power to issue
any or all of our authorized but unissued shares without stockholder approval.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The
following table sets forth certain information as of March 13, 2020 with respect to the beneficial ownership of shares of the
Company’s common stock by (i) each person or group known to us, to beneficially own more than 5% of the outstanding shares
of such stock, (ii) each director; (iii) each of our executive officers named in the summary compensation table under “Director
and Executive Compensation” currently serving as an executive officer; and (iv) the executive officers and directors as
a group. All persons listed below have (i) sole voting power and investment power with respect to their shares of common stock
(the only class of outstanding stock), except to the extent that authority is shared by spouses under applicable law, and (ii)
record and beneficial ownership with respect to their shares of stock. The percentage of beneficial ownership is based upon 87,275,673
shares of common stock outstanding as of March 13, 2020. Except as otherwise indicated in the footnotes to the table, the persons
and entities named in the table have sole voting and investment power with respect to all shares beneficially owned, subject to
community property laws, where applicable.
Name and Address of Beneficial Owner
|
|
Number of Shares
|
|
|
Percent of Class (1)
|
|
|
|
|
|
|
|
|
David Platt (2)
|
|
|
43,027,274
|
|
|
|
48.9
|
%
|
|
|
|
|
|
|
|
|
|
Offer Binder
|
|
|
8,691,369
|
|
|
|
9.9
|
%
|
12 Azoar
6233906 Tel Aviv
Israel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ola Soderquist (2)
|
|
|
21,082,563
|
|
|
|
24.0
|
%
|
|
|
|
|
|
|
|
|
|
Dale H. Conaway (2)
|
|
|
8,000
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
Alan M. Hoberman (2)
|
|
|
81,300
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
Henry J. Esber (2)
|
|
|
3,000
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
Anders Utter (2)
|
|
|
27,100
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
All Officers and Directors as a Group (6 persons)
|
|
|
64,229,237
|
|
|
|
73.0
|
%
|
(1)
|
The percentage shown
in the table is based on 88,025,673 shares of Common Stock outstanding on March 13, 2020
|
(2)
|
The business address
for these individuals is 233 Needham Street, Suite 300, Newton, MA 02464.
|
Item
13. Certain Relationships and Related Transactions, and Director Independence
From
the date of the Company’s Merger on September 21, 2018 we have not entered into any material transactions or series of transactions
that would be considered material in which any officer, director or beneficial owner of 5% or more of any class of our capital
stock, or any immediate family member of any of the preceding persons, had a direct or indirect material interest, and there are
no transactions presently proposed, except as follows:
As
of December 31, 2019, the Company have accrued a total amount of $48,000 each for David Platt and Ola Soderquist for salary, retirement
benefits and expense reimbursement.
Item
14. Principal Accountant Fees and Services.
The
table below shows the fees that we paid or accrued for the audit and other services provided by Heaton & Company, PLLC dba
Pinnacle Accountancy Group of Utah for the fiscal year ended December 31, 2019 and 2018.
Fee Category
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Audit Fees
|
|
$
|
14,000
|
|
|
$
|
11,450
|
|
|
|
|
|
|
|
|
|
|
Audit Related Fees
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
$
|
1,750
|
|
|
$
|
1.750
|
|
|
|
|
|
|
|
|
|
|
All other Fees
|
|
$
|
-
|
|
|
$
|
-
|
|
This
category includes the audit of our annual financial statements, review of financial statements included in our annual and quarterly
reports and services that are normally provided by the independent registered public accounting firms in connection with engagements
for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of,
the audit or the review of interim financial statements.
Audit-Related
Fees
This
category consists of assurance and related services by the independent registered public accounting firms that are reasonably
related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.”
The services for the fees disclosed under this category include services relating to our registration statements.
Tax
Fees
This
category consists of professional services rendered for tax compliance and tax advice.
All
Other Fees
This
category consists of fees for other miscellaneous items.
Pre-Approved
Services
The
Audit Committee requires pre-approval of audit, audit-related and tax services to be performed by the independent registered public
accounting firm. The Audit Committee approved the audit and audit-related services to be performed by the independent registered
public accounting firms and tax professionals in 2019 and 2018.
The
Audit Committee has not expressly adopted rules permitting the Audit Committee to delegate to one or more of its members pre-
approval authority with respect to permitted services nor has the Audit Committee actually delegated such authority to its members.
To the extent it elects to do so in the future, the Board expects that such delegation will be subject to the requirement that
the decisions of any Audit Committee member to whom pre-approval authority is delegated must be presented to the full Audit Committee
at its next scheduled meeting.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS
AT DECEMBER 31, 2019 AND DECEMBER 31, 2018
NOTE
1 – BACKGROUND AND ORGANIZATION
Business
Operations
Bioxytran,
Inc. (the “Company”) is an early-stage pharmaceutical company focused on the development, manufacture and commercialization
of therapeutic drugs designed to address hypoxia in humans, which is a lack of oxygen to tissues, in a safe and efficient manner.
If it is not addressed, lack of oxygen to tissues, or hypoxia, results in necrosis, which is the death of cells comprising body
tissue. Necrosis cannot be reversed. Our lead drug candidate, code named BXT-25, is an oxygen-carrying small molecule consisting
of bovine hemoglobin stabilized with a co-polymer with intended applications to include treatment of hypoxic conditions in the
brain resulting from stroke, and hypoxic conditions in wounds to prevent necrosis and to promote healing. The Company’s
initial focus is the treatment of hypoxic conditions in the brain resulting from stroke, and hypoxic conditions in wounds to prevent
necrosis and to promote healing. The Company’s approach potentially will result in the creation of safe drug alternatives
to existing therapies for effectively addressing hypoxic conditions in humans. Our drug development efforts are guided by specialists
in co-polymer chemistry and other disciplines, and we intend to supplement our efforts with input from a scientific and medical
advisory board whose members are leading physicians.
