UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

or

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ___________

 

Commission file number: 001-33635

 

 

 

GENE BIOTHERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware		27-0075787
State or other jurisdiction of incorporation or organization		IRS Employer Identification No.
11230 Sorrento Valley Rd, Suite 220 San Diego, California 92121		(858) 414-1477
Address of principal executive offices		(Registrant’s telephone number)

 

 

Securities registered under Section 12(b) of the Exchange Act:

None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☒		Smaller reporting company	☒
			Emerging Growth Company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of October 8, 2021,64,931,888 shares of our common stock were outstanding.

 

 

 

TABLE OF CONTENTS

 

		Page
EXPLANATORY NOTE		3
Special Note About Forward Looking Statements		3
PART 1 FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	6
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Operations	7
	Condensed Statement of Stockholders Equity	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
SIGNATURES		30

 

 

EXPLANATORY NOTE

 

Due to financial hardship, we were unable to secure auditor review or audit of our financial statements and suspended regular reporting of our financial results of operations following our quarterly report for the period ended March 31, 2017. On May 22, 2020, during the period covered by this report, we secured a $1.7 million financing arrangement and have used a portion of those proceeds to complete the financial statements and disclosures in this report. On April 23, 2021 we filed a comprehensive Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Annual Report”), with expanded disclosures for the fiscal years ended December 31, 2018 and 2017, and the quarterly periods ended March 31, June 30, and September 30 during 2019, 2018 and 2017. We have subsequently filed quarterly reports for the periods ended March 31 and June 30, 2020.

 

The filing of this report will not result in us becoming “current” in our reporting requirements under the Securities Exchange Act of 1934. It is our intention to become current, and we are preparing reports for the periods beyond September 30, 2020. Once we do become current, we will continue to be precluded from the use of certain abbreviated registration statements and forms, which are predicated on timely filing all required reports over the prior 12-month period.

 

All references in this report to the “Company,” “Gene Biotherapeutics,” “Gene Bio,” “we,” “our,” and “us” refer to Gene Biotherapeutics Inc., and its consolidated subsidiaries Angionetics Inc. and Activation Therapeutics, Inc.

 

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements that reflect our current expectations and views of future events. These forward-looking statements can also be identified by words such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “believes,” “anticipates,” “intends,” “estimates,” “approximates,” “predicts,” or “projects,” or similar terms. Forward-looking statements in this report may include statements about:

 

	●	our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately, particularly with respect to the timely production and delivery of our Generx product candidate;
	●	our ability and the ability of third parties with whom we contract to successfully manufacture our commercial products at scale, as well as drug substances, delivery vehicles, development candidates, and investigational medicines for preclinical and clinical use;
	●	the scope of protection we are able to establish and maintain for intellectual property rights covering our commercial products, investigational medicines and technology;
	●	the initiation, timing, progress, results, and cost of our research and development programs and our current and future preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;
	●	the ultimate impact of the current coronavirus pandemic, or the COVID-19 pandemic, or any other health epidemic, on our business, manufacturing, clinical trials, research programs, supply chain, regulatory review, healthcare systems or the global economy as a whole;

 

 

	●	risks related to the direct or indirect impact of the COVID-19 pandemic or any future large-scale adverse health event, such as the scope and duration of the outbreak, government actions and restrictive measures implemented in response, material delays in diagnoses, initiation or continuation of treatment for diseases that may be addressed by our development candidates and investigational medicines, or in patient enrollment in clinical trials, potential clinical trials, regulatory review or supply chain disruptions, and other potential impacts to our business, the effectiveness or timeliness of steps taken by us to mitigate the impact of the pandemic, and our ability to execute business continuity plans to address disruptions caused by the COVID-19 pandemic or future large-scale adverse health event;
	●	our anticipated next steps for our development candidates and investigational medicines that may be slowed down due to the impact of the COVID-19 pandemic;
	●	our ability to identify research priorities and apply a risk-mitigated strategy to efficiently discover and develop development candidates and investigational medicines, including by applying learnings from one program to our other programs and from one modality to our other modalities;
	●	the ability and willingness of our third-party strategic collaborators to continue research and development activities relating to our development candidates and investigational medicines;
	●	our ability to obtain and maintain regulatory approval of our investigational medicines;
	●	our ability to successfully commercialize any future products, if approved;
	●	the pricing and reimbursement of our investigational medicines, if approved;
	●	the implementation of our business model, and strategic plans for our business, investigational medicines, and technology;
	●	estimates of our future expenses, revenues, capital requirements, and our needs for additional financing;
	●	the potential benefits of strategic collaboration agreements, our ability to enter into strategic collaborations or arrangements, and our ability to attract collaborators with development, regulatory, and commercialization expertise;
	●	future agreements with third parties in connection with the commercialization of our investigational medicines, if approved;
	●	the size and growth potential of the markets for our investigational medicines, and our ability to serve those markets;
	●	our financial performance;
	●	the rate and degree of market acceptance of our investigational medicines;
	●	regulatory developments in the United States and foreign countries;
	●	our ability to produce our products or investigational medicines with advantages in turnaround times or manufacturing cost;

 

 

	●	the success of competing therapies that are or may become available;
	●	our ability to attract and retain key scientific or management personnel;
	●	the impact of laws and regulations;
	●	developments relating to our competitors and our industry; and
	●	other risks and uncertainties discussed in this Form 10-Q.

 

Caution should be taken not to place undue reliance on any such forward-looking statements. Forward-looking statements are subject to certain events, risks, and uncertainties that may be outside of our control that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. These factors include, among others, the risks described under Part II, Item 1A “Risk Factors” and elsewhere in this report, as well as in other reports and documents we file with the United States Securities and Exchange Commission (the “SEC”). The forward-looking statements in this report speak only as of the date of this report. We do not undertake to update or revise any forward-looking statements in the report, except as required by law.

 

This report also contains, or may contain, estimates, projections and other information concerning our industry, our business, and the markets for our products, including data regarding the estimated size of those markets and their projected growth rates. Information that is based on estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

 

Additional Information

 

Additional information about the Company is available from our website, www.genebiotherapeutics.com, including the investor relations section. In addition, specific information about our planned FDA-cleared, Generx [Ad5FGF-4] AFFIRM Phase 3 clinical study is available from our website www.myrefractoryangina.com. We encourage investors to visit these websites as information is frequently updated and information is shared. The information on our website is not incorporated into this report.

 

 

GENE BIOTHERAPEUTICS INC.

Condensed Balance Sheets

(unaudited)

		September 30,				December 31,
		2020				2019
Assets
Current assets:
Cash and cash equivalents		$	781,571			$	400
Prepaid expenses and other assets			19,174				32,395
Total current assets			800,745				32,795
Property and equipment, net			4,908				2,640
Right of use asset			162,090				-
Other long term assets			7,074				0
Total assets		$	974,817			$	35,435
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable		$	661,950			$	967,126
Accrued liabilities			3,055,405				2,796,689
Current portion – operating lease liability			66,962				-
Advances from officer			590,900				725,425
Note payable - Current			551,451				273,749
Total current liabilities			4,926,668				4,762,989
Operating lease liability – net of current portion			101,184				-
Note payable – long term			25,663				122,209
Total liabilities		$	5,053,515				4,885,198
Commitments and contingencies
Stockholders’ deficit:
Common stock issuable			-				600,000
Series A Convertible Preferred stock, $0.0001 par value; 40,000,000 shares authorized; issued and outstanding 602 at September 30, 2020 and 790 at December 31, 2019.			-				-
Series B Preferred stock, $0.0001 par Value; 1,700,000 shares authorized; issued and outstanding 1,700,000 September 30, 2020 and $nil at December 31, 2019.			170				-
Common stock, $0.0001 par value; 200,000,000 shares authorized; issued and outstanding 31,126,575 at September 30, 2020 and 14,489,399 at December 31, 2019			3,112				1,449
Additional paid-in capital			115,551,857				114,020,581
Accumulated deficit			(118,987,399	)			(118,912,290	)
Total controlling interest			(3, 432,259)				(4,290,260	)
Non-controlling interest			(646,438	)			(559,503	)
Total stockholders’ deficit		$	(4,078,698	)			(4,849,763	)
Total liabilities and stockholders’ deficit		$	974,817			$	35,435

 

See accompanying notes, which are an integral part of these condensed consolidated financial statements.

