QRONS INC.
CONDENSED BALANCE SHEETS
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
116,468
|
|
|
$
|
155,242
|
|
Total current assets
|
|
|
116,468
|
|
|
|
155,242
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
116,468
|
|
|
$
|
155,242
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
6,346
|
|
|
$
|
287
|
|
Convertible note – related party, net of debt discount
|
|
|
182
|
|
|
|
3,583
|
|
Derivative liabilities
|
|
|
72.954
|
|
|
|
-
|
|
Total current liabilities
|
|
|
79,482
|
|
|
|
3,870
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
79,482
|
|
|
|
3,870
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
|
Series A Preferred Shares: $0.001 par value, authorized 10,000; 2,000 shares issued and outstanding
|
|
|
2
|
|
|
|
2
|
|
Common stock, $0.0001 par value: shares authorized 100,000,000;
11,552,000 and 11,424,000 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
|
|
|
1,155
|
|
|
|
1,142
|
|
Additional Paid-in Capital
|
|
|
328,907
|
|
|
|
319,468
|
|
Accumulated deficit
|
|
|
(293,078
|
)
|
|
|
(169,240
|
)
|
Total stockholder's equity
|
|
|
36,986
|
|
|
|
151,372
|
|
TOTAL LIABILITIES & EQUITY
|
|
$
|
116,468
|
|
|
$
|
155,242
|
|
The accompanying notes are an integral part of these unaudited financial statements.
QRONS INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the three months ended September 30,
|
|
|
For the nine months ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net sales
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
8,406
|
|
|
|
-
|
|
|
|
10,120
|
|
|
|
-
|
|
Professional fees
|
|
|
8,170
|
|
|
|
2,500
|
|
|
|
11,297
|
|
|
|
2,500
|
|
General and administrative expenses
|
|
|
31,643
|
|
|
|
2,980
|
|
|
|
47,252
|
|
|
|
2,980
|
|
Total operating expenses
|
|
|
48,219
|
|
|
|
5,480
|
|
|
|
68,669
|
|
|
|
5,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(48,219
|
)
|
|
|
(5,480
|
)
|
|
|
(68,669
|
)
|
|
|
(5,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,785
|
)
|
|
|
(1,028
|
)
|
|
|
(7,215
|
)
|
|
|
(1,028
|
)
|
Change in derivative liabilities
|
|
|
(47,954
|
)
|
|
|
-
|
|
|
|
(47,954
|
)
|
|
|
-
|
|
Other (expense)
|
|
|
(49,739
|
)
|
|
|
(1,028
|
)
|
|
|
(55,169
|
)
|
|
|
(1,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(97,958
|
)
|
|
$
|
(6,508
|
)
|
|
$
|
(123,838
|
)
|
|
$
|
(6,508
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) per common shares (basic and diluted)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
11,552,000
|
|
|
|
10,120,000
|
|
|
|
11,544,293
|
|
|
|
10,120,000
|
|
The accompanying notes are an integral part of these unaudited financial statements.
QRONS INC.
CONDENSED STATEMENTS
OF CASH FLOWS
(Unaudited)
|
|
For the nine months ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(123,838
|
)
|
|
$
|
(6,508
|
)
|
Adjustments to reconcile net income to net cash provided from (used by) operating activities:
|
|
|
|
|
|
|
|
|
Preferred stock issued to Directors, valuation
|
|
|
-
|
|
|
|
2,598
|
|
Accretion of debt discount
|
|
|
6,599
|
|
|
|
-
|
|
Change in derivative liabilities
|
|
|
47,954
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
-
|
|
Accounts payable and accrued liabilities
|
|
|
6,059
|
|
|
|
1,028
|
|
Net cash provided (used by) operating activities
|
|
|
(63,226
|
)
|
|
|
(2,882
|
)
|
|
|
|
|
|
|
|
-
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
Net cash provided from (used by) investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
-
|
|
|
|
1,012
|
|
Proceeds from sale of Series A preferred stock
|
|
|
-
|
|
|
|
2
|
|
Proceeds from private placement
|
|
|
32,000
|
|
|
|
-
|
|
Financing costs
|
|
|
(22,548
|
)
|
|
|
-
|
|
Proceeds from convertible note
|
|
|
15,000
|
|
|
|
10,000
|
|
Net cash provided from financing activities
|
|
|
24,452
|
|
|
|
11,014
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(38,774
|
)
|
|
|
8,132
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
155,242
|
|
|
|
-
|
|
Cash at end of period
|
|
|
116,468
|
|
|
|
8,132
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these unaudited financial statements.
