UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from ________________ to ________________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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 | ☐ |
| ☒ | 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 May 15, 2023, the registrant had 6,762,081 and
Table of Contents
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
| ● | we have generated no significant revenue from commercial sales to date and our future profitability is uncertain; |
| ● | if we fail to obtain the capital necessary to fund our operations, we will be unable to continue or complete our product development, execute on our strategic M&A initiatives, commence our planned clinical trials and you will likely lose your entire investment; |
| ● | our financial situation creates doubt whether we will continue as a going concern; |
| ● | we may need to raise additional funding, which may not be available on acceptable terms, or at all; |
| ● | even if we can raise additional funding, we may be required to do so on terms that are dilutive to you; |
| ● | the regulatory approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of our future product candidates, if any; |
| ● | we may encounter substantial delays in completing our clinical studies which in turn will require additional costs, or we may fail to demonstrate adequate safety and efficacy to the satisfaction of applicable regulatory authorities; |
| ● | if our future pre-clinical development and future clinical Phase I/II studies are unsuccessful, we may be unable to obtain regulatory approval of, or commercialize, our product candidates on a timely basis or at all; |
| ● | even if we receive regulatory approval for any of our product candidates, we may not be able to successfully commercialize the product and the revenue that we generate from their sales, if any, may be limited; |
| ● | adverse events involving our products may lead the FDA or applicable foreign regulatory agency to delay or deny clearance for our products or result in product recalls that could harm our reputation, business and financial results; |
| ● | our technology is subject to licenses from LLU and Stanford (as defined below), each of which are revocable in certain circumstances, including in the event we do not achieve certain payments and milestone deadlines. Without these licenses, we may not be able to continue to develop our product candidates; |
| ● | if we were to lose our CLIA certification or state laboratory licenses, whether as a result of a revocation, suspension or limitation, we would no longer be able to offer our assays (including our AditxtScore™ platform), which would limit our revenues and harm our business. If we were to lose, or fail to obtain, a license in any other state where we are required to hold a license, we would not be able to test specimens from those states; |
| ● | our results of operations will be affected by the level of royalty and milestone payments that we are required to pay to third parties; |
| ● | we face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do; |
ii
| ● | our technologies and products under development, and our business, may fail if we are not able to successfully commercialize them and ultimately generate significant revenues as a result; |
| ● | customers may not adopt our products quickly, or at all; |
| ● | COVID-19 may impact our business and operations; |
| ● | the failure to obtain or maintain patents, licensing agreements and other intellectual property could materially impact our ability to compete effectively; |
| ● | some of our intellectual property may be subject to “march-in” rights by the U.S. federal government; |
| ● | we do not expect to pay dividends in the foreseeable future; |
| ● | we have issued a significant number of restricted stock awards, restricted stock units, options and warrants and may continue to do so in the future. The vesting and, if applicable, exercise of these securities and the sale of the shares of common stock issuable thereunder may dilute your percentage ownership interest and may also result in downward pressure on the price of our common stock; |
| ● | future sales or issuances of substantial amounts of our common stock, including, potentially as a result of future acquisitions or strategic transactions, could result in significant dilution; |
| ● | while we have entered into an Asset Purchase Agreement with Cellvera Global, we cannot assure you that the transaction contemplated by the Asset Purchase Agreement will be consummated or, that if such transaction is consummated, that it will be accretive to stockholder value; |
| ● | we have provided loans to Cellvera Global in the principal amount of $14.5 million, if we are unable to complete the transactions contemplated by the Asset Purchase Agreement, we cannot provide any assurance that we will be able to timely collect such amounts from Cellvera Global, if at all; |
| ● | we may engage in future acquisitions or strategic transactions, including the transaction with Cellvera Global, which may require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management; |
| ● | exclusive forum provisions in our amended and restated certificate of incorporation and amended and restated bylaws. |
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition, and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes, or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles, and surveys. Industry surveys, publications, consultant surveys, and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
References to Aditxt, Inc.
Throughout this Quarterly Report on Form 10-Q, the “Company,” “Aditxt,” “we,” “us,” and “our” refers to Aditxt, Inc. and “our board of directors” refers to the board of directors of Aditxt, Inc.
iii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ADITXT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Fixed assets, net | ||||||||
| Intangible assets, net | ||||||||
| Deposits | ||||||||
| Right of use asset - long term | ||||||||
| Deferred issuance costs | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Notes payable, net of discount | ||||||||
| Financing on fixed assets | ||||||||
| Deferred rent | ||||||||
| Lease liability - current | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Lease liability - long term | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Treasury stock, | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
1
ADITXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended | Three Months Ended | |||||||
| March 31, 2023 | March 31, 2022 | |||||||
| REVENUE | ||||||||
| Sales | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| OPERATING EXPENSES | ||||||||
| General and administrative expenses, includes $ | ||||||||
| Research and development, includes $ | ||||||||
| Sales and marketing, includes $ | ||||||||
| Total operating expenses | ||||||||
| NET LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER EXPENSE | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Other income | ||||||||
| Amortization of debt discount | ( | ) | ||||||
| Total other expense | ( | ) | ||||||
| Net loss before income taxes | ( | ) | ( | ) | ||||
| Income tax provision | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
See accompanying notes to the condensed consolidated financial statements.
2
ADITXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Unaudited)
Preferred Outstanding | Preferred Shares Par | Preferred B Outstanding | Preferred B Shares Par | Common Outstanding | Common Par | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Balance December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Issuance of shares for vested restricted stock units | - | - | ( | ) | - | |||||||||||||||||||||||||||||||||||
| Sale of common stock | - | - | ||||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | - | - | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
3
ADITXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Unaudited)
Preferred | Preferred Shares Par | Preferred
B | Preferred B Shares Par | Common | Common | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Balance December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Issuance of shares for vested restricted stock units | - | - | ( | ) | - | - | ||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
4
ADITXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended | Three Months Ended | |||||||
| March 31, 2023 | March 31, 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Stock-based compensation | ||||||||
| Depreciation expense | ||||||||
| Amortization of intangible assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Deposits | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Tenant improvement allowance receivable | ( | ) | ||||||
| Notes receivable and accrued interest | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from notes, net of offering costs | ||||||||
| Common stock issued for cash, net of issuance costs | ||||||||
| Payments on financing on fixed asset | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| NET DECREASE IN CASH | ( | ) | ( | ) | ||||
| CASH AT BEGINNING OF YEAR | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest expense | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
5
ADITXT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Company Background
Overview
We are a biotech innovation company with a mission of prolonging life and enhancing its quality by improving the health of the immune system. We are an innovation company developing and commercializing technologies with a focus on monitoring and modulating the immune system. Our immune reprogramming technologies are currently at the pre-clinical stage and are designed to retrain the immune system to induce tolerance with an objective of addressing rejection of transplanted organs, autoimmune diseases, and allergies. Our immune monitoring technologies are designed to provide a personalized comprehensive profile of the immune system and we plan to utilize them in our upcoming reprogramming clinical trials to monitor subjects’ immune response before, during and after drug administration.