 

 

GENE BIOTHERAPEUTICS INC.

Condensed Statements of Operations

(unaudited)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Operating expenses
Research and development		$	66,116			$	61,443			$	161,842			$	185,177
Selling, general and administrative			322,583				114,047				622,398				474,119
Total operating expenses			388,699				175,490				784,240				659,296
Gain on sale or transfer of assets and technology			—				—				(600,000	)			—
Loss from operations			(388,699	)			(175,490	)			(184,240	)			(659,296	)
Other income (expenses):
Interest expense			(12,706	)			(10,952	)			(44,555	)			(31,585	)
Gain on accounts payable forgiveness							35,985				66,751				35,985
			(12,706	)			25,033				22,196				4,400
Net loss		$	(401,405	)		$	(150,457	)		$	(162,044	)		$	(654,896	)
Net loss (income) attributable to the non-controlling interest			(40,273	)			(19,790	)			(86,935	)			(71,490	)
Net loss (income) attributable to the controlling interest		$	(361,132	)		$	(130,667	)			(75,109	)			(583,406	)
Net loss attributable to controlling interest per share:
Basic and diluted			(0.015	)			(0.01	)			(0.003	)			(0.04	)
Weighted average common shares outstanding			24,449,004				14,489,399				23,157,097				14,481,311

 

See accompanying notes, which are an integral part of these condensed consolidated financial statements.

 

 

GENE BIOTHERAPEUTICS INC. AND SUBSIDIARIES

Condensed Consolidated Statements Of Stockholders (Deficit)/Equity

September 30, 2020

 

		Controlling Interest
		Common Stock								Series A Convertible Preferred Stock								Series B Convertible Preferred Stock								Common Stock				Additional Paid-In-				Controlling Interest				Non-Controlling Interest				Deficit
		Shares				Amount				Shares				Amount				Shares				Amount				Issuable				Capital				Deficit				Deficit				Total
Balance—December 31, 2019			14,489,399			$	1,449				790															$	600,000			$	114,020,581			$	(118,912,290	)		$	(559,503	)		$	(4,849,763	)
Issuance of common stock on conversion of preferred stock			16,637,176				1663				(188	)																															1663
Issuance of Preferred Stock																			1,700,000				170								1,531,276												1,531,446
Cancellation of Pending Issuance																											(600,000	)															(600,000	)
Non-controlling interest net income																							—																(86,935	)			(86,935	)
Controlling Interest Net income																																			(75,109	)							(75,109	)
Balance—September 30, 2020			31,126,575			$	3112				602								1,700,000				170							$	115,551,857			$	(118,987,399	)		$	(646,438	)		$	(4,078,698	)

 

		Controlling Interest
		Common Stock								Series A Convertible Preferred Stock								Series B Convertible Preferred Stock								Common Stock				Additional Paid-In-				Controlling Interest				Non-Controlling Interest				Deficit
		Shares				Amount				Shares				Amount				Shares				Amount				Issuable				Capital				Deficit				Deficit				Total
Balance—December 31, 2018			14,433,843			$	1,444				800															$	600,000			$	114,020,586			$	(119,778,965	)		$	(471,956	)		$	(5,628,891	)
Issuance of common stock on conversion of preferred stock			55,556				5				(10	)											—								(5	)
Issuance of Preferred Stock
Cancellation of Pending Issuance
Non-controlling interest net income																							—																(71,490	)			(71,490	)
Controlling Interest Net income																																			(583,406	)							(583,406	)
Balance—September 30, 2019			14,489,399			$	1,449				790																600,000			$	114,020,581			$	(120,362,371	)		$	(543,446	)		$	(6,283,787	)

 

 

GENE BIOTHERAPEUTICS INC.

Condensed Statements of Cash Flows

(unaudited)

 

		Nine Months Ended September 30,
		2020				2019
Cash Flows From Operating Activities
Net loss		$	(162,044	)		$	(654,896	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			1161				47,827
Gain on sale of assets and technology			(600,000	)
Deferred rent amortization			6,056				(8,167	)
Changes in operating assets and liabilities
Prepaid expenses and other assets			13,221				2,202
Accounts payable			(305,176	)			6,198
Accrued liabilities			258,716				493,064
Other long term assets			(7074	)
Net cash used in operating activities			(795,140	)			(113,771	)
Cash Flows From Investing Activities
Purchase of fixed assets			(3429	)			—
Net cash used in investing activities			(3,429	)			—
Cash Flows From Financing Activities
Cash advance from officer			(134,525	)			(76,162	)
Proceeds from note payable			181,156				145,076
Proceeds from preferred stock issuable			1,700,000				-
Cost on issuance of preferred shares			(166,891	)			-
Net cash provided by financing activities			1,579,740				68,914
Net increase (decrease) in cash			781,171				(44,857	)
Cash and cash equivalents at beginning of period			400				82,115
Cash and cash equivalents at end of period		$	781,571			$	37,258
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest		$	9,153			$	6,507
Supplemental noncash financing activities:
Transfer of assets and technology in exchange for common stock issuable			600,000				-

 

See accompanying notes, which are an integral part of these condensed consolidated financial statements.

 

 

GENE BIOTHERAPEUTICS INC. AND SUBSIDIARIES

NOTES TO CONDENSED FINANCIAL STATEMENTS

 

Note 1. Organization and Liquidity

 

Organization

 

Gene Biotherapeutics was initially incorporated in Delaware in December 2003. The Company is a clinical stage biotechnology company focused on pre-clinical, clinical and commercialization of angiogenic gene therapy biotherapeutics for strategic niche markets, primarily for the treatment of cardiovascular disease. The technology platform is designed to biologically activate the human body’s innate angiogenic healing process to stimulate the growth of microvascular networks for patients with ischemic cardiovascular, cerebral and other medical conditions and diseases, as well as for advanced tissue engineering applications.

 

The Company’s current business is focused exclusively on the development of Generx, a gene therapy product candidate targeted at men and women with advanced ischemic heart disease and refractory angina, through its equity-based investment Angionetics which is an 85% owned subsidiary. The Company has received FDA approval and FAST Track Status for a Phase 3 clinical trial. The Company does not currently have any other products or other product candidates and has not generated any revenues from operations for the three-month period ended September 30, 2020 and 2019.

 

Liquidity and Going Concern

 

As of September 30, 2020, the Company had $781,571 in cash and cash equivalents. The Company’s working capital deficit at September 30, 2020 was $4,125,923 and the Company has incurred recurring losses and has an accumulated deficit of $118,987,399. During the nine month period ended September 30, 2020, the Company used approximately $795,140 of cash in our operating activities.

 

The Company’s primary source of capital has been from proceeds from sales of its equity securities, shareholder and executive loans and the sale of its non-core products, as the strategy has focused on the development of Generx.

 

The Company anticipates that negative cash flows from operations will continue for the foreseeable future. The Company’s history of recurring losses and uncertainties as to whether operations will become profitable raises substantial doubt about its ability to continue as a going concern for the next twelve months from the date of issuance of these financial statements. We have yet to generate positive cash flows from operations and we are essentially dependent on external funding sources to support the Company’s research, development and commercialization activities. We do not have any unused credit facilities. We intend to pursue sources of working capital from non-dilutive funding channels to support the Company’s operations that could include, but not be limited to, (1) up to $3.350 million from potential royalties from commercial sales of Excellagen® from certain geographic regions, including the United States; (2) Federal government sponsored research grants; (3) agreements and arrangements covering distributor and strategic partnerships and drug royalty agreements based on the commercial sale of Generx following the successful completion of the planned FDA-cleared, Phase 3 AFFIRM clinical study and FDA registration in the U.S., and additional registrations to market and sell Generx in other countries internationally. In addition, at the appropriate time, with favorable market conditions, and an appropriate enterprise value reflective of the Company’s clinical status and the Generx [Ad5FGF-4] economic potential, we could also consider the sale of equity and debt securities in a variety privately negotiated structured transactions or public capital market offerings.

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates our continuation as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The Company’s ability to continue operations is dependent on the execution of management’s plans, which include the raising of additional capital through the equity and/or debt markets, until such time that funds provided by operations are sufficient to fund working capital requirements. Without additional capital the Company will not have sufficient sources for research, product development and sales and marketing efforts to bring Generx to commercialization. The consolidated financial statements contained in this report do not include any adjustments related to the recoverability of assets or classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 

Impact of Coronavirus Outbreak

 

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

 

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity.

