UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
FOR
THE QUARTERLY PERIOD ENDED
OR
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☐ | Smaller Reporting Company | ||
| Emerging Growth Company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
As of November 12, 2024, the number of outstanding shares of Common Stock of the registrant was .
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL INFORMATION
CONDENSED UNAUDITED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
| September 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Grants receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND DEFICIT | ||||||||
| Accounts payable | $ | $ | ||||||
| Due to affiliates | ||||||||
| Related party note | ||||||||
| Operating lease liabilities – Current | ||||||||
| SAFE Liability | ||||||||
| Taxes payable | ||||||||
| Total current liabilities | ||||||||
| Deferred grant reimbursement | ||||||||
| Operating lease liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Deficit: | ||||||||
| Preferred stock, $ par value, shares authorized; shares issued and outstanding on September 30, 2024 and December 31, 2023, respectively. | ||||||||
| Common shares, authorized shares at $; and shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively. | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Deficit | ( | ) | ( | ) | ||||
| Total liabilities and deficit | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 3 |
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Total operating income | $ | $ | $ | $ | ||||||||||||
| Operating costs: | ||||||||||||||||
| General and administrative costs: | ||||||||||||||||
| Compensation | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Information technology | ||||||||||||||||
| General and administrative-other | ||||||||||||||||
| Total general and administrative costs | ||||||||||||||||
| Research and development costs, net of grants amounting to $ | ||||||||||||||||
| Total operating costs | ||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ||||||||||||
| Change in fair value of SAFE | ( | ) | ( | ) | ||||||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income taxes | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss per common share – basic and diluted | ) | ) | ) | ) | ||||||||||||
| Weighted average of common shares outstanding – basic and diluted | ||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 4 |
Invizyne TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT (Unaudited)
The Nine months Ended September 30, 2024 and 2023
| Common Shares | Additional Paid-In | Accumulated | Total Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock options (vested through 3/31/24) | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance, March 31, 2024 | $ | $ | ( | ) | $ | ( | ) | |||||||||||||
| Stock options (vested through 6/30/24) | - | |||||||||||||||||||
| Common Stock Issued against exercise of stock options | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock options (vested through 9/30/24) | - | |||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common Shares | Additional Paid-In | Accumulated | Total | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock options (vested through 3/31/23) | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock options (vested through 6/30/23) | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock options (vested through 9/30/23) | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to condensed unaudited consolidated financial statements.
| 5 |
Invizyne TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Depreciation of property and equipment | ||||||||
| Accretion of deferred grant reimbursement | ( | ) | ( | ) | ||||
| Non-cash lease expense | ( | ) | ||||||
| Change in fair value of SAFE | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in - | ||||||||
| Grants receivable | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Increase (decrease) in - | ||||||||
| Accounts payable and other liabilities | ( | ) | ( | ) | ||||
| Due to affiliate | ||||||||
| Taxes Payable | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Deferred grant reimbursement | ( | ) | ||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Related party note | ||||||||
| SAFE note | ||||||||
| Deferred IPO Costs | ( | ) | ||||||
| Net cash (used in) financing activities | ||||||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Income taxes | $ | ( | ) | $ | ||||
| Non-cash investing and financing activities: | ||||||||
| Unpaid offering costs included in prepaid expenses | $ | ( | ) | $ | ||||
| Conversion of due to affiliate to related party note | ||||||||
| Modification of lease - right-of-use asset and lease liability | ||||||||
| Record right-of-use asset and operating lease liability | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
INVIZYNE TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Nine months Ended September 30, 2024 and 2023
1. Organization and Description of Business
Invizyne
Technologies, Inc. was formed in Nevada in 2019 and its wholly owned subsidiary Invizyne Technologies, Inc. (“Invizyne
CA”) was formed in California in 2014, together (“Invizyne”). Invizyne was formed with the vision of taking
nature’s building blocks to make molecules of interest, effectively simplifying nature. Invizyne’s technology is a
differentiated and unique synthetic biology platform which would enable the scalable exploration of large number of molecules and
properties found in nature. Invizyne is a technology development subsidiary of MDB Capital Holdings, LLC (“MDB”), which
held a
On June 1st, 2022, the Company signed a joint venture with Neuractas Therapeutics, a preclinical company developing high impact therapeutics, to work with the Company on deuterated cannabinoid molecules, for which the Company has filed a provisional patent application. No business activities have occurred to date. The Company follows Accounting Standards Codification subtopic 323-10, Investments-Equity Methods and Joint Ventures (“ASC 323-10”) The Company accounted for its interest ownership utilizing the equity method of accounting. These members thereafter contributed their equity interest to MDB, with the result of the Company becoming the subsidiary of MDB.