Organization
Bioxytan,
Inc. was organized on October 5, 2017 as a Delaware corporation, with a taxing structure for U.S. federal and state income tax
as a C-Corporation with 95,000,000 authorized common shares with a par value of $0.0001, and 5,000,000 preferred shares with a
par value of $0.0001. On September 21, 2018, the Company went under a reorganization in form of a reverse merger and is currently
registered as a Nevada corporation with a taxing structure for U.S. federal and state income tax as a C-Corporation with 300,000,000
authorized common shares with a par value of $0.001, and 50,000,000 preferred shares with a par value of $0.001
Basis
of Presentation
The
summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated
financial statements. Such financial statements and accompanying notes are the representations of the Company’s management,
who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally
accepted in the United States of America (“U.S. GAAP”) in all material respects and have been consistently applied
in preparing the accompanying consolidated financial statements. The Company has not earned any revenue from operations since
inception. The Company chose December 31st as its fiscal year end.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of Bioxytran, Inc. a Nevada Corporation and its wholly owned
subsidiary, Bioxytran, Inc. of Delaware (collectively, the “Company”). All intercompany accounts have been eliminated
upon consolidation.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A
summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
Cash
For
purposes of the Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date
of three months or less to be cash equivalents.
Use
of Estimates
The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting
period. Significant estimates include the fair value of the Company’s stock, stock-based compensation and the valuation allowance
related to deferred tax assets. Actual results may differ from these estimates.
Net
Loss per Common Share, basic and diluted
The
Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC
260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common
stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon
the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or
“if converted” methods as applicable.
At December 31, 2019, we would, based on
current market price of $0.285/share, be obligated to issue approximately 5,628,000 shares of common stock upon conversion of the
currently outstanding Convertible Notes and 2,140,473 shares upon exercise of the warrants. For the Notes, the shares total is
based on $901,274 of currently outstanding principal and unpaid interest. At December 31, 2018, we would, based on current market
price of $0.51/share, be obligated to issue approximately 2,114,000 shares of common stock upon conversion of the outstanding Convertible
Note and 208,333 shares upon exercise of the warrants. For the Notes, the shares total was based on $253,722 of currently outstanding
principal and unpaid interest
The
conversion is priced to equal to the lesser of (i) the lowest trading price for the twenty-day period prior to the date
of the Note or (ii) 65% of the lowest trading price during the twenty days prior to a conversion notice on the applicable trading
market or the closing bid price on the applicable trading market. The Convertible Notes are limited to converting no more than
4.99% of our issued an outstanding common stock.
Stock
Based Compensation
The
Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award
on the grant date Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements
of operations, as if such amounts were paid in cash. As of December 31, 2019, there were 341,000 outstanding stock options with
a fair market value of $257,143 at the time of award and 1,127,000 shares issued with a fair market value of $864,551 at the time
of award. At December 31, 2018, there were no outstanding stock options, nor any shares awarded.
Income
Taxes
The
Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates in effect for the year in which those temporary differences are expected to be recovered or be settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. A valuation allowance is provided when it is more likely than not that some portion of the gross deferred tax asset will
not be realized. The Company records interest and penalties related to income taxes as a component of provision for income taxes.
The Company did not recognize any interest and penalty expense for the years ended December 31, 2019 and 2018.
On
December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law by the President of the United States. TCJA is a tax reform
act that among other things, reduced corporate tax rates to 21 percent effective January 1, 2018. FASB ASC 740, Income Taxes,
requires deferred tax assets and liabilities to be adjusted for the effect of a change in tax laws or rates in the year of enactment,
which is the year in which the change was signed into law. Accordingly, the Company adjusted its deferred tax assets and liabilities
at December 31, 2017, using the new corporate tax rate of 21 percent. See Note 8.
Research
and Development
The
Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research
and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as
incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development
costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the
applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed
in the period incurred. During the year ended December 31, 2019 and December 31, 2018 the Company did not incur significant research
and development expenses.
Fair
Value
Accounting
Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value
of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and
short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these
instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized
or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future
cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities
have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.
The
Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”)
and Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities
to choose to measure many financial instruments and certain other items at fair value.
Recent
Accounting Pronouncements
There
were various updates recently issued, most of which represented technical corrections to the accounting literature or application
to specific industries and are not expected to a have a material impact on the Company’s financial position, results of
operations or cash flows.
NOTE
3 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As
of December 31, 2019, the Company had cash of $169,628 and a negative working capital of $799,287. As of December 31, 2019, the
Company has not yet generated any revenues, and has incurred cumulative net losses of $2,241,305. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern.
During
the year ended December 31, 2019, the Company has raised a net of $794,250, while we have paid back $636,900 from issuance of
debt in form of convertible notes, and $20,000 in cash proceeds from the issuance of common stock. During the same period in 2018
the company had raised a net of $222,205 from issuance of debt in form of convertible notes. The Company is aware that its current
cash on hand will not be sufficient to fund its projected operating requirements through the month of March 2020 and is pursuing
alternative opportunities to funding.
The
Company intends to raise additional capital through private placements of debt and equity securities, but there can be no assurance
that these funds will be available on terms acceptable to the Company, or will be sufficient to enable the Company to fully complete
its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have
to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient
additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
Accordingly,
the accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation
of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business.
The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable
or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of
this uncertainty.
NOTE
4 – ACCOUNTS PAYABLES AND ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
On
December 31, 2019, there was $96,000 Accrued Expenses in Accounts Payables to related parties in form of payroll and advanced
expenses. On December 31, 2018 there was $10,900 Accrued Expenses in Accounts Payables to related parties.