On January 1, 2023, the Company formed Adimune, Inc. a Delaware, wholly owned subsidiary.
On January 1, 2023, the Company formed Pearsanta, Inc. a Delaware, wholly owned subsidiary.
Reverse Stock Split
Offerings
On August
31, 2021, the Company completed a registered direct offering (“August 2021 Offering”). In connection therewith, the Company
issued
On October
18, 2021, the Company entered into an underwriting agreement with Revere Securities LLC, relating to the public offering (the “October
2021 Offering”) of
On December
6, 2021, the Company completed a public offering for net proceeds of $
6
On September
20, 2022, the Company completed a public offering for net proceeds of $
See Note 12 for subsequent event transactions relating to additional offerings.
Risks and Uncertainties
The Company has a limited operating history and is in the very early stages of generating revenue from intended operations. The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, and federal governmental policy decisions. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include: changes in the biotechnology regulatory environment, technological advances that render our technologies obsolete, availability of resources for clinical trials, acceptance of technologies into the medical community, and competition from larger, more well-funded companies. These adverse conditions could affect the Company’s financial condition and the results of its operations.
On January 30, 2020, the World Health Organization declared the COVID-19 novel coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus included restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the financial impact will be to the Company, it is reasonably possible that future capital raising efforts and additional development of our technologies may be negatively affected.
NOTE 2 – GOING CONCERN ANALYSIS
Management Plans
The Company
was incorporated on September 28, 2017 and has not generated significant revenues to date. During the three months ended March 31, 2023,
the Company had a net loss of $
As of March
31, 2023, the maximum amount the Company could sell under its shelf registration statement on Form S-3 was approximately $
In addition, factors such as stock price, volatility, trading volume, market conditions, demand and regulatory requirements may adversely affect the Company’s ability to raise capital in an efficient manner. Because of these factors, the Company believes that this creates substantial doubt with the Company’s ability to continue as a going concern.
In addition to the shelf registration, the Company has the ability to raise capital from equity or debt through private placements or public offerings pursuant to a registration statement on Form S-1. We may also secure loans from related parties.
The financial statements included in this report do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein. The Company’s ability to continue as a going concern is dependent upon the ability to complete clinical studies and implement the business plan, generate sufficient revenues and to control operating expenses. In addition, the Company is consistently focused on raising capital, strategic acquisitions and alliances, and other initiatives to strengthen the Company.
7
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the Company’s management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended March 31, 2023 and March 31, 2022. Although management believes that the disclosures in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in condensed consolidated financial statements that have been prepared in accordance U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on April 17, 2023. The interim results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ended December 31, 2023 or for any future interim periods.
Principles of consolidation
The unaudited consolidated financial statements include the accounts of Aditxt, Inc., and its wholly owned subsidiaries, Adimune, Inc. and Pearsanta, Inc. All significant intercompany balances and transactions have been eliminated in the condensed consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Significant estimates underlying the financial statements include the collectability of notes receivable, collectability and reserve on accounts receivable, the reserve on insurance billing, and the fair value of stock options and warrants.
Fair Value Measurements and Fair Value of Financial Instruments
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
| Level 1 - | Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. |
| Level 2 - | Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
| Level 3 - | Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.
Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet dates.
8
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.
The Company maintains its cash accounts at financial institutions which are insured by the Federal Deposit Insurance Corporation. At times, the Company may have deposits in excess of federally insured limits.
Substantially all the Company’s accounts receivable are with companies in the healthcare industry, individuals, and the U.S. government. However, concentration of credit risk is mitigated due to the Company’s number of customers. In addition, for receivables due from U.S government agencies, the Company does not believe the receivables represent a credit risk as these are related to healthcare programs funded by the U.S. government and payment is primarily dependent upon submitting the appropriate documentation.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid investments.
Inventory
Inventory consists of laboratory materials and supplies used in laboratory analysis. We capitalize inventory when purchased. Inventory is valued at the lower of cost or net realizable value on a first-in, first-out basis. We periodically perform obsolescence assessments and write off any inventory that is no longer usable.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Cost includes expenditures for furniture, office equipment, laboratory equipment, and other assets. Maintenance and repairs are charged to expense as incurred. When assets are sold, retired, or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. The costs of fixed assets are depreciated using the straight-line method over the estimated useful lives or lease life of the related assets.
Useful lives assigned to fixed assets are as follows:
| Computers | |
| Lab Equipment | |
| Office Furniture | |
| Other fixed assets | |
| Leasehold Improvements |
Intangible Assets
Intangible assets are stated at cost less accumulated amortization. For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives of the related assets. For intangible assets with indefinite lives, the assets are tested periodically for impairment.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the amount management
expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company
determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management.
As of March 31, 2023 and December 31, 2022, there was an allowance for doubtful accounts of
9
Offering Costs
Offering costs incurred in connection with equity are recorded as a reduction of equity and offering costs incurred in connection with debt are recorded as a reduction of debt as a debt discount.
Revenue Recognition
In accordance with ASC 606 (Revenue From Contracts with Customers), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:
| 1) | Identify the contract with a customer |
| 2) | Identify the performance obligations in the contract |
| 3) | Determine the transaction price |
| 4) | Allocate the transaction price to performance obligations in the contract |
| 5) | Recognize revenue when or as the Company satisfies a performance obligation |
Revenues reported from services relating to the AditxtScore™ are recognized when the AditxtScoreTM report is delivered to the customer. The services performed include the analysis of specimens received in the Company’s CLIA laboratory and the generation of results which are then delivered upon completion.
The Company recognizes revenue in the following manner for the following types of customers:
Client Payers:
Client payers include physicians or other entities for which services are billed based on negotiated fee schedules. The Company principally estimates the allowance for credit losses for client payers based on historical collection experience and the period of time the receivable has been outstanding.
Cash Pay:
Customers are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Collection of billings is subject to credit risk and the ability of the patients to pay.
Insurance:
Reimbursements from healthcare insurers are based on fee for service schedules. Net revenues recognized consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, collection experience, and the terms of the Company’s contractual arrangements.
Leases
Under Topic 842 (Leases), operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases consisting of office space, laboratory space, and lab equipment.
10
Leases with an initial term of twelve months or less are not recorded on the balance sheet. We combine the lease and non-lease components in determining the lease liabilities and right of use (“ROU”) assets.
Stock-Based Compensation
The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services.