Going Concern
These
financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets
and discharge its liabilities in the normal course of business. The Company incurred a net loss of $
On
November 11, 2024, the Company signed a firm commitment underwriting agreement for its IPO, in which it sold an aggregate of shares
of Common Stock for gross proceeds of $
Based
on its working capital of approximately $
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying condensed unaudited consolidated financial statements include the accounts of the Company and wholly owned and majority owned subsidiary. The accompanying condensed unaudited condensed consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial statements and Article 8 of Regulation S-X. The consolidated balance sheet as of December 31, 2023, and related notes were derived from the audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited consolidated financial statements reflect, in the opinion of management, all material adjustments (which include normal recurring adjustments) necessary to fairly state, in all material respects, the Company’s financial position as of September 30, 2024, the results of operations for the nine months ended September 30, 2024 and 2023 and its cash flows for the nine months ended September 30, 2024 and 2023. The results of operations for the nine months ended September 30, 2024, are not necessarily indicative of the operating results for the full year or any future period. The unaudited consolidated financial information should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023, included in the Form S-1 Registration Statement, Number 333-276987, declared effective November 8, 2024. All intercompany accounts and transactions have been eliminated in consolidation.
Reclassification
Certain
prior period balances have been reclassified to conform to the Company’s current year presentation. We have reclassified certain
prior period income amounts from R&D expenses and a total of $
Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the disclosure of contingent assets and liabilities. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in the calculation of right-of-use asset and lease liabilities, accruals for potential liabilities, SAFE liability, and the realization of any deferred tax assets.
Emerging Growth Company
The Company is an “emerging growth company,” or “EGC” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such choice to opt out is irrevocable. The Company has elected to opt out of the extended transition periods.
| 7 |
Concentration of Risk
Financial
instruments which are potentially subject to the Company’s concentrations of credit risk consist primarily of cash, cash equivalents,
and grants receivable. The Company may periodically have cash balances in financial institutions more than the FDIC insurance limits
of $
Revenue Recognition
The Company primarily generated revenues from its strategic alliances. The strategic alliances with strategic collaborators typically contain multiple elements, including research and other licenses, research and development services, obligations to develop and manufacture pre-commercial and commercial material, and options to obtain additional research and development services. Such arrangements provide for various types of payments to us, including upfront fees, and funding of research and development services. Such payments are often not commensurate with the timing of revenue recognition and therefore result in deferral of revenue recognition.
The Company analyzes the collaboration arrangements to assess whether they are within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities. To the extent the arrangement is within the scope of ASC 808, the Company assesses whether aspects of the arrangement between the Company and the collaboration partner are within the scope of other accounting literature. If the Company concludes that some or all aspects of the arrangement represent a transaction with a customer, the Company accounts for those aspects of the arrangement within the scope of ASC 606. If the Company concludes that some or all aspects of the arrangement are within the scope of ASC 808 and do not represent a transaction with a customer, the Company recognizes its allocation of the shared costs incurred with respect to the jointly conducted activities as a component of the related expense in the period incurred. Pursuant to ASC 606, a customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
To determine the appropriate amount of revenue to be recognized for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following steps: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) each performance obligation is satisfied. ASC 606 requires significant judgment and estimates and results in changes to, but not limited to: (i) the determination of the transaction price, including estimates of variable consideration, (ii) the allocation of the transaction price, including the determination of estimated selling price, and (iii) the pattern of recognition, including the application of proportional performance as a measure of progress on service-related promises and application of point-in-time recognition for supply-related promises.
Cash and Cash Equivalents
The Company considers highly liquid investments with original maturities or remaining maturities upon purchase of three months or less to be cash equivalents. There were no cash equivalents held by the Company as of September 30, 2024.
The Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”).