 

Note 2—Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP and the rules and regulations of the Securities and Exchange Commission (“SEC”).

 

Critical Accounting Policies and Estimates

 

Our consolidated financial statements included Annual Report on Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of our financial statements in accordance with U.S. GAAP requires that we make estimates and assumptions that affect the amounts reported in our financial statements and their accompanying notes.

 

Accounting estimates or assumptions are inherently subject to change, and certain estimates or assumptions are difficult to measure or value. We base our estimates on our historical experience, industry standards, and various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. If results differ materially from our estimates, we will make adjustments to our financial statements prospectively as we become aware of the necessity for an adjustment.

 

We believe that the following accounting policies involve the most complex judgments concerning assumptions and estimates with the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see the notes to our consolidated financial statements included in this Annual Report on Form 10-K.

 

Fair Value of Financial Instruments

 

The carrying amounts of cash and cash equivalents, accounts receivable, inventories, accounts payable, and accrued liabilities approximate fair value due to the short-term maturities of these instruments.

 

Use of Estimates and assumptions and critical accounting estimates and assumptions

 

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

 

The most significant estimates and critical accounting policies involve valuing warrants using option pricing models and determination of the valuation allowance for deferred tax assets.

 

Actual results could differ from these estimates. Management’s estimates and assumptions are reviewed regularly, and the effects of revisions are reflected in the consolidated financial statements in the periods they are determined to be necessary.

 

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Gene Biotherapeutics Inc., and its consolidated subsidiaries, Angionetics Inc.and Activation Therapeutics, Inc.. All significant inter-company transactions and balances have been eliminated in consolidation.

 

The profit and losses of Angionetics are allocated among the controlling interest and the non-controlling interest in the same proportions as their ownership interests.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and cash equivalents. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. As of September 30, 2020, the Company had no cash and cash equivalent balances in excess of the federally insured limit of $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial position of the depository institution in which those deposits are held.

 

Property and Equipment, net

 

Property and equipment are stated at cost and include equipment, installation costs and materials less accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives of the assets range from 3 to 5 years. Leasehold improvements are amortized over the lesser of the useful lives or the term of the respective lease.

 

Expenditures for maintenance and repairs, which do not extend the useful life of the assets, are charged to expense as incurred. Gains or losses on disposal of property and equipment are reflected in general and administrative expenses in the statement of operations.

 

Impairment of Long-Lived Assets

 

The Company assesses its property and equipment for potential impairment when there is a change in circumstances that indicates carrying values of assets may not be recoverable. Such long-lived assts are deemed to be impaired when the undiscounted cash flows expected to be generated by the asset (or asset group) are less than the asset’s carrying amount. Any required impairment loss would be measured as the amount by which the asset’s carrying value exceeds its fair value and would be recorded as a reduction in the carrying value of the related asset and a charge to operating expense. The Company recognized no impairment losses during any of the periods presented in these financial statements.

 

 

Preferred Stock

 

The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Shares that are subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control, as temporary equity. At all other times, preferred shares are classified as stockholders’ equity.

 

Revenue Recognition

 

The Company’s products have not reached commercialization, accordingly revenue from product sales have not been recognized. For arrangements that include sales-based royalties, the Company recognizes revenue based on an assessment of the probability of achievement. There is considerable judgement involved in determining whether it is probable that royalties will be collected. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement and if necessary, adjusts the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. To date, the Company has not recognized revenue from product sales or for royalties.

 

Research and Development

 

Research and development expenditures, which are charged to operations in the period incurred, include costs associated with the design, development, testing and enhancement of products, regulatory fees, the purchase of laboratory supplies, and pre-clinical and clinical studies as well as salaries and benefits for research and development employees.

 

Income Taxes

 

Income taxes are accounted for under the asset and liability 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 and operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income(loss) in the years in which those temporary differences are expected to be recovered or settled. Due to the Company’s history of losses, a full valuation allowance was recognized against the deferred tax assets as of December 31,2019. The Company expects that it will continue to experience operating losses.

 

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. For the three-month period ended September 30, 2020, the Company has not recorded any interest or penalties related to income tax matters. The Company does not foresee any material changes in unrecognized tax benefits within the next twelve months.

 

When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.

 

Tax positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes our tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

 

 

Under the provision of ASC 740-10, the Company recognizes the impact of a tax position in its financial statements if the position is more likely than not to be sustained upon examination based on the technical merits of the position. For the year period ended September 30, 2020, the Company had no material unrecognized tax benefits, and based on the information currently available, no significant changes in unrecognized tax benefits are expected in the next twelve months

 

As of the tax year ending December 31,2019 the Company has net operating loss carryforwards for federal income tax purposes of approximately $91.4 million and net operating loss carryforwards for state income tax purposes of approximately $52.5 million. The net operating losses begin to expire in 2023 for federal income purposes and in 2028 for state income tax purposes. The federal net operating loss carryover includes $258,000 of net operating losses generated in 2018 and later. Federal net operating losses generated from 2018 onwards carryover indefinitely and may generally be used to offset up to 80% of future taxable income. The Company also has R&D tax credits available for federal and state purposes of $1.8 million and $1.9 million, respectively. The federal R&D credits will begin to expire December 31, 2035.

 

The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those net operating losses are available. The Company considers projected future taxable income and tax planning strategies in making their assessment. At present, the Company does not have a sufficient history of income to conclude that it is more-likely-than-not that the Company will be able to realize all of our tax benefits in the near future and therefore the Company has established a valuation allowance for the full value of the deferred tax asset.

 

In December 2017, the Tax Cuts and Jobs Act (the “2017 Act) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 34 percent to 21 percent for tax years beginning after December 31, 2017. In 2017, the Company recorded provisional amounts for certain enactment-date effects of the act by applying the guidance in Staff Accounting Bulletin No. 118 (“SAB 118”). In 2018 and 2017, the Company recorded $0 net tax expense related to the enactment-date effects of the Act related to the remeasurement of deferred tax assets and liabilities.

 

As of December 31, 2018, the Company completed its accounting for all of the enactment-date income tax effects of the Act and no adjustments were made to the provisional amounts recorded on December 31, 2017.

 

As of December 31, 2017, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future (which was generally 21%), by recording a provisional amount of $14.5 million, which was fully offset by valuation allowance. Upon further analysis of certain aspects of the Act and refinement of our calculations during the 12 months ended December 31, 2018, the Company determined that no adjustment was necessary to our provisional amount.

 

Pursuant to the Internal Revenue Code (“IRC”) of 1986, as amended, specifically IRC Section 382 and 383, the Company’s ability to use net operating loss and R&D tax credit carryforwards (“tax attribute carries forwards”) to offset future taxable income is limited if we experience a cumulative change in ownership of more than 50% within a three-year testing period. The Company had an ownership change on May 22, 2020 as result of the Nostrum investment. Accordingly for periods subsequent to May 22, 2020, the annual utilization of the net operating losses that are carried forward are expected to be limited. Further, the Company’s deferred tax assets associated with such tax attributes are expected to be significantly reduced upon realization of the ownership change within the meaning of IRC 382. The Company expects to have operating losses and federal and state tax losses for the full year December 31, 2020.

 

Earnings (Loss) Per Common Share

 

Basic earnings (loss) per common share is computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed by dividing net income or loss by the weighted average number of common shares outstanding, plus the issuance of common shares, if dilutive, that could result from the exercise of outstanding stock options and warrants. These potentially dilutive securities were included in the calculation of loss per common share for three-month and nine-month period ended September 30, 2020.

 

As of September 30, 2020, there were potentially dilutive securities issued and outstanding which consisted of 602 shares of convertible Series A preferred stock convertible into 53,274,336 shares of the Company’s common stock 1,700,000 shares of convertible Series B preferred stock convertible into 150,442,478 shares of the Company’s common stock and potentially dilutive securities consisted of outstanding stock options and warrants to acquire 14,811,333 shares of the Company’s common stock. The 602 shares of Series A preferred stock includes both the 382 shares owned by Sabby Healthcare Master Volatility Fund and the 220 shares owned by Nostrum Pharmaceuticals, LLC.