The
following table represents the major components of accounts payables and accrued expenses and other current liabilities at December
31, 2019 and December 31, 2018:
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Accounts Payables related party (1)
|
|
$
|
96,000
|
|
|
$
|
10,900
|
|
Professional fees
|
|
|
42,963
|
|
|
|
19,175
|
|
Interest
|
|
|
14,374
|
|
|
|
3,722
|
|
Payroll Taxes
|
|
|
7,344
|
|
|
|
-
|
|
Other Accounts Payables
|
|
|
7,251
|
|
|
|
550
|
|
Convertible Note Payables
|
|
|
850,983
|
|
|
|
227,378
|
|
Total
|
|
$
|
1,018,915
|
|
|
$
|
261,725
|
|
|
(1)
|
48,000
to each the CFO and the CEO for 8 months of salary for the period May through December
2019, 10,900 to the CFO for 1 month of salary and prepaid expenses during December 2018
|
NOTE
5 – CONVERTIBLE NOTES PAYABLE
As
long as the following convertible notes remain outstanding, the Company cannot amend its charter in any matter that materially
effects rights of noteholders, repay or repurchase more than de minimis number of shares of common stock other than conversion
or warrant shares, repay or repurchase all or any portion of any indebtedness, or pay cash dividends.
Auctus
Note #1
On
October 24, 2018 (the “Date of Issuance”) the Company issued a convertible promissory note (the “Auctus
Note #1”) with a face value of $250,000, maturing on October 23, 2019, and a stated interest of 8% to a third-party investor.
The Auctus Note #1 is convertible into common stock of the Company, par value $.001 per share (the “Common Stock”)
at any time after the earlier of: (i) 180 days from the date of the Auctus Note #1, or (ii) upon effective date of a registration
statement. The conversion price of the Auctus Note #1 is equal to the lesser of: (i) the lowest trading price for the twenty-day
period prior to the date of the Auctus Note #1 or (ii) 65% of the average of the three lowest trading prices during the twenty
days prior to a conversion notice on the applicable trading market or the closing bid price on the applicable trading market.
The Auctus Note #1 was funded on October 29, 2018, when the Company received proceeds of $222,205, after disbursements for the
lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $27,795 to be amortized
to interest expense over the life of the Auctus Note #1.
Additionally,
the variable conversion rate component requires that the Auctus Note #1 be valued at its stock redemption value (i.e., “if-converted” value)
pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the undiscounted face value being
deemed a premium to be added to the principal balance and accreted to additional paid-in capital over the life of the Auctus Note
#1. As such, the Company recorded a premium of $343,796 as a reduction to additional paid-in capital based on a discounted “if-converted” rate
of $0.20 per share (lowest trading price during the 20 days preceding the note’s issuance), which computed to 1,211,828
shares of ‘if-converted’ common stock with a redemption value of $593,796 due to $0.49 per share fair market value
of the Company’s stock on the Auctus Note #1’s date of issuance. Debt discount amortization is recorded as interest
expense, while debt premium accretion is recorded as an increase to additional paid-in capital. For the year ended at December
31, 2019, the Company amortized $20,853 debt discount to operations as interest expense, and accreted $306,820 of premium to additional
paid-in capital. For the year ended December 31, 2018, the Company amortized $5,173 debt discount to operations as interest expense.
Along
with the Auctus Note #1, on the Date of Issuance the Company issued 208,333 Common Stock Purchase Warrants (the “Warrants”),
exercisable immediately at a fixed exercise price of $0.60 with an expiration date of October 23, 2023. The Company has
determined that the Warrants are exempt from derivative accounting and were valued at $101,937 on the Date of Inception using
the Black Scholes Options Pricing Model. Assumptions used for the Black Scholes Options Pricing Model include (1) stock
price of $0.49 per share, (2) exercise price of $0.60 per share, (3) term of 5 years, (4) expected volatility of 251% and (5)
risk free interest rate of 2.51%. The note proceeds of $250,000 were then allocated between the fair value of the Auctus
Note #1 ($250,000) and the Warrants ($101,937), resulting in a debt discount of $72,412. As the warrants were exercisable
immediately, this debt discount was amortized in its entirety to interest expense on the Date of Issuance.
The
Auctus Note #1 was payed-off at Maturity on 10/24/2019.
Auctus
Note #2
On
February 25, 2019, the Company entered into a $250,000 Senior Secured Promissory Note (“the Auctus Note #2”), dated
February 25, 2019 at an interest rate of 8% per annum, maturing on February 24, 2020 (the “Maturity Date”). Issuance
fees totaling $27,750 were recorded as a debt discount, resulting in net proceeds of $222,250. The Auctus Note #2 is convertible
into common stock of the Company, par value $.001 per share (the “Common Stock”) at any time after the earlier of:
(i) 180 days from the date of the Auctus Note #2 or (ii) upon effective date of a new registration statement. The conversion price
of the Auctus Note #2 is equal to the lesser of: (i) the lowest trading price for the twenty-day period prior to the date of the
Auctus Note #2 or (ii) 65% of the average of the three lowest trading prices during the twenty days prior to a conversion notice
on the applicable trading market or the closing bid price on the applicable trading market. The Company may prepay the Auctus
Note #2 at any time at a rate of 120% of outstanding principal and interest during the first 90 days it is outstanding and 130%
of outstanding principal and interest for the next 90 days thereafter. Thereafter the prepayment amount increases 5% for each
thirty-day period until 270 days from the issue date at which time it is fixed at 150% of the outstanding principal and interest
on the Auctus Note #2.