The Company periodically reviews the financial condition of the financial institutions and assesses the credit risk of such investments. The Company had no uninsured cash balances as of September 30, 2024. The Company did not experience any credit risk losses during the nine months ended September 30, 2024 and 2023.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; | |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
| 8 |
The following tables set forth the fair value of the Company’s consolidated financial instruments that were measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023:
| September 30, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| SAFE Note | $ | $ | $ | $ | ||||||||||||
| Total fair value | $ | $ | $ | $ | ||||||||||||
| December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| SAFE Note | $ | $ | $ | $ | ||||||||||||
| Total fair value | $ | $ | $ | $ | ||||||||||||
The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying consolidated balance sheets. The fair values of cash and cash equivalents, prepaid expenses and other, accounts payable and accrued expenses, and due to related party are estimated to approximate the carrying values as of September 30, 2024 and December 31, 2023.
Property and Equipment
Property and equipment are recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in the statement of operations when realized. Depreciation is provided using the straight-line method over the following estimated useful lives:
| Laboratory equipment | ||
| Furniture and fixtures | ||
| Leasehold improvements |
Property and equipment consist of the following as of September 30, 2024 and December 31, 2023, respectively:
| September 30, 2024 | December 31, 2023 | |||||||
| Laboratory equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Total property and equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expenses were $
| 9 |
Research Grants
Invizyne receives grant reimbursements, which are offset against research and development expenses in the unaudited condensed consolidated statements of operations. In addition to actual reimbursements, Invizyne also receives indirect expense grants (which are not reimbursement-based) and fees (typically of minor significance). It is important to note that there may be instances where the grants received for indirect costs exceed the actual costs, resulting in a negative impact. For capitalized assets, grant reimbursements are recognized over the useful life of the assets. Any portion of the grant not yet recognized is recorded as deferred grant reimbursements and included as a liability in the unaudited condensed consolidated balance sheet.
Grants that operate on a reimbursement basis are recognized on the accrual basis and are offsets to expenses to the extent of disbursements and commitments that are reimbursable for allowable expenses incurred as of September 30, 2024 and 2023, and respectively, expected to be received from funding sources in the subsequent year. Management considers such receivables on September 30, 2024 and 2023, respectively, to be fully collectable due to the historical experience with the Federal Government of the United States of America. Accordingly, no allowance for credit losses on the grants receivable was recorded in the accompanying unaudited condensed consolidated financial statements.
Summary of grants receivable activity for the nine months ended September 30, 2024 and 2023, is presented below:
| 2024 | 2023 | |||||||
| Balance at beginning of period | $ | $ | ||||||
| Grant costs expensed | ||||||||
| Grants for equipment purchased | ||||||||
| Grant fees | ||||||||
| Grant funds received | ( | ) | ( | ) | ||||
| Balance at end of period | $ | $ | ||||||
Invizyne
has received three grants provided by the National Institute of Health, the Department of Energy and Department of Defense through
September 30, 2024. The first grant was awarded on October 1, 2023 and the latest of these grants was set to expire on May 14, 2026,
however grants can be extended, or new phases can be granted, extending the expiration of the grant. None of the grants has
commitments made by the parties, provisions for recapture, or any other contingencies, beyond complying with the terms of each
research and development grant. Research grants received from organizations are subject to the contract agreement as to how Invizyne
conducts its research activities, and Invizyne is required to comply with the agreement terms relating to those grants. Amounts
received under research grants are nonrefundable, regardless of the success of the underlying research project, to the extent that
such amounts are expended in accordance with the approved grant project. Invizyne is permitted to draw down the research grants
after incurring the related expenses. Amounts received under research grants are offset against the related research and development
costs in the unaudited condensed consolidated statements of operations. For the nine months ended September 30, 2024 and 2023,
respectively, grants amounting to $
| 10 |
Research and Development Costs
Research
and development costs are expensed as incurred. Research and development costs consist primarily of compensation costs, fees paid to
consultants, and other expenses relating to the development of Invizyne’s technology. For the nine months ended September 30, 2024
and 2023, research and development costs prior to offset of the grants amounted to $
Patent and Licensing Legal and Filing Fees and Costs
Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the research efforts and related patent applications, all patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property are charged to operations as incurred.