Patents
The Company incurs fees from patent licenses,
which is reflected in research and development expenses, and are expensed as incurred. During the three months ended March 31, 2023 and
2022, the Company incurred patent licensing fees for the patents of $
Research and Development
We incur research and development costs during
the process of researching and developing our technologies and future offerings. We expense these costs as incurred unless such costs
qualify for capitalization under applicable guidance. During the three months ended March 31, 2023 and 2022, the Company incurred research
and development costs of $
Basic and Diluted Net Loss per Common Share
Basic loss per common share is computed by dividing
the net loss by the weighted average number of shares of common stock outstanding for each period. Diluted loss per share is computed
by dividing the net loss attributable of common stockholders by the weighted average number of shares of common stock outstanding plus
the dilutive effect of shares issuable through the common stock equivalents. The weighted-average number of common shares outstanding
excludes common stock equivalents because their inclusion would be anti-dilutive. As of March 31, 2023,
Recent Accounting Pronouncements
The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our financial statements.
NOTE 4 – FIXED ASSETS
The Company’s fixed assets include the following on March 31, 2023:
| Cost Basis | Accumulated Depreciation | Net | ||||||||||
| Computers | $ | $ | ( | ) | $ | |||||||
| Lab Equipment | ( | ) | ||||||||||
| Office Furniture | ( | ) | ||||||||||
| Other Fixed Assets | ( | ) | ||||||||||
| Leasehold Improvements | ( | ) | ||||||||||
| Total Fixed Assets | $ | $ | ( | ) | $ | |||||||
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The Company’s fixed assets include the following on December 31, 2022:
| Cost Basis | Accumulated Depreciation | Net | ||||||||||
| Computers | $ | $ | ( | ) | $ | |||||||
| Lab Equipment | ( | ) | ||||||||||
| Office Furniture | ( | ) | ||||||||||
| Other Fixed Assets | ( | ) | ||||||||||
| Leasehold Improvements | ( | ) | ||||||||||
| Total Fixed Assets | $ | $ | ( | ) | $ | |||||||
Depreciation expense was $
Financed Assets:
In October 2020, the Company purchased two pieces
of lab equipment and financed them for a period of twenty-four months with a monthly payment of $
In January of 2021, the Company purchased one piece
of lab equipment and financed it for a period of twenty-four months with a monthly payment of $
In March of 2021, the Company purchased five pieces
of lab equipment and financed them for a period of twenty-four months with a monthly payment of $
As of March 31, 2023 all lab equipment financing agreements have matured.
NOTE 5 – INTANGIBLE ASSETS
The Company’s intangible assets include the following on March 31, 2023:
| Cost Basis | Accumulated Amortization | Net | ||||||||||
| Proprietary Technology | $ | $ | ( | ) | $ | |||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||
The Company’s intangible assets include the following on December 31, 2022:
| Cost Basis | Accumulated Amortization | Net | ||||||||||
| Proprietary Technology | $ | $ | ( | ) | $ | |||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||
Amortization expense was $
NOTE 6 – RELATED PARTY TRANSACTIONS
See Note 12 for subsequent event transactions with related parties.
NOTE 7 – NOTES PAYABLE
On February 21, 2023, the Company entered into
an agreement for the purchase and sale of future receipts (the “Future Receipts Agreement”) with a commercial funding source
pursuant to which the Company agreed to sell to the funder certain future trade receipts in the aggregate amount of $
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See Note 12 for subsequent note payable transactions.
NOTE 8 – LEASES
Our lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. We used the incremental borrowing rate on March 31, 2023 and December 31, 2022 for all leases that commenced prior to that date. In determining this rate, which is used to determine the present value of future lease payments, we estimate the rate of interest we would pay on a collateralized basis, with similar payment terms as the lease and in a similar economic environment.
Our corporate headquarters is located in Richmond,
Virginia, where we lease approximately
We also lease approximately
Additionally, we lease approximately
As of and subsequent to March 31, 2023, the Company is in arrears on certain lease payments.
Lease Costs
| Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |||||||
| Components of total lease costs: | ||||||||
| Operating lease expense | $ | $ | ||||||
| Total lease costs | $ | $ | ||||||
Lease Positions as of March 31, 2023 and December 31, 2022
ROU lease assets and lease liabilities for our operating leases are recorded on the balance sheet as follows:
| March 31, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Right of use asset – long term | $ | $ | ||||||
| Total right of use asset | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease liabilities – short term | $ | $ | ||||||
| Operating lease liabilities – long term | ||||||||
| Total lease liability | $ | $ | ||||||
Lease Terms and Discount Rate as of March 31, 2023
| Weighted average remaining lease term (in years) – operating leases | ||||
| Weighted average discount rate – operating leases | % |
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Maturities of leases are as follows:
Three Months Ended March 31, 2023
| 2023 (remaining) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total lease payments | $ | |||
| Less imputed interest | ( | ) | ||
| Less current portion | ( | ) | ||
| Total maturities, due beyond one year | $ |
NOTE 9 – COMMITMENTS & CONTIGENCIES
On March 17, 2023, the Company entered into a
consulting agreement (the “Independent Consulting Agreement”) with an independent consultant for a term of thirty days. Pursuant
to the Independent Consulting Agreement, the independent consultant agreed to provide the Company with business advisory services, guidance
on growth strategies and networking with its clients on a non-exclusive basis for general business purposes (the “Independent Consulting
Services”). In consideration for the Independent Consulting Services, the Company issued to the independent consultant
License Agreement with Loma Linda University
On March 15, 2018, as amended on July 1, 2020, we entered into a LLU License Agreement directly with Loma Linda University.
Pursuant to the LLU License Agreement, we obtained
the exclusive royalty-bearing worldwide license in and to all intellectual property, including patents, technical information, trade
secrets, proprietary rights, technology, know-how, data, formulas, drawings, and specifications, owned or controlled by LLU and/or any
of its affiliates (the “LLU Patent and Technology Rights”) and related to therapy for immune-mediated inflammatory diseases
(the ADI™ technology). In consideration for the LLU License Agreement, we issued
Pursuant to the LLU License Agreement, we are
required to pay an annual license fee to LLU. Also, we paid LLU $
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The LLU License Agreement shall terminate on
the last day that a patent granted to us by LLU is valid and enforceable or the day that the last patent application licensed to us is
abandoned. The LLU License Agreement may be terminated by mutual agreement or by us upon 90 days written notice to LLU. LLU may terminate
the LLU License Agreement in the event of (i) non-payments or late payments of royalty, milestone and license maintenance fees not cured
within 90 days after delivery of written notice by LLU, (ii) a breach of any non-payment provision (including the provision that requires
us to meet certain deadlines for milestone events (each, a “Milestone Deadline”)) not cured within 90 days after delivery
of written notice by LLU and (iii) LLU delivers notice to us of three or more actual breaches of the LLU License Agreement by us in any
12-month period. Additional Milestone Deadlines include: (i) the requirement to have regulatory approval of an IND application to initiate
first-in-human clinical trials on or before March 31, 2022, which has been extended to March 31, 2023 due to payment of a $
License Agreement with Leland Stanford Junior University
On February 3, 2020, we entered into an exclusive license agreement (the “February 2020 License Agreement”) with Stanford regarding a patent concerning a method for detection and measurement of specific cellular responses. Pursuant to the February 2020 License Agreement, we received an exclusive worldwide license to Stanford’s patent regarding use, import, offer, and sale of Licensed Products (as defined in the agreement). The license to the patented technology is exclusive, including the right to sublicense, beginning on the effective date of the agreement, and ending when the patent expires. Under the exclusivity agreement, we acknowledged that Stanford had already granted a non-exclusive license in the Nonexclusive Field of Use, under the Licensed Patents in the Licensed Field of Use in the Licensed Territory (as those terms are defined in the February 2020 License Agreement”). However, Stanford agreed to not grant further licenses under the Licensed Patents in the Licensed Field of Use in the Licensed Territory. On December 29, 2021, we entered into an amendment to the February 2020 License Agreement which extended our exclusive right to license the technology deployed in AditxtScoreTM and securing worldwide exclusivity in all fields of use of the licensed technology.
