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LUDWIG ENTERPRISES, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Fiscal Year ended December 31, 2024
Items in Form 10-K
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. For example, statements included in this Annual Report regarding our financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future product demand, supply, manufacturing, costs, marketing and pricing factors are all forward-looking statements. When we use words like “intend,” “anticipate,” “believe,” “estimate,” “plan” or “expect,” or other words of a similar import, we are making forward-looking statements. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, based upon information available to us on the date hereof, but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be planning. We have disclosed certain important factors that could cause our actual results to differ materially from our current expectations elsewhere in this Annual Report. You should understand that forward-looking statements made in this Annual Report are necessarily qualified by these factors. We are not undertaking to publicly update or revise any forward-looking statement if we obtain new information or upon the occurrence of future events or otherwise.
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PART I
Item 1. Business
In this Annual Report, “we,” “us” and “our” refer to Ludwig Enterprises, Inc.
Background
The Company was originally organized as a Kentucky corporation on February 11, 1988, as Ludwig Enterprises, Inc. On February 8, 2006, we formed a wholly owned subsidiary, Ludwig Enterprises, Inc., a Nevada corporation. On March 28, 2006, Ludwig Enterprises, Inc., the Kentucky corporation, merged with and into Ludwig Enterprises, Inc., the Nevada corporation, with the Company, Ludwig Enterprises, Inc., the Nevada corporation, being the surviving entity.
During the history of the Company, it has, variously, been involved in the radio paging industry and the broadcasting industry as it relates to “specialized programming” utilizing surplus spectra present on existing FCC-licensed spectrum. In April 2019, the Company acquired Direct Mortgage Investors, Inc. (“DMI”), a residential mortgage broker. However, due to ongoing disputes between the former owner of DMI and his then-wife, this acquisition was rescinded in September 2021, and the parties returned to status quo ante.
Shortly after the DMI rescission transaction, our management became aware of the potential an mRNA-based business model could provide our Company and investigated the opportunity for our Company. It was in late 2021 that our mRNA-based business plan gained clarity, after our then-management had learned of its specific potential. At that time, our then-management determined to take initial steps towards achieving our current objectives. Beginning in early 2022, the Company has actively pursued our business plan, putting into action our strategies, including the conceiving and development of our first products.
Our Focus
We are an innovative genomic technology and health related Company that is developing products that use mRNA genetic biomarkers to potentially assess the occurrence of inflammation, and, as a result, inflammation related chronic diseases. We are currently using genetic tools in our mRNA program that were developed between 1990 and 2003 by The Human Genome Project (HGP). The project sequenced all of the genes within the human genome. Base pairs that compose our mRNA biomarkers are based on these DNA findings. Advancements in genomic technology have awarded humankind with cutting edge genetic tools, unheard of even a generation ago. These genetic tools, coupled with our proprietary mRNA technology, have the potential to achieve early detection of inflammatory driven diseases, and support customized treatments that may improve patient outcomes. To date, we have not launched our genetic screening program and have not sold any of our test kits.
The immune system and inflammatory processes are involved in not just a few select disorders, but a wide variety of physical health problems that dominate the occurrences of many chronic diseases and worldwide morbidity and mortality. Chronic inflammatory diseases have been recognized as the most significant cause of death in the world today, with more than 50% of all deaths being attributable to inflammation-related diseases, according to [ Furman D, et al. Chronic inflammation in the Etiology of Disease Across The Life Span. Nat Med. 2019 Dec; 25(12): 1822–1832.]
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Scientifically valid studies in peer reviewed journals have shown that over 90% of chronic diseases are related to inflammatory causation. These diseases include but are not limited to heart disease, stroke, cancer, diabetes mellitus, arthritis, autoimmune and neurodegenerative disorders. Furthermore, chronic inflammation has also been linked to mental issues such as depression, according to a study published at the Am J. Psychiatry journal (Frank P, et al. Association Between Systemic Inflammation and Individual Symptoms of Depression: A Pooled Analysis of 15 Population-Based Cohort Studies. Am J Psychiatry. Published online October 14, 2021. doi: 10.1176/appi.ajp.2021.20121776). The risk of developing chronic inflammation may be traced back to early development, and its effects can persist throughout the life span to affect adulthood health and the risk of mortality. With this perspective, the Company’s genomic technology intends to offer promising avenues for future research and medical care intervention.
We use commercially available medical machine learning artificial intelligence (“AI”) technology that uses mRNA inflammatory language to potentially capture an inflammatory snapshot of disease and the body’s response to treatment.
Recent Developments
On August 13, 2024, the majority shareholders of the Company, acting by majority written consent in lieu of a meeting, approved a change of the Company’s corporate name to “Revealia, Inc.” Once FINRA processes the aforementioned name change we will take the necessary steps to effectuate the change. The timing of FINRA’s processing cannot be estimated by the Company.
On September 16, 2024, we entered into an Intellectual Property Conveyance Agreement, to be effective as of August 26, 2024 (the “IP Agreement”), with Marvin S. Hausman, M.D., the Company’s Chief Science Officer and Director, and Nova Mentis Life Science Corp. (“Nova”). The basis for the IP Agreement is that certain mRNA Neuro Panel and Serotonin Assay, lodged by Nova on or about April 26, 2024, as U.S. Patent Application 18/705375, International Publication Number WO 2023/077245, captioned as “Diagnosing, Monitoring and Treating Neurological Disease with Psychoactive Tryptamine Derivatives and mRNA Measurements” (the “Patent”), the invention of which was done by Mr. Hausman in collaboration with Nova.
The stated purpose of the IP Agreement was to resolve all obligations owed to Hausman by Nova, including but not limited to $245,712.00 in unpaid consulting consideration (the “Consulting Consideration”), by and through conveyance of all right, title and interest Nova may have held in the Patent and associated intellectual property associated therewith to the Company (the “Conveyance”) for further commercialization (the “Commercialization”).
On December 31, 2024, the Board of Directors of the Company, acting by unanimous consent in lieu of a meeting, approved the sale of the Company’s wholly owned subsidiary, Exousia AI, Inc., to Marijuana Inc (“MAJI”). In connection therewith, the Company and MAJI entered into a Stock Purchase Agreement, whereby MAJI issued 10,000 Series B Convertible Stock to the Company in exchange for 100% ownership of Exousia AI, Inc. MAJI also agreed to issue a 1 year, 8%, $100,000 Secured Promissory Note to the Company with a maturity date of December, 21, 2025.
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What is mRNA?
First, Ribonucleic acid (“RNA”), is a nucleic acid present in all living cells that has structural similarities to deoxyribonucleic acid (“DNA”). Unlike DNA, however, RNA is most often single stranded. An RNA molecule has a backbone made of alternating phosphate groups and the sugar ribose, rather than the deoxyribose found in DNA.
mRNA, or messenger RNA, is, in simple terms, a type of RNA found in cells. mRNA molecules carry the genetic language and information from DNA that is needed to make proteins. They carry the information from the DNA in the nucleus of the cell to the cytoplasm where the proteins are made.
Our Philosophy
We believe the future of healthcare will focus on personalized medicine that is preventative, rather than reactive, and we can be at the front of this revolution. We are of the opinion, and believe that many others share our sentiment, that the healthcare system, as it is currently structured, can be improved. The practice of healthcare is often reactive rather than preventative. This means that, in many instances, the detection and/or identification of diseases does not occur until they have already caused a certain amount of damage. This results in higher financial costs overall as well as a lower quality of life for people. We believe that healthcare does not have to remain this way. With precision medicine, of which we want our mRNA genetic indexing to be a part, diseases may be detected early and before they cause irreparable damage.
Recent research has revealed that inflammation plays a key role in many diseases and that reducing it can even prevent heart attacks and strokes, among other diseases. In September 2017, a truly landmark significant clinical study called the “CANTOS Trial” was primarily authored by Dr. Paul M. Ridker and published in the New England Journal of Medicine. In the Cantos Trial, the study showed that therapy with the anti-inflammatory drug Canakinumab reduced inflammation”, anti-inflammatory therapy, in people who had a prior heart attack and showed that, was shown to reduce their likelihood of subsequent heart attacks or strokes was reduced by 15 percent. It also decreased the need for major interventions such as angioplasty and bypass surgery by 30 percent, proving that addressing inflammation to prevent heart disease is essential.
The objective of our program is to measure key mRNA genes that are involved in the production of inflammatory molecules, called cytokines and chemokines, that cause chronic tissue damage, such as those produced in heart attacks, strokes and inflammation related diseases. If caught early enough, appropriate anti-inflammatory treatment can be employed in an attempt to ward off the chronic process before it causes irreparable damage.
Chronic inflammation can be silent and not produce symptoms — and most people are not regularly screened for inflammation.
Candidates
Our products include our proprietary Revealia™ Home Test Kits
Revealia™ Home Test Kits
Our test kits use mRNA genetic indices to measure the expression of cytokines and chemokines, which are small proteins that create cellular signals. Increases and decreases in gene expression levels of pro-inflammatory cytokines and chemokines may be found in patients with active or inactive chronic disease conditions. The combination of mRNA genetic expression and machine learning AI could, we believe, with a certain degree of accuracy, identify individuals with the potential to develop chronic inflammatory diseases, such as cancer and heart disease. Through mRNA indices, we have the potential to obtain a personalized inflammatory score, which is a snapshot or signature, which may have the predictive power to diagnose chronic disease development, and further provide us with the ability to evaluate treatment response. One example of treatment response is to evaluate patient outcomes to different anti-cancer therapies.
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To better understand the relationship between genomic data and patient phenotype and clinical diagnosis the Company has developed, internally, a variety of statistical and data analysis approaches, all centering around a combined representation of machine learning and clustering methodology. We will examine the efficacy of three types of models:
| 1. | A model using the biomarker embedding alone. |
| 2. | A model using the biomarker embedding in addition to patient demographic information. |
| 3. | A model using the biomarker embedding, patient demographic information, and relevant data extracted from the medical record. |
Once individuals test over a certain period of time, we intend to illustrate via the snapshot index or picture how that individual’s health may have changed, whether it is an improvement or worsening of their health by showing the changes in their levels of mRNA genes. We believe our approach will be unique as it is tailored to the individuality of each patient. For instance, we intend to personalize each patient’s care based on their specific needs as determined by our mRNA indexing. We believe the benefits of our approach can potentially lead to earlier detection of inflammation that could lead to chronic disease development, which can improve patient outcomes, and hopefully lower individual healthcare costs.
Machine Learning (AI). In a general sense, machine learning (ML; often used interchangeably with the term “Artificial Intelligence”, or AI) is a set of computational approaches wherein an algorithm is used to learn characteristics of some data set or group together entities in the data based on common characteristics. Machine learning has three main subfields: supervised, unsupervised, and reinforcement learning. In the present set of studies we mainly concern ourselves with supervised and unsupervised machine learning. In the former, labeled data are used to learn important predictive characteristics for some response variable. For example, one might have a set of measurements for a collection of three types of iris flowers. Using supervised methods, one could build a model to predict the species of previously unseen iris flowers based on their own measurements. Unsupervised machine learning is slightly different. Here, we don’t have labels but use observed characteristics (or features) of entities to cluster together into groups. Ideally, the groupings that result are associated with some latent shared labels (i.e., without using iris species labels we could cluster them based on their measurements and would likely find that flowers of the same species naturally land in the same group).
In the present work we will use a combination of the above methods, but our main proposal is to use the output of our inflammatory biomarker panel, along with patient metadata and clinical notes, in conjunction with a set of algorithms called autoencoders (AEs), to learn a lower dimensional embedding that lends itself to predicting disease state of patients. On their own, autoencoders are systems that learn something called the identity function—that is, their job is to, given some input, produce the same output. By imposing certain constraints on how this process is carried out, we’re able to use these tools to do far more interesting tasks. For example, if we introduce some complexity penalty onto how it learns the identity function, we force the algorithm to make an accuracy/complexity tradeoff, effectively teaching it how to compress data while minimizing loss of information. Here, we impose an additional constraint on the system: given some labeled data (e.g., disease category and disease state), learn a lower dimensional embedding that compresses the data and minimizes information loss, but also does so in such a way that the lower-dimensional representation lends itself to clustering similar patients.
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In order to take the above-described approach, we’ll need a significant amount of data. While this is being collected, we will analyze all patient samples using standard approaches out of the frequentist statistical literature linear models corrected for multiple comparisons. This approach allows us to give feedback to patients on disease state, when relevant, but also confirm that there is relevant signal in the data we’re collecting before attempting to derive our new AE-based approach.
Planned Research Study
In December 2022, we received Institutional Review Board (“IRB”) approval of our study titled “Using Measurements of mRNA and ELISA-based Cytokine/Protein Indices to Evaluate Pre- and Post- Diagnosis and Treatment Response of Patients with Urothelial Carcinoma of the Bladder.” IRB approval is an important step in conducting a research study. This study is expected to proceed upon us securing the necessary funds to undertake such a study, which is estimated to be $1,250,000. We will commence this study using funds from this offering, though we will need to secure additional funding to complete the study. There is no guarantee that we will be able to secure additional funding in order to complete the study.
| - | The study is anticipated to continue for approximately 12 months after admitting the first patient. |
| - | This single arm study is expected to admit 300 individuals who qualify. |
| - | Observational Study Aims and Methodology: |
There are no specified primary and secondary treatment endpoints.
The objective of this study is to develop a computational risk model using mRNA and Elisa-based protein cellular biomarkers collected from bladder cancer patients who will undergo BCG immunotherapy as part of standard of care. Delivery of BCG intravesical immunotherapy is not an observational study procedure.
Elisa-based protein cellular biomarkers and Elisa technology: the enzyme linked immunosorbent assay ELISA is a powerful method for detecting and quantifying a specific protein in a complex mixture. Originally described by Engvall and Perlmann (1971), the method enables analysis of protein samples immobilized in microplate wells using specific antibodies. ELISA is the main approach for the sensitive quantification of protein biomarkers in body fluids and is currently employed in clinical laboratories for the measurement of clinical biomarkers. As such, it also constitutes the main methodological approach for biomarker validation and further qualification.
ELISAs are typically performed in 96-well or 384-well polystyrene plates, which passively bind antibodies and proteins. It is this binding and immobilization of reagents that makes ELISAs easy to design and perform. Having the reactants of the ELISA immobilized to the microplate surface makes it easy to separate bound from non-bound material during the assay. This ability to use high-affinity antibodies and wash away non-specific bound materials makes ELISA a powerful tool for measuring specific analytes within a crude preparation.
Computational models in medicine are a new development and are used to create a personalized patient-specific model to provide a patient with optimal diagnosis and treatment. As the amount of diagnostic data increases, paralleled by the greater capacity to personalize treatment, the difficulty of using the full array of measurements of a patient to determine an optimal treatment seems also to be paradoxically increasing. Computational models are progressively addressing this issue by providing a common framework for integrating multiple data sets from individual patients. In the Ludwig clinical strategy, we will be using 48 mRNA based inflammatory genes called cytokines and chemokines plus other protein inflammatory biomarkers to obtain a computational diagnostic score relative a specify chronic inflammatory disease, such as bladder cancer, heart disease and preeclampsia, to name a few. In October 2024, we filed US Provisional Patent Application 63/710,157, (Patent Name. mRNAs DIFFERENTIALLY EXPRESSED IN CANCER), that indicates 6 of the 48 mRNA based inflammatory genes can be used as a screening test to detect propensity for developing breast cancer.
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All diagnostic evaluation and treatment protocols are already under use at urological offices and clinics according to established industry standards of care for patients suspected of having urothelial carcinoma of the bladder and potential treatment with BCG Immunotherapy.
This study is purely observational and generated data and genetic risk scores will not be a determining factor in patient diagnosis and treatment.
Statistical analysis will be performed. The mRNA genetic analysis, measurement inflammatory proteins using Elisa technology plus a unique AI bioinformatics strategy may allow development of predictive models prior to onset of obvious manifestations of a disease. The resultant predictive risk profile, ‘L-Statistic’, could also potentially guide the therapeutic approach of the physician and decrease the severity of future associated comorbidities.
Under FDA regulations, IRB review and approval is required for projects that: (i) meet the definition of research, (ii) involve human subjects and (iii) include any interaction or intervention with human subjects or involve access to identifiable private information.
Planned Clinical Trials
We intend to conduct the following three clinical trials.
| 1. |
Named “Using Measurements of mRNA and Elisa-based Cytokine/Protein Indices to Evaluate Pre- and Post- Diagnosis and Treatment Response of Patients with Urothelial Carcinoma of the Bladder,” this Institutional Review Boards (IRB) approved clinical study is anticipated to begin within the next six months and will continue for about one year after the admission of the first patient; this single arm study will admit 300 individuals who qualify. Machine learning (AI) statistical analysis will be used to analyze all clinical lab results and develop indices that assess the severity of the state of disease for each patient and also allow assessment of disease response to treatment.
This study is a standard-of-care study with BCG immunotherapy, an approved FDA drug. Therefore, it is anticipated that evaluation and treatment of patients enrolled would be covered under existing medical and surgical insurance. The costs to evaluate the 300 patients with our mRNA technology and Elisa protein saliva and urine costs is expected to be approximately $180,000, to apply machine learning (AI) statistical costs are expected to be approximately $300,000 and to retain a Clinical Research Organization (CRO) is expected to be approximately $600,000. We expect that the total cost of this clinical study will be approximately $1,250,000. |
| 2. | We intend to initiate a clinical study with respect to preeclampsia (a persistent high blood pressure that develops during pregnancy or the postpartum period). The anticipated start date for this clinical study is the second to third quarter of 2025. Prior to commencing this clinical study, a clinical protocol must be written (we expect that our Chief Executive Officer, Marvin S. Hausman, M.D., will author the necessary protocol) and IRB approval obtained. This clinical study is for 100 patients, with anticipated expenses for controls, laboratory tests and a CRO to perform the study are expected to be at least $10,000 per patient. Machine learning AI statistical evaluation will be used to analyze all clinical lab results and develop indices that assess the severity of the state of disease for each patient and also allow assessment of disease response to treatment. In addition, machine learning (AI) statistical costs are expected to be approximately $300,000. We expect that the total cost of this clinical study will be approximately $1,250,000. |
| 3. |
We intend to initiate a clinical study with respect to cardiovascular/heart diseases. The anticipated start date for this clinical study is the third quarter of 2025. Prior to commencing this clinical study, a clinical protocol must be completed and submitted for IRB approval.