Patent
and licensing legal and filing fees and costs were $
Related Party and Due to Affiliates Expenses
As
of September 30, 2024, MDB Capital Holdings, LLC has advanced $
The
payable balance includes $
3. Equity and Non-Controlling Interests
Equity
In
April 2019, the Company entered into an equity subscription agreement with Public Ventures, LLC, d/b/a MDB Capital (formerly known as
MDB Capital Group LLC), which was later transferred to MDB in 2022, whereby MDB would purchase up to $
On May 19, 2024, shares of common stock were issued as part of a cashless stock option exercise.
Invizyne’s 2020 Equity Incentive Plan (the “2020 Plan”), which was approved by the Invizyne shareholders, permits grants to its officers, directors, and employees for up to shares of Invizyne’s Common Stock. On May 1st, 2023 the board and shareholders approved an increase of shares under the plan. The 2020 Plan authorizes the issuance of stock options, shares of restricted stock, and restricted stock units, among other forms of equity-based awards.
On May 1, 2023, stock options to purchase shares of Common Stock were granted at an exercise price of $ per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of years. The stock options vest ratably over a period of years. The inputs used to determine the fair value was Common Stock price of $, option exercise price of $, expected life in years of years, with a contract life of years, risk-free rate of %, expected annual volatility of %, and annual rate of dividends of $.
On November 1, 2023, stock options to purchase shares of Common Stock were granted at an exercise price of $ per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of years. The stock options vest ratably over a period of years. The inputs used to determine the fair value was Common Stock price of $, option exercise price of $, expected life in years of years, with a contract life of years, risk-free rate of %, expected annual volatility of %, and annual rate of dividends of $.
On February 1, 2024, stock options to purchase shares of Common Stock were granted at an exercise price of $ per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of years. The stock options vest ratably over a period of years. The inputs used to determine the fair value was Common Stock price of $, option exercise price of $, expected life in years of years, with a contract life of years, risk-free rate of %, expected annual volatility of %, and annual rate of dividends of $.
On April 1, 2024, stock options to purchase shares of Common Stock were granted at an exercise price of $ per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of years. The stock options vest ratably over a period of years. The inputs used to determine the fair value was Common Stock price of $, option exercise price of $, expected life in years of years, with a contract life of years, risk-free rate of %, expected annual volatility of %, and annual rate of dividends of $.
| 11 |
On May 19, 2024, stock options were exercised using a cashless exercise option. The individual received a stock option grant of shares of which shares were vested and exercisable. shares were sold using a cashless exercise option in order to acquire the remaining shares. The remaining unvested options totaling shares were forfeited.
On June 1, 2024, stock options to purchase shares of Common Stock were granted at an exercise price of $ per share, which was equal to the fair value of the Common Stock on the date of grant and are exercisable for a period of years. The stock options vest ratably over a period of years. The inputs used to determine the fair value was Common Stock price of $, option exercise price of $, expected life in years of years, with a contract life of years, risk-free rate of%, expected annual volatility of %, and annual rate of dividends of $.
As of September 30, 2024 stock options to purchase shares of Common Stock were vested, the weighted average exercise price is $, the aggregate intrinsic value is $, and the weighted average remaining contractual term is years. Invizyne stock-based compensation were $ and $ for the nine months ended September 30, 2024 and 2023. As of September 30, 2024, the unrecognized stock-based compensation is $.
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | ||||||||||
| Stock options outstanding at January 1, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Expired | - | |||||||||||
| Stock options outstanding at September 30, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Expired | - | |||||||||||
| Stock options outstanding at December 31, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | - | |||||||||
| Expired | ( | ) | - | |||||||||
| Stock options outstanding at September 30, 2024 | ||||||||||||
| Stock options exercisable at September 30, 2023 | $ | |||||||||||
| Stock options exercisable at September 30, 2024 | $ | |||||||||||
On March 28, 2022, Invizyne granted restricted stock units (“RSUs”) at a value of $per share. These RSUs were issued in 2021 in lieu of cash bonuses. As these RSUs do not vest until the expiration of any lock up after an initial public offering of the Company, or upon the change of control of the Company by Invizyne, which is outside of the control of the Company, no compensation expense related to these RSUs has been recorded. These RSUs fully vest upon the expiration of any lockup period after an initial public offering, or upon the change of control of Invizyne. The Company will record stock-based compensation for these RSUs when the RSUs begin to vest, and the unrecognized stock-based compensation is $.