Additionally,
the variable conversion rate component requires that the Auctus Note #2 be valued at its stock redemption value (i.e., “if-converted”
value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the undiscounted face value being deemed
a premium to be added to the principal balance and accreted to additional paid-in capital over the life of the Auctus Note #2.
As such, the Company recorded a premium of $82,500 as a reduction to additional paid-in capital based on a discounted “if-converted”
rate of $0.20 per share (lowest trading price during the 20 days preceding the note’s issuance), which computed to 1,250,000
shares of ‘if-converted’ common stock with a redemption value of $332,500 due to $0.266 per share fair market value
of the Company’s stock on the Auctus Note #2’s date of issuance. Debt discount amortization is recorded as interest
expense, while debt premium accretion is recorded as an increase to additional paid-in capital. For the year ended at December
31, 2019, the Company amortized $16,271 debt discount to operations as interest expense, and accreted $16,949 of premium to additional
paid-in capital.
Along
with the the Auctus Note #2, on the Date of Issuance the Company issued 208,333 Common Stock Purchase Warrants (the “Warrants”),
exercisable immediately at a fixed exercise price of $0.60 with an expiration date of February 24, 2024. The Company has
determined that the Warrants are exempt from derivative accounting and were valued at $55,417 on the Date of Inception using the
Black Scholes Options Pricing Model. Assumptions used for the Black Scholes Options Pricing Model include (1) stock price
of $0.27 per share, (2) exercise price of $0.60 per share, (3) term of 5 years, (4) expected volatility of 358% and (5) risk free
interest rate of 2.48%. The Auctus Note #2 proceeds of $250,000 were then allocated between the fair value of the Auctus
Note #2 ($250,000) and the Warrants ($55,417), resulting in a debt discount of $45,361. As the warrants are exercisable immediately,
this debt discount was amortized in its entirety to issuance of warrants (other expenses) on the Date of Issuance.
In
the period October 23, 2019 through December 30, 2019, the Company entered into five separate Secured Promissory Note Agreements
(“SPA”) with a face value of $636,900, and received net proceeds of $572,000. The Notes are convertible into common
stock of the Company, par value $.001 per share (the “Common Stock”) at any time after the earlier of: (i) 180 days
from the date of the Note or (ii) upon effective date of a registration statement. The conversion price of the Notes is equal
to 65% of the lowest trading price at close during the twenty days prior to a conversion notice. The debt discount of $64,900
is amortized over the duration of the loans. The Debentures permit the Company to pre-pay its obligations at a premium prior to
maturity.
Further,
the Company issued five-year warrants with cashless exercise provisions to purchase a total of 200,000 shares of Common Stock
of the Company at an exercise price of $2.00 per share with cashless exercise provisions to four of the Lenders. The Company has
determined that the Warrants are exempt from derivative accounting. The note proceeds of $636,900 were then allocated between
the fair value of the Notes ($636,900) and the Warrants ($103,200), resulting in a debt discount of resulting in a fully amortized
debt discount of $84,568. As the warrants were exercisable immediately, this debt discount was amortized in its entirety to interest
expense on the Date of Issuance.
A
summary of the outstanding notes at December 31, 2019, are as follows:
Debtor
|
|
Date
of
Issuance
|
|
|
Maturity
Date
|
|
Principal
Amount
|
|
|
Net
Received
|
|
|
Interest
|
|
|
Warrants
Issued
|
|
|
Term
|
|
|
Exercise
Price
|
|
|
Amortization
of Warrants
|
|
|
Debt
Discount
|
|
Auctus Note #2
|
|
|
02/25/2019
|
|
|
02/25/2020
|
|
$
|
250,000
|
|
|
$
|
222,250
|
|
|
|
8
|
%
|
|
|
208,333
|
|
|
|
5
|
|
|
$
|
0.60
|
|
|
$
|
45,361
|
|
|
$
|
27,795
|
|
GS Capital
|
|
|
10/30/2019
|
|
|
10/30/2020
|
|
|
125,000
|
|
|
|
109,500
|
|
|
|
4
|
%
|
|
|
50,000
|
|
|
|
5
|
|
|
|
2.00
|
|
|
|
23,867
|
|
|
|
15,500
|
|
Power Up
|
|
|
10/24/2019
|
|
|
10/23/2020
|
|
|
106,000
|
|
|
|
100,000
|
|
|
|
8
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,000
|
|
Peak One
|
|
|
10/23/2019
|
|
|
10/22/2022
|
|
|
120,000
|
|
|
|
103,000
|
|
|
|
0
|
%
|
|
|
50,000
|
|
|
|
5
|
|
|
|
2.00
|
|
|
|
21,606
|
|
|
|
17,000
|
|
Tangiers
|
|
|
10/23/2019
|
|
|
10/22/2020
|
|
|
106,300
|
|
|
|
100,000
|
|
|
|
8
|
%
|
|
|
50,000
|
|
|
|
5
|
|
|
|
2.00
|
|
|
|
21,116
|
|
|
|
6,300
|
|
FirstFire
|
|
|
11/20/2019
|
|
|
11/20/2020
|
|
|
125,000
|
|
|
|
109,500
|
|
|
|
4
|
%
|
|
|
50,000
|
|
|
|
5
|
|
|
|
2.00
|
|
|
|
17,979
|
|
|
|
15,500
|
|
Power Up
|
|
|
12/30/2019
|
|
|
12/30/2020
|
|
|
54,600
|
|
|
|
50,000
|
*
|
|
|
8
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,600
|
|
|
|
|
|
|
|
|
|
$
|
886,900
|
|
|
$
|
794,250
|
|
|
|
|
|
|
|
408,333
|
|
|
|
|
|
|
|
|
|
|
$
|
129,929
|
|
|
$
|
92,695
|
|
Convertible
notes payable consists of the following at December 31, 2019 and December 31, 2018:
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Principal balance
|
|
$
|
886,900
|
|
|
$
|
250,000
|
|
Unamortized debt discount
|
|
|
(60,038
|
)
|
|
|
(22,622
|
)
|
Unamortized debt premium
|
|
|
24,121
|
|
|
|
-
|
|
Outstanding, net of debt discount and premium
|
|
$
|
850,983
|
|
|
$
|
227,378
|
|
NOTE
6 – STOCKHOLDERS’ EQUITY
At
a Board of Director’s Meeting on July 30, 2018, the Company authorized a reverse split that resulted in a reduction of the
number of outstanding and issued shares of both common and preferred stock so that after the split became effective on August
13, 2018, the shares of both common and preferred stock were reduced to 1 share for each 30 shares currently issued and outstanding.