Currently, we are organizing cheek swab samples that have already been collected from 40 clinical centers in the United States. The immediate goal is to isolate mRNA genetic samples and analyze them to identify chronic inflammatory biomarkers specific to cardiovascular diseases. The cost of collecting 300 samples is $300 per sample, or approximately $90,000. Prior to commencing this clinical study, a clinical protocol must be written (we expect that our Chief Executive Officer, Marvin S. Hausman, M.D., will author the necessary protocol) and IRB approval obtained. This clinical trial is expected to enroll 100 patients, with anticipated expenses for controls, laboratory tests and a CRO to perform the study are expected to be at least $15,000 per patient. At a cost of approximately $300,000, machine learning (AI) statistical analysis will be used to analyze all clinical lab results and develop indices that assess the severity of the state of disease for each patient and also allow assessment of disease response to treatment. We expect that the total cost of this clinical study will be approximately $1,250,000. |
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The objective of this clinical study, which will utilize our mRNA genomic-based technology, cytokines and related proteins is to establish a diagnostic paradigm for patients with urothelial carcinoma of the bladder and to use this data to evaluate the efficacy of Bacillus Calmette-Guerin (“BCG”) immunotherapy as a personalized score for the patient. Integrating these disciplines into a computational model can develop a personalized patient diagnostic and treatment response, ‘L- genomic bladder cancer risk’ score, to aid in BCG immunotherapy disease management at a clinical practice level. BCG is approved by the FDA to treat bladder cancer patients. BCG is a non-specific potentiator (a reactant that enhances a physiologic response) of a person’s immune system. The goal of the Company through this planned program is to illustrate the potential of our technology to detect early the development of the inflammation that leads to bladder cancer and to predict patient response to anti-cancer treatment. In anticipation of starting this observational cancer program, we filed a patent that identifies and describes the Company’s proprietary 48 gene mRNA genomic technology plus a proprietary nutritional and supplements program called “My RNA for Life.”
The patient to be tested will swab the right and left buccal area (i.e., cheeks) with a soft flocked tip swab and place the swab in an envelope or tube. Targeted gene sequencing will be performed using a Thermo Fisher Scientific Gene Studio S5 System and Ion Chef CGX and PGX equipment. An Amplicon library for 48 target mRNA inflammatory cytokines was designed with a Thermo Fisher Scientific Ion-Ampliseq Designer. In March 2024, the Company filed PCT Patent Application PCT/US2023/074690, INFLAMMATORY DISEASE GENE PANEL, that covers the proprietary 48 gene mRNA panel that are useful for determining and developing treatments for chronic inflammatory diseases.; patent filed on the Company’s proprietary 48 mRNA microarray panel.
The buccal cell samples will be analyzed, and expression profiles will be obtained of inflammatory cytokines involved in apoptosis, cellular proliferation, cellular repair, wound healing, etc. ELISA determined levels of proteins, cytokines, and chemokines will be measured in the urine, saliva and blood as dictated by the protocol and chronic disease diagnosis.
The test orders, results, and health information for all patients will be maintained on a centralized HIPAA compliant network containing personal health records.”
All of the individual data points, 48 mRNA genes and approximately 10 Elisa based proteins such as TRAIL, 8oHdG, will be used to come up with an inflammatory index related to each specific chronic inflammatory disease being clinically studied. The number of data points as you can imagine is huge and machine learning AI will be needed to analyze the data points and come up with a computational score. For the bladder cancer study, we used”“L-genomic bladder cancer risk score”” Appropriate names will be used for different clinical disease studies.
We believe that our mRNA inflammatory index has the potential to assess the presence of inflammation that can lead to early-stage bladder cancer and then monitor treatment cancer response to BCG immunotherapy. This genetic signature provides a potential framework to optimize early diagnosis and clinical management with appropriate therapy.
Additional Planned Research Studies
The following planned research studies for preeclamspsia and cardiovascular/heart disease will need to be submitted for Institutional Review Board (IRB) approval before initiation of the clinical study, all of which are subject to the Company securing additional funding. There is no guarantee that the Company will secure adequate funding to undertake the research studies. Under the IRB system, a clinical protocol and application is completed, and the study is submitted to an IRB committee for review. At a subsequent IRB member meeting this initial review is discussed and a vote for an action is taken. Additional adjustments to the study may be necessitated by IRB review until approved. There is no established timeline or guarantee for receiving IRB approval.
All proposals submitted for either expedited or full review must contain four primary sections:
| - | Purpose of investigation. |
| - | Procedures. |
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| - | Anticipated risk and potential benefits to participants. |
| - | Steps taken to protect the participants. |
The criteria for IRB approval of a human research study includes:
| - | Risks to subjects are minimized. |
| - | Procedures are consistent with sound research design and do not unnecessarily expose subjects to risk. |
| - | Study utilizes procedures already performed for diagnosis/treatment— when appropriate. |
Preeclampsia.
Preeclampsia is a pregnancy specific, hypertensive disorder that is associated with high maternal morbidity and mortality. Placental dysfunction is a major contributor to adverse pregnancy outcomes, including preeclampsia.
The mRNA Inflammatory Index™ has the potential to create a genetic signature in patients with preeclampsia.
Primary study endpoint: early diagnosis of preeclamptic condition.
Secondary study endpoint: Substantiate mRNA genetic signature for preeclampsia.
The Company’s mRNA genetic signature may provide a therapeutic framework for the physician to obtain an earlier diagnosis of the preeclamptic condition which is not currently possible. Moreover, importantly, can allow earlier initiation of clinical management procedures which could be lifesaving.
Cardiovascular/Heart Diseases.
Cardiovascular diseases have a major societal impact due to morbidity, mortality, and the associated economic impacts. We intend to develop a paradigm of risk factors to manage cardiovascular disease(s) and conduct clinical studies to integrate data from cardiac genetic risk statistics and the mRNA Inflammatory Index™.
Our ability to move forward with any additional planned research studies will be dependent on our ability to raise funds from this and other offerings.
Primary study endpoint: early diagnosis of cardiac condition.
Secondary study endpoint: Substantiate mRNA genetic signature for specific cardiovascular conditions, including but not limited to heart attacks, vascular clotting disorders, hypertension, and myocarditis.
This genetic signature may provide a therapeutic framework for the physician to obtain an earlier diagnosis of the preeclamptic condition which is not currently possible. Moreover, importantly, can allow earlier initiation of clinical management procedures which could be lifesaving.
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Intellectual Property
We strive to protect the intellectual property that we believe is important to our business, including seeking and maintaining patent protection intended to cover the composition of matter of our product candidates, their methods of use, their methods of production, related technologies and other inventions. In addition to patent protection, we also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection, including certain aspects of technical know-how.
Our commercial success depends in part upon our ability to obtain and maintain patent and other proprietary protection for commercially important technologies, inventions and know-how related to our business, defend and enforce our intellectual property rights, particularly our patent rights, preserve the confidentiality of our trade secrets and operate without infringing valid and enforceable intellectual property rights of others.
The patent positions for companies like us are generally uncertain and can involve complex legal, scientific and factual issues. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our product candidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.
The Company’s discovery and development capabilities generate intellectual property which is owned and/or licensed from our direct efforts and our research partners.
We currently have filed three (3) pending patent applications in countries worldwide. These include composition and method patents.
| Number | Application Date | Assignee | ||
| 63/376400 | March 28, 2024 | Ludwig Enterprises, Inc | ||
| 63/689422 | August 30, 2024 | Ludwig Enterprises, Inc | ||
| 63/710157 | October 22, 2024 | Ludwig Enterprises, Inc. |
Our Strategy
In terms of making assessments using RNA vs DNA, the flexibility of RNA is important. DNA holds the genetic blueprint for humans, but RNA actually carries out its instructions to create functional proteins. This means real time information is being translated into cellular language. Our objective is to capture a snapshot in real time of important inflammatory signaling biomarkers, called cytokines, present in specific cells and tissues.
The importance of RNA is that mRNA allows us to identify differentially expressed genes (“DEGs”) involved in the inflammatory process associated with development of chronic diseases. Our mRNA Inflammatory Index™ is intended to provide guidance as a predictive model, prior to onset of obvious manifestations of a disease. By utilizing machine learning AI and mRNA indices, we may discover hidden patterns and diagnostic biomarkers within different biologic systems and organs. We have chosen 48 mRNA genes that our technology then uses to assess snapshots, creating a diagnostic disease index that is calculated from the gene panels. The mRNA genes chosen were based on specific chronic inflammatory diseases, such as heart disease, diabetes, cancer of the colon, breast and bladder, preeclampsia and osteoarthritis. The number 48 was based on the ability of Thermo Fisher Scientific to sequence the cli\genes and place them on a microarray chip. Moreover, the uncovering of these hidden inflammatory patterns my allow anti-inflammatory nutritional interventions at an early stage before disease onset. We plan to combine measured levels of mRNA genes with machine learning AI to generate a statistical score,. the Revealia™ Inflammatory Index (RII). The objective is to develop a personalized inflammatory genetic signature for a patient and their respective diseases healthcare status at a particular moment in time, which serves to educate the customer and potentially provide a call to action to see their medical provider.
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With a portion of the proceeds of this Offering, we expect to analyze over 3,500 mRNA samples obtained from patients with various chronic inflammatory diseases and choose the most significant mRNA diagnostic genes. These samples were obtained from 40 clinical centers in the United States. Once we identify the key diagnostic genes related to specific diseases, we expect to develop a specific research plan that may include an internal lab or contracting with an outside lab, or a major pharmaceutical company to target the chosen genes. Our plan is to develop specific antibodies or inhibitor mRNA molecules (mRNAi) that bind to these genes and market them to biotech- and pharma-companies to treat chronic inflammatory diseases, such as cancer, diabetes and heart disease. Given the nascent stage of our development, we have yet to determine the precise strategies by which we would market our developed antibodies.
We believe that there are many medical technologies in current practices that are outdated; however, emerging technologies have recently started including nanomedicine and genome based personalized medicine to aid in care and treatment. Our technology is intended to enable physicians to employ new treatment modalities for their patients. Inflammation can be silent, present at one time, and undetected at others, similar to a light switch that can be turned on and off. The problem, however, is that it can stay on and cause both silent and visible diseases. We believe our technology provides an opportunity to integrate genetic technology into the diagnosis and treatment continuum of a patient.
We also aspire to provide more individualized care through nutritional supplementation, tailored to the genetic makeup of the individual. Our approach focuses on the body’s cellular communication and responses.
Our Analysis Method
To understand inflammation, we will analyze both acute and chronic inflammation. Acute inflammation is how the body fights infections and helps speed up the healing process, which, in this context, is beneficial since it protects the body. However, if inflammation becomes chronic, it can lead to major diseases such as heart disease, diabetes, cancer, stroke and others. With both of the foregoing forms of inflammation, the goal is to recognize that something is awry and requires attention.
Chronic diseases are long-term medical conditions that are progressive. Examples of chronic diseases include cancer, diabetes, cardiovascular disease, chronic kidney disease, arthritis and stroke, and others. The root causes of these diseases are usually lifestyle, diet, stress, physical activity and the environment. The common denominators for all of chronic diseases are inflammation, cellular damage, and apoptosis (i.e., programmed cellular death).
By using our Revealia™ Inflammatory Index™ to match disease with its unique fingerprint mRNA, we believe treatment can be personally modified based on the patient’s individual genetic makeup. With the help of machine learning AI, our proprietary Revealia™ Inflammatory Index™ enables the modulation of key inflammatory related biomarkers with the potential to coordinate medical therapy. It is anticipated that our proprietary mRNA Inflammatory Index will be able to measure intercellular communication, subsequently allowing us to discover hidden gene patterns related to inflammatory causation of specific diseases.
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The patient to be tested will swab the right and left buccal area (i.e., cheeks) with a soft flocked tip swab and place the swab in an envelope or tube. Targeted gene sequencing will be performed using a Thermo Fisher Scientific Gene Studio S5 System and Ion Chef CGX and PGX equipment. Targeted gene sequencing for 48 mRNA genes contained on a microarray panel will be performed.
The buccal cell samples will be analyzed, and expression profiles will be obtained of mRNA-based inflammatory cytokines, as well as proteins, involved in apoptosis, cellular proliferation, cellular repair, wound healing, etc. ELISA determined levels of proteins, cytokines, and chemokine may, as needed, also be measured in the urine, saliva and blood as dictated by the protocol and chronic disease diagnosis.
The test orders, results, and health information for all patients will be maintained on a centralized HIPAA compliant network containing personal health records.
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Our Objectives.
| ● | Establish diagnoses and show response to treatment; |
| ● | Expand core AI facilities for better developed machine learning methods for genetic analysis. |
| ● | Pre and post treatment snapshots allowing assessment of therapeutic response; and |
| ● | Modulating inflammatory genetic biomarkers and potentially disease states with nutritional supplementation. |
The Long-Term Strategy. We intend to provide patients with cutting edge genetic tools using proprietary mRNA genetic methodology. These diagnostic tools will provide both physicians and patients with an optimized proactive approach in preventing disease. Execution of this strategy will require us to implement adequate infrastructure to offer screening and supplement programs in the United States and Canada. We believe the future of the Company is poised for continued adoption of its technology and success in the coming years. With a strong team in place and a clear vision for the future, we are well positioned to continue our growth trajectory.
Our core catalysts and value drivers are the following:
| ● | Revealia™ Proprietary Inflammatory Panel, for which patents have been filed. |
| ● | Additional clinical research studies. |
| ● | Apoptotic Index™ technology, measuring DNA damage, cell damage and death, and |
| ● | mRNA Inflammatory Indices data bank; potential value to pharmaceutical companies and drug development programs. |
Our Planned Marketing and Distribution
The Company is developing a new direct-to-consumer mail-order cheek-swab cancer screening product. The Company has collected and continually receives samples from its partners, to date approximately 3,350 cheek samples from 40 multi-center clinics in the United States. The Company to date contracted with its third party laboratory to perform mRNA analysis on approximately 250 samples specifically related to the diagnosis of breast, colon and bladder cancer. Adequate numbers of controls were also analyzed to obtain needed statistical significance for the specific mRNA genes in the various cancers
To achieve commercial success for our flagship cheek-swab cancer screening product we plan to successfully market it first within the United States and then develop a strategy for sales outside of the United States. We intend to outsource the manufacturing and fulfillment of this mail-order product. Our biggest hurdle will be cost-effectively reaching our target prospects and converting them into customers at scale. We intend to engage social media marketing such as Facebook, Instagram and Twitter to reach potential customers. We will also utilize ad campaigns based on the successful models of similar companies.
Our B2C approach will utilize various marketing strategies to engage the individual at home. We intend to create marketing partnerships with certain health influencers to promote our products. Our initial approach will be to work with health influencers on a commission basis which we believe will incentivize them to promote our products. We plan to offer the Revealia™ Home Test Kit to individuals directly via online websites. With our B2C approach, we intend to offer a service in which a “Certified Genetic Counselor” (which will be someone who has been trained as a geneticist and has a MD, PhD or master’s degree) will provide a one-time call and an email to the patient after the patient has received their results.
Our ability to market and distribute our products will be dependent on our ability to raise capital through this Offering.
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Laboratory Developed Test (LDT)
We intend to launch and market our testing kits as a Laboratory Developed Test (LDT). A LDT is defined by the FDA as “a type of in vitro diagnostic test that is designed, manufactured and used within a single laboratory.” (Source: Laboratory Developed Tests, US Food and Drug Administration https://www.fda.gov/medical devices/in vitro diagnostics/laboratory developed tests Accessed 11/23/2022).
The classification of an LDT is partly dependent on its components. LDTs must use only in-house materials, general purpose reagents (GPRs), and analyte specific reagents (ASRs). GPRs are chemical reagents that might commonly be used in a laboratory, such as a pH buffer. ASRs are substances essential to the function of the diagnostic test and which act as the “active ingredient” in the test. ASRs might be “antibodies, both polyclonal and monoclonal, specific receptor proteins, ligands, nucleic acid sequences, and similar reagents which, through specific binding or chemical reactions with substances in a specimen, are intended for use in a diagnostic application for identification and quantification of an individual chemical substance or ligand in biological specimens” (21 CFR 864.4020). LDTs can use GPRs and ASRs manufactured by parties other than the laboratory developing the LDT – this does not affect the single laboratory requirement for the LDT.
The FDA requirements for a diagnostic test to be classed as LDT, and therefore subject to regulatory discretion, include single laboratory development and use, authorized physician instruction, and “CLIA” ( Clinical Laboratory Improvement Amendments program) certification and accreditation. First, the development and performance of the test must be conducted by a single laboratory. The test can no longer be classified as an LDT if any aspect of the LDT extends beyond a single laboratory, such as the test having been developed in a separate laboratory, used in multiple laboratories, or relying on third party manufacturers for critical components not deemed ASRs, and will instead be classed as an IVD. Second, the LDT must be performed because of an instruction from an authorized physician or healthcare professional. An LDT cannot be offered direct-to-consumer, and a physician ordering the test must be independent from the laboratory offering the LDT. Third, the laboratory must be appropriately certified under the CLIA program as able to “perform high-complexity testing.” The single laboratory requirement for test development and use refers to a single CLIA certification.
The FTC and the FDA share jurisdiction over the marketing of supplements as well as drugs, foods, devices and other health related products. FTC regulates the advertising of these products, including infomercials and other direct to consumer methods. The Company if not diligent in its accuracy of its representations to the market on its products could be at risk of a cease-and-desist order for marketing its products. This would result in a deleterious effect on the Company.
Our inflammatory assessment tool is manufactured, distributed and analyzed by a third party CLIA and CAP certified laboratory. The Laboratory has made large investments in equipment, human resources and capital in order to facilitate the Company’s business. If the Laboratory fails CLIA or CAP inspections the Company would cease to operate until a replacement Laboratory is established. The time and expense required by a Laboratory to come up to speed would be at least 12 months potentially causing the Company to cease to exist.
The CLIA require laboratories that perform clinical testing (including IVDs and LDTs) to be certified by the Centers for Medicare and Medicaid Services (CMS) before accepting materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or the impairment of, or assessment of the health of human beings (42 CFR Part 493). CLIA requirements for certification depend on the complexity of tests conducted by the laboratory; LDTs are classed as high complexity and as such, the requirements include demonstration of the analytical validity of the test, quality assurance protocols, and presence of qualified personnel (42 CFR 493). The focus of the CLIA is to ensure accurate and reliable diagnostic test results. Laboratories must receive CLIA certification before releasing any test results and will be inspected by the CMS to ensure compliance with the requirements. All analytical validity assessments are conducted only within the laboratory because the test will be used only within the laboratory and therefore validation conducted outside the laboratory environment is not necessary or relevant. The validation is reviewed during its routine two-yearly survey.
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There are no CLIA requirements for clinical validity, meaning there is no assessment of how well a test can diagnose or predict a clinical condition. Instead, the CMS evaluates whether the test successfully detects the substance it is designed to detect, for instance, assessing whether a test can accurately and reliably measure the presence of a biomarker associated with lung cancer rather than assessing whether the test can accurately diagnose lung cancer. Clinical validity requirements fall under FDA authority in the FD&C Act during the premarket review, something with which LDTs are not required to comply via enforcement discretion.5 LDTs are also not required to comply with the FDA’s quality system regulations. However, enforcement discretion toward LDTs does not equal exemption, and the FDA can chose to enforce full regulatory compliance of an LDT “when appropriate, such as when it is appropriate to address significant public health concerns.”6 In summary, the FDA focuses on ascertaining the safety and effectiveness of a diagnostic, and, if it is an IVD, the design and manufacture quality, whereas the CMS checks the scientific performance of the test.
Should any of our products be determined not to be LDT products, we would be forced to cease the sale of any such products, which could have a material adverse effect on our operating results. No prediction can be made in this regard, however. (See “Risk Factor—Risks Related to Our Business”).
According to the FDA, “LDT’s are important to the continued development of personalized medicine, so it is important that in vitro diagnostics are accurate so that patients and health care providers do not seek unnecessary treatments, delay needed treatments or become exposed to inappropriate therapies.