 

 

Stock-Based Equity and Options Compensation

 

The Company recognizes the fair value of all share-based payment awards in the statement of operation over the requisite vesting period for each expected volatility, expected term, and risk-free interest rate.

 

The Company estimated the fair value of an option award on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are input into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the option’s expected life, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of our common stock over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its common stock and does not intend to pay dividends on its common stock in the foreseeable future. The expected forfeiture rate is estimated based on historical experience.

 

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards require the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, equity–based compensation could be materially different in the future. In addition, the Company has required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If actual forfeiture rate is materially different from the estimates, the equity–based compensation could be significantly different from what the Company has recorded in the current period.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases. Under this new guidance, at the commencement date, lessees will be required to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. This guidance is not applicable for leases with a term of 12 months or less. The Company adopted the new guidance effective January 1, 2020.

 

Note 3—Property and Equipment

 

Property and equipment consisted of the following:

 

		September 30				December 31
		2020				2019
Computer and telecommunication equipment		$	16,331			$	12,902
Office equipment			5,871				5,871
Office furniture and equipment			7,396				7,396
Leasehold improvements			177,436				177,436
			207,034				203,605
Accumulated depreciation and amortization			(202,126	)			(200,965	)
Property and equipment, net		$	4,908			$	2,640

 

Depreciation and amortization of property and equipment for three-month and nine-month period ended September 30, 2020, totaled $370 and $1,161.

 

 

Note 4—Accrued Liabilities

 

Accrued Liabilities consisted of the following:

 

		September 30				December 31
		2020				2019
Payroll and benefits		$	2,845,033			$	2,657,717
Other			210,372				138,972
Total		$	3,055,405			$	2,796,689

 

Note 5—Advances from Related Party-Officer

 

As of September 30, 2020, and December 31, 2019, $590,900 and $725,425, respectively, of cash was advanced by the Company’s Chief Executive Officer. These advances are non-interest bearing with no fixed terms of repayment. During the period ended September 30, 2020, the Company repaid $134,525. Effective beginning in June, 2020, the Company is repaying the loan in equal monthly instalment of $20,000.

 

Note 6—Commitments and Contingencies

 

Lease Commitments

 

On June 23, 2016, the Company entered into a thirty-eight-month lease agreement to lease office space commencing on September 30, 2016. The approximate base monthly rent in the first, second and third years is $3,500, $3,700, and $3,800, respectively. The base monthly rent in the final two months of the agreement is $3,900. The total base rent over the lease term equals $139,800.

 

On August 1, 2020, the Company entered into a twenty-nine-month lease for approximately 3,039 square feet of office space in San Diego, California commencing on August 1, 2020. The monthly base rent is $6,686 and increases by three percent (3%) on each anniversary of the Commencement Date.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases. Under this new guidance, at the commencement date, lessees will be required to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. This guidance is not applicable for leases with a term of 12 months or less. The Company adopted the new guidance effective January 1, 2020. The ASU is applicable to the Company’s new leased which commenced on August 1 ,2020.

 

Under the new ASU the Company determines if an arrangement contains a lease at inception. Right of use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

 

The Company’s only office facility is in San Diego, California. Effective August 1, 2020, the Company entered into a lease agreement for its office with an expiration date of December 31,2022. The lease agreement includes leasehold improvement incentives, escalating lease payments, renewal provisions and other provisions which require the Company to pay taxes, insurance, maintenance costs, or defined rent increases. Rent expense is recorded over the lease terms on a straight-line basis.

 

 

The Company estimated an appropriate discount rate. The Company considered the range of the term, the range of the lease payments, the category of the underlying asset and the Company’s estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments.

 

The lease agreement includes options to extend the lease. Based on management’s judgement the Company will review its leasing alternatives on a periodic basis. The ASU does not apply to leases with a term of 12 months or less. The Company recognizes lease expenses on a straight-line basis over the lease term. Rent expense under the new ASU for the two month period of August and September 2020 was $ 12,272 and $19,414 for the third quarter ending September 30.2020.

 

Supplemental balance sheet information related to leases was as follows:

 

		Period Ended
		September 30, 2020
Operating Leases:
Operating lease ROU assets		$	162,090
Current operating lease liabilities, included in current liabilities			66,962
Noncurrent operating lease liabilities, included in long-term liabilities			101,184
Total operating lease liabilities		$	168,146

 

Supplemental cash flow and other information related to leases was as follows:

 

		Period Ended
		September 30, 2020
ROU assets obtained in exchange for lease liabilities:		$	173,371
Operating leases
Weighted average remaining lease term (in years):			2.25
Operating leases
Weighted average discount rate:
Operating leases			5.25	%

 

Total future minimum payments required under the lease obligations as of September 30, 2020 are as follows:

 

Period Ending September 30,
2021		$	73,744
2022			83,050
2023			21,279
Total lease payments			178,073
Less: amounts representing interest			(9,927	)
Total lease obligations		$	168,146

 

 

Note 7 Contingent Liability

 

During the year ended December 31, 2019, the Company entered into various restructuring efforts including the restructuring of certain payables with its vendors to pay certain amounts due contingent on the receipt of FDA approval on Generx or contingent on the FDA approval and commercial sales of Generx. Since it is not determinable when and if Generx will receive FDA approval and the Company will achieve commercial sales, the Company has reflected these re-negotiated amounts due as contingent liabilities where it is not determinable when and if the amounts will ultimately be paid. The total liabilities payable by the Company in the event of FDA approval is $172,449 and an additional amount totaling $225,000 is payable when commercial sales cumulatively reach $100 million for Generx. Since the Company does not know if FDA approval will be received for the Generx product, it is not determinable if and when this payment will be made by the Company. Accordingly, these amounts have been reported as a contingent liability and have not been included in accounts payable and accrued liabilities.

 

Note 8 Technology License Agreements and Liability Restructuring

 

In October 2005, the Company completed a transaction with Schering AG Group, Germany (now part of Bayer AG) and related licensors, to certain patents covering (1) methods of gene therapy from the Regents of University of California (the (UC License Agreement); and (2) the DNA sequence for Fibroblast Growth Factor – 4 (FGF-4) from New York University (NYU License Agreement), for the transfer or license of certain assets and technology for potential use in treating ischemic and other cardiovascular conditions. Under the terms of the transaction, the Company paid Schering a $4 million fee, and would be required to pay a $10 million milestone payment upon the first commercial sale of each resulting product. The Company also may be obligated to pay the following future royalties to Schering: (i) 5% on net sales of an FGF-4 based product such as Generx, or (ii) 4% on net sales of other products developed based on technology transferred to Gene Biotherapeutics by Schering. The royalty rate is reduced to 2% on net sales for an FGF-4 based product following the expiration of the issued patients on a country-by-country basis. As of December 31, 2019, all such worldwide patients have expired.

 

As of October 2019, the outstanding and unpaid amount due and payable under the UC License Agreement totaled $1,006,709. As part of the Company’s restructuring efforts, the Company and the University of California reached a settlement agreement in the amount of $172,449, payable as $100,000 in quarterly cash payments of $8,333 over a 36 month-month period, with the first payment commencing on June 15, 2020, and an additional lump sum payment of $72,449 payable upon FDA approval of Generx.

 

As of November 2019, the Company and the New York University reached an agreement to settle total amounts due under this agreement for $400,000 payable as follows: (1) $75,000 in six quarterly payments of $12,500 commencing June 15, 2020, with additional contingent payments due as follows (2) $100,000 payable upon FDA approval to market and sell Generx; and (3) an additional amount totaling $225,000 when commercial US sales cumulatively reach $100 million for Generx.

 

The Company has not reflected the contingent amounts payable of $397,449 in the Consolidated Balance Sheet as the payable is contingent on FDA approval and commercialization of the product. Since it is not determinable when and if FDA approval will be received, it is not determinable if and when this payment will be made by the Company. Accordingly, these amounts have been reported as a contingent liability. As a result of these settlements, the agreements are deemed terminated and no further amounts and royalties are payable by the Company.