On May 1, 2023, Invizyne granted restricted stock units (“RSUs”) at a value of $ per share. These RSUs were issued in 2023 in lieu of cash bonuses. As these RSUs do not vest until the expiration of any lock up after an initial public offering of the Company, or upon the change of control of the Company by Invizyne, which is outside of the control of the Company, no compensation expense related to these RSUs has been recorded. These RSUs fully vest upon the expiration of any lockup period after an initial public offering, or upon the change of control of Invizyne. The Company will record stock-based compensation for these RSUs when the RSUs begin to vest, and the unrecognized stock-based compensation is $.
Number of Restricted Stock Units | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Life (in Years) | ||||||||||
| Restricted stock units outstanding at December 31, 2023 | $ | |||||||||||
| Granted | - | |||||||||||
| Exercised | - | |||||||||||
| Expired | - | |||||||||||
| Forfeited | - | |||||||||||
| Restricted stock units outstanding at September 30, 2024 | $ | |||||||||||
| Restricted stock units at September 30, 2023 | $ | |||||||||||
| Restricted stock units at September 30, 2024 | $ | |||||||||||
| 12 |
The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to holders of the Common Stockholders divided by the weighted average of the common shares outstanding for the period. Diluted EPS is like basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., preferred shares, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Loss per common share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the respective periods. Basic and diluted loss per common share was the same for all periods presented because warrants, RSU’s and options outstanding were anti-dilutive, for a total of shares and , respectively.
| September 30, 2024 | September 30, 2023 | |||||||
| Common shares | Common shares | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding – basic and diluted | ||||||||
| Net loss per share – basic and diluted | $ | ) | $ | ) | ||||
| September 30, 2024 | December 31, 2023 | |||||||
| Warrants to purchase common stock | ||||||||
| Options | ||||||||
| Restricted stock awards units | ||||||||
| Total | ||||||||
6. Commitments and Contingencies
Legal Claims
The Company may be subject to legal claims and actions from time to time as part of its business activities. As of September 30, 2024 and 2023, the Company was not subject to any pending or threatened legal claims or actions.
| 13 |
External Risks Associated with the Company’s Business Activities
Inflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy.
Supply Chain Issues. The Company does not currently expect that supply chain issues will have a significant impact on its business activities.
Potential Recession. There are various indications that the United States economy may be entering a recessionary period. Although unclear, at this time an economic recession would likely impact the general business environment and the capital markets, which could, in turn, affect the Company.
The Company is continuing to monitor these matters and will adjust its current business and financing plans as more information and guidance become available.
7. Employee Benefit Plans
Invizyne
sponsors an individual 401(k) defined contribution plan for the benefit of employees when eligible. The plan allows eligible employees
to contribute a portion of their annual compensation, not to exceed annual limits for the employee as established by the Department of
Treasury. Invizyne makes matching contributions for participating employees up to a certain percentage of the employee contributions;
matching contributions were funded for the six months ended September 30, 2024 and 2023. Benefits under this plan were available to all
employees, and employees become fully vested in the employer’s contribution upon receipt. A total of $
Invizyne also provides health and related benefit plans for eligible employees.
8. Exclusive License Agreement (Invizyne)
On April 19, 2019, Invizyne entered into a license agreement (the “License Agreement”) with The Regents of the University of California (“The Regents”) for patent rights and associated technology relating to the biosynthetic platform being developed by the Company. Certain individuals named as inventors of the patent rights are also the founding stockholders of Invizyne. One of the founders of Invizyne was the head of the laboratory which was used in the research and development of patents and associated technology subject to the agreement with The Regents.
Under the License Agreement, Invizyne holds an exclusive license of the patent rights and a non-exclusive license for the associated technology to make, have made, use, have used, sell, have sold, offer for sale, and import licensed products in the field of use. Under the License Agreement, Invizyne paid an initial license fee and is to pay an annual license fee and royalties on net sales, a minimum annual royalty that is credited against the royalties on net sales, and a percentage of any sublicensing income. The net income royalty commences after the first commercial sale of a licensed product. As of September 30, 2024, there were no accrued royalties recorded.
Under the License Agreement, Invizyne is required to achieve certain development milestones. Invizyne is obligated to make payments upon achievement of certain sales thresholds, as defined in the License Agreement. As of September 30, 2024 the development milestones have been met.