Some common examples of LDT’s include flow cytometry, next generation sequencing of DNA and RNA, liquid and gas chromatography and liquid biopsy. All of these are considered to be key tests in personalized/precision medicine.
We intend to perform LDT testing in a CLIA Certified, CAP Accredited, High Complexity Molecular Laboratory under the direction of a qualified Laboratory Director with fully licensed Medical Laboratory Scientists.
On May 6, 2024, the FDA issued a final regulating LDTs by amending regulations to explicitly provide that IVDs offered as LDTs fall under the FDCA and phasing out its general enforcement discretion approach for most LDTs. The rule makes it clear that the FDA will provide greater oversight of LDTs through a phaseout of its general enforcement discretion approach for LDTs over the course of four years, as well as targeted enforcement discretion policies for certain categories of IVDs manufactured by laboratories. Pursuant to the phaseout policy for LDTs not grandfathered by the rule, following a four-year period, IVDs offered as LDTs generally will be expected to meet applicable requirements, including compliance with medical device reporting requirements and correction and removal reporting requirements by May 2025; compliance with registration, listing and labeling requirements by May 2026; compliance with quality system requirements (other than those in stage 1) by May 2027; and compliance with premarket review requirements for high-risk IVDs offered as LDTs, unless premarket submission has been received. Under the FDA’s phaseout schedule our current and proposed products will not be subject to premarket clearance until at a minimum November 6, 2027.
LDTs such as Revealia’s product that will enter the market within this four-year phase-out period may enter the market under enforcement discretion but are required to comply with the below timelines for enforcement of LDT regulatory requirements. This includes:
| ● | May 6, 2025 - compliance with medical device reporting, correction and removal reporting, and quality system requirements regarding complaint files |
| ● | May 6, 2026 - compliance with general requirements not covered in other stages, including establishment registration and device listing requirements, labeling requirements, and investigational requirements |
| ● | May 6, 2027 - compliance with quality system requirements including design controls, purchasing controls, acceptance activities, CAPA, and records requirements |
| ● | November 6, 2027 - compliance with premarket review for high risk IVDs |
| ● | May 6, 2028 - compliance with premarket review for moderate and low risk IVDs |
We intend to position its product as a qualified LDT ordered by and with the meaningful involvement of a licensed healthcare provider. The Revealia product can enter the market immediately without requiring any premarket submission or clearance by the FDA. Revealia may then operate under the FDA’s current enforcement discretion for LDTs while preparing to comply with all relevant regulatory requirements according to the LDT enforcement discretion phase out timeline described above.
Government Regulation
We will be subject to various healthcare related laws regulating fraud and abuse, pricing and sales and marketing practices and the privacy and security of health information, including the United States federal regulations described below. Many states, foreign countries and supranational bodies have also adopted laws and regulations similar to, and in some cases more stringent than, the federal regulations discussed above and below. Under the FDA’s phaseout schedule our current and proposed products will not be subject to premarket clearance until at a minimum November 6, 2027.
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Regulation of Our Predictive Laboratory Developed Tests (LDT Tests)
CLIA and CMS for Diagnostics
The CMS, an agency within the U.S. Department of Health and Human Services, regulates all clinical laboratory testing (except research) performed on humans in the United States through the CLIA. All clinical laboratories that perform clinical lab services on human specimens for the purpose of providing information on the diagnosis, prevention or treatment of disease must receive CLIA certification. Laboratories must obtain CLIA certification and demonstrate compliance with CLIA requirements as confirmed by an inspection by CMS. We received our initial CLIA certification in 2018. Our laboratory was additionally certified by CAP, in 2021, an organization recognized by CMS as a third-party reviewer of clinical laboratories. Several states, including, among others, New York and California, require licensure of out-of-state labs that receive specimens from the state and compliance with the state’s individual laboratory regulations.
If a testing laboratory is out of compliance with CLIA requirements, it may be subject to sanctions such as suspension, limitation or revocation of our CLIA certificate, as well as directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit or criminal penalties. Therefore, we plan to maintain CLIA compliance and certification to be eligible to bill for services provided to Medicare and Medicaid beneficiaries. If a diagnostic testing company like us were to be found out of compliance with CLIA program requirements and subjected to sanction, its business could be harmed. Failure to comply with state licensure laws, if applicable, could lead to additional sanctions imposed by state licensing authorities.
FDA Regulation of Diagnostics
On May 6, 2024, the FDA issued a final ruling regulating LDTs by amending regulations to explicitly provide that IVDs offered as LDTs fall under the FDCA and phasing out its general enforcement discretion approach for most LDTs. The rule makes it clear that the FDA will provide greater oversight of LDTs through a phaseout of its general enforcement discretion approach for LDTs over the course of four years, as well as targeted enforcement discretion policies for certain categories of IVDs manufactured by laboratories. Pursuant to the phaseout policy for LDTs not grandfathered by the rule, following a four-year period, IVDs offered as LDTs generally will be expected to meet applicable requirements, including compliance with medical device reporting requirements and correction and removal reporting requirements by May 2025; compliance with registration, listing and labeling requirements by May 2026; compliance with quality system requirements (other than those in stage 1) by May 2027; and compliance with premarket review requirements for high-risk IVDs offered as LDTs, unless premarket submission has been received. Under the FDA’s phaseout schedule our current and proposed products will not be subject to premarket clearance until at a minimum November 6, 2027. There are currently several legal challenges to the final ruling and its long term enforcement may or may not occur. We intend to comply with the final ruling until such time that the current regulatory environment changes.
Pricing and Reimbursement of Our Therapeutic Product Candidates and PMP-Diagnostic Testing
Pricing and reimbursement of a therapeutic product depend on multiple factors, including the clinical profile created through the research and development program or the breadth of its regulatory approval as described in the prescribing information. Uncertainty about the clinical profile or any of these factors translate into uncertainly about the coverage and reimbursement status of any future Notable products that may be sold. Sales of any Notable products (or revenues through selling the product itself) will depend, in part, on the extent to which the costs of the products will be covered by third-party payors, including government health programs such as Medicare and Medicaid, commercial health insurers, managed care organizations or pharmaceutical companies. The process for determining whether a third-party payor will provide coverage for a test sometimes is separate from the process for setting the price of a drug product or for establishing the reimbursement rate that a payor will pay for the drug product. Third-party payors may limit coverage to specific testing products on an approved list, which might not include all of the tests available for a particular indication.
In order to obtain coverage and reimbursement for any product, we may need to conduct robust pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the therapeutic product or diagnostic test. Even with successful studies, our products may not be considered medically necessary or cost-effective by payers. A third-party payor’s decision to provide coverage for a test does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage, and adequate reimbursement, for the product. Third-party reimbursement may not be sufficient to enable us to maintain price levels high enough to realize an appropriate return on our investment in product development.
The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of tests and drugs have been a focus in this effort. Third-party payors are increasingly challenging the prices charged for medical products and services, examining the medical necessity and reviewing the cost-effectiveness of testing products, drug products and medical services and questioning safety and efficacy. If these third-party payors do not consider our products to be cost-effective compared to other available products or treatments, they may not cover our products or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls and restrictions on reimbursement. Adoption of such controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for our diagnostic products or treatments that require use of our testing products and could adversely affect our net revenue and results.
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Pricing and reimbursement schemes vary widely from country to country. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular test to currently available tests. The downward pressure on healthcare costs in general, particularly prescription drugs and testing products, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for testing products may not allow favorable reimbursement and pricing arrangements for any of our products.
Coverage policies, third-party reimbursement rates and pricing regulation may change at any time.
Other Healthcare Laws
Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in the U.S. in addition to the FDA, including CMS, the HHS Office of Inspector General and HHS Office for Civil Rights, other divisions of the HHS and the Department of Justice.
Healthcare providers, physicians, and third-party payors will play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. Our current and future arrangements with third-party payors, healthcare providers and physicians may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute therapeutic and diagnostic products. In the U.S., these laws include, without limitation, state and federal anti-kickback, false claims, physician transparency, and patient data privacy and security laws and regulations, including but not limited to those described below.
The U.S. federal Anti-Kickback Statute (“AKS”), prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. The AKS has been interpreted to apply to arrangements between pharmaceutical and medical device manufacturers on the one hand and prescribers, purchasers, formulary managers and beneficiaries on the other hand. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the AKS. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Moreover, a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. On November 20, 2020, the Office of Inspector General (“OIG”) finalized further modifications to the AKS. Under the final rule, OIG added safe harbor protections under the AKS for certain coordinated care and value-based arrangements among clinicians, providers, and others. The final rule (with some exceptions) became effective January 19, 2021. The industry continues to evaluate what effect, if any, this rule will have.
In addition, under a federal law directed at “self-referral,” commonly known as the “Stark Law,” there are prohibitions, with certain exceptions, on referrals for certain designated health services, including laboratory services, that are covered by the Medicare and Medicaid programs by physicians who personally, or through a family member, have an investment or ownership interest in, or a compensation arrangement with, an entity performing the tests. The prohibition also extends to payment for any testing referred in violation of the Stark Law. A person who engages in a scheme to circumvent the Stark Law’s referral prohibition may be fined up to $100,000 for each such arrangement or scheme. In addition, any person who presents or causes to be presented a claim to the Medicare or Medicaid programs in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per bill submission, an assessment of up to three times the amount claimed and possible exclusion from participation in federal governmental payor programs. Bills submitted in violation of the Stark Law may not be paid by Medicare or Medicaid, and any person collecting any amounts with respect to any such prohibited bill is obligated to refund such amounts. Many states have comparable laws that are not limited to Medicare and Medicaid referrals.
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Furthermore, we could be held liable under the federal False Claims Act, which imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities (including manufacturers) for, among other things, knowingly presenting, or causing to be presented to federal programs (including Medicare and Medicaid) claims for items or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. This could apply even if we are not submitting claims directly to payors as would be the case with drug products. The government may deem manufacturers of such products to have “caused” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. Several biopharmaceutical, medical device and other healthcare companies have been prosecuted under federal false claims and civil monetary penalty laws for, among other things, allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of products for unapproved (e.g., or off-label), and thus non-covered, uses. In addition, the civil monetary penalties statute imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
Our future marketing and activities relating to the reporting of wholesaler or estimated retail prices for our products, if approved, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for our products, and the sale and marketing of our product candidates, are subject to scrutiny under these laws.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and certain other healthcare providers. The ACA imposed, among other things, new annual reporting requirements through the Physician Payments Sunshine Act for covered manufacturers for certain payments and “transfers of value” provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners. Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership or investment interests may result in civil monetary penalties. Covered manufacturers must submit reports by the 90th day of each subsequent calendar year and the reported information is publicly made available on a searchable website.
We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by HITECH, and their respective implementing regulations, including the Final HIPAA Omnibus Rule published on January 25, 2013, impose specified requirements relating to the privacy, security and transmission of individually identifiable health information held by covered entities and their business associates. Among other things, HITECH made HIPAA’s security standards directly applicable to “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity, although it is unclear that we would be considered a “business associate” in the normal course of our business. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same requirements, thus complicating compliance efforts. See “European Data Collection” below for a discussion of data privacy and security enactments of the EU.
For example, California’s Consumer Privacy Act (“CCPA”), went into effect in January 2020, and the California Attorney General has since promulgated final regulations. The law provides broad rights to California consumers with respect to the collection and use of their personal information and imposes data protection obligations on certain businesses. While the CCPA does not apply to protected health information that is subject to HIPAA or personal information collected, used or disclosed in research, as defined by federal law, the CCPA may still affect our business activities. Moreover, on November 3, 2020, California voters passed the California Privacy Rights Act (“CPRA”), under a ballot initiative. The CPRA amends the existing CCPA to include new consumer rights and additional data protection obligations. The new data protection requirements under the CPRA apply to information collected on or after January 1, 2022. With the promulgation of final regulations, the California State Attorney General has commenced enforcement actions against CCPA violators. The uncertainty surrounding the implementation of CCPA and the amendments under the CPRA exemplifies the vulnerability of our business to the evolving regulatory environment related to personal data and protected health information. The California law further expands the need for privacy and process enhancements and commitment of resources in support of compliance. Moreover, more than ten states have proposed bills in the last year with provisions similar to the CCPA and CPRA. It is likely that other states will pass laws similar to the CCPA and the CPRA in the near future and a federal data protection law may also be on the horizon.
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Similar state and foreign fraud and abuse laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services. Such laws are generally broad and are enforced by various state agencies and private actions. Also, many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant federal government compliance guidance, and require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or drug pricing.
In order to sell products, we must also comply with state laws, including those that require the registration of manufacturers and wholesale distributors of drug and biological products. These include, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, the company may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, imprisonment, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business and financial results. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource consuming and can divert a company’s attention from the business.
European Data Collection
The collection and use of personal health data in or arising from the EU are governed by the provisions of the Data Protection Directive, and the General Data Protection Regulation (“GDPR”). This directive imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent national data protection authorities and the security and confidentiality of the personal data. The Data Protection Directive and GDPR also impose strict rules on the transfer of personal data out of the EU, to the U.S. Failure to comply with the requirements of the Data Protection Directive, the GDPR and the related national data protection laws of the EU Member States may result in fines and other administrative penalties. The GDPR introduces new data protection requirements in the EU and substantial fines for breaches of the data protection rules. The GDPR regulations may impose additional responsibility and liability in relation to personal data that we process, including in respect of clinical trials, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. This may be onerous and adversely affect our business, financial condition, results of operations and prospects.
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Other Regulatory Requirements
Our operations use small amounts of hazardous materials in research and development and generate regulated medical waste in the normal course of performing its predictive diagnostic tests. This subjects us to a variety of federal, state and local environmental and safety laws and regulations. Some of the regulations under the current regulatory structure provide for strict liability, holding a party potentially liable without regard to fault or negligence. We could be held liable for damages and fines as a result of our, or others’, business operations should contamination of the environment or individual exposure to hazardous substances occur. We cannot predict how changes in laws or development of new regulations will affect its business operations or the cost of compliance.
Current and Future Legislation
In the U.S. and other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and additional downward pressure on the price that we, or any collaborators, may receive.
Manufacturing and Distribution
We will utilize third party logistics (“3PL”) companies who specialize in the distribution of DTC medical devices to assemble and distribute our Revealia Test Kits. The commercially available collection media in our kits are sourced from COPAN Diagnostics, Inc., and will be delivered to our 3PL partner(s), along with our proprietary packaging for kit assembly and distribution. The 3PL will then distribute the kits to customers at the time of order.
We intend use Grace Health Technology Inc. as our Clinical Research Organization (“CRO”) and as our laboratory partner to process the specimens sent back by our customers. Grace Health Technology contracts with Designer Genomics International, Inc. for the performance of certain CRO-related functions (our Company has no contractual relationship with Designer Genomics International). The agreement with Grace Health Technology was for an initial term ending in July 2023, that renewed automatically until July of 2024. The Company is in the process of renegotiating its agreements with Grace Health Technology, Inc.
Competitive Environment
We believe there are few existing comparable competitors with an mRNA focus. We feel the closest competitors are companies that engage in direct-to-consumer DNA genetic testing, such as 23andME Inc., Alpha Laboratories Ltd., Centrillion Technology Holding Ltd., and others. According to Cision PR Newswire, the global direct to consumer Genetic Testing Market is positioned to grow by $1.38 billion USD through 2025, with a compound annual growth rate of 16.73%. We believe that advances in next generation genetic sequencing will be one of the key driving forces in the market through 2025. These trends are expected to have a major impact as companies expand into this new territory, which leads us to believe that this market will be fragmented.
We believe that a primary difference between us and any of the comparable companies described above is that we are focused on mRNA, while they focus on DNA. The mRNA changes day by day while DNA is permanent. That means these companies can suggest hereditary health concerns based on DNA indexes but cannot provide the detailed specificity that a mRNA index can provide. We believe this differentiates us from others, but also allows us to tap into a market that is not very saturated at this point. Since mRNA is everchanging, we will not have the single-service limitation that models that employ DNA-based testing have.
We believe the direct sales segment will contribute the largest share of the market. Direct sales channels can give consumers access to their personal genetic and health information, regardless of the time and place. We understand consumers purchase genetic testing services directly based on quick turnaround time for test results and accessibility to the tests themselves. This has fueled the demand for online orders of genetic tests, thus boosting revenue growth in the direct sales segment.
We believe that we have little direct competition, due to our unique proposition of solely using mRNA patent-pending indices for screening health.
Additionally, we believe our products and services could be used by many patients if supply and logistics were of no issue. Our initial target patient profile is an individual over the age of 35 that is health conscious, demonstrates buying habits of a healthy lifestyle (e.g., gym memberships, use of dietary supplements), and earns more than the mean U.S. yearly income.
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Employees
Currently, we have three executive officers who perform all required administrative functions, in addition to their respective executive officer activities. We have three total employees and our CEO is the sole full-time employee. Further, we retain persons who perform required professional services on our behalf as consultants.
Corporate Information
The Company was originally organized as a Kentucky corporation on February 11, 1988. On February 8, 2006, we formed a wholly owned subsidiary, Ludwig Enterprises, Inc., a Nevada corporation. On March 28, 2006, Ludwig Enterprises, Inc., our Kentucky corporation, merged with and into Ludwig Enterprises, Inc., our Nevada corporation, with the Company, Ludwig Enterprises, Inc., the Nevada corporation, being the surviving entity.
Our principal executive offices, and our subsidiaries, are located at 8950 SW 74th Ct, Ste 2201-A149, Miami, FL 33156; our telephone number is (786) 323-0166; our corporate website is located at www.ludwigent.com. No information found on, or connected to, the Company’s website is incorporated by reference into, any you must not consider the information to a part of, this Annual Report
Item 1A. Risk Factors
Not applicable to a smaller reporting company.
Item 1B. Unresolved Staff Comments
Not applicable to a smaller reporting company.
Item 2. Properties
We own no real property interest. The Company leases a small office that is sufficient for our current operations at a monthly rental of $100. We intend to lease additional office space as our needs require.
Item 3. Legal Proceedings
We have no pending legal or administrative proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is currently quoted on the OTC PINK tier of the OTC Markets under the symbol “LUDG.” Trading in OTC PINK stocks can be volatile, sporadic and risky, as thinly traded stocks tend to move more rapidly in price than more liquid securities. Such trading may also depress the market price of our common stock and make it difficult for our stockholders to resell their common stock.
The following table reflects the high and low closing price for our common stock for the periods indicated. The information was obtained from the OTC Markets Group, Inc. and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.
| Year Ended December 31, 2024 | ||||||||
| March 31, 2024 | $ | 0.071 | $ | 0.290 | ||||
| June 30, 2024 | $ | 0.130 | $ | 0.300 | ||||
| September 30, 2024 | $ | 0.102 | $ | 0.280 | ||||
| December 31, 2024 | $ | 0.111 | $ | 0.230 | ||||
| Year Ended December 31, 2023 | ||||||||
| March 31, 2023 | $ | 0.018 | $ | 0.0149 | ||||
| June 30, 2023 | $ | 0.0131 | $ | 0.0067 | ||||
| September 30, 2023 | $ | 0.0068 | $ | 0.0042 | ||||
| December 31, 2023 | $ | 0.0056 | $ | 0.0008 | ||||
On March 27, 2025, the closing price of our Common Stock was $0.136.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.