We were obligated to pay and paid a fee of $
15
Off Balance Sheet Arrangements
From time to time the Company enters short term research and development
contracts. These contracts have payment provisions which require payment once regulatory and completion milestones are met. As of March
31, 2023, the Company has approximately $
NOTE 10 – STOCKHOLDERS’ EQUITY
Common Stock
On May 24, 2021, the Company increased the number
of authorized shares of the Company’s common stock, par value $
During the three months ended March 31, 2023,
the Company issued
During the three months ended March 31, 2022,
the Company issued
On December 20, 2022, the Company entered into
an At The Market Offering Agreement (the “ATM”) with H.C. Wainwright & Co., LLC as agent (the “Agent”), pursuant
to which the Company may offer and sell, from time to time through the Agent, shares of the Company’s common stock having an aggregate
offering price of up to $
The offer and sale of the Shares was made pursuant to a shelf registration statement on Form S-3 and the related prospectus (File No. 333-257645) filed by the Company with the SEC on July 2, 2021, amended on July 6, 2021 and declared effective by the SEC on July 13, 2021, under the Securities Act of 1933, as amended.
For the three months
ended March 31, 2023, the Company sold
See Note 12 for subsequent equity transactions.
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Preferred Stock
The Company is authorized to issue
Issuance of Series B Preferred Stock:
On July 19, 2022, the Company entered into a
Subscription and Investment Representation Agreement with its Chief Executive Officer (the “Purchaser”), pursuant to which
the Company agreed to issue and sell
On July 19, 2022, the Company filed a certificate
of designation (the “Certificate of Designation”) with the Secretary of State of Delaware, effective as of the time of filing,
designating the rights, preferences, privileges and restrictions of the share of Preferred Stock. The Certificate of Designation provides
that the share of Preferred Stock will have
The Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Preferred Stock will not be entitled to receive dividends of any kind.
The outstanding share of Preferred Stock shall
be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion
or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing a reverse stock split.
Upon such redemption, the holder of the Preferred Stock will receive consideration of $
Redemption of Series B Preferred Stock
On October 7, 2022, the Company paid $
Stock-Based Compensation
In October 2017, our Board of Directors adopted
the Aditx Therapeutics, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan provides for the grant of equity
awards to directors, employees, and consultants. The Company is authorized to issue up to
On February 24, 2021, our Board of Directors
adopted the Aditx Therapeutics, Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for grants
of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock and restricted stock units, and other
stock-based awards (collectively, the “Awards”). Eligible recipients of Awards include employees, directors or independent
contractors of the Company or any affiliate of the Company. The Compensation Committee of the Board of Directors (the “Committee”)
will administer the 2021 Plan. A total of
17
During the three months ended March 31, 2023 and 2022, the Company granted no new options.
The following is an analysis of the stock option grant activity under the Plan:
| Vested and Nonvested Stock Options | Number | Weighted Average Exercise Price | Weighted Average Remaining Life | |||||||||
| Outstanding December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired or forfeited | ||||||||||||
| Outstanding March 31, 2023 | $ | |||||||||||
| Nonvested Stock Options | Number | Weighted- Average Exercise Price | ||||||
| Nonvested on December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Nonvested on March 31, 2023 | $ | |||||||
As of March 31, 2023 there were
The Company recognized stock-based compensation
expense related to options granted and vesting expense of $
The Company recognizes warrant forfeitures as they occur as there is insufficient historical data to accurately determine future forfeitures rates.
Warrants
For the three months ended March 31, 2023 and 2022 there were no new warrants granted, therefore no fair value was assigned.
The risk-free interest rate assumption for warrants granted is based upon observed interest rates on the United States Government Bond Equivalent Yield appropriate for the expected term of warrants.
The Company determined the expected volatility assumption for warrants granted using the historical volatility of comparable public companies’ common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future warrant grants, until such time that the Company’s common stock has enough market history to use historical volatility.
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The dividend yield assumption for warrants granted is based on the Company’s history and expectation of dividend payouts. The Company has never declared nor paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
The Company recognizes warrant forfeitures as they occur as there is insufficient historical data to accurately determine future forfeitures rates.
A summary of warrant issuances are as follows:
| Vested and Nonvested Warrants | Number | Weighted Average Exercise Price | Weighted Average Remaining Life | |||||||||
| Outstanding December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired or forfeited | ( | ) | ||||||||||
| Outstanding March 31, 2023 | $ | |||||||||||
| Nonvested Warrants | Number | Weighted- Average Exercise Price | ||||||
| Nonvested on December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Nonvested on March 31, 2023 | $ | |||||||
The Company recognized stock-based compensation
expense related to warrants granted and vesting expense of
Restricted Stock Units
A summary of Restricted Stock Units (“RSUs”) issuances are as follows:
| Nonvested RSUs | Number | Weighted Average Price | ||||||
| Nonvested December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Nonvested March 31, 2023 | $ | |||||||
The Company recognized stock-based compensation
expense related to RSUs granted and vesting expense of $
19
During the three months ended March 31, 2023,
the Company granted a total of
NOTE 11 – INCOME TAXES
The Company has incurred losses since inception. During the three months ended March 31, 2023, the Company did not provide any provision for income taxes as the Company incurred losses during such period. The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. In assessing the need for a valuation allowance, the Company has considered both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely than not” standard. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Based on the Company’s review of this evidence, the Company has recorded a full valuation allowance for its net deferred tax assets as of March 31, 2023.
As of March 31, 2023, the Company did not have any amounts recorded pertaining to uncertain tax positions.