The effect on the Balance Sheet is a transfer of value from stock value at par to Additional Paid-in Capital. As a result of the
one (1) for thirty (30) reverse stock split, the Company will continue to be authorized to issue 300,000,000 shares of Common
Stock, and 50,000,000 shares of Preferred Stock. The reverse split has been retroactively applied to all periods presented.
Preferred
stock
As
of December 31, 2019 and 2018, no preferred shares have been designated or issued.
Common
stock
On
May 30, 2019, 25,000 shares of common stock were issued as a result of conversion of accrued interest on the Auctus Note #1 at
$0.20 per share for a total of $5,000.
On
July 18, 2019, 25,000 shares of common stock were issued as a result of conversion of accrued interest on the Auctus Note #1 at
$0.20 per share for a total of $5,000.
On
August 20, 2019, 20,000 shares of common stock were sold and issued from the active S-1 at $1 per share for a total of $20,000.
On
August 22, 2019, 25,000 shares of common stock were issued as a result of conversion of accrued interest on the Auctus Note #1
at $0.20 per share for a total of $5,000.
On
October 8, 2019, 50,000 shares of common stock were issued as a result of conversion of principal as well as accrued interest
on the Auctus Note #1 at $0.20 per share for a total of $10,000.
On
November 8, 2019, 100,000 shares of common stock were issued as a result of conversion of accrued interest on the Auctus Note
#2 at $0.12 per share for a total of $12,000.
Between
November 2, 2018 and December 31, 2019, 1,127,000 shares were awarded with an average cost per share of $0.77, under the 2010
Stock Plan for a total value of $864,551. For details, see Shares Awarded and Issued under Note 5.
As
of December 31, 2019, the Company has 86,475,673 shares of common stock issued and outstanding. At December 31, 2018 there were
85,103,673 shares of common stock issued and outstanding.
Common
Stock Options/Warrants
For
the year ended December 31, 2019 the Company issued 408,333 Warrants as part of a convertible note agreements. The warrants total
value allocated to debt discount was $129,929. For the year ended December 31, 2018 the Company issued 208,333 Warrants as part
of a convertible note agreement. The warrants total value allocated to debt discount was $72,412. For details, see Convertible
Note Payable under Note 3.
The
following table summarizes the Company’s common stock warrant activity for the year ended December 31, 2019 and 2018:
|
|
|
|
|
Weighted
Average
|
|
|
Weighted-
Average Remaining
|
|
|
|
Number of Warrants
|
|
|
Exercise
Price
|
|
|
Expected
Term
|
|
Outstanding as of January 1, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
208,333
|
|
|
|
0.60
|
|
|
|
5.0
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of December 31, 2018
|
|
|
208,333
|
|
|
$
|
0.60
|
|
|
|
4.8
|
|
Granted
|
|
|
408,333
|
|
|
|
1.29
|
|
|
|
5.0
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of December 31, 2019
|
|
|
616,666
|
|
|
$
|
1.06
|
|
|
|
4.2
|
|
Through
December 31, 2019 there were 341,000 options were awarded under the 2010 Stock Option Plan. The options total fair value at the
time of award was $257,143. There were no options awarded in 2018.
The
following table summarizes the Company’s common stock warrant and options activity for the year ended at December 31, 2019
and the year ended December 31, 2018:
|
|
|
|
|
Weighted
Average
|
|
|
Weighted-
Average Remaining
|
|
|
|
Number of Options
|
|
|
Exercise
Price
|
|
|
Expected
Term
|
|
Outstanding as of January 1, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Granted
|
|
|
341,000
|
|
|
|
0.96
|
|
|
|
3.0
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of December 31, 2019
|
|
|
341,000
|
|
|
$
|
0.96
|
|
|
|
2.7
|
|
NOTE
7 – STOCK OPTION PLAN AND STOCK-BASED COMPENSATION
During
the year ended December 31, 2010, the Company adopted a stock option plan entitled “The 2010 Stock Plan” (2010 Plan)
under which the Company may grant Options to Purchase Stock, Stock Awards or Stock Appreciation Rights up to 15% of common stock,
automatically adjusted on January 1 each year. As of December 31, 2018, there were no outstanding awards under the 2010 Plan.
As of December 31, 2019, there were 341,000 outstanding stock options with a fair market value of $257,143 and 1,127,000 shares
issued with a fair market value of $864,551 at the time of award. At December 31, 2018, there were no outstanding stock options,
nor any shares awarded.
Under
the terms of the stock plans, the Board of Directors shall specify the exercise price and vesting period of each stock option
on the grant date. Vesting of the options is typically immediate and the options typically expire in five years. Stock Awards
may be directly issued under the Plan (without any intervening options). Stock Awards may be issued which are fully and immediately
vested upon issuance.