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In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, shareholders may have difficulty selling our securities.
Holders of Our Common Stock
As of March 26, 2025, we had 161,569,807 outstanding shares of common stock and approximately 614 shareholders of record.
Dividends
There are no restrictions in our Articles of Incorporation, as amended, or Bylaws that prevent us from declaring dividends. The payment of dividends on common stock is at the discretion of our Board of Directors. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend: (1) we would not be able to pay our debts as they become due in the usual course of business; or (2) our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
We currently do not anticipate paying any dividends in the foreseeable future.
Recent Sales of Unregistered Securities
During the fourth quarter of 2024, we issued no unregistered securities that have not been previously reported.
Subsequent to December 31, 2024, we issued no unregistered securities that have not been previously reported.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
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Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking Statements
There are “forward looking statements” contained herein. All statements that express expectations, estimates, forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “may,” “should,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to update or revise any of the forward-looking statements after the date of this quarterly report to conform forward-looking statements to actual results. Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited to, uncertainties associated with the following:
| ● | Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans; | |
| ● | Our failure to earn revenues or profits; | |
| ● | Inadequate capital to continue business; | |
| ● | Volatility or decline of our stock price; | |
| ● | Potential fluctuation in quarterly results; | |
| ● | Rapid and significant changes in markets; | |
| ● | Litigation with or legal claims and allegations by outside parties; and | |
| ● | Insufficient revenues to cover operating costs. |
The following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this quarterly report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result of various factors.
Overview
We are an innovative technology and health related Company that is developing products that use mRNA-based genetic markers with the potential to measure the presence of inflammation, and, as a result, inflammatory driven diseases and monitor patient response to treatment. Advancements in medical technology have awarded us with cutting edge genetic tools, unheard of even a generation ago. These genetic tools have the potential to not only achieve early detection of diseases but also to support customized treatments that may improve patient outcomes. The Company is at the forefront of this new era of medicine with development of products that will embody our proprietary mRNA genomic technology that has the potential of detecting genetic biomarkers for inflammatory driven diseases, including, but not limited to, heart disease, diabetes, preeclampsia, cancer and “long COVID”.
23
Current Financial Condition Summary
We have not yet derived revenues from our operations.
We had a net loss of $3,016,884 for the year ended December 31, 2024. Additionally, we had net cash used in operating activities of $660,302 for the year ended December 31, 2024. At December 31, 2024, we had a working capital deficit of $2,378,145, an accumulated deficit of $7,259,366 and a stockholders’ deficit of $2,378,145, which could have a material impact on our ability to obtain needed capital.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
| ● | have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; | |
| ● | comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); | |
| ● | submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on- frequency;” and | |
| ● | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. |
In addition, Section 107 of the JOBS Act also 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. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Results of Operations
Year Ended December 31, 2024, compared to the Year Ended December 31, 2023. For the years ended December 31, 2024 and 2023, we had revenues of $217 and $0, respectively. We expect that revenues from sales of our planned products will begin during the third quarter of 2025, assuming we are able to obtain needed funding of approximately $1,500,000, of which there is no assurance.
Operating Expenses. Total operating expenses for the years ended December 31, 2024 and 2023, were $1,298,406 and $1,375,761, respectively. The decrease in operating expenses during the year ended December 31, 2024, was primarily due to an increase in our activities relating to our planned products, including development of our proprietary software, website and product packaging, as well as the payment of monthly fees to our key consultants and fees for professional services, including accounting and legal, offset by a reduction in our research and development expenses.
24
General and Administrative Expenses. The increase of $168,038 in general and administrative expenses, from $964,747 for the year ended December 31, 2023, as compared to $1,132,785 for the year ended December 31, 2024, was primarily due to the increase in our activities relating to our planned products, including development of our website and product packaging, as well as the payment of monthly fees to our key consultants and fees for professional services, including accounting and legal.
Research and Development. The decrease of $245,393 in research and development expenses to $165,621 from $411,014 for the years ended December 31, 2024 and 2023, respectively, was due to our determining to make expenditures in the development of our planned products, including the payment of product study-related expenses. While we expect to continue to incur research and development expenses, we are unable to predict the level of such expenditures, due to the uncertainty of the level of funding that will be available to us.
Other Income/Expense. The increase in total other expense of $750,816 to $1,753,498 from $1,002,682 for the years ended December 31, 2024 and 2023, respectively, was primarily due to a increase in inducement expenses, finance expenses and interest expense offset by a reduction in amortization of debt discount associated with extending the maturity of and obtaining loans convertible into shares of our common stock.
Inducement Expense Inducement Expense for the year ended December 31, 2024, was higher than for the year ended December 31, 2024, $1,004,574 versus $517,454 due to consideration given for the extensions of our OID and convertible notes.
Finance Expense Finance Expenses for the year ended December 31, 2024, was 677,130 for the year ended December 31, 2024, compared to $0 for the year ended December 31, 2023 related to the issuance of warrants during the year ended December 31, 2024.
Interest Expense. Interest expense for the year ended December 31, 2024, was $56,794 for the year ended December 31, 2024, compared to $15,714 for the year ended December 31, 2023. The increase is due to the issuance of convertible promissory notes during the year.
Amortization of Debt Discount. During the year ended December 31, 2024, we incurred amortization of debt discount expense of $15,000. During the year ended December 31, 2023, we incurred amortization of debt discount expense of $469,514 for OID and guaranteed interest on convertible notes payable.
Net Loss. We incurred a net loss of $3,016,884 for the year ended December 31, 2024, as compared to a net loss of $2,456,550 for the year ended December 31, 2023. The increase in net loss for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to decrease of $77,355 in operating expenses and an increase of $750,816 in other expenses.
Liquidity and Capital Resources
December 31, 2024. At December 31, 2024, the Company had $6,741 in cash and a working capital deficit of $2,378,145, compared to $7,263 in cash and $105,205 in Assets from Discontinued Operations and a working capital deficit of $1,461,565 at December 31, 2023. The Company does not have sufficient working capital to fund current operating expenses at least through the first quarter of 2025 and will require additional funds. We will need to obtain additional debt or equity-based capital from third parties to implement our full business plans. There is no assurance that we will be successful in obtaining such additional capital.
Cash Flows
Net Cash Used in Operating Activities. Net cash used in operating activities was $ 660,302 during the year ended December 31, 2024, compared to $647,860 used during the year ended December 31, 2023.
Net Cash Used in Investing Activities. Net cash used in investing activities was $-0- during the year ended December 31, 2024, compared to $-0- during the year ended December 31, 2023.
Net Cash Provided by Financing Activities. Net cash provided by financing activities was $558,708 during the year ended December 31, 2024, as compared to $240,000 provided during the year ended December 31, 2023..
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Notes Payable and Convertible Notes Payable
Notes Payable - Net
The Company had the following activity related to its notes payable:
| Balance - December 31, 2022 | $ | 507,136 | ||
| Proceeds (face amount of note) | 222,873 | |||
| Reclassifications | 640,000 | |||
| Balance - December 31, 2023 | $ | 1,370,009 | ||
| Balance - December 31, 2024 | $ | 1,370,009 |
Notes payable are summarized as follows:
| Maturity | Interest | December 31, | December 31, | |||||||||||
| Issue Date | Date | Rate | Collateral | 2024 | 2023 | |||||||||
| June 2012 (2) | April 2025 | 8% | Unsecured | $ | 6,240 | $ | 6,240 | |||||||
| May 2014 (2) | April 2025 | 8% | Unsecured | 3,456 | 3,456 | |||||||||
| June 2016 (2) | April 2025 | 8% | Unsecured | 38,216 | 38,216 | |||||||||
| January 2017 (2) | April 2025 | 8% | Unsecured | 7,344 | 7,344 | |||||||||
| November 2020 (2) | April 2025 | 12% | Unsecured | 46,480 | 46,480 | |||||||||
| March 2021 (2) | April 2025 | 8% | Unsecured | 5,400 | 5,400 | |||||||||
| November 2021 (2) | April 2025 | 0% | Unsecured | 250,000 | 250,000 | |||||||||
| February 2022 (2) | April 2025 | 0% | Unsecured | 150,000 | 150,000 | |||||||||
| August 2023 (2) | April 2025 | 8% | Unsecured | 122,873 | 122,873 | |||||||||
| January 2023 (1,2) | April 2025 | 0% | Unsecured | 100,000 | 100,000 | |||||||||
| October 2022 (1,2) | April 2025 | 0% | Unsecured | 440,000 | 440,000 | |||||||||
| November 2022 (1,2) | April 2025 | 0% | Unsecured | 100,000 | 100,000 | |||||||||
| October 2023(3) | April 2025 | 8% | Unsecured | 100,000 | 100,000 | |||||||||
| Notes payable | $ | 1,370,009 | $ | 1,370,009 | ||||||||||
| (1) | In November 2023, the convertible notes were amended to remove the conversion features and the Company reclassified $640,000 from convertible notes to notes payable |
| (2) | In October 2024, the Company entered into agreements with 16 noteholders, extending the maturity on their notes to April 1, 2025. In consideration thereof, the noteholder will, receive 500,000 shares of common stock |
| (3) | In October 2024, the Company entered into agreements with 1 noteholder, extending the maturity on their note to April 3, 2025. In consideration thereof, the noteholder received 500,000 shares of common stock |
Note issued in 2023
Effective August 10, 2023, we entered into a Common Stock Repurchase Agreement, pursuant to which we repurchased 171,162,746 shares of our common stock. In payment of such shares, we issued a promissory note in the principal amount of $122,873 that bears interest at 8% per annum.
Modification of Notes Payable
The notes listed above issued in between June 2012 and February 2022, totaling $507,136 were originally due at various dates in 2023. In 2023, the Company extended the maturity dates of these notes listed above to January 2024 or April 2024. In 2024, the Company extended the maturity dates of all notes listed above to April 2025.
The Company evaluated the modification of terms under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension of the maturity dates did not result in significant and consequential changes to the economic substance of the debt, and thus resulted in a modification of the debt and not an extinguishment of the debt. Accordingly, no gain or loss on debt extinguishment was recorded.
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Specifically, on the date of modification, the Company determined that the present value of the cash flows of the modified debt instruments were less than 10% different from the present value of the remaining cash flows under the original debt instruments.
See below for discussion of inducement expense.
Convertible Notes Payable - Net
The Company had the following activity related to its convertible notes payable:
| Balance - December 31, 2022 | $ | 828,344 | ||
| Proceeds (face amount of note) | 205,000 | |||
| Reclassifications | (640,000 | ) | ||
| Original issue debt discount | (65,000 | ) | ||
| Amortization of debt discount | 469,514 | |||
| Conversion of notes payable to common stock | (797,858 | ) | ||
| Balance - December 31, 2023 | $ | - | ||
| Proceeds (face amount of note) | 628,708 | |||
| Guaranteed interest recorded to convertible note payable | 5,000 | |||
| Original issue debt discount | (10,000 | ) | ||
| Guaranteed interest – debt discount | (5,000 | ) | ||
| Repayments including guaranteed interest | (55,000 | ) | ||
| Amortization of debt discount | 15,000 | |||
| Balance - December 31, 2024 | $ | 578,708 |
Convertible Notes Payable are summarized as follows:
| Interest | December 31, | December 31, | ||||||||||||
| Issue Date | Maturity Date | Rate | Collateral | 2024 | 2023 | |||||||||
| March 2024 | March 2025 | 8% | Unsecured | 150,000 | - | |||||||||
| March 2024 | March 2025 | 8% | Unsecured | 50,000 | - | |||||||||
| March 2024 | March 2025 | 8% | Unsecured | 50,000 | - | |||||||||
| April 2024 | April 2025 | 8% | Unsecured | 10,000 | - | |||||||||
| April 2024 | April 2025 | 8% | Unsecured | 20,000 | - | |||||||||
| May 2024 | May 2025 | 8% | Unsecured | 10,000 | - | |||||||||
| May 2024 | May 2025 | 8% | Unsecured | 100,000 | - | |||||||||
| July 2024 | July 2025 | 8% | Unsecured | 5,000 | - | |||||||||
| July 2024 | July 2025 | 8% | Unsecured | 15,000 | - | |||||||||
| July 2024 | July 2025 | 8% | Unsecured | 10,000 | - | |||||||||
| July 2024 | July 2025 | 8% | Unsecured | 4,000 | - | |||||||||
| July 2024 | July 2025 | 8% | Unsecured | 50,000 | - | |||||||||
| August 2024 | August 2025 | 8% | Unsecured | 10,000 | - | |||||||||
| November 2024 | November 2025 | 8% | Unsecured | 10,000 | - | |||||||||
| November 2024 | November 2025 | 8% | Unsecured | 30,000 | - | |||||||||
| November 2024 | November 2025 | 8% | Unsecured | 54,708 | - | |||||||||
| $ | 578,708 | $ | - | |||||||||||
| Less: unamortized debt discount | - | - | ||||||||||||
| Convertible notes payable – net | $ | 578,708 | $ | - | ||||||||||
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Notes issued in 2024
In February, 2024, the Company entered into a securities purchase agreement (the “SPA”), pursuant to which the Company agreed to issue to the Investor a Promissory Note (the “Note”), dated February 12, 2024, in the principal amount of $50,000. The Note was funded by the Investor on February 15, 2024, with the Company receiving funding of $40,000, net of OID of $15,000, including guaranteed interest of 10% per calendar year, or $5,000. The Note matures on May 12, 2024. In July, 2024 the Company extended the maturity on the note to October 1, 2024. In consideration thereof, the noteholder received a warrant to purchase 2 shares of the Company’s common stock for each $1 of indebtedness they held, at an exercise price of $0.30 per share and an expiration date of July 16, 2026. The shares underlying each warrant are to be included in the Company’s next-filed registration statement with the Securities and Exchange Commission on Form S-1. Only upon an event of default that shall not have been cured, the Note is convertible into shares of the Company’s common stock at any time at a conversion price equal to the lowest traded price of the Common Stock during the thirty (30) business days prior to the relevant notice of conversion; provided, however, that the Investor may not convert the Note to the extent that such conversion would result in the investor’s beneficial ownership of the Company’s common stock being in excess of 9.99% of the Company’s then-issued and outstanding common stock. The Note was repaid on May 9, 2024.
Between March 2024 and November, 2024, the Company entered into securities purchase agreements (the “SPAs”) with 13 individuals, pursuant to which the Company agreed to issue to the Investors Promissory Notes (the “Notes”), in the aggregate principal amount of $628,708 with an interest rate of 8% per annum. The Notes mature twelve (12) months from the dates of issue. The principal amounts of the notes together with any accrued interest are convertible into common shares at any time prior or at maturity at a price of $0.10 per common share. The Notes, together with any accrued interest, shall automatically convert into common shares at a price of $0.10 per share upon the successful uplisting of the Company’s common stock onto the NASDAQ, CBOE or NYSE American stock exchanges.
Note issued in 2023
In January 2023, the Company issued an unsecured, one (1) year, original issue discount convertible note with a face amount of $100,000. This note contained an original issue discount of $30,000, resulting in net proceeds of $70,000.
The total debt discount of $30,000 is being amortized over the life of the convertible note and has been recorded as a component of other income (expense) – net in the accompanying consolidated statements of operations.
This note is convertible at a 20% discount to market upon the effectiveness of the Company’s Form S-1 registration statement. This convertible note contains an embedded contingent conversion feature that until the contingency is resolved (declared effectiveness of the S-1 registration statement) is not required to be accounted for in accordance with the related accounting guidance. The embedded feature in this convertible note was not accounted for at September 30, 2023 and December 31, 2022, respectively, given the probability of the S-1 not becoming effective and also due to the expected inability to acquire sufficient funds from an effective S-1 to repay the note holder, as determined by the Company.
On November 8, 2023, the Company’s S-1 registration statement was declared effective. However, the lender has waived their right to the discount to market feature. As a result, both at September 30, 2023 and November 8, 2023, the Company was not required to account for the discount to market feature as a derivative liability.
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In October and November 2023, the Company issued unsecured, one (1) month, original issue discount convertible notes with a total of face amount of $105,000. These notes contained an original issue discount of $35,000, resulting in net proceeds of $70,000. The convertible note was fully converted into 954,638 shares of common stock in November and December 2023. The notes were also issued with 62,000 bonus shares having a fair value of $11,098 ($0.179/share), based upon the closing price. These shares are considered an inducement expense. See Note 6 regarding common stock issued.
These notes are payable in cash or convertible at $0.11 per share, at the sole option of the Company.
In October 2023, the Company executed a one-year (1) note payable for $100,000. The note bears interest at 8% and is unsecured. The note was also issued with 1,000,000 shares of common stock having a fair value of $179,000 ($0.179/share), based upon the quoted closing price. These shares are considered and inducement expense. See Note 6 regarding common stock issued.
Modification and Extinguishment of Convertible Notes Payable (Year Ended December 31, 2023)
Year Ended December 31, 2023
Maturity Date, Note Modifications in 2023 and Inducement Expense
In May 2023, the note issued in October 2022 ($440,000) were extended to January 2024.
The Company evaluated the modification of terms under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension of the maturity date did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt. Accordingly, no gain or loss on debt extinguishment was recorded.
Specifically, on the date of modification, the Company determined that the present value of the cash flows of the modified debt instrument was less than 10% different from the present value of the remaining cash flows under the original debt instrument.
In May 2023, the outstanding $1,232,857 in convertible notes payable balance, $692,857 of these notes were converted to 6,298,703 shares of common stock ($0.11/share) (see Note 6 and below regarding inducement).
As a result, $540,000 in convertible notes remained from this initial debt modification (October 2022 - $440,000 (now due April 2024), and December 2022 - $100,000 (now due April 2024)).
In September 2023, all of the notes listed above ($540,000) as well as the note issued in January 2023 ($100,000) were extended to April 2024 (total $640,000).
The Company evaluated the modification of terms under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension of the maturity dates resulted in significant and consequential changes to the economic substance of the debt totaling $640,000 (due April 2024), and thus resulted in an extinguishment of the debt. The Company issued 640,000 shares of common stock, having a fair value of $114,560 (based upon the quoted closing price of $0.179/share) in connection with the lender agreeing to extend the loan maturity date. There were no other changes to these notes payable. Accordingly, the Company recorded an inducement expense of $114,560.
In November, 2023, the holders of all of the convertible notes listed above waived the convertibility feature of these notes. As a result, $640,000 of Convertible Notes Payable were reclassified from Convertible Notes Payable to Notes Payable.
Specifically, on the date of modification, the Company determined that the present value of the cash flows of the modified debt instruments were greater than 10% different from the present value of the remaining cash flows under the original debt instruments.
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In December 2023, 6 notes totaling $107,136 were extended to July 2024.
In March 2024, all of the notes listed above, as well as the note issued in January 2023 ($100,000) were extended to July 2024 (total ($640,000).
Inducements
Fiscal year 2024
In March 2024, the Company recorded 2,080,000 shares of common stock issuable as inducements to 7 individuals for the extension of 7 promissory notes to July 1, 2024, which shares were valued at $0.25 per share. All shares were issued in April 2024. The Company recognized the extensions as debt extinguishment and recorded $520,000 as inducement expense.