NOTE 12 – SUBSEQUENT EVENTS
On April 4, 2023, the
Company entered into a Business Loan and Security Agreement (the “April Loan Agreement”) with a commercial funding source
(the “April Lender”), pursuant to which the Company obtained a loan from the April Lender in the principal amount of $
On April 24, 2023, the
Company entered into a Business Loan and Security Agreement (the “Loan Agreement”) with a commercial funding source
(the “Lender”), pursuant to which the Company obtained a loan from the Lender in the principal amount of $
On April 13, 2023, the Company formed Adivir, Inc. a Delaware, wholly owned subsidiary.
On April 18, 2023, the Company entered into an
Asset Purchase Agreement (the “Asset Purchase Agreement”) with Cellvera Global Holdings LLC (“Cellvera Global”),
Cellvera Holdings Ltd. (“BVI Holdco”), Cellvera, Ltd. (“Cellvera Ltd.”), Cellvera Development LLC (“Cellvera
Development” and together with Cellvera Global, BVI Holdco, Cellvera Ltd. and Cellvera Development (the “Sellers”),
AiPharma Group Ltd. (“Seller Owner” and collectively with the Sellers, “Cellvera”), and the legal representative
of Cellvera, pursuant to which, the Company will purchase Cellvera’s
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On April 20, 2023, the
Company entered into a securities purchase agreement (the “April Purchase Agreement”) with an institutional investor, pursuant
to which the Company agreed to sell to such investor pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to
On April 21, 2023, Amro Albanna, the Chief Executive
Officer of the Company, and Shahrokh Shabahang, the Chief Innovation Officer of the Company, loaned $
On April 24, 2023, the Company entered into a
Business Loan and Security Agreement (the “Loan Agreement”) with a commercial funding source (the “Lender”),
pursuant to which the Company obtained a loan from the Lender in the principal amount of $
On April 28, 2023, the
Company was notified (the “Notification Letter”) by Nasdaq that it is not in compliance with the minimum bid price requirements
set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing
Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $
The Notification Letter
provides that the Company has 180 calendar days, or until October 25, 2023, to regain compliance with Nasdaq Listing Rule 5550(a)(2).
To regain compliance, the bid price of the Company’s common stock must have a closing bid price of at least $
The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider implementing available options, including, but not limited to, implementing a reverse stock split of its outstanding securities, to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules.
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes for the year ended December 31, 2022 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those factors set forth in the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry Data” and in the section entitled “Risk Factors” in Part II, Item 1A.
Overview
We are an innovation company with a mission of Making Promising Innovations Possible, Together. We develop, build, and grow innovations with a focus on monitoring and modulating the immune system. We take a socialized approach to innovation by engaging stakeholders into all aspects of the process.
Our innovation portfolio includes the following programs:
| - | Adimune™ - Immune modulation technologies which are currently at the pre-clinical stage and are designed to retrain the immune system to induce tolerance with an objective of addressing rejection of transplanted organs, autoimmune diseases, and allergies. |
| - | AditxtScore™ - Immune monitoring technologies designed to provide a personalized comprehensive profile of the immune system. |
ADI™ (Immune Modulation Program)
Background
The discovery of immunosuppressive (anti-rejection and monoclonal) drugs over 40 years ago has made possible life-saving organ transplantation procedures and blocking of unwanted immune responses in autoimmune diseases. However, immune suppression leads to significant undesirable side effects, such as increased susceptibility to life-threatening infections and cancers, because it indiscriminately and broadly suppresses immune function throughout the body. While the use of these drugs has been justifiable because they prevent or delay organ rejection, their use for treatment of autoimmune diseases and allergies may not be acceptable because of the aforementioned side effects. Furthermore, transplanted organs often ultimately fail despite the use of immune suppression, and about 40% of transplanted organs survive no more than 5 years.
New, focused therapeutic approaches are needed that modulate only the immune cells involved in rejection of the transplanted organ, as this approach can be safer for patients than indiscriminate immune suppression. Such approaches are referred to as immune tolerance, and when therapeutically induced, may be safer for patients and potentially allow longer-term survival of transplanted tissues and organs.
In the late 1990s, academic research on these approaches was conducted at the Transplant Center in Loma Linda University (“LLU”) in connection with a project that secured initial grant funding from the U.S. Department of Defense. The focus of that project was induction of tolerance for skin allografting for burn victims. Twenty years of research at LLU and an affiliated incubator led to a series of discoveries that have been translated into a large patent portfolio of therapeutic approaches that may be applied to the modulation of the immune system to induce tolerance to self and transplanted organs.
22
We have an exclusive worldwide license for commercializing Apoptotic DNA Immunotherapy™ (ADI™), a nucleic acid-based technology (which is currently at the pre-clinical stage), from LLU. ADI™ utilizes a novel approach that mimics the way the body naturally induces tolerance to our own tissues (“therapeutically induced immune tolerance”). While immune suppression requires continuous administration to prevent rejection of a transplanted organ, induction of tolerance has the potential to retrain the immune system to accept the organ for longer periods of time. Thus, ADI™ may allow patients to live with transplanted organs with significantly reduced immune suppression. ADI™ is a technology platform which we believe can be engineered to address a wide variety of indications.
We are developing ADI™ products for organ transplantation including skin allografting, autoimmune diseases, and allergies, with the initial focus on psoriasis, type 1 diabetes and skin allografting, indications for which we have compelling preclinical data. To submit a Biologics License Application (“BLA”) for a biopharmaceutical product, clinical safety and efficacy must be demonstrated in clinical studies conducted with human subjects. For products in our class of drugs, the first-in-human trials will be a combination of Phase I (safety/tolerability) and Phase II (efficacy) in affected subjects. To obtain approval to initiate the Phase I/IIa studies, an Investigational New Drug or Clinical Trial Application will be submitted that will include a compilation of non-clinical efficacy data as well as manufacturing and pre-clinical safety/toxicology data. To date, we have conducted non-clinical studies in a stringent model of skin transplantation using genetically mismatched donor and recipient animals demonstrating a 3-fold increase in the survival of the skin allograft in animals that were tolerized with ADI™ compared to animals that receive immune suppression alone. Prolongation of graft life was observed despite discontinuation of immune suppression after the first 5 weeks. In a non-obese diabetic mouse model of type 1 diabetes, we showed reversal of hyperglycemia with 80% of the animals showing durable glycemic control for the 40-week study period. Additionally, in an induced non-clinical model for psoriasis, ADI™ treatment resulted in a 69% reduction in skin thickness and a 38% decrease in skin flaking (two clinical parameters for assessment of psoriasis skin lesions). The Phase I/IIa studies in psoriasis will evaluate the safety/tolerability of ADI™ in patients diagnosed with psoriasis. Since the drug will be administered in subjects diagnosed with psoriasis, effectiveness of the drug to improve psoriatic lesions will also be evaluated. In the type 1 diabetes clinical studies, newly diagnosed subjects will receive ADI™ treatment to evaluate safety and efficacy. In another Phase I/IIa study, patients requiring skin allografts will receive weekly intra-dermal injections of ADI™ in combination with standard immune suppression to assess safety/tolerability and possibility of reducing levels of immunosuppressive drugs as well as prolongation of graft life.