 

Liability Restructuring

 

As of September 30, 2020, we had an outstanding balance in accrued but unpaid salaries and benefits for current and former employees totaling $2,986717. In January 2020, all affected current and former employees agreed to defer their compensation, less applicable tax withholdings, upon the earliest to occur of (a) the FDA’s approval of Generx for marketing and sale in the U.S.; (b) the EMA approval of Generx for marketing and sale in the European Union and the United Kingdom; (c) the sale of Generx to an independent third party for an aggregate value equal to or greater than $35,000,000; (d) our entry into a strategic partnership that would facilitate a capital contribution equal to or greater than $35,000,000 for the purpose of supporting the clinical and commercial development of Generx; (e) our successful completion of a public or private equity offering for the issuance of its common stock equal to $35,000,000; or (f) at such other time, as our board of directors determines that we have the financial ability to make such payments without jeopardizing our ability to operate as a going concern.

 

Note 9 Legal Proceedings

 

In the course of our business, the Company is routinely involved in proceedings such as disputes involving goods or services provided by various third parties, which the Company does not consider likely to be material to the technology we develop or license, or the products we develop for commercialization, but which can result in costs and diversions of resources to pursue and resolve.

 

Note 10—Stockholders’ Equity

 

Matters Relating to Our Relationship with Shanxi Taxus Pharmaceuticals Inc. and Affiliated Entities

 

In April 2015, the Company entered into a term sheet with Shenzhen Qianhai Taxus Capital Management Co., Ltd. (“Shenzhen Qianhai Taxus”), a company affiliated with Shanxi Taxus Pharmaceuticals Co. Ltd., whereby the Company proposed to sell Shenzhen Qianhai Taxus 600,000 shares of common stock in our Angionetics subsidiary in exchange for $3.0 million in cash. The $3.0 million was to be paid in tranches that were to be completed by May 31, 2015. Shenzhen Qianhai Taxus paid $600,000 of the financing, which was recorded as common stock issuable. Shenzhen Qianhai Taxus did not complete this transaction. This subscription was committed and not refundable to Shenzhen Qianhai Taxus. Shenzhen Qianhai Taxus was eligible to apply this amount toward the purchase of common stock of the Company or its subsidiaries based on terms and conditions approved by the Company’s Board of Directors.

 

 

On April 10, 2020, we transferred our residual rights in Excellagen to Shanxi Taxus Pharmaceuticals Co. Ltd. in exchange for the release of any rights or claims of an equity ownership interest in Gene Biotherapeutics. As a result, we no longer have an interest in Excellagen, other than the right to receive royalty payments from Olaregen totaling up to $3,350,000, based on monthly net sales of Excellagen worldwide, excluding Greater China, the Russian Federation, and countries in the Commonwealth of Independent States. In connection with this transaction, Shanxi agreed to apply its previously funded $600,000 stock subscription payment in exchange for the rights to Excellagen in the Greater China, the Russian Federation and countries in the Commonwealth of Independent States, and Shanxi released any future rights or claims against us.

 

In additional to the Excellagen transaction, on April 10, 2020, our Angionetics, Inc. subsidiary entered into a Distribution and License Agreement with Shanxi (as amended, the “Shanxi License Agreement”), granting Shanxi certain license rights with respect to our Generx product candidate. The distribution and license rights commence only after we obtain U.S. FDA approval for marketing and sale of Generx in the United States. The license rights include (a) a non-exclusive right to manufacture Generx products in China, and (b) an exclusive right to market and sell Generx products in Singapore, Macau, Hong Kong, Taiwan, any other municipality other than mainland China where Chinese (Mandarin or Cantonese) is the common language, the Russian Federation, and the Commonwealth of Independent States (i.e., Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan). The Shanxi License Agreement provides for a royalty ranging from 5% up to 10% based on the level of annual net sales of the Generx product sold by Shanxi in the licensed territory.

 

Series A Preferred Stock

 

Purchase Agreement with Sabby Healthcare Volatility Master Fund, Ltd.

 

On April 4, 2013, the Company entered into a securities purchase agreement with Sabby Healthcare Volatility Master Fund, Ltd. (“Sabby”) to purchase up to 4,012 shares of our newly authorized Series A Convertible Preferred Stock (the “Preferred Stock”) for maximum proceeds of $4.0 million. The Preferred Stock was convertible into shares of our common stock at an initial conversion price of $0.6437 per share. The conversion price is subject to downward adjustment if the Company issues common stock or common stock equivalents at a price less than the then effective conversion price. Following the issuance of our Series B Preferred Stock, the current conversion price is $0.0113 per share of Common Stock. Sabby is limited to hold no more than 10% of Gene Biotherapeutics’ issued and outstanding common stock at any time. As long as the Preferred Stock is outstanding, the Company has also agreed not to incur specified indebtedness without the consent of the holders of the Preferred Stock. These factors may restrict our ability to raise capital through equity or debt offerings in the future.

 

As of September 30, 2020, and December 31, 2019, there was Series A Preferred Stock outstanding of 602 and 790 shares respectively.

 

Series B Preferred Stock

 

Amendment to Certificate of Incorporation and Amendment to Bylaws

 

On May 21, 2020, the Company amended their Certificate of Incorporation with the filing of a Certificate of Designation to establish the rights, privileges, and preferences of a new class of our preferred stock designated Series B Convertible Preferred Stock (“Series B Preferred Stock”). The Series B Preferred have the following material terms and provisions:

 

Dividends. Each share of our Series B Convertible Preferred Stock is entitled to receive dividends when, as, and if dividends are paid on shares of our Common Stock. Dividends are payable on each share of Series B Convertible Preferred Stock on an “as-converted” basis, in the same amount and form as dividends actually paid on shares of our Common Stock. The Company has never paid dividends on shares of our common stock and the Company does not intend to do so for the foreseeable future.

 

Voting Rights. Each share of our Series B Convertible Preferred Stock will have the same voting rights as shares of our Common Stock, on an “as-converted” basis, and will vote on all matters with the Common Stock as a single class. In addition, the Series B Convertible Preferred Stock has voting rights that require the approval of a majority of the outstanding shares of Series B Convertible Preferred Stock for any action to: (1) alter or change adversely the powers, preferences or rights given to the shares of our Series B Convertible Preferred Stock or alter or amend its Certificate of Designation, (2) authorize or create any class of shares ranking as to dividends, redemption or distribution of assets upon liquidation senior to, or otherwise pari passu with, the shares of our Series B Convertible Preferred Stock, (3) amend our Certificate of Incorporation or other charter documents in any manner that adversely affects any rights of the holders of our Series B Convertible Preferred Stock, (4) increase the number of authorized shares of our Series B Convertible Preferred Stock, or (5) enter into any agreement with respect to any of the foregoing.

 

 

Conversion. The shares of our Series B Convertible Preferred Stock are convertible at any time at the option of the holder into shares of our Common Stock at a ratio determined by dividing the Stated Value of such share of Series B Preferred Stock by the conversion price of $0.0113 per share of Common Stock. Accordingly, each share of our Series B Convertible Preferred Stock is initially convertible into 88.5 shares of our Common Stock. The conversion price is subject to adjustment in the case of share splits, share dividends, combinations of shares and similar recapitalization transactions. In addition, if the Company sells shares of Common Stock or Common Stock equivalents at a price less than the current conversion price, the conversion price of the Series B Convertible Preferred Stock will be reduced to equal eighty percent (80%) of the price at which such Common Stock or Common Stock equivalents are sold.

 

Liquidation. The Series B Convertible Preferred Stock has a liquidation preference. Upon any liquidation, dissolution or winding up of our company, after payment or provision for payment of our debts and other liabilities and before any distribution or payment is made to the holders of our common stock or any junior securities, the holders of our Series B Convertible Preferred Stock will first be entitled to be paid an amount equal to $1.00 per share plus any other fees, liquidated damages or dividends then owing, before our remaining assets will be distributed among the holders of the other classes or series of shares of our capital stock in accordance with our Certificate of Incorporation.

 

On May 22, 2020, the Board amended the Company’s bylaws to eliminate the classified Board. Directors will serve one-year terms until the next annual meeting of stockholders or until their successors are duly elected and qualified. year terms until the next annual meeting of stockholders or until their successors are duly elected and qualified.

 

Stock Options and Other Equity Compensation Plans

 

The Company had an equity incentive plan that was established in 2005 under which 283,058 shares of our common stock was reserved for issuance to employees, non-employee directors and consultants. The 2005 Equity Incentive Plan expired on October 20, 2015, ten years after its adoption, and the Company is no longer able to issue share or awards under that plan. All options or other awards issued under the 2005 Equity Incentive plan prior to its expiration remain outstanding in accordance with their terms. At June 30,2020, there are no shares outstanding and available for future issuance under the option plan.