In July 2024, the Company entered into agreements with 16 noteholders, extending the maturity on their notes to October 1, 2024. In consideration thereof, each noteholder received a warrant to purchase 2 shares of the Company’s common stock for each $1 of indebtedness they held, for an aggregate of 16 warrants exercisable into 2,541,276 shares of common stock, at an exercise price of $0.30 per share and an expiration date of July 16, 2026. The Company recorded $377,774 as inducement expense. In October, 2024, the Notes were further extended to April, 2025.
In October 2024, the Company entered into agreements with 16 noteholders, extending the maturity on their note to April 1, 2025. In consideration thereof, the noteholder received 500,000 shares of common stock, which shares were valued at $0.2136 per share. The Company recognized the extensions as debt extinguishment and recorded $106,800 as inducement expense.
Fiscal year 2023
1st Inducement
In May 2023, the Company added a second conversion feature to certain notes aggregating $342,857. The Company, in addition to allowing conversion at a discount to market pending the effectiveness of their S1 registration statement, allowed these debt holders an option to convert their debt at a fixed rate of $0.11/share.
In adding this substantive conversion option ($0.11/share), the Company determined that an inducement had occurred. Of the $692,857 in debt converted, $342,857 was the amount of debt that received a fixed rate conversion option ($0.11/share), the remaining $350,000 in debt did not receive a fixed rate conversion option, however, was converted at an agreed upon amount of $0.11/share.
The entire $692,857 was converted into 6,298,703 shares of common stock. See Note 5.
The fair value of the Company’s common stock on the date of inducement was in excess of the value of the debt converted by $102,857 as follows during the year ended December 31, 2023:
| December 31, 2023 | ||||
| Fair value of common stock on conversion date | $ | 445,714 | ||
| Fair value of debt subject to inducement | 342,857 | |||
| Inducement expense | $ | 102,857 | ||
2nd Inducement (summary of activity from above – excludes inducement related to addition of substantive conversion option at $0.11/share)
As noted above for various notes ($400,000) and convertible notes ($640,000) which were amended in September 2023 (aggregate $1,040,000) to extend the maturity date of these notes to April 2024, the Company issued 1,040,000 shares of common stock having a fair value of $186,160, based upon the quoted closing price of $0.179/share.
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The fair value of the Company’s common stock on the date of inducement was in excess of the value of the debt converted by $186,160 as follows during the year ended December 31, 2023:
| December 31, 2023 | ||||
| Fair value of debt and common stock on extinguishment date | $ | 1,226,160 | ||
| Fair value of debt subject to inducement | 1,040,000 | |||
| Inducement expense | $ | 186,160 | ||
3rd Inducement
In October 2023, the Company issued convertible notes of $105,000. As a result of conversion of notes, the Company issued extra shares and recorded it as inducement expense.
The fair value of the Company’s common stock on the date of inducement was in excess of the value of the debt converted by $105,000 as follows during the year ended December 31, 2023:
| December 31, 2023 | ||||
| Fair value of debt and common stock on extinguishment date | $ | 154,438 | ||
| Fair value of debt subject to inducement | 105,000 | |||
| Inducement expense | $ | 49,438 | ||
Interest expense and amortization of debt discount
During the years ended December 31, 2024 and 2023, the Company recorded interest expense for notes payable and convertible notes of $56,794 and $15,714, respectively.
During the years ended December 31, 2024 and 2023, the Company recorded amortization of debt discount of $15,000 and $469,514, respectively.
Going Concern
The consolidated financial statements beginning on page F-1 have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As reflected in the financial statements, we had a working capital deficit of $2,378,145 at December 31, 2024, and had a net loss from continuing operations of $3,051,687 for the year December 31, 2024, which raises substantial doubt as to the Company’s ability to continue as a going concern for a period of one year from the issuance of the financial statements.
Off Balance Sheet Arrangements
At December 31, 2024, we did not have any off balance sheet arrangements that we believe have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Policies
Our accounting policies are more fully described in our financial statements, beginning on page F-1. The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on our best knowledge of current and anticipated events, actual results could differ from the estimates.
We have identified the following accounting policies as those that require significant judgments, assumptions and estimates and that have a significant impact on our financial condition and results of operations. These policies are considered critical because they may result in fluctuations in our reported results from period to period, due to the significant judgments, estimates and assumptions about complex and inherently uncertain matters and because the use of different judgments, assumptions or estimates could have a material impact on our financial condition or results of operations. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions.
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Fair Value of Financial Instruments. The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.
The three tiers are defined as follows:
Level 1 - Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
Level 2 - Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
Level 3 - Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.
The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.
Beneficial Conversion Features. For instruments that are not considered liabilities under ASC 480 or ASC 815, the Company applies ASC 470-20 to convertible securities with beneficial conversion features that must be settled in stock. ASC 470-20 requires that the beneficial conversion feature be valued at the commitment date as the difference between the effective conversion price and the fair market value of the common stock (whereby the conversion price is lower than the fair market value) into which the security is convertible, multiplied by the number of shares into which the security is convertible limited to the amount of the loan. This amount is recorded as a debt discount and amortized to interest expense in the Consolidated Statements of Operations.
Debt Discount. For certain notes issued, the Company may provide the debt holder with an original issue discount. The original issue discount is recorded as a debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations.
The Company adopted ASU 2020-06 on January 1, 2024, which eliminated the cash conversion sub-sections of ASC 470-20 resulting in these instruments being recorded as a single liability. As a result, the discount created by recognition of a component of the convertible debt in equity was eliminated and interest expense was reduced. When adopted, the Company recorded the change to retained earnings.
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Research and Development. The Company accounts for research and development costs in accordance with ASC subtopic 730-10, Research and Development (“ASC 730-10”).
Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.
Stock-based Compensation. The Company accounts for our stock-based compensation under ASC 718 “Compensation - Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options.
The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
When determining fair value, the Company considers the following assumptions in the Black-Scholes model:
| ● | Exercise price, | |
| ● | Expected dividends, | |
| ● | Expected volatility, | |
| ● | Risk-free interest rate; and | |
| ● | Expected life of option |
Recent Accounting Standards. Changes to accounting principles are established by the FASB in the form of Accounting Standards Updates (“ASU’s”) to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found the following recent accounting pronouncements issued, but not yet effective accounting pronouncements, are not expected to have a material impact on the financial statements of the Company.
In November 2024, the FASB issued ASU 2024-03, ASC Subtopic “Disaggregation of Income Statement Expenses (ASC 220-40): Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures”. The amendments require additional disclosure of the nature of expenses included in the income statement. The amendments in this update are effective for public business entities for fiscal years, beginning after December 15, 2026. Early adoption is permitted. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
We do not expect the adoption of this pronouncement will have a material effect on the Company’s financial statements.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable to a smaller reporting company.
Item 8. Financial Statements and Supplementary Data
Please see our Financial Statements beginning on page F-1 of this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
During the years ended December 31, 2024 and 2023, there were no changes, in or disagreements with, our independent auditor.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to our management, including our President and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Exchange Act Rule 13a-15(e), we carried out an evaluation, under the supervision and with the participation of our management, including our President and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our President and our Chief Financial Officer concluded that our disclosure controls were not effective at December 31, 2024.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
| ● | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; | |
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and | |
| ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
As an emerging growth company experiencing rapid growth, we have worked diligently to improve processes within our company that increase risk related to transaction processing which can impact our financial reporting. We intend to implement a significant number of manual compensating controls to address this risk.
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Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Our management, including our President and our Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the 2013 Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on that evaluation, they concluded that, during the period covered by this Annual Report, such internal controls and procedures were not effective.
This Annual Report on Form 10-K does not include an attestation report by our company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our company’s registered public accounting firm pursuant to the rules of the SEC that require our company to provide only our company’s management’s report in this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our last fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth the names and ages of our company’s current directors and executive officers.
Directors and Executive Officers
| Name | Age | Position(s) | ||
| Jose Antonio Reyes | 57 | Chief Executive Officer | ||
| Scott Silverman | 55 | Chief Financial Officer and Director | ||
| Marvin S. Hausman, M.D. | 83 | Chief Science Officer and Director |
Our Directors serve until the earlier occurrence of the election of his successor at the next meeting of shareholders, death, resignation or removal by the Board of Directors. Officers serve at the discretion of our Board of Directors. There exist no family relationships among our officers and directors.
Certain information regarding the backgrounds of each of our officers and directors is set forth below.
Jose Antonio Reyes has served as our Chief Executive Officer since August 2024. Prior to becoming our CEO, Mr. Reyes served as our COO from February 2023 until taking over as our CEO. From 2017 through 2023, Mr. Reyes served as Director of Executive Relations & Business Development for BlockScience, Inc., where his duties included overseeing the development of internal communications, hiring, monitoring and quality control systems. Mr. Reyes has over 30 years of leadership experience across national and international markets. Previously, Mr. Reyes co-founded and led IGM Global Inc., an executive education media company that provides insights into disruptive technologies and their industry impacts. He also founded Excelorators, Inc., offering corporate leadership development programs at prestigious institutions such as Harvard, MIT, Stanford, and West Point. Additionally, he was the Chief Strategy Officer for Trademark Tours, which specializes in private hospitality and customized education services at Harvard University. Reyes holds an MA in Communication and Media Studies and an MA in Biblical Studies from Regent University, along with a BA in Public Policy-Telecommunications from Duke University.
Scott J. Silverman has served as our Chief Financial Officer and a director since November 2023. Mr. Silverman has over 30 years of business success on national and international levels, with a highly diverse knowledge of financial, legal and operations management; public company management, accounting and SEC regulations. Mr. Silverman is one of the founders, and currently serves as President and CEO since 2007, of Thornhill Advisory Group, Inc., a multi-national corporate financial management and advisory firm serving clients around the world, and Thornhill Holdings, Ltd, a private equity firm that focuses its investments in the hospitality, construction, real estate and healthcare sectors. Additionally, he currently serves as the CFO of PanGIA Biotech, a biotechnology company that has developed liquid biopsy technologies, a position he has held since November 2023, and as the CFO of Vitae Group, Inc., a global insurance brokerage, since December 2022. Mr. Silverman is also a director nominee of Muliang Viagoo Technology, Inc. (OTC:MULG). From November 2023 to September 2024, he served as the CFO of Vocodia Holdings, Inc (OTC:VHAI), a publicly traded artificial intelligence software company, and from August 2021 through April 2022 as the CFO of Sidus Space, Inc., (NASDAQ:SIDU), a publicly traded Space-as-a-Service company, both of which in his capacities, he oversaw their IPOs. From October 2018 through February 2024, Mr. Silverman also served as the CFO of Healthsnap, Inc. a healthcare Software as a Service (SaaS) platform on the cutting edge of remote patient monitoring and chronic care management and from November 2018 through February 2023 as the CFO of Riverside Miami, LLC, a mixed-use restaurant and entertainment project in Miami, Florida. He has a bachelor’s degree in finance from George Washington University and a master’s degree in accounting from NOVA Southeastern University. We believe that Mr. Silverman is qualified to serve on our board by reasons of the above mentioned professional experiences and qualifications, specifically as it relates to financial management, accounting controls and financial strategy.
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Marvin S. Hausman, M.D. has served as our Chief Science Officer since September 5, 2023 and served as our Chief Executive Officer from September 2023 through August 2024, and a key consultant to our company from July 2022 until September 2023 and as a director since November 2023. In the five years prior to joining Ludwig, Dr. Hausman served as a consultant with various life science companies including Nova Mentis Life Science, Summit Joint Performance and Designer Genomics. Dr. Hausman is an Immunologist and Board-Certified Urological Surgeon with more than 40 years of drug research and development experience with various pharmaceutical companies, including Bristol Myers International, Mead Johnson Pharmaceutical Co., E.R. Squibb, Medco Research, and Axonyx. An accomplished executive with domestic and international experience, Dr. Hausman successfully executed acquisitions of breakthrough medical technology, in conjunction with formation, funding and launch of several corporations. He is a co-founder of Medco Research Inc., a NYSE biopharmaceutical company acquired by King Pharmaceutical Inc, currently a division of Pfizer. He is a founder of Axonyx Inc., acquired by Torrey Pines Therapeutics, Inc. He is a founder of Entia Biosciences, Inc., which designs and develops natural organic antioxidant food-based products to be used as nutritional supplements in humans and animals. He is founder and President of Northwest Medical Research Partners, Inc., a company specializing in the identification and acquisition of breakthrough pharmaceutical and nutraceutical products. Dr. Hausman is a Member of the Board of Governors of New York University School of Medicine Alumni Association. Dr. Hausman received his medical degree from New York University School of Medicine in 1967. We believe that Dr. Hausman is qualified to serve as a member of the Board because of the above-mentioned professional experiences and qualifications, specifically as they relate to the medical field and profession.
Key Consultant
Kyle Ambert, PhD. Dr. Ambert is currently Director of Data Science at Nike, Inc. and has extensive experience in data analytics, machine learning, artificial intelligence and applied analytics. His previous experience includes postings with the National Library of Medicine and Intel Corp. Dr. Ambert holds a PhD in Biomedical Informatics from Oregon Health & Science University.
Additionally, Dr. Ambert has interests in the following: applied analytics, multivariate statistics, machine learning and deep learning, text mining and natural language processing, biomedical informatics, distributed computing, information visualization, and behavioral economics. These interests give him skills in technical communication, data analysis, data visualization, analytics, programing, deep learning frameworks, and health and life sciences, all of which we believe are of great value to the Company.
Under our consulting agreement dated July 1, 2022, with Dr. Ambert, we pay Dr. Ambert $2,500 per month. In addition, we issued Dr. Ambert 250,000 shares of our Common Stock upon his entering into the agreement. Dr. Ambert provides us with Biomedical Informatics Services, which includes developing data mining tools to quantitate, analyze and perform cluster analysis of DNA and RNA panels. The agreement is for a term of one year, which renews for additional one-year periods, unless either party elects not to renew the agreement. Kyle was issued a bonus in shares on the filing of our most recent patent showing bladder, breast and colon cancer data.
Conflicts of Interest
Our executive officers, our sole director and our key consultant are engaged in other businesses, either individually or through partnerships and corporations in which they may have an interest, hold an office or serve on a board of directors. As a result, certain conflicts of interest may arise. We will attempt to resolve such conflicts of interest in favor of our company. In general, our officers and directors are accountable to us and our shareholders as fiduciaries, which requires that these officers and directors exercise good faith and integrity in handling our company’s affairs. A shareholder may be able to institute legal action on behalf of our company or on behalf of itself and other similarly situated shareholders to recover damages or for other relief in cases of the resolution of conflicts is in any manner prejudicial to us.
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Involvement in Certain Legal Proceedings
None of our executive officers and directors has, during the past ten years:
| ● | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); | |
| ● | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; | |
| ● | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; | |
| ● | been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| ● | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and- desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
| ● | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
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Code of Business Conduct and Ethics
As of the date of this Annual Report, our Board of Directors has not adopted a code of ethics with respect to our directors, officers and employees. Our Board of Directors intends to adopt a Code of Business Conduct and Ethics in the near future.
Corporate Governance
We do not have a separate Compensation Committee, Audit Committee or Nominating Committee. These functions are conducted by our entire Board of Directors. During the year ended December 31, 2024, our Board of Directors did not hold a meeting, but instead took actions by written consent in lieu of a meeting.
There are no understandings between the Directors of the Company or any other person pursuant to which our officers and directors were or are to be selected as an officer or director.
Independence of Board of Directors
None of our Directors is independent, within the meaning of definitions established by the SEC or any self-regulatory organization. We are not currently subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include independent directors.
Shareholder Communications with Our Board of Directors
The Company welcomes comments and questions from our shareholders. Shareholders should direct all communications to our Chief Executive Officer, Jose Antonio Reyes., at our executive offices. However, while we appreciate all comments from shareholders, we may not be able to respond individually to all communications. We will attempt to address shareholder questions and concerns in our press releases and documents filed with the SEC, so that all shareholders have access to information about us at the same time. Mr. Reyes collects and evaluates all shareholder communications. All communications addressed to our directors and executive officers will be reviewed by those parties, unless the communication is clearly frivolous.
Insider Trading Policy
The Company has
Item 11. Executive Compensation
In General
Currently, our management is unable to estimate accurately when, if ever, our company will possess sufficient capital, whether derived from sales revenues, this offering or otherwise, for the payment of salaries to our management.
As of the date of this Annual Report, there are no annuity, pension or retirement benefits proposed to be paid to officers, directors or employees of our company, pursuant to any presently existing plan provided by, or contributed to, our company.
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Compensation Summary
The following table summarizes information concerning the compensation awarded, paid to or earned by, our executive officers.
our named executive officers.
| Name and Principal Position | Year Ended 12/31 | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Com- pensation ($) | Non-qualified Deferred Compen- sation Earnings ($) | All Other Compen- sation ($) | Total ($) | |||||||||||||||||||||||||
| Jose Antonio Reyes | 2024 | 78,750 | — | — | — | — | — | — | 78,750 | |||||||||||||||||||||||||
| Chief Executive Officer | 2023 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Scott J. Silverman(3) | 2024 | 105,000 | — | — | — | — | — | — | 105,000 | (5) | ||||||||||||||||||||||||
| Chief Financial Officer, Secretary and Treasurer | 2023 | 13,125 | (4) | — | — | — | — | — | — | 13,125 | (4) | |||||||||||||||||||||||
| Marvin S. Hausman, M.D.(1) | 2024 | 105,000 | — | — | — | — | — | — | 105,0000 | |||||||||||||||||||||||||
| President, Chief Science Officer and Former CEO | 2023 | 60,000 | (2) | — | — | — | — | — | — | 60,000 | (2) | |||||||||||||||||||||||
| (1) | Dr. Hausman served as our Chief Executive Officer from September 5, 2023 until June 2024 |
| (2) | $25,000 of this amount was accrued |
| (3) | Mr. Silverman did not become our Chief Financial Officer until November 28, 2023. |
| (4) | $7,625 of this amount was accrued. |
| (5) | $41,250 of this amount was accrued |
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Outstanding Option Awards
The following table provides certain information regarding unexercised options to purchase common stock, stock options that have not vested and equity-incentive plan awards outstanding as of the date of this Annual Report, for each named executive officer.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unex- ercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | |||||||||||||||||||||||||||
| Jose Antonio Reyes | - | - | - | - | n/a | - | n/a | - | - | |||||||||||||||||||||||||||
| Scott J. Silverman | - | - | - | - | n/a | - | n/a | - | - | |||||||||||||||||||||||||||
| Marvin S. Hausman, M.D. | - | - | - | - | n/a | - | n/a | - | - | |||||||||||||||||||||||||||
Employment Agreements
Jose Antonio Reyes On April 1, 2024, Jose Antonio Reyes signed an Offer Letter for his employment as our Chief Operating Officer. In September 2024, Mr. Reyes was named as our Chief Executive Officer. Pursuant to the terms of his employment, which remained the same upon his appointment as Chief Executive Officer, the Company is obliged to make monthly payments to Mr. Reyes of $8,750, as follows:
Beginning from the execution date of the Offer Letter and continuing until the Company raises $750,000 in equity or debt financing (the “Accrual Period”), the Company is obligated to make the monthly payments described in the following table:
| Funds Raised | Paid Monthly | Accrued Monthly | ||||||
| $0 – $250,000 | $ | 3,750 | $ | 5,000 | ||||
| $250,000 – $750,000 | $ | 5,000 | $ | 3,750 | ||||
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Upon the Company’s raising of $750,000, it shall pay the accrued amount in cash. Thereafter, the Company shall pay the entire monthly payment without accrual.