AditxtScore™ (Immune Monitoring Program)
Background
We believe that understanding the status of an individual’s immune system is key to understanding health by the numbers and for developing therapeutics that result in better outcomes for more individuals. We have secured an exclusive worldwide license for commercializing a technology platform named AditxtScore™, which provides a personalized comprehensive profile of the immune system. AditxtScore™ is intended to be informative for individual immune responses to viruses, bacteria, peptides, drugs, supplements, bone marrow and solid organ transplants and cancer. It has broad applicability to many other agents of clinical interest impacting the immune system, including those not yet identified such as emerging infectious agents.
AditxtScore™ is being designed to allow individuals to understand, manage and monitor their immune profiles in order to be informed about attacks on or by their immune system. We believe AditxtScore™ can also assist the medical community in anticipating possible immune responses and reactions to viruses, bacteria, allergens and foreign tissues such as transplanted organs. This capability may be possible by having the ability to determine the body’s potential response and for developing a plan to deal with an undesirable reaction by the immune system. Its advantages include the ability to provide a simple, rapid, accurate, high throughput assays that can be multiplexed to determine the immune status with respect to several factors simultaneously, in 3-16 hours. In addition, it can determine and differentiate between various types of cellular and humoral immune responses (T and B cells and other cell types). It also provides for simultaneous monitoring of cell activation and levels of cytokine release (i.e., cytokine storms).
We plan to utilize AditxtScore™ in our upcoming pre-clinical and clinical studies to monitor subjects’ immune response before, during and after ADI™ drug administration. We are also evaluating plans to obtain regulatory approval for AditxtScore™’s use as a clinical assay and seeking to secure manufacturing, marketing and distribution partnerships for application in the various markets. To obtain regulatory approval to use AditxtScore™ as a clinical assay, we have conducted validation studies to evaluate its performance in detection of antibodies and plan to continue conducting additional validation studies for new applications in autoimmune diseases and transplantation.
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License Agreement with Loma Linda University
On March 8, 2018, we entered into an Assignment Agreement (the “Assignment Agreement”) with Sekris Biomedical, Inc. (“Sekris”). Sekris was a party to a license agreement with LLU, entered and made effective on May 25, 2011, and amended on June 24, 2011, July 16, 2012 and December 27, 2012 (the “Original Agreement,” and together with the Assignment Agreement, the “Sekris Agreements”). Pursuant to the Assignment Agreement, Sekris transferred and assigned all of its rights, obligations and liabilities under the Original Agreement, of whatever kind or nature, to us. In exchange, on March 8, 2018, we issued a warrant to Sekris to purchase up to 10,000 shares of our common stock (the “Sekris Warrant”). The warrant was immediately exercisable and has an exercise price of $200.00 per share. The expiration date of the warrant is March 8, 2023. On March 15, 2018, as amended on July 1, 2020, we entered into a LLU License Agreement directly with Loma Linda University, which amends and restates the Sekris Agreements.
Pursuant to the LLU License Agreement, we obtained the exclusive royalty-bearing worldwide license in and to all intellectual property, including patents, technical information, trade secrets, proprietary rights, technology, know-how, data, formulas, drawings, and specifications, owned or controlled by LLU and/or any of its affiliates (the “LLU Patent and Technology Rights”) and related to therapy for immune-mediated inflammatory diseases (the ADI™ technology). In consideration for the LLU License Agreement, we issued 500 shares of common stock to LLU.
Pursuant to the LLU License Agreement, we are required to pay an annual license fee to LLU. Also, we paid LLU $455,000 in July 2020 for outstanding milestone payments and license fees. We are also required to pay to LLU milestone payments in connection with certain development milestones. Specifically, we are required to make the following milestone payments to LLU: $175,000 on March 31, 2022; $100,000 on March 31, 2024; $500,000 on March 31, 2026; and $500,000 on March 31, 2027. In lieu of the $175,000 milestone payment due on March 31, 2022, the Company paid LLU an extension fee of $100,000. Upon payment of this extension fee, an additional year will be added for the March 31, 2022 milestone. Additionally, as consideration for prior expenses incurred by LLU to prosecute, maintain and defend the LLU Patent and Technology Rights, we made the following payments to LLU: $70,000 at the end of December 2018, and a final payment of $60,000 at the end of March 2019. We are required to defend the LLU Patent and Technology Rights during the term of the LLU License Agreement. Additionally, we will owe royalty payments of (i) 1.5% of Net Product Sales (as such terms are defined under the LLU License Agreement) and Net Service Sales on any Licensed Products (defined as any finished pharmaceutical products which utilizes the LLU Patent and Technology Rights in its development, manufacture or supply), and (ii) 0.75% of Net Product Sales and Net Service Sales for Licensed Products and Licensed Services (as such terms are defined under the LLU License Agreement) not covered by a valid patent claim for technology rights and know-how for a three (3) year period beyond the expiration of all valid patent claims. We also are required to produce a written progress report to LLU, discussing our development and commercialization efforts, within 45 days following the end of each year. All intellectual property rights in and to LLU Patent and Technology Rights shall remain with LLU (other than improvements developed by or on our behalf).
The LLU License Agreement shall terminate on the last day that a patent granted to us by LLU is valid and enforceable or the day that the last patent application licensed to us is abandoned. The LLU License Agreement may be terminated by mutual agreement or by us upon 90 days written notice to LLU. LLU may terminate the LLU License Agreement in the event of (i) non-payments or late payments of royalty, milestone and license maintenance fees not cured within 90 days after delivery of written notice by LLU, (ii) a breach of any non-payment provision (including the provision that requires us to meet certain deadlines for milestone events (each, a “Milestone Deadline”)) not cured within 90 days after delivery of written notice by LLU and (iii) LLU delivers notice to us of three or more actual breaches of the LLU License Agreement by us in any 12-month period. Additional Milestone Deadlines include: (i) the requirement to have regulatory approval of an IND application to initiate first-in-human clinical trials on or before March 31, 2022, which has been extended to March 31, 2023 due to payment of a $100,000 extension fee paid in March 2022, the Company plans to exercise its right to request the option to extend this milestone as it continues its ongoing clinical trial programs planned by its subsidiary, Adimune, (ii) the completion of first-in-human (phase I/II) clinical trials by March 31, 2024, (iii) the completion of Phase III clinical trials by March 31, 2026 and (iv) biologic licensing approval by the FDA by March 31, 2027.