Shares
Awarded and Issued:
On
November 2, 2018, the Company granted 4,000 shares with a fair market value of $0.51 to four members of the Company Board as compensation
for their contribution in the Company’s Board of Directors, for a total of $2,040. The shares were issued in 2019.
On
November 6, 2018, the Company granted 1,000 shares with a fair market value of $0.52 to one member of the Audit Committee as compensation
for his contribution in this Company Committee, for a total of $520. The shares were issued in 2019.
On
November 29, 2018, the Company granted 4,000 shares with a fair market value of $1.00 to four members of the Audit Committee as
compensation for his contribution in this Company Committee, for a total of $4,000. The shares were issued in 2019.
On
March 7, 2019, the Company granted 3,000 shares with a fair market value of $0.27 to three members of the Audit Committee as compensation
for their contribution in the Audit Committee, for a total of $810.
On
March 11, 2019 the Company granted 100,000 shares with a fair market value of $0.266, to a consultant as compensation for their
work with the Company’s IR, for a total of $26,600.
On
May 10, 2019 the Company granted 3,000 shares with a fair market value of $1.00 to three members of the Audit Committee as
compensation for their contribution in the Audit Committee, for a total of $3,000.
On
May 17, 2019, the Company granted 4,000 shares with a fair market value of $1.49 to four members of the Company Board as compensation
for their contribution in the Company’s Board of Directors, for a total of $5,960.
On
June 11, 2019 the Company granted 250,000 shares with a fair market value of $1.39 to a Financial Advisory Board Member for his
contribution in the Company’s Advisory Board, for a total of $347,500.
On
July 15, 2019 the Company granted 100,000 shares with a fair market value of $0.75 to a Financial Advisory Board Member for his
contribution in the Company’s Advisory Board, for a total of $75,000.
On
July 16, 2019 the Company granted 100,000 shares with a fair market value of $1.00 to a Financial Advisory Board Member for his
contribution in the Company’s Advisory Board, for a total of $100,000.
On
August 9, 2019, the Company granted 2,000 shares with a fair market value of $0.80 to two members of the Audit Committee as compensation
for their contribution in the Audit Committee, for a total of $1,600.
On
October 17, 2019 the Company granted 3,000 shares with a fair market value of $0.60 to four members of the Company Board as compensation
for their contribution in the Company’s Board of Directors, for a total of $1,800.
On
October 21, 2019 the Company granted 300,000 shares with a fair market value of $0.554 at the time of award, to a consultant as
compensation for their work with the Company’s IR, for a total of $166,283.
On
November 8, 2019 the Company granted 3,000 shares with a fair market value of $0.65 to four members of the Company Board as compensation
for their contribution in the Company’s Board of Directors, for a total of $1,950.
On
November 11, 2019 granted a subcontractor 250,000 shares with a fair market value of $0.51 at the time of award, as compensation
for their work with the Company’s IR, for a total of $127,500.
|
|
Number of
Shares
|
|
|
Fair Value
per Share
|
|
|
Weighted
Average
Market
Value
per Share
|
|
Shares Granted as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Shares Granted
|
|
|
1,127,000
|
|
|
|
0.27 - 1.49
|
|
|
|
0.77
|
|
Shares Granted not Issued as of December 31, 2019
|
|
|
1,127,000
|
|
|
$
|
0.27 - 1.49
|
|
|
$
|
0.77
|
|
For
the year ended December 31, 2019, the Company recorded stock-based compensation expense of $864,551 in connection with share-based
payment awards. The Company did not record any recorded stock-based compensation expense during 2018.
Stock
options granted and vested:
On
May 1, 2019, the Company granted 45,000 three-year options at an exercise price of $1.21, to a Medical Advisory Board Member for
his contribution in the Company’s Advisory Board. The options total fair value at the time of award was $44,820.
On
July 1, 2019 the Company granted 3,000 three-year options at an exercise price of $1.09 to a Medical Advisory Board Member for
his contribution in the Company’s Advisory Board. The options total fair value at the time of award was $2,447.
On
August 1, 2019 the Company granted 45,000 three-year options at an exercise price of $1.10 a Medical Advisory Board Member for
his contribution in the Company’s Advisory Board. The options total fair value at the time of award was $39,731.
On
September 13, 2019 the Company granted 200,000 three-year options at an exercise price of $0.95 to two Financial Advisory Board
Members for their contribution in the Company’s Advisory Board. The options total fair value at the time of award was $141,060.
On
October 1, 2019 the Company granted 3,000 three-year options at an exercise price of $0.73 a Medical Advisory Board Member for
his contribution in the Company’s Advisory Board. The options total fair value at the time of award was $1,635.
On
November 1, 2019 the Company granted 45,000 three-year options at an exercise price of $0.61 a Medical Advisory Board Member for
his contribution in the Company’s Advisory Board. The options total fair value at the time of award was $27,450.
The
fair value of stock options granted and revaluation of non-employee consultant options for the year ended December 31, 2019 was
calculated with the following assumptions:
|
|
2019
|
|
Risk-free interest rate
|
|
|
1.34 - 2.32
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Volatility factor (weekly)
|
|
|
122.25
|
%
|
Expected life of option
|
|
|
3 years
|
|
For
the year ended December 31, 2019, the Company recorded compensation expense of $257,143 in connection with awarded stock options.
The Company did not record any awarded option valuation as compensation expense during 2018. As at December 31, 2019, there was
no unrecognized compensation expense related to non-vested stock option awards.