 

There were no stock options or warrants under the Equity Incentive plan and no stock options or warrants issued outside of the plan to employees and consultants during the six -month period ended September 30, 2020. Similarly, there were no options or warrants exercised during the six- month period ended September 30, 2020. The total number of options and warrants outstanding and exercisable were 14,811,333 as of September 30, 2020 with a weighted average exercise price of $0.62 per share, and a weighted average remaining life of 3.82.

 

		Number of Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (in years)
Balance outstanding, January 1, 2017			12,116,334			$	0.62				7.67
Granted			—				—				—
Exercised			—				—				—
Cancelled (unvested)			—				—				—
Expired (vested)			(5,001	)			0.62				—
Balance outstanding, December 31, 2017			12,111,333				0.62				6.67
Granted			—				—				—
Exercised			—				—				—
Cancelled (unvested)			—				—				—
Expired (vested)			—				—				—
Balance outstanding, December 31, 2018			12,111,333			$	0.62				5.67
Granted			—				—				—
Exercised			—				—				—
Cancelled (unvested)			—				—				—
Expired (vested)			—				—				—
Balance outstanding, December 31, 2019			12,111,333			$	0.62				4.67
Balance exercisable, December 31, 2019			12,111,333			$	0.62				4.67
Exercised Balance exercisable, September 30, 2020			12,111,333			$	0.62				3.82

 

 

Warrants

 

In October 2017, the Company issued 1,000,000 fully vested Common Stock warrants to Landmark, in exchange for economic monetization and business mobilization services for the Company. The warrants are exercisable at any time from October 9, 2017 (initial exercise date) and on or prior to the close of business on the 10-year anniversary from the initial exercise date, October 8, 2027, at an exercise price of $0.25 per share. The warrants had a fair value of $0.15 per share and the Company has recognized $150,000 as consulting costs in the statement of operations during the fourth quarter ended December 31, 2017.

 

In November 2017, the Company issued 700,000 fully vested Common Stock warrants to a consultant for ongoing scientific and business consulting services. The warrants are exercisable at any time from November 14, 2017 (the grant date) for a period up to 10 years at an exercise price of $0.25 per share. The warrants had a fair value of $0.11 per share, determined using the Black-Scholes valuation model, and the Company has recognized $79,222 as consulting costs in the statement of operations during the further quarter ended December 31, 2017.

 

In April 2018, the Company issued an additional 1,000,000 fully vested Common Stock warrants to Landmark as final consideration paid upon completion of the 6-month Agreement. The Common Stock warrants are exercisable at any time from April 23, 2018 (initial exercise date) and on or prior to the close of business on the 10-year anniversary from the initial exercise date, April 22, 2028, at an exercise price of $0.25 per share. The warrants had a fair value of $0.08 per share, determined using the Black-Scholes valuation model. The Company recognized approximately $80,000, representing the aggregate fair value of the warrants as consulting expenses in the statement of operations during the second quarter ended June 30, 2018.

 

The Company calculates the fair value of stock options using the Black-Scholes option-pricing model which approximates a binomial lattice model. In determining the expected term, the Company separate groups of employees that have historically exhibited similar behavior regarding option exercises and post-vesting cancellations. The option-pricing model requires the input of subjective assumptions, such as those included in the table below. The volatility rates are based principally on our historical stock prices and expectations of the future volatility of its Common Stock. The risk-free interest rate is based on the U.S. Treasury Yield curve in effect at the time of grant. The total expense to be recorded in future periods will depend on several variables, including the number of share-based awards and expected vesting.

 

The following table summarizes warrants that we granted during the year ended December 31, 2017 and 2018:

 

Grant Date		Quantity Issued				Expected Life (Years)				Strike Price				Volatility				Dividend Yield				Risk-Free Interest Rate				Grant Date Fair Value Per Warrant				Aggregate Fair Value
04/23/2018			1,000,000				10.0			$	0.25				126.00	%			0	%			2.47	%		$	0.08			$	80,000
11/14/2017			700,000				10.0			$	0.25				116.47	%			0	%			2.33	%		$	0.11				79,222
10/09/2017			1,000,000				10.0			$	0.25				115.00	%			0	%			2.47	%		$	0.16				150,000

 

 

Nostrum Financing

 

On May 22, 2020, the Company entered into a Preferred Stock Purchase Agreement (“the Agreement”) with Nostrum Pharmaceuticals, LLC, a Delaware limited liability company (“Nostrum”) pursuant to which the Company sold Nostrum 1,700,000 shares of newly designated Series B Preferred Stock, for a total cash consideration of $1.7 million. Legal costs associated with the Nostrum investment were $166,891.Nostrum is the parent of Nostrum Laboratories, Inc., a privately held pharmaceutical company engaged in the formulation and commercialization of specialty pharmaceutical products and controlled release, orally administered branded and generic drug products. Series B Preferred Stock is convertible into shares of our common stock at an initial conversion ratio of $.0113 shares of Series B Preferred Stock for each share of common stock or 150,442,478 shares of the Company’s common stock.

 

We will use the proceeds from the sale of the Series B Convertible Preferred Stock to fund working capital requirements in preparation for conducting the U.S. FDA-approved Phase 3 clinical trial for our Generx product candidate. We believe that Nostrum’s assets and experience in the formulation and commercialization of pharmaceutical products will facilitate the administration and completion of the Phase 3 clinical trial for Generx on a cost-effective basis.

 

Concurrently with the sale of the Series B Preferred Stock, Nostrum acquired 220 shares of the Company’s Series A Preferred Stock from Sabby Master Healthcare Ltd. and agreed to purchase the remaining 570 shares of Series A Convertible Preferred Stock that are outstanding and held by Sabby. As a result of the issuance of the Series B Convertible Preferred Stock, each share of our Series A Convertible Preferred Stock became convertible into 88,496 shares of our Common Stock. The Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock restricts Nostrum from converting any Series A Preferred Stock if Nostrum would beneficially own a number of shares of Common Stock in excess of 9.99% of the shares of Common Stock then issued and outstanding. As a result of its ownership of the Series B Convertible Preferred Stock, Nostrum is currently limited in its entirety from converting any shares of Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock has no voting rights on general corporate matters, provided that the Series A Convertible Preferred Stock contain customary protective provisions.

 

The Company used the proceeds from the sale of the Series B Preferred Stock to fund working capital requirements in preparation for conducting a Phase 3 clinical trial in the United States for its Generx® product candidate. The Company will need additional capital to complete the Phase 3 clinical trial for Generx. Nostrum’s initial investment in the Series B Preferred Stock represented control of 91.2% of the voting power of the Company.

 

Nostrum Debt Financing

 

In January 2020, we issued Nostrum a promissory note in exchange for cash of $25,000. These bear interest at 6% per annum and matures 24 months from the date of issuance. The cash funding related to a December 30, 2019 promissory notes was not received by the Company until January 2020, so the Company recorded the note payable in the consolidated balance sheet in January 2020, upon receipt of the cash from Nostrum. As of September 30, 2020, the Company had received debt financing from Nostrum totaling $265,000.

 

Retirement of Members of the Board of Directors

 

On May 22, 2020, Andrew Leitch, John Wallace, Jiayue Zhang and Wei-Wei Zhang resigned as members of the Company’s Board of Directors. The resignations were required under the terms of the Series B Preferred Stock Purchase Agreement. On May 22, 2020, at the request of Nostrum, James Grainer and Kaushik K. Vyas were appointed to the Company’s Board of Directors and James L. Grainer was appointed to serve as Chairman of the Board.

 

 

Note 11—Subsequent Events

 

Fuji Film

 

In March 2021, the Company entered into an agreement with FUJIFILM Diosynth Biotechnologies (“FDB”) to manufacture the Generx [Ad5FGF-4] angiogenic gene therapy product candidate for Phase 3 clinical evaluation for the treatment of refractory angina due to late-stage coronary artery disease. Manufacturing operations will be conducted at FDB’s facilities in College Station, Texas where FDB will perform technology transfer and process development activities for Phase 3 clinical and commercial-scale GMP manufacturing of Generx.