QRONS INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1 – Description of Business and Basis of Presentation
Organization and nature of business:
Qrons Inc. ("Qrons" and/or the "Company") was incorporated under the laws of the State of Wyoming on August 22, 2016 under the name BioLabMart Inc. Our headquarters are located at 777 Brickell Avenue, Suite 500, Miami, FL 33131.
The Company is a p
reclinical stage biotechnology company developing advanced cell-based solutions to combat neuronal injuries with a laser focus on traumatic brain injuries. The technology could
potentially treat a wide range of neurodegenerative diseases
.
The Company's
treatment integrates proprietary, engineered mesenchymal stem cells, 3D printable scaffolding, smart materials and a novel delivery system
.
On December 14, 2016, the Company entered into a license and research funding agreement ("License Agreement") with Ariel University R&D Co., Ltd., ("Ariel"), a wholly owned subsidiary of Ariel University of Samaria, based in Ariel, Israel. Under the terms of the License Agreement, Professor Danny Baranes, the principal investigator and his research team will carry out further research relating to cell treatment with conditioned medium for neuronal tissue regeneration and repair. In consideration for payments under the License Agreement, the Company received an exclusive worldwide royalty- bearing license in Ariel patents and know-how to develop and commercialize products based on or incorporating conditioned medium for neuronal tissue regeneration and/or repair, resulting from Ariel's research or technology or the Company's research funding (the "Products").
Under the License Agreement, the Company is required to use its best efforts to develop and commercialize the Products in accordance with development milestones set forth in the Agreement.
On July 6, 2017, the board of directors and a majority of the Company's shareholders approved an amendment to the Company's
Articles of Incorporation to change the name of the Company from "BioLabMart Inc." to "Qrons Inc.".
The Company's common stock was approved by the Financial Industry Regulatory Authority ("FINRA") for quotation on the OTC pink sheets under the symbol "BLMB" as of July 3, 2017. FINRA announced the Company's name change to Qrons Inc. on its Daily List on August 9, 2017. The new name and symbol change to "QRON" for the OTC market was effective August 10, 2017.
On August 8, 2017, the Company filed Amended Articles of Incorporation with the State of Wyoming.
On October 17, 2017, the Company entered into an option agreement with the Trustees of Dartmouth College which provides for, among other things, the grant to the Company of a one-year exclusive option to negotiate a worldwide, royalty bearing, exclusive license with Dartmouth for 3D printable materials in the field of human and animal health. During the option period, the Company agreed to use all commercially reasonable resources to evaluate the intellectual property and provide quarterly milestone reports and a commercialization plan upon exercise of the option. Pursuant to the agreement, the Company agreed to finance the prosecution of patents by Dartmouth to protect its intellectual property. Further, the agreement provides for the payment by the Company of an option fee and certain license fees and royalty payments based upon the Company's product sales, as part of a final negotiated license agreement.
Note 2 – Summary of Significant Accounting Policies
Financial Statement Presentation:
The unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
Fiscal year end:
The Company has selected December 31 as its fiscal year end.
Use of Estimates:
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.
Cash Equivalents:
The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.
Research and Development Costs:
The Company charges research and development costs to expense when incurred in accordance with FASB ASC 730, "Research and Development". Research and development costs were $10,120 for the nine months ended September 30, 2017 (2016 – Nil).
Advertising and Marketing Costs:
Advertising and marketing costs are expensed as incurred. The Company incurred $15,657 advertising or marketing costs during the nine months ended September 30, 2017 (2016 - $0).
QRONS INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
Related parties:
For the purposes of these financial statements, parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.