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License Agreement with Leland Stanford Junior University (“Stanford”)
On February 3, 2020, we entered into an exclusive license agreement (the “February 2020 License Agreement”) with Stanford regarding a patent concerning a method for detection and measurement of specific cellular responses. Pursuant to the February 2020 License Agreement, we received an exclusive worldwide license to Stanford’s patent regarding use, import, offer, and sale of Licensed Products (as defined in the agreement). The license to the patented technology is exclusive, including the right to sublicense, beginning on the effective date of the agreement, and ending when the patent expires. Under the exclusivity agreement, we acknowledged that Stanford had already granted a non-exclusive license in the Nonexclusive Field of Use, under the Licensed Patents in the Licensed Field of Use in the Licensed Territory (as those terms are defined in the February 2020 License Agreement”). However, Stanford agreed to not grant further licenses under the Licensed Patents in the Licensed Field of Use in the Licensed Territory. On December 29, 2021, we entered into an amendment to the February 2020 License Agreement which extended our exclusive right to license the technology deployed in AditxtScoreTM and securing worldwide exclusivity in all fields of use of the licensed technology.
We were obligated to pay and paid a fee of $25,000 to Stanford within 60 days of February 3, 2020. We also issued 375 shares of the Company’s common stock to Stanford. An annual licensing maintenance fee is payable by us on the first anniversary of the February 2020 License Agreement in the amount of $40,000 for 2021 through 2024 and $60,000 starting in 2025 until the license expires upon the expiration of the patent. The Company is required to pay and has paid $25,000 for the issuances of certain patents. The Company will pay milestone fees of $50,000 on the first commercial sales of a licensed product and $25,000 at the beginning of any clinical study for regulatory clearance of an in vitro diagnostic product developed and a potential licensed product. The Company paid a milestone fee for a clinical study for regulatory clearance of an in vitro diagnostic product developed and a potential licensed product of $25,000 in March of 2022. We are also required to: (i) provide a listing of the management team or a schedule for the recruitment of key management positions by March 31, 2020 (which has been completed), (ii) provide a business plan covering projected product development, markets and sales forecasts, manufacturing and operations, and financial forecasts until at least $10,000,000 in revenue by June 30, 2020 (which has been completed), (iii) conduct validation studies by September 30, 2020 (which has been completed), (iv) hold a pre-submission meeting with the FDA by September 30, 2020 (which has been completed), (iv) submit a 510(k) application to the FDA, Emergency Use Authorization (“EUA”), or a Laboratory Developed Test (“LDT”) by March 31, 2021 (which has been completed), (vi) develop a prototype assay for human profiling by December 31, 2021 (which has been completed), (vii) execute at least one partnership for use of the technology for transplant, autoimmunity, or infectious disease purposes by March 31, 2022 (which has been completed) and (viii) provided further development and commercialization milestones for specific fields of use in writing prior to December 31, 2022.
In addition to the annual license maintenance fees outlined above, we will pay Stanford royalties on Net Sales (as such term is defined in the February 2020 License Agreement) during the of the term of the agreement as follows: 4% when Net Sales are below or equal to $5 million annually or 6% when Net Sales are above $5 million annually. The February 2020 License Agreement may be terminated upon our election on at least 30 days advance notice to Stanford, or by Stanford if we: (i) are delinquent on any report or payment; (ii) are not diligently developing and commercializing Licensed Product; (iii) miss certain performance milestones; (iv) are in breach of any provision of the February 2020 License Agreement; or (v) provide any false report to Stanford. Should any events in the preceding sentence occur, we have a thirty (30) day cure period to remedy such violation.
Our Team
We have assembled a team of experts from a variety of scientific fields and commercial backgrounds, with many years of collective experience that ranges from founding startup biotech companies, to developing and marketing biopharmaceutical products, to designing clinical trials, and to management of private and public companies.
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Going Concern
We were incorporated on September 28, 2017 and have not generated significant revenues to date. During the three months ended March 31, 2023 we had a net loss of $5,984,706 and cash of $302,509 as of March 31, 2023. The Company will require significant additional capital to operate in the normal course of business and fund clinical studies in the long-term. As a result of the January 2021 Securities Purchase Agreement, the August 2021 Offering, the October 2021 Offering, the December 2021 Offering, and September 2022 Offering we received net proceeds of approximately $52,000,000 during the last twelve months. We believe that the remaining funds on hand will not be sufficient to fund our operations for the next 12 months and such creates substantial doubt about our ability to continue as a going concern beyond one year.
Financial Results
We have a limited operating history. Therefore, there is limited historical financial information upon which to base an evaluation of our performance. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. Our condensed consolidated financial statements as of March 31, 2023, show a net loss of $5,984,706. We expect to incur additional net expenses over the next several years as we continue to maintain and expand our existing operations. The amount of future losses and when, if ever, we will achieve profitability are uncertain.
Results of Operations
Results of operations for the three months ended March 31, 2023 and 2022
We generated revenue of $218,415 and $210,279 for the three months ended March 31, 2023 and 2022, respectively. Cost of sales for the three months ended March 31, 2023 and 2022 was $178,309 and $188,071, respectively.
During the three months ended March 31, 2023, we incurred a loss from operations of $5,822,001. This is due to general and administrative expenses of $4,368,843, which includes $274,315 in stock-based compensation, research and development of $1,387,541, which includes $62,633 in stock-based compensation, and sales and marketing expenses of negative $65,617, which includes $2,503 in stock-based compensation. The $1,387,541 in research and development is mainly comprised of $415,429 in consulting expenses, and $673,377 in compensation.
During the three months ended March 31, 2022, we incurred a loss from operations of $6,116,931. This is due to general and administrative expenses of $4,624,158, which includes $451,987 in stock-based compensation, research and development of $1,428,382, which includes $149,288 in stock-based compensation, and sales and marketing expenses of $86,599. The $1,428,382 in research and development is mainly comprised of $499,938 in consulting expenses, and $828,411 in compensation offset by a one-time adjustment to research and development purchases. During the quarter, the Company transitioned from purchasing certain inventory items to internally manufacturing these items.
The decrease in expenses during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was due to the Company continuing to execute its business plan and incur costs of being a public company.
Liquidity and Capital Resources
We have incurred substantial operating losses since inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2023, we had an accumulated deficit of $101,025,068. We had working capital of $(3,966,767) as of March 31, 2023. During the three months ended March 31, 2023, we purchased $5,049 in fixed assets, for which we made cash payments of $5,049. These fixed assets were purchased to continue the buildout of our operations. Approximately $3,000 of these purchased fixed assets were lab equipment and $2,049 was for computers.
Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern.
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We have funded our operations from proceeds from the sale of equity and debt securities. On July 2, 2020, we completed our IPO and raised approximately $9.5 million in net proceeds. At the time of the IPO, we believed that these funds would be sufficient to fund our operations for the foreseeable future.