The following net sales milestone payments have not yet been incurred. The net sales milestones do not have a deadline and are listed below as of September 30, 2024.
| ● | A
payment of $ | |
| ● | A
payment of $ |
The Regents have the right terminate the License Agreement for breaches of the License Agreement by Invizyne
Invizyne may terminate the License Agreement, in whole or in part as to a particular patent right, at any time by providing notice of termination to The Regents as defined in the License Agreement.
The payments made to the Regents in connection with our license agreement with the Regents, from 2019 to September 30, 2024,
has aggregated $
Under
the License Agreement, the Company issued
shares of Common Stock, then representing four percent of its common equity, as initial consideration. The Company agreed to issue
additional shares of Common Stock to The Regents so that The Regents were to own no less than four percent of all outstanding common
shares of the Company until the Company received an aggregate amount of $
Invizyne
accounts for the costs incurred in connection with the License Agreement in accordance with ASC Topic 730, Research and Development.
The Company paid license fees for the nine months ended September 30, 2024 and 2023, respectively, of $
| 14 |
9. Leases
For
operating leases, the Company records right-of-use assets and corresponding lease liabilities in the consolidated balance sheets for
all leases with terms longer than twelve months. The Company has two operating leases, with
On
April 3, 2023, the Company executed a lease for new office space next to the existing space at Invizyne in the Los Angeles, California
metropolitan area.
In
April 2023, Invizyne made changes to an existing lease agreement, which resulted in an
ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses the implicit rate in its lease calculations when it is readily determinable. Since the Company’s leases do not provide implicit rates, to determine the present value of lease payments, management uses the Company’s estimated incremental borrowing rate for a fully collateralized loan with a similar term of the lease that is based on the information available at the inception of the lease.
| September 30, 2024 | December 31, 2023 | |||||||
| Operating leases: | ||||||||
| Right-of-use assets | $ | $ | ||||||
| Operating lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term in years | ||||||||
| Weighted average discount rate | % | % | ||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | $ | ||||||
The
operating lease costs were $
| 15 |
Future payments due under operating leases as of September 30, 2024 are as follows:
| Year | Amount | |||
| Remainder of 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
| Less effects of discounting | ( | ) | ||
| Total operating lease liabilities | $ | |||
10. Simple Agreement for Future Equity (SAFE)
On
July 3, 2023, Invizyne executed a simple agreement for future equity (SAFE) with MDB Capital Holdings LLC which provided funding of $
A continuity of the SAFE notes are as follows:
| Balance as at December 31, 2023 | $ | |||
| Issued | ||||
| Change in fair value of SAFE notes | ||||
| Balance as of September 30, 2024 | $ |
11. Subsequent Events
The Company has evaluated subsequent events through November 12, 2024, the date on which these financial statements were issued.
On
October 3, 2024, our board of directors approved a
On
October 1, 2024, we received a cost share grant from the Department of Defense (DOD) BioMADE initiative to help fund next steps toward
cell-free biomanufacturing of isobutanol in the amount of approximately $
On
November 11, 2024, the Company signed a firm commitment underwriting agreement (“Underwriting Agreement”) with MDB
Capital (“IPO”) to sell at the initial closing on November 13, 2024, an aggregate of shares
of Common Stock, for gross proceeds of $
In
a private placement ( “Concurrent Private Offering”) completed concurrently with the completion of the IPO, the Company sold
to accredited investors an aggregate of
On
November 12, 2024, the Company gave instruction to issue an aggregate of shares of Common Stock on the conversion of the simple
agreements for future equity (SAFEs) issued on July 3, 2023, to MDB Capital Holdings LLC and Paul Opgenorth, which provided funding of
$
| 16 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Invizyne is a bio-technology, pre-revenue, development stage company, which as of the date of this report is an approximate 48% owned subsidiary of MDB Capital Holdings, LLC. Management believes that Invizyne’s technology is a differentiated and unique synthetic biology platform. Management believes the platform will enable scalable production of chemical molecules found in nature in a process that is alternative to and more environmentally friendly and sustainable than the typical methods used today, such as chemical synthesis, natural extraction, and synthetic biology. Invizyne believes its technology could significantly change biomanufacturing through leveraging cell-free, multi-step enzyme-based systems that will be able to transform natural or renewable resources into sought after chemicals. The objective with SimplePath,™ the Invizyne synthetic biology platform, as it is developed over time, for diverse range of select chemicals will enable the production of pharmaceuticals, fuels, materials, food additives, and novel compounds.