Scott J. Silverman. On November 15, 2023, we entered into a Financial Advisory Services Agreement (the “CFO Agreement”) with Thornhill Advisory Group, Inc. (f/k/a EverAsia Financial Group, Inc.), a financial consulting firm owned by Scott J. Silverman, who, in conjunction with the execution the CFO Agreement, was appointed as our Chief Financial Officer. Pursuant to the terms of the CFO Agreement, Mr. Silverman shall serve as our Chief Financial Officer for an initial term of one (1) year, with automatic three-month extension terms thereafter, unless either party provides notice of its intent not to renew. In addition, the CFO Agreement may be terminated at any time by either party, upon 60-days’ notice.
Under the CFO Agreement, the Company is obligated to make monthly payments of $8,750, as follows:
Beginning from the execution date of the CFO Agreement and continuing until the Company raises $750,000 in equity or debt financing (the “Accrual Period”), the Company is obligated to make the monthly payments described in the following table:
| Funds Raised | Paid Monthly | Accrued Monthly | ||||||
| $0 – $250,000 | $ | 3,750 | $ | 5,000 | ||||
| $250,000 – $750,000 | $ | 5,000 | $ | 3,750 | ||||
Upon the Company’s raising of $750,000, it shall pay the accrued amount in cash. Thereafter, the Company shall pay the entire monthly payment without accrual.
Marvin S. Hausman, M.D. On April 1, 2024, Marvin S. Hausman., M.D. signed an Offer Letter for his employment as our Chief Science Officer. Additionally, Dr. Hausman serves as our Chairman of the Board of Directors. Pursuant to the terms of his employment, the Company is obliged to make monthly payments to Dr. Hausman of $8,750, as follows:
Beginning from the execution date of the Offer Letter and continuing until the Company raises $750,000 in equity or debt financing (the “Accrual Period”), the Company is obligated to make the monthly payments described in the following table:
| Funds Raised | Paid Monthly | Accrued Monthly | ||||||
| $0 – $250,000 | $ | 3,750 | $ | 5,000 | ||||
| $250,000 – $750,000 | $ | 5,000 | $ | 3,750 | ||||
Upon the Company’s raising of $750,000, it shall pay the accrued amount in cash. Thereafter, the Company shall pay the entire monthly payment without accrual.
From September 5, 2023 until April 1, 2024, Marvin S. Hausman, M.D., served as our Chief Executive Officer. Under his employment agreement, we paid Dr. Hausman $5,000 per month. In addition, we were to pay Dr. Hausman an amount equal to 10% of gross sales revenues attributable to Dr. Hausman’s efforts, in perpetuity.
From July 1, 2022, to September 5, 2023, Dr. Hausman provided services on behalf of our Company, pursuant to a consulting agreement. Under his consulting agreement, we paid Dr. Hausman $5,000 per month. In addition, we were responsible for paying Dr. Hausman an amount equal to 10% of gross sales revenues attributable to Dr. Hausman’s efforts, in perpetuity. We made no payments to Dr. Hausman based on sales, during the term of his consulting agreement.
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Outstanding Equity Awards
Our Board of Directors has made no equity awards and no such award is pending.
Equity Compensation Plan Information
Our Board has adopted the 2024 Stock Incentive Plan (the “Plan”).
The following table sets forth information about our equity compensation plans as of December 31, 2024.
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted- average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under the equity compensation plan (excluding securities reflected in column (a) (c) | ||||||||||
| Equity compensation plan approved by security holders | $ | 30,000,000 | ||||||||||
| Equity compensation plan not approved by security holders | — | — | — | |||||||||
| Total | $ | 30,000,000 | ||||||||||
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Summary of the Plan
Authorized Shares
There are currently 30,000,000 shares of our Common Stock available for issuance pursuant to the Plan. Shares of Common Stock issued under our Plan may be authorized but unissued or reacquired shares of our Common Stock. If any Award granted under this Plan is canceled, terminates, expires, or lapses for any reason, Shares subject to such Award shall be again available for the grant of an Award under the Plan. Additionally, in the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, Stock dividend, split-up, Share combination, or other change in the corporate structure of the Company affecting the Shares, an adjustment shall be made in the number and class of Shares which may be delivered under the Plan, as may be determined to be appropriate and equitable by the Board of Directors, in its sole discretion, to prevent dilution or enlargement of rights.
Administration
Our Board has the authority to administer our Plan and may issue either unrestricted or restricted stock grants. Subject to the terms of our Plan, the Board has the authority to determine the terms of awards, including recipients, the number of shares of Common Stock subject to each stock award, the fair market value of a share of our Common Stock, the vesting schedule applicable to the awards, together with any vesting acceleration, and the terms and conditions of the award agreements for use under the Plan. The Committee has the power to modify outstanding awards under the Plan, subject to the terms of the Plan and applicable law.
Restricted Stock
The terms and conditions of any restricted stock awards granted to a participant will be set forth in an award agreement and, subject to the provisions in the Plan, will be determined by the Committee. Under a restricted stock award, we issue shares of our Common Stock to the recipient of the award, subject to vesting conditions and transfer restrictions that lapse over time or upon achievement of performance conditions. The Committee will determine the vesting schedule and performance objectives, if any, applicable to each restricted stock award. Unless the Committee determines otherwise, the recipient may vote and receive dividends on shares of restricted stock issued under our Plan.
Merger, Consolidation or Asset Sale
If the Company is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to another company while awards or options remain outstanding under the Plan, unless provisions are made in connection with such transaction for the continuance of the Plan and/or the assumption or substitution of such awards or options with new options or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, then all outstanding options and stock awards which have not been continued, assumed or for which a substituted award has not been granted shall, whether or not vested or then exercisable, unless otherwise specified in the relevant agreements, terminate immediately as of the effective date of any such merger, consolidation or sale.
Change in Capitalization
If the Company shall effect a subdivision or consolidation of shares of Common Stock or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of Common Stock outstanding, without receiving consideration therefore in money, services or property, then awards amounts, type, limitations, and other relevant consideration shall be appropriately and proportionately adjusted. The Committee shall make such adjustments, and its determinations shall be final, binding and conclusive.
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Plan Termination
No Awards may be issued under the Plan after December 31, 2029.
Director Compensation
We have made no payments to our directors in consideration of their services to date, and there is currently no agreement or arrangement to pay any of our directors for their service as directors in the future.
Compensation Recovery and Clawback Policy
Under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), in the event of misconduct that results in a financial restatement that would have reduced a previously paid incentive amount, we can recoup those improper payments from our Chief Executive Officer, Chief Financial Officer, and Chief Science Officer (if any). The SEC also recently adopted rules which direct national stock exchanges to require listed companies to implement policies intended to recoup bonuses paid to executives if the company is found to have misstated its financial results.
Additionally, on December 31, 2024, the Board of Directors of the Company adopted a Policy for the Recovery of Erroneously Awarded Incentive-Based Compensation (the “Clawback Policy”), to comply with the final clawback rules adopted by the U.S. Securities and Exchange Commission under Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended (“Rule 10D-1”). The Clawback Policy provides for the mandatory recovery of erroneously awarded incentive compensation from current and former officers of the Company as defined in Rule 10D-1 (“Covered Officers”) in the event the Company is required to prepare an accounting restatement as specified in the Clawback Policy. Under the Clawback Policy, the Board may recoup from the Covered Officers erroneously awarded incentive compensation received within a lookback period of the three completed fiscal years preceding the date on which the Company is required to prepare an accounting restatement. The Clawback Policy is effective as of December 31, 2024.
Company Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
We do not have a policy on the timing of awards of options in relation to the disclosure by us of material nonpublic information. During the fiscal year ended December 31, 2024, no Named Executive Officer was awarded stock options, and we did not time the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.
Director Compensation
Our directors receive no compensation for their serving as directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information about the beneficial ownership of our capital stock at April 16, 2024, for:
| ● | each person known to us to be the beneficial owner of more than 5% of our common stock; | |
| ● | each named executive officer; | |
| ● | each of our directors; and | |
| ● | all of our named executive officers and directors as a group. |
Unless otherwise indicated, the business address of each person listed is c/o Ludwig Enterprises, Inc., 8950 SW 74th Ct, Ste 2201-A149, Miami, FL 33156. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.
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In computing the number of shares of our common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of our common stock subject to options, warrants, preferred stock or restricted stock units held by that person that are currently exercisable or convertible or exercisable or convertible within 60 days of March 15, 2025. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.
| Number of Shares | % | |||||||||
| Beneficially | Beneficially | Effective Voting | ||||||||
| Name of Shareholder | Owned | Owned(1) | Power | |||||||
| Common Stock | ||||||||||
| Named Executive Officers and Directors | ||||||||||
| Jose Antonio Reyes | 0 | 0 | % | |||||||
| Scott J. Silverman | 0 | 0 | % | |||||||
| Marvin S. Hausman, M.D. | 243,800,000 | (2) | 28.30 | * | See Note 10 | |||||
| Officers and directors, as a group (3 persons) | 243,800,000 | (2) | 31.69 | % | ||||||
| 5% Owners | ||||||||||
| Thomas Terwilliger | 31,409,040 | (3) | 3.65 | % | ||||||
| Baranquilla Investments, LLC (4) | 200,000,000 | (5) | 23.21 | % | ||||||
| Homeopathic Partners, Inc.(6) | 300,000,000 | (7) | 34.82 | % | ||||||
| Vasaio Capital, Inc.(8) | 200,000,000 | (9) | 23.21 | % | ||||||
| Convertible Preferred Stock (10) | ||||||||||
| Barranquilla Investments, LLC (4) | 2,000,000 | 28.57 | % | |||||||
| Homeopathic Partners, Inc.(6) | 3,000,000 | 42.86 | % | |||||||
| Vasaio Capital, Inc. (8) | 2,000,000 | 28.57 | % | |||||||
| * | Less than 1%. |
| (1) | Based on 861,569,807 shares outstanding, which includes (a) 161,569,807 issued shares, and (b) 700,000,000 unissued shares that underlie shares of Convertible Preferred Stock convertible within 60 days of the date of this Annual Report. |
| (2) | 200,000,000 of these shares are unissued but underlie currently convertible shares of our Convertible Preferred Stock. |
| (3) | 1,175,992 of these shares are owned by Tadas Trust, James Williams, Trustee, the beneficiary of which is Mr. Terwilliger; and 102,710 of these shares are owned by Barr Irrevocable Trust, the trustee of which trust is Mr. Terwilliger. |
| (4) | The manager of Barranquilla Investments, LLC is Marvin S. Hausman, M.D., our Chief Executive Officer. Dr. Hausman has the sole voting and dispositive control over the shares held by Barranquilla Investments, LLC. The address of this shareholder is 1309 Coffeen Avenue, Suite 1200, Sheridan, Wyoming 82801. |
| (5) | These shares are unissued but underlie currently convertible shares of our Convertible Preferred Stock owned by Barranquilla Investments, LLC. |
| (6) | Carl Rubin is the Chief Executive Officer of Homeopathic Partners, Inc. Mr. Rubin has the sole voting and dispositive control over the shares held by Homeopathic Partners, Inc. The address of this shareholder is 2363 Arbordale Avenue, The Villages, Florida 32162. |
| (7) | These shares are unissued, but underlie currently convertible shares of our Convertible Preferred Stock owned by Homeopathic Partners, Inc. |
| (8) | Corain McGinn is the Chief Executive Officer of Vasaio Capital, Inc. Mr. McGinn has the sole voting and dispositive control over the shares held by Vasaio Capital, Inc. The address of this shareholder is 288 Grove Streeet, Suite 361, Braintree, Massachusetts 02184. |
| (9) | These shares are unissued, but underlie currently convertible shares of our Convertible Preferred Stock owned by Vasaio Capital, Inc. |
| (10) | Each share of Convertible Preferred Stock (a) is convertible into 100 shares of our common stock at any time and (b) has the following voting rights: each share of Convertible Preferred Stock shall vote on all matters as a class with the holders of common stock and each share of Convertible Preferred Stock shall be entitled to the number of votes equal to the “conversion rate,” or 100 votes per share. |
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Equity Compensation Plan Information
Our Board has adopted the 2024 Stock Incentive Plan (the “Plan”).
The following table sets forth information about our equity compensation plans as of December 31, 2024.
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted- average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under the equity compensation plan (excluding securities reflected in column (a) (c) | ||||||||||
| Equity compensation plan approved by security holders | $ | 30,000,000 | ||||||||||
| Equity compensation plan not approved by security holders | - | - | - | |||||||||
| Total | $ | 30,000,000 | ||||||||||
Summary of the Plan
Authorized Shares
There are currently 30,000,000 shares of our Common Stock available for issuance pursuant to the Plan. Shares of Common Stock issued under our Plan may be authorized but unissued or reacquired shares of our Common Stock. If any Award granted under this Plan is canceled, terminates, expires, or lapses for any reason, Shares subject to such Award shall be again available for the grant of an Award under the Plan. Additionally, in the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, Stock dividend, split-up, Share combination, or other change in the corporate structure of the Company affecting the Shares, an adjustment shall be made in the number and class of Shares which may be delivered under the Plan, as may be determined to be appropriate and equitable by the Board of Directors, in its sole discretion, to prevent dilution or enlargement of rights.
Administration
Our Board has the authority to administer our Plan and may issue either unrestricted or restricted stock grants. Subject to the terms of our Plan, the Board has the authority to determine the terms of awards, including recipients, the number of shares of Common Stock subject to each stock award, the fair market value of a share of our Common Stock, the vesting schedule applicable to the awards, together with any vesting acceleration, and the terms and conditions of the award agreements for use under the Plan. The Committee has the power to modify outstanding awards under the Plan, subject to the terms of the Plan and applicable law.
Restricted Stock
The terms and conditions of any restricted stock awards granted to a participant will be set forth in an award agreement and, subject to the provisions in the Plan, will be determined by the Committee. Under a restricted stock award, we issue shares of our Common Stock to the recipient of the award, subject to vesting conditions and transfer restrictions that lapse over time or upon achievement of performance conditions. The Committee will determine the vesting schedule and performance objectives, if any, applicable to each restricted stock award. Unless the Committee determines otherwise, the recipient may vote and receive dividends on shares of restricted stock issued under our Plan.
Merger, Consolidation or Asset Sale
If the Company is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to another company while awards or options remain outstanding under the Plan, unless provisions are made in connection with such transaction for the continuance of the Plan and/or the assumption or substitution of such awards or options with new options or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, then all outstanding options and stock awards which have not been continued, assumed or for which a substituted award has not been granted shall, whether or not vested or then exercisable, unless otherwise specified in the relevant agreements, terminate immediately as of the effective date of any such merger, consolidation or sale.
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Change in Capitalization
If the Company shall effect a subdivision or consolidation of shares of Common Stock or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of Common Stock outstanding, without receiving consideration therefore in money, services or property, then awards amounts, type, limitations, and other relevant consideration shall be appropriately and proportionately adjusted. The Committee shall make such adjustments, and its determinations shall be final, binding and conclusive.
Plan Termination
No Awards may be issued under the Plan after December 31, 2029.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since January 1, 2021, in which the amount involved in the transaction exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last two completed fiscal years.
Common Stock Repurchase Agreement
Effective August 10, 2023, we entered into a Common Stock Repurchase Agreement (the “Repurchase Agreement”) with Worthington Financial Services, Inc. (“Worthington”), pursuant to which we repurchased 171,162,746 shares of our common stock (the “Worthington Shares”). In payment of such shares, we issued a promissory note (the “Worthington Note”) in the principal amount of $122,873 that bears interest at 8% per annum. The Worthington Note is due on the earlier to occur of (1) our receipt of the first $500,000 in proceeds in our offering in November 2023 (of which there is no assurance) and (2) April 3, 2025. Under the Worthington Note, an event of default occurs if (1) we fail on the maturity date to pay timely the principal and accrued interest or (2) fail to timely file with OTC Markets or any regulatory agency, including the SEC, a required filing or (3) fail to timely pay, in full, any creditor or note holder of our company. Upon any such event of default, the then-unpaid principal amount shall bear interest at 18% per annum. In addition to customary rights of a creditor, upon an event of default under the Worthington Note, Worthington shall have the right, in its sole discretion, to rescind the Repurchase Agreement and to have the Worthington Shares reissued to it.
Consulting Agreement
Homeopathic Partners, Inc. Effective July 1, 2022, we entered into a consulting agreement with Homeopathic Partners, Inc. for the provision of general business consulting services. Upon the signing of this agreement, we issued Homeopathic Partners 2,000,000 shares of our Series B Preferred Stock. We pay Homeopathic Partners $10,000 per month. In addition, we are responsible to pay Homeopathic Partners an amount equal to 10% of gross sales revenues attributable to Homeopathic Partners’ efforts, in perpetuity. The agreement is for a term of one year, which renews for additional one-year periods, unless either party elects not to renew the agreement; provided, however, that Homeopathic Partners’ consulting agreement can be terminated at any time by either party, upon 15-days’ notice.
Effective September 5, 2023, in conjunction with our adding two executive officers, we terminated the consulting agreement with Homeopathic Partners, pursuant to its terms of termination.
Commercial Registered Agent
Since 2006, Thomas Terwilliger, has owned Corporate World, Inc., a Commercial Registered Agent in the State of Nevada that provides an array of corporate services in Nevada, including registered agent services to Nevada corporations. Mr. Terwilliger is not involved in the day-to-day operations of Corporate World, Inc. Corporate World, Inc. has served as our company’s registered agent in the State of Nevada since February 2006. We pay Corporate World, Inc. $350 annually for its registered agent services, which include mail-forwarding and similar administrative services.
Policy for Approval of Related-Person Transactions
Our Board of Directors has adopted a related-person transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification for the review of any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or each person whom we know to beneficially own more than 5% of our outstanding shares of common stock (a “5% shareholder”) (or their immediate family members), each of whom we refer to as a “related person,” has a direct or indirect material interest.
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If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related-person transaction,” the related person must report the proposed related-person transaction to our outside general counsel. The policy calls for the proposed related-person transaction to be reviewed by and if deemed appropriate approved by, the audit committee of our board of directors. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the audit committee will review and, in its discretion, may ratify the related-person transaction. The policy also permits the chair of the audit committee to review, and if deemed appropriate approve, proposed related-person transactions that arise between audit committee meetings, subject to ratification by the audit committee at its next meeting. Any related-person transactions that are ongoing in nature will be reviewed annually.
A related-person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the committee will review and consider:
| ● | the related person’s interest in the related-person transaction; | |
| ● | the approximate dollar amount involved in the related-person transaction; | |
| ● | the approximate dollar amount of the related person’s interest in the transaction without regard to the amount of any profit or loss; | |
| ● | whether the transaction was undertaken in the ordinary course of our business; | |
| ● | whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party; | |
| ● | the purpose of, and the potential benefits to us of, the related-person transaction; and | |
| ● | any other information regarding the related-person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. |
The audit committee may approve or ratify the transaction only if the audit committee determines that, under all of the circumstances, the transaction is not inconsistent with our best interests. The audit committee may impose any conditions on the related-person transaction that it deems appropriate.