The
following table summarizes the Company’s stock option activity during the year ended at December 31, 2019:
|
|
Number of Shares
|
|
|
Exercise
Price per
Share
|
|
|
Weighted
Average
Exercise
Price
per Share
|
|
Outstanding as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
341,000
|
|
|
|
0.61 - 1.21
|
|
|
|
0.96
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options forfeited/cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of December 31, 2019
|
|
|
341,000
|
|
|
$
|
0.61 - 1.21
|
|
|
$
|
0.96
|
|
The
following table summarizes information about stock options that are vested or expected to vest at December 31, 2019:
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
Exercisable Options
|
|
|
|
|
Exercise
Price
|
|
|
Number of Options
|
|
|
Weighted Average
Exercise Price
Per Share
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Aggregate Intrinsic
Value
|
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
Per Share
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Aggregate Intrinsic
Value
|
|
$
|
0.61
|
|
|
|
45,000
|
|
|
$
|
0.61
|
|
|
|
2.84
|
|
|
$
|
-
|
|
|
|
45,000
|
|
|
$
|
0.61
|
|
|
|
2.84
|
|
|
$
|
-
|
|
|
0.73
|
|
|
|
3,000
|
|
|
|
0.73
|
|
|
|
2.73
|
|
|
|
-
|
|
|
|
3,000
|
|
|
|
0.73
|
|
|
|
2.73
|
|
|
|
-
|
|
|
0.95
|
|
|
|
200,000
|
|
|
|
0.95
|
|
|
|
2.70
|
|
|
|
-
|
|
|
|
200,000
|
|
|
|
0.95
|
|
|
|
2.70
|
|
|
|
-
|
|
|
1.09
|
|
|
|
3,000
|
|
|
|
1.09
|
|
|
|
2.50
|
|
|
|
-
|
|
|
|
3,000
|
|
|
|
1.09
|
|
|
|
2.50
|
|
|
|
-
|
|
|
1.10
|
|
|
|
45,000
|
|
|
|
1.10
|
|
|
|
2.58
|
|
|
|
-
|
|
|
|
45,000
|
|
|
|
1.10
|
|
|
|
2.58
|
|
|
|
-
|
|
|
1.21
|
|
|
|
45,000
|
|
|
|
1.21
|
|
|
|
2.33
|
|
|
|
-
|
|
|
|
45,000
|
|
|
|
1.21
|
|
|
|
2.33
|
|
|
|
-
|
|
$
|
0.61-1.21
|
|
|
|
341,000
|
|
|
$
|
0.96
|
|
|
|
2.65
|
|
|
$
|
-
|
|
|
|
341,000
|
|
|
$
|
0.96
|
|
|
|
2.65
|
|
|
$
|
-
|
|
The
following table sets forth the status of the Company’s non-vested stock options as of December 31, 2019 and December 31,
2018:
|
|
Number
of
Options
|
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
Non-vested as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
341,000
|
|
|
|
0.77
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
341,000
|
|
|
|
0.77
|
|
Non-vested as
of December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
The
weighted-average remaining contractual life for options exercisable at December 31, 2019 is 2.65 years.
The
aggregate intrinsic value for fully vested, exercisable options was $0 at December 31, 2019. The aggregate intrinsic value of
options exercised for the year ended at December 31, 2019 was $0 as no options were exercised. The actual tax benefit realized
from stock option exercises for the year ended at December 31, 2018 was no options available for exercise.
At
December 31, 2019 the Company has 11,297,551 options or stock awards available for grant under the 2010 Plan.
NOTE
8 – PROVISION FOR INCOME TAXES
Provision
for Income Taxes
During
the year ended December 31, 2019 and December 31, 2018, no provision for income taxes was recorded as the Company generated net
operating losses.
The
tax effects of temporary differences that give rise to deferred tax assets are presented below:
|
|
2019
|
|
|
2018
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
832,590
|
|
|
$
|
226,660
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
174,840
|
|
|
|
47,590
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(174,840
|
)
|
|
|
(47,590
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax asset, net of valuation allowance
|
|
$
|
-
|
|
|
$
|
-
|
|
A
reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
Tax benefit at federal statutory rate
|
|
|
(21.0
|
)%
|
|
|
(21.0
|
)%
|
The
Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation
allowance is established. Based upon the Company’s history of losses since inception, management believes that it is more
likely than not that future benefits of deferred tax assets will not be realized.
At
December 31, 2019, the Company had approximately $832,590 of federal net operating losses that may be available to offset future
taxable income, At December 31, 2018, the Company had approximately $226,660 of federal net operating losses that may be available
to offset future taxable income. $2,870 of the net operating loss carry forwards (NOL), if not utilized, will expire in 2037 for
federal purposes, the remaining amount of NOL can be carried forward indefinitely. As of the fiscal year 2019, a deduction for
issued warrants and stock options and restricted shares awarded from the 2010 Stock Plan for a total of $1,324,035 has not yet
been made, for the fiscal year 2018 this total was $72,412. The market value less exercise price for these awards will be deducted
if and when the warrants and stock options are exercised, while the restricted shares will be deducted at market value at the
date they were awarded, once the restriction is removed.
Pursuant
to the Internal Revenue Code Section 382 (“Section 382”), certain ownership changes may subject the net operating
loss carryforwards (“carryforwards”) and research and development tax credit carryforwards to annual limitations which
could reduce or defer the carryforwards. Section 382 imposes limitations on a corporation’s ability to utilize carryforwards
if it experiences an ownership change. An ownership change may result from transactions increasing the ownership of certain stockholders
in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change,
utilization of the carryforwards would be subject to an annual limitation under Section 382 determined by multiplying the value
of its stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may
be carried over to later years. The imposition of this limitation on its ability to use the carryforwards to offset future taxable
income could cause the Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause
such carryforwards to expire unused, reducing or eliminating the benefit of such carryforwards. The Company has not completed
a Section 382 study to determine if there have been one or more ownership changes due to the costs associated with such a study.