Stock-based compensation:
For stock-based compensation the Company follows the guidance codified in the Compensation – Stock Compensation Topic of FASB ASC ("ASC 718"). The Company determines the value of stock issued at the date of grant. It also determines at the date of grant, the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.
Fair Value of Financial Instruments
FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1
– Quoted prices in active markets for identical assets or liabilities.
Level 2
– Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3
– Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.
The following table provides a summary of the fair value of our derivative liabilities as of September 30, 2017 and December 31, 2016:
|
|
Fair value measurements on a recurring basis
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
As of September 30, 2017:
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
72,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
QRONS INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 2 – Summary of Significant Accounting Policies (continued)
Warrants:
The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in ASC Topic 815
"Derivatives and Hedging – Contracts in Entity's Own Equity"
(ASC Topic 815), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. For warrants classified as equity instruments we apply the Black Scholes model. Presently all warrants issued and outstanding are accounted for using the equity method.
Income taxes:
The Company has adopted ASC Topic 740 – "Income Taxes" ASC Topic 740 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary 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 expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Basic and Diluted Loss Per Share
: In accordance with ASC Topic 280 – "Earnings Per Share", the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.
Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method). The computation of basic loss per share for the period ended September 30, 2017 excludes potentially dilutive securities of 566,000 shares underlying share purchase warrants, because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted.
Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.
|
|
2017
|
|
|
December 31,
2016
|
|
Stock purchase warrants
|
|
|
566,000
|
|
|
|
502,000
|
|
Convertible Notes
|
|
|
32,178
|
|
|
|
-
|
|
Series A Preferred shares
|
|
|
700
|
|
|
|
-
|
|
|
|
|
598,878
|
|
|
|
502,000
|
|
New Accounting Pronouncements:
There were various accounting standards and interpretations issued recently, none of which are expected to have a material effect on the Company's operations, financial position or cash flows.
Note 3 – Going Concern
The Company has experienced net losses to date, and it has not generated revenue from operations, and will need additional working capital to service debt and for ongoing operations, which raises substantial doubt about its ability to continue as a going concern. Management of the Company has developed a strategy to meet operational shortfalls which may include equity funding, short-term or long-term financing or debt financing, to enable the Company to reach profitable operations.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amount and classification of liabilities that might cause results from this uncertainty.
QRONS INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 4 – Convertible Note – Related Party and Derivative Liabilities
On September 1, 2016, the Company entered into a convertible debenture agreement with CubeSquare, LLC ("CubeSquare"), of which our Chief Executive Officer is the managing partner and our President is 25% owner. The Company received proceeds totaling $10,000. The note bears interest at 8% per annum and is due on September 1, 2017. Interest shall accrue from September 1, 2016 and shall be payable on maturity. Interest is payable, at the lender's option, in cash or common stock. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company
at a conversion price of the greater of (i) $0.0625 per share if the Company's shares are not trading on a public market and; (ii) in the event the Company's shares are listed for trading on a public market, the conversion price shall be equal to a 50% discount to the average of the five lowest trading prices during the previous twenty trading days prior to the date of the notice of conversion from the lender.
On September 28, 2017
the Company and CubeSquare amended the above note to extend the maturity date of the note from September 1, 2017 to September 1, 2018 under the same terms and conditions.
On September 27, 2017, the Company entered into another convertible debenture agreement with CubeSquare under which the Company received proceeds totaling $15,000. The note bears interest at 8% per annum and is due on September 27, 2018. Interest shall accrue from September 27, 2017 and shall be payable on maturity. Any portion of the principal and unpaid interest under the note is convertible at any time at the option of CubeSquare into shares of common stock of the Company at a conversion price equal to a 50% discount to the average of the five lowest trading prices during the previous twenty trading days prior to the date of the notice of conversion from CubeSquare.
The Company analyzed the above amendment and second convertible debenture under
ASC 815-10-15-83
and concluded that these two convertible debentures
meet the definition of a derivative.
We estimated the fair value of the derivative on the inception dates, and subsequently, using the Black-Scholes valuation technique, adjusted for the effect of dilution, because that technique embodies all of the assumptions (including, volatility, expected terms, and risk free rates) that are necessary to fair value complex derivate instruments.