 

Series A Preferred Stock Purchase Agreement Between Nostrum and Sabby

 

Subsequent to the May 2020 agreement between Nostrum and Sabby, as of April 28, 2021 Sabby converted all of its remaining 570 shares of Series A Convertible Preferred Stock into 50,442,489 shares of Common and no further shares of the Series A Convertible Preferred Stock were purchased by Nostrum. As a result, Nostrum did not acquire any further shares of the Series A Convertible Preferred beyond their initial 220 share acquisition

 

Nostrum Additional Investment Funding

 

Subsequent to the current period ending, September 30. 2020, between the period May 31, 2021 through September 30, 2021 Nostrum provided an additional $300,500 in equity capital to support the operations of the Company as we execute on our current business plan and seek alternative sources of financing, to fund the Company’s research, development and commercialization activities for our lead product Generx [Ad5FGF-4]. For its equity investment, the Company will issue Nostrum additional shares of the Series A preferred stock. In addition to its equity investments Nostrum has provided the Company with various services including, financial management, legal, scientific, information technology for which Nostrum has not received any compensation.

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analyses are intended to help you understand our financial condition and results of operations for the three and nine month periods ended September 30, 2020. You should read the following discussion and analysis together with our audited consolidated financial statements and the notes to the consolidated financial statements included under Part I, Item 1 in this report. Statements in the following discussion that are not historical in nature are forward looking statements, and inherently subject to risk. Our future financial condition and results of operations will vary from our historical financial condition and results of operations described below based on a variety of factors. You should carefully review the risks described under Part II, Item 1A and elsewhere in this report, which identify certain important factors that could cause our future financial condition and results of operations to vary from our historical operations and from our current expectations of future results.

 

Overview

 

We are a clinical stage biotechnology company focused on pre-clinical, clinical and commercialization of angiogenic gene therapy biotherapeutics for strategic niche markets, primarily for the treatment of cardiovascular disease. Our technology platform is designed to biologically activate the human body’s innate angiogenic healing process to stimulate the growth of microvascular networks for patients with ischemic cardiovascular, cerebral, and other medical conditions and diseases, as well as for advanced tissue engineering applications. Historically we have developed and sold various medical devices, product candidates and products.

 

Our lead product candidate, Generx, is a first in class, single dose, angiogenic gene therapy product candidate that is designed to improve blood flow and to increase the supply of oxygenated blood in patients with refractory angina and myocardial ischemia due to advanced coronary artery disease. Generx has been designed to improve perfusion by promoting the formation of functional coronary collateral blood vessels within the heart through enlargement of existing arterioles (arteriogenesis) and formation on new capillary vessels (angiogenesis). This process, termed “medical revascularization,” represents a fundamentally new mechanism of action that involves the stimulation of the formation of new biological structures in the heart, as opposed to currently available pharmacologic therapies, which only address the symptoms of angina, or mechanical intervention. Results from prior clinical studies demonstrate perfusion improvements with Generx similar to that achieved with coronary artery bypass surgery or stents, but in a significantly less costly and less invasive procedure.

 

 

Our current business is focused exclusively on the development of Generx, a gene therapy product candidate targeted at men and women with advanced ischemic heart disease and refractory angina. We have received FDA approval and FAST Track Status for a Phase 3 clinical trial. We do not currently have any other products or other product candidates and have not generated any revenues from operations for the three month period ended September 30, 2020. Our operations currently comprise one segment for financial reporting purposes.

 

Results of Operations

 

For the Three Months Ended September 30, 2020 compared to the Three Months Ended September 30, 2019

 

The following tables sets forth our results of operations for the three-month period ended September 30, 2020 and 2019, and the relative dollar and percentage change between the two periods.

 

		Three Month Period Ended September 30,								Change
		2020				2019				($)				%
Operating Expenses		$				$										%
Research and development			66,116				61,443				4,673				7.6	%
Selling, general and administrative			322,583				114,047				208,536				183.	%
Total Operating Expenses			388,699				175,490				213,209				121.4	%
Gain on sale of assets and technology			—				—				—				—
Loss from Operations			(388,699	)			(175,490	)			(213,209	)			121.4	%
Other Income (expenses)																%
Gain on account payable forgiveness			—				35,985				(35,985	)			(100.0	)%
Interest Expense			(12,706	)			(10,952	)			(1,754	)			16.0	%
Total other Income (Expense)			(12,706	)			25,033				(37,739	)			(151	)%
Net income (Loss)			(401,405	)			(150,457	)			(250,948	)			167	%
Net loss attributable to the non-controlling interest			(40,273	)			(19,790	)			(18,165	)			103	%
Net loss attributable to the controlling interest			(361,132	)			(130,667	)			210,772				176	%

 

Research and development expenses increased by $4,673 or 7.6% for the three-month period ended September 30, 2020 compared to 2019 mainly due to a decrease in salary costs, which were offset by an increase in benefit costs for a net increase of $7,069, as the Company paid some benefits. In addition, clinical trials expenses increased by $10,104 when compared to 2019 due to costs incurred for protocol design and electronic submission of a protocol amendment related to the Generx product. These increases were offset by a decrease in research costs related with the Company’s termination of it’s agreement with New York University where research and development fees of $12,500 per quarter were incurred.

 

Selling, general and administrative expenses for the three-month period ended September 30, 2020, increased by $208,536 or 183% compared to 2019 mainly due to an increase in salary and benefits of $51,328 and an increase in professional and legal services expense of $120,022, as the Company re-engaged its regulatory compliance activities, thereby incurring legal, audit and accounting services costs.

 

Interest expenses increased for the three-month period ended September 30, 2020 by $1,754 compared to 2019 primarily as a result of an increase in the notes payables $120,000 received from Nostrum in January 2020, which bears an interest at 6% per annum and lease financing costs.

 

 

For the Nine Months Ended September 30, 2020 compared to the Nine Months Ended September 30, 2019

 

The following tables sets forth our results of operations for the nine-month period ended September 30, 2020 and 2019, and the relative dollar and percentage change between the two periods.

 

		Nine Month Period Ended September 30,								Change
		2020				2019				($)				%
Operating Expenses		$				$										%
Research and development			161,842				185,177				(23,335	)			(12.6	)%
Selling, general and administrative			622,398				474,120				148,278				31.3	%
Total Operating Expenses			784,240				659,297				103,732				18.9	%
Gain on sale of assets and technology			(600,000	)			—				—				—
Loss from Operations			(184,240	)			(659,297	)			475,057				(72	)%
Other Expenses																%
Gain on account payable forgiveness			66,751				35,985				30,767				85.5	%
Interest Expense			(44,555	)			(31,584	)			(12,971	)			41. 0	%
Total other Income (Expense)			22,196				4,401				17,795				404	%
Net income (Loss)			(162,044	)			(654,896	)			492,852				(75.3	%)
Net loss attributable to the non-controlling interest			(86,935	)			(71,490	)			(15,445	)			21.6	%
Net loss attributable to the controlling interest			(75,109	)			(583,406	)			508,297				(87.1	)%

 

Research and development expenses decreased by $23,335 or 12.6% for the nine-month period ended September 30, 2020 compared to 2019 primarily due to a decrease of $37,500 in fees due to New York University for research service as the Company terminated its agreement in 2019 in its efforts to conserve cash spending and to restructure the organization away from development of non-core products to development of its primary product, Generx. The decrease was offset by an increase in clinical trials expense $12,584, related to protocol design and electronic submission of a protocol amendment related to the Generx product.

 

Selling, general, and administrative expenses for nine-month period ended September 30, 2020, increased by $148,278 or 31.3% compared to 2019 primarily due to an increase related to professional and legal services as the Company re-engaged its regulatory compliance activities, thereby incurring legal, audit and accounting service costs.

 

Interest expense increased for the nine-month period ended September 30, 2020, by $12,971 compared to 2019 primarily as a result of an increase in the notes payables $120,000 received from Nostrum in January 2020, which bears an interest at 6% per annum and lease financing costs.