On September 10, 2020, we completed a follow-on public offering. In connection therewith, we issued 48,000 units, or Follow-On Units, excluding the underwriters’ option to cover overallotments, at an offering price of $200.00 per Follow-On Unit, resulting in gross proceeds of approximately $9.6 million.
On January 25, 2021, the Company entered into a securities purchase agreement with an institutional accredited investor (the “Investor”) for the sale of a $6,000,000 senior secured convertible note (the “Convertible Note”). The Convertible Note had a term of 24 months, was originally convertible at a price of $200.00 per share and was issued at an original issuance discount of $1,000,000. On August 30, 2021, the Company entered into a defeasance and waiver agreement with the Investor, pursuant to which the Noteholder has agreed in exchange for (a) a cash payment by the Company to the Investor of $1.2 million (the Cash Payment”), (b) a waiver, in part of the conversion price adjustment provision such that the January 2021 Note shall be convertible into 96,050 shares of common stock (without giving effect to the conversion notice received by the company form the Noteholder prior to the date hereof totaling (20,115 shares) (the “Shares”), and (c) a voluntary and permanent reduction by the Company of the exercise price of the warrant to purchase 16,000 shares of the common stock of the Company (the “January 2021 Warrant”) to $126.50 per share. As of December 31, 2022, the outstanding principle of the convertible note had been converted to 96,050 shares of common stock.
On August 30, 2021, we completed a registered direct; offering and raised approximately $10.1 million in net proceeds.
On October 20, 2021, we completed an offering for net proceeds of $3.8 million. As part of this offering, we issued 56,667 shares of the Company’s common stock
On December 6, 2021, we completed an offering for net proceeds of $16.0 million. As part of this offering, we issued 164,929 units consisting of shares of the Company’s common stock and warrant to purchase shares of the Company’s common stock and 166,572 prefunded warrants. The warrant issued as part of the units had an exercise price of $57.50 and the prefunded warrants had an exercise price of $0.001.
On September 20, 2022, we completed a public offering for net proceeds of $18.1 million (the “September 2022 Offering”). As part of the September 2022 Offering, we issued 1,224,333 of shares of the Company’s common stock, pre-funded warrants to purchase 2,109,000 shares of the Company’s common stock and warrants to purchase 3,333,333 shares of the Company’s common stock. The warrants had an exercise price of $6.00 and the pre-funded warrants had an exercise price of $0.001.
We may need to raise significant additional capital to continue to fund our operations and the clinical trials for our product candidates. We may seek to sell common stock, preferred stock or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing. In addition, we may seek to raise cash through collaborative agreements or from government grants. The sale of equity and convertible debt securities may result in dilution to our stockholders and certain of those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible debt securities, or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights.
The source, timing, and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of our clinical development program. Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate expenses including some or all our planned development, including our clinical trials. While we may need to raise funds in the future, we believe the current cash reserves should be sufficient to fund our operation for the foreseeable future. Because of these factors, we believe that this creates doubt about our ability to continue as a going concern.
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Contractual Obligations
The following table shows our contractual obligations as of March 31, 2023:
| Payment Due by Year | ||||||||||||||||||||
| Total | 2023 | 2024 | 2025 | 2026 | ||||||||||||||||
| Lease | $ | 2,991,341 | $ | 851,883 | $ | 1,004,982 | $ | 710,546 | $ | 423,930 | ||||||||||
Critical Accounting Polices and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We believe that our critical accounting policies described under the heading “Management’s Discussion and Analysis of Financial Condition and Plan of Operations—Critical Accounting Policies” in our Prospectus, dated September 1, 2020, filed with the SEC pursuant to Rule 424(b), are critical to fully understanding and evaluating our financial condition and results of operations. The following involve the most judgment and complexity:
| ● | Research and development |
| ● | Stock-based compensation expense |
| ● | Fair value of common stock |
Accordingly, we believe the policies set forth above are critical to fully understanding and evaluating our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
JOBS Act
On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
When favorable, we have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our IPO (December 31, 2025); (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
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Recently Issued and Adopted Accounting Pronouncements
See Note 3 - Summary of Significant Accounting Policies to the accompanying condensed consolidated financial statements for a description of other accounting policies and recently issued accounting pronouncements.
Recent Developments
See Note 12 – Subsequent Event to the accompanying condensed consolidated financial statements for a description of material recent developments.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined in Rule 229.10(f)(1).
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were (a) designed to ensure that the information we are required to disclose in our reports under the Exchange Act is recorded, processed, and reported in an accurate manner and on a timely basis and the information that we are required to disclose in our Exchange Act reports is accumulated and communicated to management to permit timely decisions with respect to required disclosure and (b) operating in an effective manner.
Change in Internal Control Over Financial Reporting
No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
Item 1A. Risk Factors
Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our most recent Annual Report on Form 10-K and in our other filings with the SEC, the occurrence of any one of which could have a material adverse effect on our actual results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
| (a) | Sales of Unregistered Securities |
On March 17, 2023, the Company issued a consultant 187,000 shares of common stock for services rendered.
The issuances above were made pursuant to Section 4(a)(2) of the Securities Act.
| (b) | Use of Proceeds from Initial Public Offering |
On July 2, 2020, the Company completed its initial public offering (“IPO”). In connection therewith, the Company issued 24,534 Units (the “Units”), excluding the underwriters’ option to cover overallotments (the underwriter did not exercise their overallotment), at an offering price of $450.00 per Unit, resulting in gross proceeds of approximately $11.0 million. The Units issued in the IPO consisted of one share of common stock, one Series A warrant, and one Series B warrant. The Series A warrants originally had an exercise price of $450.00 and a term of 5 years. In addition, the Company issued a Unit Purchase Option at an exercise price of $562.50 per unit to the underwriters to purchase up to 1,350 units, with each unit consisting of (i) one share of common stock and (ii) one Series A Warrant. On August 19, 2020, the Company modified the exercise price of the Series A Warrants from $450.00 per share to $225.00 per share. The term of the Series A Warrants was not modified. The Series B warrants have an exercise price of $562.50 per share, a term of 5 years and contain a cashless exercise option upon certain criteria being met. As of March 31, 2023, substantially all of the Series B warrants issued in the IPO have been exercised pursuant to a cashless provision therein.
We received net proceeds of $8.5 million in the IPO, after deducting underwriting discounts and commissions and issuance expenses borne by us. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors pursuant to our director compensation policy. Dawson James Securities, Inc. acted as lead book-running manager of the offering and as representative of the underwriters for the offering.
There has been no material change in the planned use of proceeds from our IPO from that described in the final prospectus related to the offering, dated June 29, 2020 as filed with the SEC.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
| * | This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Aditxt, Inc. | ||
| Date: May 15, 2023 | By: | /s/ Amro Albanna |
| Amro Albanna | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: May 15, 2023 | By: | /s/ Thomas J. Farley |
| Thomas J. Farley | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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