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the compensation committee of our board of directors in the manner specified in its charter.
Item 14. Principal Accountant Fees and Services
The following table sets forth fees billed to us by our independent auditors during the fiscal years ended December 31, 2024 and 2023, for: (a) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (b) services by our auditors that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees, (c) services rendered in connection with tax compliance, tax advice and tax planning and (d) all other fees for services rendered.
| Year
Ended December 31, 2024 | Year
Ended December 31, 2022 | |||||||
| Audit Fees | $ | 56,500 | $ | 56,500 | ||||
| Audit Related | $ | 4,500 | $ | 4,500 | ||||
| Fees | $ | 0 | $ | 0 | ||||
| Tax | $ | 0 | $ | 0 | ||||
| All Other Fees | $ | 0 | $ | 0 | ||||
| Total | $ | 61,000 | $ | 61,000 | ||||
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PART IV
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this Annual Report on Form 10-K:
| (1) | Financial Statements (included in Item 8): |
Ludwig Enterprises, Inc. - Audited Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
| (2) | Financial Statement Schedules: None |
| (3) | Exhibits: |
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51
| 10.15 | Executive Employment Agreement Between Registrant and Marvin S. Hausman, M.D. | S-1/A | 333-271439 | 10.16 | Filed previously | |||||
| 10.16 | Form of Securities Purchase Agreement entered into between March 28, 2024 and January 10, 2025 | S-1 | 333-284885 | 10.16 | Filed previously | |||||
| 10.17 | Termination Agreement between Registrant and Marvin S. Hausman | S-1/A | 333-271439 | 10.13 | Filed previously | |||||
| 10.18 | Termination Agreement between Registrant and Homeopathic Partners, Inc. | S-1/A | 333-271439 | 10.14 | Filed previously | |||||
| 10.19 | Consulting Agreement dated July 1, 2022 between Registrant and Homeopathic Partners, Inc. | S-1/A | 333-271439 | 10.4 | Filed previously | |||||
| 10.20 | Consulting Agreement dated July 1, 2022, between Registrant and Marvin S. Hausman, M.D. | S-1/A | 333-271439 | 10.5 | Filed previously | |||||
| 14.1 | Code of Business Conduct and Ethics | Filed herewith | ||||||||
| 19.1 | Insider Trading Policy | Filed herewith | ||||||||
| 21.1 | Subsidiaries of Registrant | S-1/A | 333-271439 | 22.1 | Filed previously | |||||
| 23.1 | Consent of | Filed herewith | ||||||||
| 31.1 | CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | Filed herewith | ||||||||
| 31.2 | CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | Filed herewith | ||||||||
| 32.1 | Certification pursuant to 18 U.S.C. Section 1350 | Filed herewith | ||||||||
| 101.INS | Inline XBRL Instance Document. | Filed herewith | ||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | Filed herewith | ||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | Filed herewith | ||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | Filed herewith | ||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | Filed herewith | ||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | Filed herewith | ||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | Filed herewith |
| * | Filed herewith. |
Item 16. Form 10-K Summary
None.
52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| LUDWIG ENTERPRISES, INC. | ||
| Dated: March 28, 2025. | By: | /s/ Jose Antonio Reyes |
| Jose Antonio Reyes | ||
| Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Title(s) | Date | ||
| /s/ Jose Antonio Reyes | Chief Executive Officer | March 28, 2025 | ||
| Jose Antonio Reyes | [Principal Executive Officer] | |||
| /s/ Scott J. Silverman | Chief Financial Officer | March 28, 2025 | ||
| Scott J. Silverman | [Principal Accounting Officer] and Director | |||
| /s/ Marvin S. Hausman | Chief Science Officer | March 28, 2025 | ||
| Marvin S. Hausman | and Director |
53
INDEX TO FINANCIAL STATEMENTS
Ludwig Enterprises, Inc.
| Audited Financial Statements for the Years Ended December 31, 2024 and 2023 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders’
of Ludwig Enterprises Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ludwig Enterprises, Inc. and Subsidiaries (the Company) as of December 31, 2024 and 2023, and the related statements of operations, changes in stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023 and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph- Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 of the consolidated financial statements, the Company suffered recurring losses from operations and has a significant accumulated deficit of $7,259,366 at December 31, 2024. For the year ended December 31, 2024, the Company incurred net loss of $3,016,884 and net cash used in operations of $660,302. In addition, the Company continues to experience negative cash flows from operations. The Company's ability to continue as a going concern is dependent on its ability to raise debt or equity-based capital at favorable terms. These factors raise substantial doubt about the Company's ability to continue as a going concern. This gives rise to substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months after the issuance of these financial statements. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
F-2
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of the consideration received from the sale of Exousia Ai, Inc. (“EXO”)
Description of the matter and considerations leading to the matter
As described in Note 3, on December 31, 2024, the Company entered into a Stock Purchase Agreement (the “Exousia SPA”) with Marijuana, Inc., a publicly-traded Florida corporation (symbol: MAJI) (“Purchaser”), pursuant to which Purchaser would purchase 100% ownership of a subsidiary of the Company, Exousia Ai, Inc. The purchase price under the Exousia SPA for 100% ownership of EXO is approximately $203,000, payable by Purchaser by delivery of (a) 103,000 of assumed liabilities (b) 10,000 shares of Purchaser Series B Convertible Preferred stock (the “Purchaser Shares”) and (c) a $100,000 principal amount promissory note (the “Purchaser Note”). Series B Convertible Preferred stock is convertible into 4,700 Purchaser common stock. The Purchaser Note bears interest at eight percent (8%) per annum, with principal and accrued interest due December 31, 2025. The valuation of the purchase price, specifically the preferred stock, was complex due to the fact that MAJI is not an operating Company and did not have a fair market value assessment for its stock.
Description of how the matter was addressed
We obtained management’s assessment, analysis and memo to support the rationale and method used by the Company for valuation of the purchase price which was based on cost of the main asset purchased by MAJI in the absence of supported and reasonable fair market value approaches. We detailed tested the costs and obtained invoice support to ensure the costs were accurate. We verified through guidance that the accounting treatment was appropriate including conversations with our technical experts on the matter.
Conclusion
Based on management’s assessment and our audit procedures we concluded that the fair value of the preferred stock and total purchase price recorded was reasonable.
We have served as the Company’s auditor since 2022.
March 28, 2025
F-3
Ludwig Enterprises, Inc.
Consolidated Balance Sheets
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Deferred offering cost | ||||||||
| Note receivable from sale of subsidiary | ||||||||
| Assets from discontinued operations | ||||||||
| Total Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Notes payable | ||||||||
| Convertible notes payable, net | ||||||||
| Due to related party | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock: | ||||||||
| Common stock: | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Ludwig Enterprises, Inc.
Consolidated Statements of Operations
| Year Ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | $ | ||||||
| Operating expenses | ||||||||
| General and administration expenses | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Net loss from operations | ( |
) | ( |
) | ||||
| Other income (expense) | ||||||||
| Inducement expense | ( |
) | ( |
) | ||||
| Finance expense | ( |
) | ||||||
| Interest expense | ( |
) | ( |
) | ||||
| Amortization of debt discount | ( |
) | ( |
) | ||||
| Total other expense | ( |
) | ( |
) | ||||
| Net loss before taxes | ( |
) | ( |
) | ||||
| Income tax benefit | ||||||||
| Loss from continuing operations | $ | ( |
) | $ | ( |
) | ||
| Income (loss) from discontinued operation, net of tax | $ | $ | ( |
) | ||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Basic and diluted loss from continuing operations per common share | $ | ( |
) | $ | ( |
) | ||
| Basic and diluted income from discontinued operations per common share | $ | $ | ( |
) | ||||
| Basic and diluted loss per common share | $ | ( |
) | $ | ( |
) | ||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Ludwig Enterprises, Inc.
Consolidated Statements of Changes in Stockholders’ Deficit
For the years ended December 31, 2024 and 2023
| Convertible | Additional | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Stock issued for license fee ($ |
- | |||||||||||||||||||||||||||
| Stock issued for services | - | |||||||||||||||||||||||||||
| Stock issued for conversion of debt including inducement expense | - | |||||||||||||||||||||||||||
| Stock issued in connection with the extension of notes and convertible notes including inducement expense | - | |||||||||||||||||||||||||||
| Stock repurchased in exchange for note payable ($ |
- | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Stock issued for services | - | |||||||||||||||||||||||||||
| Common stock issued for R&D expenses | - | |||||||||||||||||||||||||||
| Common stock issued for inducement expense | - | |||||||||||||||||||||||||||
| Warrants issued for commitment fee | - | - | ||||||||||||||||||||||||||
| Warrants issued for inducement expense and debt discount | - | - | ||||||||||||||||||||||||||
| Cancellation of common stock | ( |
) | ||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Ludwig Enterprises, Inc.
Consolidated Statements of Cash Flows
| Year Ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock issued for services | ||||||||
| Stock issued for research and development | ||||||||
| Stock warrants issued for finance cost | ||||||||
| Stock issued for license fee | ||||||||
| Stock issued for inducements | ||||||||
| Gain on sale of subsidiary | ( | ) | ||||||
| Amortization of debt discount | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Unearned fee | ( | ) | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Deferred offering cost | ( | ) | ||||||
| Proceeds from related party | ||||||||
| Proceeds from convertible notes payable - net | ||||||||
| Repayment of convertible note and guaranteed interest | ( | ) | ||||||
| Cash advance from investor | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash, beginning of year | ||||||||
| Cash, end of year | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activity | ||||||||
| Original issuance debt and guaranteed interest as debt discount | $ | $ | ||||||
| Conversion of notes payable into common stock | $ | $ | ||||||
| Stock repurchased and returnable in exchange for note payable - related party - net | $ | $ | ||||||
| Cancellation of common stock | $ | $ | ||||||
| Reclassification from convertible notes to notes payable | $ | $ | ||||||
| Note receivable acquired in exchange with sale of subsidiary | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
LUDWIG ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2024 and 2023
Note 1 – Organization and Nature of Operations
Organization and Nature of Operations
Ludwig Enterprises, Inc. (collectively, “we,” “us,” “our” or the “Company”), a Nevada Corporation (incorporated February 2006).
The Company is currently seeking to develop products and services through the use of cutting-edge technologies in the health care industry.
Formation of Subsidiaries
On May 18, 2022, the Company formed mRNA for Life, Inc. (“mRNA”), a Wyoming corporation, which is a wholly-owned subsidiary of the Company. mRNA is expected to produce supplements to address clinical diagnoses from mRNA cheek swabs.
On November 18, 2022, the Company formed Precision Genomics, Inc. (“PGI”), a Wyoming corporation, which is a wholly-owned subsidiary of the Company. PGI will be developing proprietary medical artificial intelligence (“AI”) technology that uses mRNA inflammatory language to potentially capture an inflammatory snapshot of disease and the body’s response to treatment.
On June 6, 2023, the Company formed Exousia Ai, Inc. (“EXO”), a Wyoming corporation, which is a wholly-owned subsidiary of the Company. EXO was formed to focus on studying the expression of differentially expressed mRNA genes in various chronic inflammatory diseases.
In
October 2024, the Company dissolved
On
December 31, 2024, the Company entered into a Stock Purchase Agreement with Marijuana, Inc., a publicly-traded Florida corporation
(“Purchaser”), pursuant to which Purchaser would purchase
Liquidity, Going Concern and Management’s Plans
These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
As reflected in the accompanying financial statements, for the year ended December 31, 2024, the Company had:
| ● | Net loss of $ | |
| ● | Net cash used in operations was $ |
Additionally, at December 31, 2024, the Company had:
| ● | Accumulated
deficit of $ | |
| ● | Stockholders’
deficit of $ | |
| ● | Working
capital deficit of $ |
The
Company has cash on hand of $
F-8
These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these financial statements are issued.
The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
Management’s strategic plans include the following:
| ● | Execute business operations more fully during the year ended December 31, 2025, | |
| ● | Seek out strategic acquisitions of health care technology; and | |
| ● | Explore prospective partnership opportunities |
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Principles of Consolidation
These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries mRNA, PGI and EXO. All intercompany transactions and balances have been eliminated.
Business Segments
The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company has identified one single reportable operating segment. The Company manages its business on the basis of one operating and reportable segment.
Use of Estimates
Preparing 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 the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.
Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and other assumptions, which include both quantitative and qualitative assessments that it believes to be reasonable under the circumstances.
Significant estimates during the years ended December 31, 2024 and 2023 include valuation of stock-based compensation, uncertain tax positions, the fair value determination of investment in convertible preferred stock, and the valuation allowance on deferred tax assets.
Fair Value of Financial Instruments
The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.
F-9
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.
The three tiers are defined as follows:
| ● | Level 1 | – | Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; | |
| ● | Level 2 | – | Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and | |
| ● | Level 3 | – | Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.
Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.
The Company’s financial instruments are carried at historical cost. At December 31, 2024 and 2023, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.
Investment in convertible preferred stock
The Company elected the measurement alternative for these investments without readily determinable fair values and for which the Company does not control or have the ability to exercise considerable influence over operating and financial policies.
The non-marketable equity securities are carried at cost less any impairment, adjusted for observable price changes of similar investments of the same issuer. On a quarterly basis, the Company performs a qualitative assessment to evaluate whether the investment is impaired. If there are sufficient indicators that the fair value of the investment is less than the carrying value, the carrying value of the investment is reduced and an impairment is recorded in the consolidated statements of operations as other expense.
At December 31, 2024, the Company held
There were no indicators of impairment during the years ended December 31, 2024.
Cash and Cash Equivalents and Concentration of Credit Risk
For purposes of the statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.
At December 31, 2024 and 2023, respectively, the Company did not have any cash equivalents.
The
Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent
account balances exceed the amount insured by the FDIC, which is $
At
December 31, 2024 and 2023, the Company’s cash balances exceeded FDIC insured limits by $
F-10
Inventory
Inventory consists solely of finished goods and is stated at the lower of cost or net realizable value. Specifically, the Company has swabs that will be used in our collection kits.
Cost is determined using the first-in, first-out (FIFO) method of inventory valuation.
Management assesses the recoverability and establishes reserves of the various inventory components on a quarterly basis and is based on the estimated net realizable values of respective finished inventory.
Slow moving and obsolete inventories are written down based on a comparison of on-hand quantities to historical and projected usages.
Inventory at December 31, 2024 and 2023 was $
From time to time, the Company may give away samples of its inventory. Samples are recorded as a component of advertising expense.
During
the year ended December 31, 2024 and 2023, the Company recorded a provision for obsolete inventory of $
Derivative Liabilities
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), “Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease in the fair value recorded in the results of operations (other income/expense) as change in fair value of derivative liabilities. The Company uses a binomial pricing model to determine fair value of these instruments.
Upon conversion or repayment of a debt instrument in exchange for shares of common stock, where the embedded conversion option has been bifurcated and accounted for as a derivative liability (generally convertible debt and warrants), the Company records the shares of common stock at fair value, relieves all related debt, derivatives, and debt discounts, and recognizes a net gain or loss on debt extinguishment.
Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.
At December 31, 2024 and 2023, the Company had no derivative liabilities.
Convertible Notes with Fixed Rate Conversion Options
The Company may enter into convertible notes, some of which may contain fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted, by the holder, into common shares at a fixed discount to the price of the common stock at the time of conversion. The Company measures the fair value of the notes at the time of issuance.
Debt Discount
For certain notes issued, the Company may provide the debt holder with an original issue discount. The original issue discount is recorded as a debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations.
F-11
Debt Issue Cost
Debt issuance cost paid to lenders, or third parties are recorded as debt discounts and amortized to interest expense over the life of the underlying debt instrument, in the Consolidated Statements of Operations.
Research and Development
The Company accounts for research and development costs in accordance with ASC subtopic 730-10, Research and Development (“ASC 730-10”).
Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.
The
Company incurred research and development expenses of $
Income Taxes
The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.
As of December 31, 2024 and 2023, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.
The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded during the years ended December 31, 2024 and 2023, respectively.
Due to the Company’s net operating loss posture, all tax years are open and subject to income tax examination by tax authorities.
Advertising Costs
Advertising and marketing costs are expensed as incurred. Advertising and marketing costs are included as a component of general and administrative expense in the statements of operations. Marketing and advertising costs primarily consisted of preparation of our go-to-market strategy, development of our consumer packaging and website design.
The
Company recognized $
Stock-Based Compensation
The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
F-12
The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options.
The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
When determining fair value, the Company considers the following assumptions in the Black-Scholes model:
| ● | Exercise price, |
| ● | Expected dividends, |
| ● | Expected volatility, |
| ● | Risk-free interest rate; and |
| ● | Expected life of option |
Basic and Diluted Earnings (Loss) per Share
Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible preferred stock, convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future.
At December 31, 2024 and 2023, respectively, the Company had the following common stock equivalents, which are potentially dilutive equity securities:
| December 31, 2024 | December 31, 2023 | |||||||
| Convertible Preferred Stock | ||||||||
Each share
of preferred stock (
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
New Accounting Standard Adopted
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments in this update are effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted.
This guidance was adopted on January 1, 2024. The adoption of ASU 2022-03 did not have a material impact on the Company’s consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this update expand segment disclosure requirements, including new segment disclosure requirements for entities with a single reportable segment among other disclosure requirements. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. There was no impact on the Company’s financial statements as a result of the adoption of the standard.
F-13
Recent Accounting Standards
Changes to accounting principles are established by the FASB in the form of Accounting Standards Updates (“ASU’s”) to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found the following recent accounting pronouncements issued, but not yet effective accounting pronouncements, are not expected to have a material impact on the financial statements of the Company.
In November 2024, the FASB issued ASU 2024-03, ASC Subtopic “Disaggregation of Income Statement Expenses (ASC 220-40): Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures”. The amendments require additional disclosure of the nature of expenses included in the income statement. The amendments in this update are effective for public business entities for fiscal years, beginning after December 15, 2026. Early adoption is permitted. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
We do not expect the adoption of this pronouncement will have a material effect on the Company’s financial statements.
Note 3 – Discontinued Operations
On December 31, 2024, the Company entered into a Stock Purchase Agreement
(the “Exousia SPA”) with Marijuana, Inc., a publicly-traded Florida corporation (symbol: MAJI) (“Purchaser”),
pursuant to which Purchaser would purchase
The purchase price under the Exousia SPA for
As such, the Company recognized note receivable and investment in convertible preferred stock of MAJI as of December 31, 2024.
In October 2024, the Company dissolved the two subsidiaries, mRNA for Life, Inc. and Precision Genomics, Inc.
The above restructuring of subsidiaries will have an effect on the Company’s operations and financials results and this qualifies for presentation as a discontinued operation.