 

 

Liquidity and Capital Resources

 

The following table summarizes our liquidity and working capital position at September 30, 2020 and 2019:

 

		September 30,
		2020				2019
Cash and Cash Equivalents		$	781,571			$	37,258
Other Current Assets			19,174				16,763
Accounts Payable			661,950				1,864,149
Other Current Liabilities			4,264,718				4,366,251
Working Capital			(4,125,923	)			(6,176469	)

 

The following table summarizes our operating, investing, and financing activities for the nine-month period ended September 30, 2020, and 2019:

 

		Period ended September 30,
		2020				2019
Net cash generated from (used in) operating activities		$	(795,140	)		$	(113,771	)
Net cash used in investing activities			(3,429	)
Net cash generated from/(used in) financing activities			1,579,740				68,914
Net increase/(decrease) in cash and cash equivalents			781,171				(44,857	)

 

The $795,140 of net cash used in operating activities for the nine-month period ended September 30, 2020 was primarily due to payments being made on accounts payable, general working capital requirement and increased professional expenses to achieve compliance with its regulatory filing requirements.

 

Cash used in investing activities for the nine-month period ended September 30, 2020 of $3,429 related to computer equipment purchases during the quarter.

 

The $1,579,740 in net cash from financing activities was primarily due to our Series B Convertible Preferred Stock financing transaction, net of financing costs. In May 2020 we secured $1.7 million financing from the sale of our newly authorized Series B Convertible Preferred Stock to Nostrum. We will use the proceeds from the sale of the Series B Convertible Preferred Stock to fund working capital requirements in preparation for conducting a Phase 3 clinical trial in the U.S. for our Generx product candidate.

 

We anticipate that negative cash flows from operations will continue for the foreseeable future. We do not have any unused credit facilities. We have yet to generate positive cash flows from operations and are dependent on equity and debt funding to finance our operations. Our history of recurring losses and uncertainties as to whether our operations will become profitable raise substantial doubt about our ability to continue as a going concern.

 

As long as any shares of our Preferred Stock are outstanding, we have agreed that we will not, without the consent of the holders of two-thirds of the Series A Convertible Preferred Stock, incur indebtedness other than specified “Permitted Indebtedness”, or incur any liens other than specified “Permitted Liens”.

 

Our principal business objective is to advance our Generx product candidate through the AFFIRM Phase 3 clinical trial and to begin commercialization of Generx in the United States. In order to secure the requisite funding, we intend to sell debt or equity securities in the Company.

 

Subsequent to the current period ending September 30, 2020, between the period May 31, 2021 through September 30, 2021, Nostrum provided an additional $300,500 in equity capital to support the operations of the Company. In exchange for the equity financing, the Company plans to issue Nostrum shares of the Company’s Series B Preferred Stock which converts into the Company’s common stock at a conversion rate of $0.0113 per share. At this point, the Company’s cash resources are insufficient to (1) support the Company’s ongoing working capital requirements, financial obligations and outstanding agreements and (2) advance the cGMP manufacture of Generx [Ad5FGF-4], pursuant to a manufacturing agreement with Texas-based FujiFilm Diosynth Biotechnologies, as needed to initiate the previously announced Phase 3 AFFRIM clinical study.

 

In addition to any funding that can be provided by Nostrum, the Company will require additional financing to support its operations, which it hopes to secure through the sale of additional debt or equity securities. The Company continues to pursue alternative sources of financing, however, there are no arrangements or agreements in place for any financing at this time. We cannot provide any assurances regarding the availability or terms of any future financing at this time. Any delays in obtaining appropriate financing will impact the timing and the Company’s ability to execute its strategic initiatives such as Fuji, fund its ongoing working capital requirements and financial obligations.

 

 

Off-Balance Sheet Arrangements

 

As of September 30, 2020, we did not have any significant off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that have or are reasonably likely to have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses material to investors.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, we are not required to provide the information required by this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain certain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports that we submit or file with the SEC under the Securities Exchange Act of 1934 is (1) recorded, processed summarized and reported within the time periods specified in the SEC rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely discussions regarding required disclosure.

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2020. Based on this evaluation, management concluded that our disclosure controls were not effective for their intended purposes described above as a result of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected and corrected on a timely basis. For the year ended December 31, 2019, we noted the following material weaknesses in the operation of our internal controls as follows:

 

	●	We did not maintain a sufficient complement of personnel with the appropriate level of accounting knowledge, experience, and training in the application of GAAP commensurate with our financial reporting requirements; and
	●	We did not maintain a sufficient complement of personnel to permit the segregation of duties among personnel with access to the Company’s accounting and information systems and controls.

 

 

Our management does not believe that the material weakness in internal controls has resulted in any inaccuracy or misstatement in the financial statements included in this report. We plan to remediate these material weaknesses by hiring additional qualified accounting personnel when the Company has the financial resources to support those expenses. However, these material weaknesses continued to exist during the quarterly period ended September 30, 2020.

 

Changes in Internal Control over Financial Reporting

 

There were no changes to our internal control over financial reporting during the quarterly period ended September 30, 2020 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

In the course of our business, we may become involved in proceedings such as disputes involving goods or services provided by various third parties, intellectual property infringement claims, and employment disputes. We are not currently a party to any legal proceedings that we believe would reasonably be expected to have a material effect on our financial position.

 

ITEM 1 A. RISK FACTORS

 

Our business, financial condition and operating results can be affected by a number of factors, including but not limited to those described in our annual report on Form 10-K for the year ended December 31, 2019 under the heading “Risk Factors”. The occurrence of any one or more of those factors could cause our actual financial and operating results to vary materially from past or from expected future financial condition and operating results. There have been no material changes to our risk factors since the filing of our 2019 Annual Report.

 

The risk factors included in our 2019 Annual Report and our other filings with the SEC are not the only ones we face. Additional risks and uncertainties, not presently known to us, or that we currently perceive as immaterial or remote, may also occur. If any of the following risks or any additional risks and uncertainties actually occur, our business could be materially harmed, and our financial condition, results of operations and future growth prospects could be materially and adversely affected.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On May 22, 2020 we sold 1,700,000 shares of our newly designated Series B Preferred Stock to Nostrum in exchange for $1,700,000 in cash. There were no underwriting discounts or commissions. The sale was conducted as a privately negotiated transaction with a single investor, pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 

ITEM 6. EXHIBITS

 

The following exhibit index shows those exhibits filed with this report and those incorporated by reference:

 

EXHIBIT INDEX

 

Exhibit Number		Description		Incorporated By Reference To
3.4		Certificate of Designation for Series B Convertible Preferred Stock		Exhibit 3.1 of our Current Report on Form 8-K, filed with the SEC on May 28, 2020.
10.1		Asset Purchase Agreement dated July 15, 2018 between Activation Therapeutics, Inc. and Olaregen Therapeutix, Inc. for the sale of Excellagen.		Exhibit 10.5 of our Form 10-K, filed with the SEC on April 23, 2021
10.2		Reaffirmation and Ratification Agreement dated April 10, 2020 between the registrant and Shanxi Taxus Pharmaceuticals Co. Ltd.		Exhibit 10.2 of our Current Report on Form 8-K filed with the SEC on May 28, 2020
10.3		Distribution and License Agreement Dated April 10, 2020 between Angionetics, Inc. and Shanxi Taxus Pharmaceuticals Co., Ltd.		Exhibit 10.3 of our Current Report on Form 8-K filed with the SEC on May 28, 2020
10.4		Amendment No. 1 to Distribution and License Agreement dated April 14, 2020 between Angionetics, Inc. and Shanxi Taxus Pharmaceuticals Co., Ltd.		Exhibit 10.4 of our Current Report on Form 8-K filed with the SEC on May 28, 2020
10.5		License and Patent Assignment Agreement dated April 10, 2020 between Activation Therapeutics, Inc. and Shanxi Taxus Pharmaceuticals Co., Ltd.		Exhibit 10.5 of our Current Report on Form 8-K filed with the SEC on May 28, 2020
10.6		Preferred Stock Purchase Agreement dated May 22, 2020 between the registrant and Nostrum Pharmaceuticals LLC for the purchase of Series B Convertible Preferred Stock.		Exhibit 10.1 of our Current Report on Form 8-K filed with the SEC on May 28, 2020
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Filed herewith
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Filed herewith
32		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer		Filed herewith
101		Inline XBRL document Set for the financial statements and accompanying notes in Part I, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.		Filed herewith

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Gene Biotherapeutics Inc., the registrant, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: October  27, 2021
	GENE BIOTHERAPEUTICS INC.
	By:	/s/ CHRISTOPHER J. REINHARD
		Christopher J. Reinhard,
		Chief Executive Officer (Principal Executive and Accounting Officer)
	By:	/s/ JAMES L. GRAINER
		James L. Grainer,