Until a study is completed and the extent of the limitations, if any, is able to be determined, no additional amounts have been
written off or are being presented as an uncertain tax position.
On
December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act
(the “Tax Act”). The Tax Act establishes new tax laws that affects 2018 and future years, including a reduction in
the U.S. federal corporate income tax rate to 21%, effective January 1, 2018
The
Company applies the provisions of ASC 740-10, Income Taxes. The Company has not recognized any liability for unrecognized tax
benefits and does not believe there is any uncertainty with respect to its tax position. The Company’s policy with respect
to unrecognized tax benefits is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties
in operating expenses.
The
Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business,
the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income
tax examinations. Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used in
future periods. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax
provision.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
Employment
contracts
The
Company’s executive officers have entered employment contracts and confidentiality, non-disclosure and assignment of invention
agreements. The employment agreements do not provide for the payment of any compensation to our executive officers but provide
for the payment of $100,000 in severance upon termination of employment without cause and make no provisions for any payment upon
a change of control.
Litigation
In
the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary
course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees
for such matters are expensed as incurred and we accrue for adverse outcomes as they become probable and estimable.
NOTE
10 – SUBSEQUENT EVENTS
The
Company has evaluated events from December 31, 2019 through the date the financial statements were issued. The events requiring
disclosure for this period are as follows;
Common
stock
On
January 3, 2020, 100,000 shares of common stock were issued as a result of conversion of accrued interest and principal on the
Auctus Note #2 for a total of $12,000.
On
February 18, 2020, 250,000 shares of common stock were issued as a result of conversion of accrued interest and principal on the
Auctus Note #2 for a total of $21,632.
On March 12, 2020, 750,000 of common stock were issued in exchange
for 416,666 warrants in a cashless exercise, originating from Auctus Notes #1 and #2 for a total of $250,500.
Shares
Awarded and Issued under the 2010 Stock Plan:
On
January 1, 2020 the Company granted 250,000 shares with a fair market value of $0.285/share at the time of award, to a consultant
for assistance with the Companies PR work, for a total of $71,250.
On
January 31, 2020 the Company granted two subcontractors a total of 200,000 shares with a fair market value of $0.14/share at the
time of award, as compensation for their work with the Company’s marketing efforts, for a total of $28,000.
Options
Awarded and Issued under the 2010 Stock Plan:
On
January 1, 2019 the Company granted 3,000 three-year options at an exercise price of $0.31 a Medical Advisory Board Member for
his contribution in the Company’s Advisory Board. The options total fair value at the time of award was $603.
On
February 1, 2020 the Company granted 45,000 three-year options at an exercise price of $0.15 a Medical Advisory Board Member for
his contribution in the Company’s Advisory Board. The options total fair value at the time of award was $4,401.
Issuance
of Convertible Notes Payables
During
the period January 10, 2020 through February 19, 2020, the Company entered into three separate 1-year Secured Promissory Note
Agreements (“SPA”) with a face value of $236,600, and received net proceeds of $209,500. The Notes are convertible
into common stock of the Company, par value $.001 per share (the “Common Stock”) at any time after the earlier of:
(i) 180 days from the date of the Note or (ii) upon effective date of a registration statement. The conversion price of the Notes
is equal to 65% of the lowest trading price at close during the twenty days prior to a conversion notice. The debt discount of
$31,000 is amortized over the duration of the loans. The Debentures permit the Company to pre-pay its obligations at a premium
prior to maturity.
Further,
the Company issued five-year warrants with cashless exercise provisions to purchase a total of 72,000 shares of Common Stock of
the Company at an exercise price of $2.00 per share with cashless exercise provisions to the three Lenders. The Company has determined
that the Warrants are exempt from derivative accounting. The note proceeds of $236,600 were then allocated between the fair value
of the Notes ($236,600) and the Warrants ($18,547), resulting in a debt discount of resulting in a fully amortized debt discount
of $16,002. As the warrants were exercisable immediately, this debt discount was amortized in its entirety to interest expense
on the Date of Issuance.
The
proceeds from these Notes were used to pay off the Auctus Note #2, maturing on February 25, 2020, and for working capital.
The Convertible Note transactions included in these subsequent events resulted in a Net Debt reduction of $13,400.
Debtor
|
|
Date
of
Issuance
|
|
|
Maturity
Date
|
|
Principal
Amount
|
|
|
Net
Received
|
|
|
Interest
|
|
|
Warrants
Issued
|
|
|
Term
|
|
|
Exercise
Price
|
|
|
Amortization
of Warrants
|
|
|
Debt
Discount
|
|
EMA Financial
|
|
|
01/10/2020
|
|
|
01/10/2021
|
|
$
|
125,000
|
|
|
$
|
109,500
|
|
|
|
4
|
%
|
|
|
50,000
|
|
|
|
5
|
|
|
$
|
2.00
|
|
|
$
|
5,948
|
|
|
$
|
15,500
|
|
Crown Bridge
|
|
|
02/20/2020
|
|
|
02/20/2021
|
|
|
55,000
|
|
|
|
48,000
|
|
|
|
4
|
%
|
|
|
22,000
|
|
|
|
5
|
|
|
|
2.00
|
|
|
|
10,054
|
|
|
|
7,000
|
|
PowerUp
|
|
|
02/19/2020
|
|
|
02/19/2021
|
|
|
56,600
|
|
|
|
52,000
|
|
|
|
8
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,600
|
|
|
|
|
|
|
|
|
|
$
|
236,600
|
|
|
$
|
209,500
|
|
|
|
|
|
|
|
72,000
|
|
|
|
|
|
|
|
|
|
|
$
|
16,002
|
|
|
$
|
31,000
|
|
The
management see no further subsequent events requiring disclosure.
F-20