The carrying value of these convertible notes is as follows:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
Face value of certain convertible notes
|
|
$
|
25,000
|
|
|
$
|
10,000
|
|
Less: unamortized discount
|
|
|
(24,818
|
)
|
|
|
(6,417
|
)
|
Carrying value
|
|
$
|
182
|
|
|
$
|
3,583
|
|
Amortization of the discount over the three and nine months period ended September 30, 2017 totaled $1,571 and $6,599, respectively, which amount has been recorded as interest expense. The unamortized discount of $24,818 associated with above notes will be expensed in future periods.
As a result of the application of ASC No. 815 in period ended September 30, 2017 the fair value of the conversion feature is summarized as follows:
Balance at December 31, 2016
|
|
$
|
-
|
|
Derivative addition associated with convertible notes
|
|
|
25,000
|
|
Loss on change in fair value
|
|
|
47,954
|
|
Balance at September 30, 2017
|
|
$
|
72,954
|
|
The fair value at the commitment and re-measurement dates for the Company's derivative liabilities were based upon the following management assumptions as of September 30, 2017 and commitment date:
|
|
Commitment
Date
|
|
|
September 30,
2017
|
|
Expected dividends
|
|
|
0
|
|
|
|
0
|
|
Expected volatility
|
|
101% ~103%
|
|
|
|
101% ~ 104%
|
|
Expected term
|
|
0.92 ~ 1 year
|
|
|
0.92 ~1 year
|
|
Risk free interest rate
|
|
1.33 %
|
|
|
|
1.31%
|
|
QRONS INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 5 – License and Research Funding Agreement
On December 14, 2016, the Company entered into the License Agreement with Ariel, a wholly owned subsidiary of Ariel University of Samaria ("AU") based in Israel, pursuant to which:
·
|
In the course of research performed at AU, Prof. Danny Baranes has developed certain technology relating to coral based and non-coral based conditioned medium for tissue regeneration and repair;
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·
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the Company wishes to receive a license from Ariel and in order to secure receipt of such license, agrees to fund further research at AU relating to such technology; and
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·
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Ariel is willing to grant the Company a license, pursuant to the terms of the License Agreement to allow it to develop and commercialize Products.
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Pursuant to the above noted License Agreement, the Company shall fund the research during the research period in the total amount of $100,000.
In addition, upon the occurrence of an Exit Event (as defined in the License Agreement) of the Company or of any affiliate commercializing the products, the Company is obligated to issue to Ariel an immediately exercisable warrant for that number of shares equal to 4% of the issued and outstanding shares of the Company at the time of issuance. The warrant contains an anti-dilution provision.
In addition to the other payments, the Company will pay Ariel upon the occurrence of the following milestone events, additional payments which be due within 6 months of completion of the milestone:
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Upon successful clinical FDA Phase II completion - $130,000; and
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·
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Upon successful clinical FDA Phase III completion - $390,000
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Upon successful development and commercialization and in recognition of the rights and licenses granted to the Company pursuant to the License Agreement, the Company will be subject to certain royalty payments as specified in the License Agreement.
During the year ended December 31, 2016, the Company incurred research and development costs of $156,000, which amount includes the aforementioned funding of $100,000 pursuant to the License Agreement as well as $56,000 recorded as stock based compensation in respect to certain stock awards discussed in Note 6 below. During the nine-month period ended September 30, 2017, the Company paid $5,018 to Ariel for reimbursement of a patent application fee.
Note 6 – Capital Stock
The Company has authorized 100,000,000 shares of common stock, $0.0001 par value and 10,000 shares of a class of preferred stock called the "Series A Preferred Stock", par value $0.001.
Each share of Series A Preferred Stock has a stated value of $1 per share and accrues 4% per annum for determination of liquidation, conversion or redemption. The shares convert at the option of the holder into shares of common stock at the market value of the common stock. The Series A Preferred Stock vote as a single class and maintain 66 2/3% of the total votes as long as any shares of Series A Preferred Stock remain outstanding. The Series A Preferred Stock contains liquidation preference (senior rank to all common) and are not to be amended without the holders' approval.