The following is a summary of discontinued operations for the year ended December 31, 2024 and 2023:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| Operating Expenses: | ||||||||
| General and administration expenses | ||||||||
| Research and development | ||||||||
| Total operating expenses | $ | $ | ||||||
| Loss from discontinued operations | $ | ( |
) | $ | ( |
) | ||
| Gain on sale of subsidiary | ||||||||
| Income (loss) from discontinued operation, net of tax | $ | $ | ( |
) | ||||
F-14
Gain on sale of subsidiary consisted of as follow;
| Consideration: | ||||
| Assumption of accounts payable | $ | |||
| Assumption of unearned license fees | ||||
| Note receivable | ||||
| Preferred Stock | ||||
| Total amount | $ | |||
| Assets and liabilities of subsidiary at December 31, 2024 | ||||
| Total assets | $ | |||
| Total liabilities | $ | |||
| Net assets | $ | |||
| Gain on sale of subsidiary | $ | |||
The following is a summary of the assets and liabilities of the subsidiaries as of December 31, 2024 and 2023:
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total assets from discontinued operations | $ | $ | ||||||
The following is a summary of discontinued cash flows for the year ended December 31, 2024 and 2023:
| Year Ended | ||||||||
| December 31, | ||||||||
| Cash Flows from Operating Activities: | 2024 | 2023 | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable | ||||||||
| Unearned fee | ||||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Operating Activities: | ||||||||
| Proceeds received from parent company | ||||||||
| Repayments to parent company | ( | ) | ( | ) | ||||
| Net Cash Provided by Financing Activities | ( | ) | ||||||
| Net change in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activity | ||||||||
| Forgiveness of loans from parent company | $ | $ | ||||||
F-15
Note 4 – Notes Payable and Convertible Notes Payable
Notes Payable - Net
The Company had the following activity related to its notes payable:
| Balance - December 31, 2022 | $ | |||
| Proceeds (face amount of note) | ||||
| Reclassifications | ||||
| Balance - December 31, 2023 | $ | |||
| Balance - December 31, 2024 | $ |
Notes payable are summarized as follows:
| Interest | December 31, | December 31, | ||||||||||||
| Issue Date | Maturity Date | Rate | Collateral | 2024 | 2023 | |||||||||
| June 2012 (2) | $ | $ | ||||||||||||
| May 2014 (2) | ||||||||||||||
| June 2016 (2) | ||||||||||||||
| January 2017 (2) | ||||||||||||||
| November 2020 (2) | ||||||||||||||
| March 2021 (2) | ||||||||||||||
| November 2021 (2) | ||||||||||||||
| February 2022 (2) | ||||||||||||||
| August 2023 (2) | ||||||||||||||
| January 2023 (1,2) | ||||||||||||||
| October 2022 (1,2) | ||||||||||||||
| November 2022 (1,2) | ||||||||||||||
| October 2023 (3) | ||||||||||||||
| $ | $ | |||||||||||||
| (1) | |
| (2) | |
| (3) |
F-16
Note issued in 2023
Effective
August 10, 2023, we entered into a Common Stock Repurchase Agreement, pursuant to which we repurchased
Modification of Notes Payable
The
notes listed above issued in between June 2012 and February 2022, totaling $
The Company evaluated the modification of terms under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension of the maturity dates did not result in significant and consequential changes to the economic substance of the debt, and thus resulted in a modification of the debt and not an extinguishment of the debt. Accordingly, no gain or loss on debt extinguishment was recorded.
Specifically,
on the date of modification, the Company determined that the present value of the cash flows of the modified debt instruments were less
than
See below for discussion of inducement expense.
Convertible Notes Payable - Net
The Company had the following activity related to its convertible notes payable:
| Balance - December 31, 2022 | $ | |||
| Proceeds (face amount of note) | ||||
| Reclassifications | ( | ) | ||
| Original issue debt discount | ( | ) | ||
| Amortization of debt discount | ||||
| Conversion of notes payable to common stock | ( | ) | ||
| Balance - December 31, 2023 | $ | |||
| Proceeds (face amount of note) | ||||
| Guaranteed interest recorded to convertible note payable | ||||
| Original issue debt discount | ( | ) | ||
| Guaranteed interest – debt discount | ( | ) | ||
| Repayments including guaranteed interest | ( | ) | ||
| Amortization of debt discount | ||||
| Balance - December 31, 2024 | $ |
F-17
Convertible Notes Payable are summarized as follows:
| Interest | December 31, | December 31, | ||||||||||||
| Issue Date | Maturity Date | Rate | Collateral | 2024 | 2023 | |||||||||
| March 2024 | ||||||||||||||
| March 2024 | ||||||||||||||
| March 2024 | ||||||||||||||
| April 2024 | ||||||||||||||
| April 2024 | ||||||||||||||
| May 2024 | ||||||||||||||
| May 2024 | ||||||||||||||
| July 2024 | ||||||||||||||
| July 2024 | ||||||||||||||
| July 2024 | ||||||||||||||
| July 2024 | ||||||||||||||
| July 2024 | ||||||||||||||
| August 2024 | ||||||||||||||
| November 2024 | ||||||||||||||
| November 2024 | ||||||||||||||
| November 2024 | ||||||||||||||
| $ | $ | |||||||||||||
| $ | $ | |||||||||||||
Notes issued in 2024
In
February, 2024, the Company entered into a securities purchase agreement (the “SPA”), pursuant to which the Company agreed
to issue to the Investor a Promissory Note (the “Note”), dated February 12, 2024, in the principal amount of $
Between
March 2024 and November, 2024, the Company entered into securities purchase agreements (the “SPAs”) with 13 individuals,
pursuant to which the Company agreed to issue to the Investors Promissory Notes (the “Notes”), in the aggregate principal
amount of $
Note issued in 2023
In
January 2023, the Company issued an unsecured, one (1) year, original issue discount convertible note with a face amount of $
The
total debt discount of $
F-18
This
note is convertible at a
On November 8, 2023, the Company’s S-1 registration statement was declared effective. However, the lender has waived their right to the discount to market feature. As a result, both at September 30, 2023 and November 8, 2023, the Company was not required to account for the discount to market feature as a derivative liability.
In
October and November 2023, the Company issued unsecured,
These
notes are payable in cash or convertible at $
In
October 2023, the Company executed a one-year (1) note payable for $
Modification and Extinguishment of Convertible Notes Payable (Year Ended December 31, 2023 and 2024)
Year Ended December 31, 2023
Maturity Date, Note Modifications in 2023 and Inducement Expense
In
May 2023, the note issued in October 2022 ($
The Company evaluated the modification of terms under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension of the maturity date did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt. Accordingly, no gain or loss on debt extinguishment was recorded.
Specifically,
on the date of modification, the Company determined that the present value of the cash flows of the modified debt instrument was less
than
In
May 2023, the outstanding $
As
a result, $
In
September 2023, all of the notes listed above ($
The
Company evaluated the modification of terms under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded
that the extension of the maturity dates resulted in significant and consequential changes to the economic substance of the debt totaling
$
F-19
In
November, 2023, the holders of all of the convertible notes listed above waived the convertibility feature of these notes. As a result,
$
Specifically, on the date of modification, the Company determined that the present value of the cash flows of the modified debt instruments were greater than 10% different from the present value of the remaining cash flows under the original debt instruments.
In
December 2023, 6 notes totaling $
In March 2024, all of the notes listed above,
as well as the note issued in January 2023 ($
See below for discussion of inducement expense.
Inducements
Fiscal year 2024
In
March 2024, the Company recorded
In
July 2024, the Company entered into agreements with 16 noteholders, extending the maturity on their notes to October 1, 2024. In consideration
thereof, each noteholder received a warrant to purchase
In October 2024, the Company entered into agreements with 16 noteholders, extending the maturity on their note to April 1, 2025.
In October 2024, the Company entered into agreements with 1 noteholder,
extending the maturity on their note to April 1, 2025. In consideration thereof, the noteholder received
Fiscal year 2023
1st Inducement
In
May 2023, the Company added a second conversion feature to certain notes aggregating $
In
adding this substantive conversion option ($
The
entire $
The
fair value of the Company’s common stock on the date of inducement was in excess of the value of the debt converted by $
| December 31, 2023 | ||||
| Fair value of common stock on conversion date | $ | |||
| Fair value of debt subject to inducement | ||||
| Inducement expense | $ | |||
F-20
2nd
Inducement (summary of activity from above – excludes inducement related to addition of substantive conversion option at $
As
noted above for various notes ($
The
fair value of the Company’s common stock on the date of inducement was in excess of the value of the debt converted by $
| December 31, 2023 | ||||
| Fair value of debt and common stock on extinguishment date | $ | |||
| Fair value of debt subject to inducement | ||||
| Inducement expense | $ | |||
3rd Inducement
In
October 2023, the Company issued convertible notes of $
The
fair value of the Company’s common stock on the date of inducement was in excess of the value of the debt converted by $
| December 31, 2023 | ||||
| Fair value of debt and common stock on extinguishment date | $ | |||
| Fair value of debt subject to inducement | ||||
| Inducement expense | $ | |||
See Note 6 regarding common stock issued.
Interest expense and amortization of debt discount
During the
years ended December 31, 2024 and 2023, the Company recorded interest expense for notes payable and convertible notes of $
During
the years ended December 31, 2024 and 2023, the Company recorded amortization of debt discount of $
Note 5 – Commitments and Contingencies
On September 5, 2023, we entered into an employment agreement with
Marvin S. Hausman, M.D., pursuant to which Dr. Hausman serves as our former Chief Executive Officer. Under his employment agreement, we
will pay Dr. Hausman $
On
September 5, 2023, we entered into an employment agreement with Thomas Terwilliger, pursuant to which Mr. Terwilliger serves as our Chief
Operating Officer, Treasurer and Secretary. Under his employment agreement, we will pay Mr. Terwilliger $
F-21
On
November 15, 2023, we entered into a Financial Advisory Services Agreement with EverAsia Financial Group, Inc., a financial consulting
firm owned by Scott J. Silverman, who, in conjunction with the execution the CFO Agreement, was appointed as our Chief Financial Officer.
Under the CFO Agreement, the Company is obligated to make monthly payments of $
Beginning
from the execution date of the CFO Agreement and continuing until the Company raises $
| Funds Raised | Paid Monthly | Accrued Monthly | ||||||
| $0 – $250,000 | $ | $ | ||||||
| $250,000 – $750,000 | $ | $ | ||||||
Upon
the Company’s raising of $
On April
1, 2024, Jose Antonio Reyes. signed an Offer Letter for his employment as our Chief Operating Officer. In September 2024, Mr. Reyes was
named as our Chief Executive Officer. Pursuant to the terms of his employment, the Company is obliged to make monthly payments to Mr.
Reyes of $
Beginning
from the execution date of the Offer Letter and continuing until the Company raises $
| Funds Raised | Paid Monthly | Accrued Monthly | ||||||
| $0 – $250,000 | $ | $ | ||||||
| $250,000 – $750,000 | $ | $ | ||||||
Upon
the Company’s raising of $
On
April 1, 2024, Marvin S. Hausman., M.D. signed an Offer Letter for his employment as our Chief Science Officer. Additionally, Dr. Hausman
serves as our Chairman of the Board of Directors. Pursuant to the terms of his employment, the Company is obliged to make monthly payments
to Dr. Hausman of $
From
September 5, 2023 until April 1, 2024, Marvin S. Hausman, M.D., served as our Chief Executive Officer. Under his employment agreement,
we paid Dr. Hausman $
From
July 1, 2022, to September 5, 2023, Dr. Hausman provided services on behalf of our company, pursuant to a consulting agreement. Under
his consulting agreement, we paid Dr. Hausman $
In
August 2024, the Company acquired patent pending (“Patent”) for an mRNA Neuro Panel and Serotonin Assay, which Patent was
lodged by Nova on or about April 26, 2024, as U.S. Patent Application 18/705375, International Publication Number WO 2023/077245, captioned
as “Diagnosing, Monitoring and Treating Neurological Disease with Psychoactive Tryptamine Derivatives and mRNA Measurements”
(“IP” or “Patent”) from Nova Mentis Life Science Corp. in exchange for the issuance of
F-22
Note 6 – Stockholders’ Deficit
The Company has two (2) classes of stock:
Common Stock
| ● | ||
| ● | $ | |
| ● | Voting at |
Preferred Stock
In
May 2022 and December 2022, the Company’s Articles of Incorporation, as amended, authorized the issuance of
The Board of Directors has made the following designations of its preferred stock.
Series A, Convertible Preferred Stock
| ● | ||
| ● | $ | |
| ● | Conversion feature–-each share of preferred stock is convertible into | |
| ● | Voting–-on an as converted basis with common stock, at the applicable conversion rate ( | |
| ● | Dividends–-accrued only upon declaration of the board of directors, at the applicable conversion rate. | |
| ● | Mandatorily redeemable (automatic conversion) on January 1, 2025. (See below amendment) | |
| ● | Anti-dilution provision – rights exist for the period of two years after the convertible preferred shares were converted into common stock. Additionally, holders of the convertible preferred stock will have full ratchet anti-dilution protection rights at the rate of |
In connection with the issuance of these Series A, convertible preferred shares, the Company determined that there were no provisions within ASC 815 that were met, which would require derivative liability accounting treatment. Specifically, as noted below, upon amending the terms of the Series A, convertible preferred stock, at that time, there had been no new stock issuances of any type which may have triggered the anti-dilution provision.
In December 2022, the Company amended its articles of incorporation related to certain terms of its Series A, convertible preferred stock. At that time, the Company, along with approval from its convertible preferred stockholders agreed to remove provisions related to mandatory redemption as well as anti-dilution rights.
At
December 31, 2024 and 2023, the Company had
F-23
Equity Transactions for the Year Ended December 31, 2024
During the
year ended December 31, 2024, the Company issued
| ● | ||
| ● | ||
| ● | ||
| ● |
During the
year ended December 31, 2024, the Company issued
During the
year ended December 31, 2024, the Company issued
| ● | ||
| ● |
Equity Transactions for the Year Ended December 31, 2023
Stock Issued for License
The
Company issued
The Company will expense the issuance of these shares as a component of research and development, since shortly after paying for the license, management concluded that it could not commercialize the technology.
Pursuant to Accounting Standard Codification 350 “Goodwill and Other Intangible Assets” (“ASC 350”), this guidance requires that assets with indefinite lives no longer be amortized, but instead be subject to annual impairment tests.
During the quarter ended March 31, 2023, management qualitatively assessed this intangible (license agreement) to determine whether testing was necessary.
Factors that management considered in this assessment included macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy, and changes in the composition and carrying amounts of net assets. This qualitative assessment indicated that it was more likely than not that the fair value of the reporting unit was less than it’s carrying value, a quantitative assessment was then performed. Based on the qualitative analysis conducted during the quarter, management performed a quantitative analysis determining that the asset was not recoverable and would need to be expensed (and not capitalized) on the grant date.
F-24
In reaching our conclusion to expense the issuance on the grant date and in accordance with ASC 350-30-35-3, we evaluated pertinent factors in arriving at this estimate including the Company no longer pursuing commercialization of the license.
Ultimately, we concluded that since the intellectual property cannot be commercialized at this time, the expected use of the asset as well as the Company’s historical experience (very limited) would not support capitalizing an asset that would have been deemed non recoverable on the acquisition date.
Stock Issued for Services
The
Company issued
Extinguishment of Convertible Notes Payable and Debt Converted into Common Stock
In
May 2023, the Company amended certain original issue discount notes aggregating $
On
the date of modification, the Company determined that the present value of the cash flows of the modified debt instruments (including
unamortized debt discount) were greater than
On
the date of the modification, holders of these notes simultaneously converted an aggregate $
Accordingly, no gain or loss was recognized upon debt extinguishment. On the date of debt conversion, the remaining unamortized debt discount associated with these notes was fully amortized, resulting in each of these notes being accreted to their face value at the time of conversion.
In
October and November 2023, the convertible note was fully converted into
See Note 4 for discussion of inducement expense.
Stock Issued in connection with the extension of notes and convertible notes including inducement expense
In
connection with both the 1st and 2nd inducements noted above,
In
Connection with the note payable issued in October noted above,
Common Stock Cancelled
In
October 2023,
F-25
Note 7 – Warrants
In
February 2024, the Company issued
In
July 2024, the Company issued
A summary of activity of the warrants during the year ended December 31, 2024, is follows:
| Number of | Weighted average | Weighted average Remaining | ||||||||||
| Warrant | Exercise price | life (year) | ||||||||||
| Outstanding at December 31, 2023 | $ | |||||||||||
| Grant | ||||||||||||
| Exercised | ||||||||||||
| Cancelled | ||||||||||||
| Outstanding at December 31, 2024 | $ | |||||||||||
| Exercisable at December 31, 2024 | $ | |||||||||||
The
intrinsic value of the warrants as of December 31, 2024, is $
Valuation
The
Company utilizes the Black-Scholes model to value its warrants.
| Year ended | ||
| December 31,
2024 | ||
| Expected term | ||
| Expected average volatility | ||
| Expected dividend yield | ||
| Risk-free interest rate |
Note 8 – Income Taxes
The
Company’s tax expense differs from the “expected” tax expense for the period (computed by applying the blended corporate
and state tax rates of
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Federal income tax benefit–- | $ | ( | ) | $ | ( | ) | ||
| State income tax–- | ( | ) | ( | ) | ||||
| Non-deductible items | ||||||||
| Subtotal | ( | ) | ( | ) | ||||
| Change in valuation allowance | ||||||||
| Income tax benefit | $ | $ | ||||||
F-26
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at December 31, 2024 and 2023 are approximately as follows:
Schedule of Deferred Tax Assets and Liabilities
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Amortization of debt discount | $ | ( | ) | $ | ( | ) | ||
| Share based payments | ( | ) | ( | ) | ||||
| Net operating lass carryforwards | ( | ) | ( | ) | ||||
| Total deferred Tax assets | ( | ) | ( | ) | ||||
| Less valuation allowance | ||||||||
| Net deferred tax asset recorded | $ | $ | ||||||
Deferred tax assets and liabilities are computed by applying the federal and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carryforwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse.
During
the year ended December 31, 2024, the valuation allowance increased by approximately $
At December 31, 2024, the Company has federal net operating loss carryforwards,
which are available to offset future taxable income, of approximately $
NOL carryforwards that were generated after
2017 of approximately $
These
carryforwards may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state
provisions if the Company experienced one or more ownership changes which would limit the amount of NOL and tax credit carryforwards
that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382
and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more
than
If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.
The Company files corporate income tax returns in the United States and Florida jurisdictions. Due to the Company’s net operating loss posture, all tax years are open and subject to income tax examination by tax authorities. The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. At December 31, 2024 and 2023, respectively, there were no unrecognized tax benefits, and there are no significant accruals for interest related to unrecognized tax benefits or tax penalties.
F-27
Note 9 – Segment Report
Our Chief Executive Officer (“CEO”) is the chief operating decision maker who reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, we determined we operate in a single reporting segment – developing products that use mRNA genetic biomarkers to potentially assess the occurrence of inflammation, and, as a result, inflammation related chronic diseases. Within this segment, our products will be sold into the Medical markets.
Our CEO assesses performance and decides how to allocate resources primarily based on consolidated net income, which is reported on our Consolidated Statements of Operations. Total assets on the Consolidated Balance Sheets represent our segment assets.
Note 10 – Subsequent Events
Issuance of Convertible Note
In
January, 2025, the Company entered into securities purchase agreements (the “SPAs”) with 2 individuals, pursuant to which
the Company agreed to issue to the Investors Promissory Notes (the “Notes”), in the aggregate principal amount of $
Issuance of Promissory Note
On
March 10, 2025, the Company issued a Promissory Note to an individual in the principal amount of $
F-28