At inception on August 22, 2016, the Company approved the issuance of 5,060,000 shares of common stock at par value and 1,000 shares of Series A Preferred Stock at par value to Jonah Meer, the Company's Chief Executive Officer, Chief Financial Officer and Secretary, for cash totaling $507 of which $506 was paid in respect to the issuance of the common stock and $1 was paid for the Series A Preferred Stock.
At inception on August 22, 2016, the Company issued 5,060,000 shares of common stock at par value and subsequently issued 1,000 shares of Series A Preferred Stock at par value to Ido Merfeld, the Company's President, for cash totaling $507, of which $506 was paid in respect to the issuance of the common stock and $1 was paid for the Series A Preferred Stock.
QRONS INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 6 – Capital Stock (continued)
As a result of the super voting rights allocated to the Series A Preferred Stock, management conducted a valuation of the fair value of the issued shares. Shares of the Series A Preferred Stock issued were valued based upon industry specific control premiums and the fair value of the Company's common stock at the time of the transaction applying Statement of Financial Accounting Standard ASC 820-10-35-37
Fair Value in Financial Instruments
as of the issuance date of August 22, 2016. As a result of the third-party valuation of the fair value of the Series A Preferred Stock issued to our officers and directors, the Company recorded additional stock-based compensation as general and administrative expenses of $2,598 during the year ended December 31, 2016 with respect to the shares issued.
The third party valuation report was based on the following inputs as at August 22, 2016: (1) price per share of common stock of $0.0001; (2) 10,120,000 common stock outstanding; (3) A 19.3% premium over the common stock for the voting preferences, representing $600 in control value at issuance; (4)
The Series A Preferred Stock voting rights represented 66.7% of the total voting rights; (5) The conversion value is $2,000 (no discount for lack marketability since the common shares are also restricted).
On September 4, 2016, the Company's Board of Directors approved the sale and issuance of up to 1,200,000 shares of the Company's common stock, par value $.0001, at a subscription price of $0.25 per share. In addition to each two shares of common stock purchased, the holder shall receive an immediately exercisable warrant expiring December 31, 2019 to purchase the Company's common stock at a price of $0.40 per share.
During the year ended December 31, 2016, the Company received total proceeds of $251,000 by way of private placement subscriptions for a total of 1,004,000 shares.
During the three months ended March 31, 2017,
the Company received total proceeds of $30,000 by way of private placement subscriptions for a total of 120,000 shares.
All costs incurred with respect to the Form S-1 Registration Statement prior to its effective date on May 10, 2017 totaling $22,548 have been allocated to additional paid in capital.
During the nine months ended September 30, 2017, the Company received aggregate proceeds of $32,000 in private placement subscriptions, $2,000 of which was accepted
by the Company on July 11, 2017 for 8,000 shares of its common stock at a purchase price of $0.25 per share. In addition to each two shares of common stock purchased, the investor received an immediately exercisable warrant expiring December 31, 2019 to purchase the Company's common stock at a price of $0.40 per share.
On December 14, 2016, the Company's Board of Directors approved compensation for each of its two Science Advisors with a stock award of 440,000 shares of common stock effective as of December 14, 2016 (the "Grant Date"). Under the terms of the stock award, each advisor shall receive 150,000 shares of common stock which vest upon Grant Date. A further 145,000 shares shall vest each year thereafter until December 14, 2018, provided that such Science Advisor is still acting in said capacity for the Company. The 300,000 shares issued upon Grant Date were valued at $56,000, or $0.18667 per share, based on price allocation with respect to the aforementioned private placement as to each share of common stock, and recorded the associated cost as research and development expenses.
Share Purchase Warrants
In accordance with authoritative accounting guidance,
the fair value of the aforementioned warrants was calculated using the Black-Scholes option-pricing model with the following assumptions at the measurement date(s):
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Measurement date
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Dividend yield
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0
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%
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Expected volatility
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97.90~119.33
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%
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Risk-free interest rate
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1.47~1.60
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%
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Expected life (years)
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2.71~2.92
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Stock Price
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$
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0.25
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Exercise Price
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$
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0.40
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