Results of Operations
The Company has determined its reporting units in accordance with ASC (Accounting Standards Codification) 280, Segment Reporting. The Company has one reportable segment for Invizyne as a whole. A single management team that reports to the Chief Executive Officer comprehensively manages the business. Accordingly, the Company does not have separately reportable segments.
The Company’s consolidated statements of operations as discussed herein are presented below.
Consolidated Results of Operations for the Three Months Ended September 30, 2024, and 2023 (unaudited)
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| Total operating income | $ | - | $ | - | $ | - | 0.0 | % | ||||||||
| Operating costs: | ||||||||||||||||
| General and administrative costs: | ||||||||||||||||
| Compensation | 546,095 | 119,146 | 426,949 | 358.3 | % | |||||||||||
| Professional fees | 269,543 | 92,508 | 177,035 | 191.4 | % | |||||||||||
| Information technology | 15,661 | 7,012 | 8,649 | 123.3 | % | |||||||||||
| General and administrative-other | 56,940 | 145,244 | (88,304 | ) | (60.8 | )% | ||||||||||
| Total general and administrative costs | 888,239 | 363,910 | 524,329 | 144.1 | % | |||||||||||
| Research and development costs, net of grants amounting to $489,798 and $704,162, for the three months ended September 30 | 723,487 | 27,936 | 695,551 | 2,489.8 | % | |||||||||||
| Total operating costs | 1,611,726 | 391,846 | 1,219,880 | 311.3 | % | |||||||||||
| Net operating loss | (1,611,726 | ) | (391,846 | ) | (1,219,880 | ) | 311.3 | % | ||||||||
| Other income/(expense): | ||||||||||||||||
| Interest income/ (expense) | (44,647 | ) | - | (44,647 | ) | 100 | % | |||||||||
| Change in fair value of SAFE | - | (128,750 | ) | (128,750 | ) | (100 | )% | |||||||||
| Loss before income taxes | (1,656,373 | ) | (520,596 | ) | (1,135,777 | ) | 218.2 | % | ||||||||
| Income taxes | - | - | - | 100.0 | % | |||||||||||
| Net loss | $ | (1,656,373 | ) | $ | (520,596 | ) | (1,135,777 | ) | 218.2 | % | ||||||
Consolidated Results of Operations for the Nine Months Ended September 30, 2024, and 2023 (unaudited)
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| Total operating income | $ | - | $ | 70,769 | $ | (70,769 | ) | -100.0 | % | |||||||
| Operating costs: | ||||||||||||||||
| General and administrative costs: | ||||||||||||||||
| Compensation | 1,667,748 | 289,154 | 1,378,594 | 476.8 | % | |||||||||||
| Professional fees | 816,009 | 301,244 | 514,765 | 170.9 | % | |||||||||||
| Information technology | 29,267 | 16,247 | 13,020 | 80.1 | % | |||||||||||
| General and administrative-other | 197,302 | 208,204 | (10,902 | ) | (5.2 | )% | ||||||||||
| Total general and administrative costs | 2,710,326 | 814,849 | 1,895,477 | 232.6 | % | |||||||||||
| Research and development costs, net of grants amounting to $1,807,706 and $2,265,409, for the nine months ended September 30 | 1,238,463 | 67,095 | 1,171,368 | 1,745.8 | % | |||||||||||
| Total operating costs | 3,948,789 | 881,944 | 3,066,845 | 347.7 | % | |||||||||||
| Net operating loss | (3,948,789 | ) | (811,175 | ) | (3,137,614 | ) | 386.8 | % | ||||||||
| Other income/(expense): | ||||||||||||||||
| Interest income/(expense) | (74,429 | ) | 100 | (74,529 | ) | (74,529.0 | )% | |||||||||
| Change in fair value of SAFE | - | (128,750 | ) | 128,750 | 100.0 | % | ||||||||||
| Loss before income taxes | (4,023,218 | ) | (939,825 | ) | (3,083,393 | ) | 328.1 | % | ||||||||
| Income taxes | 2,143 | - | 2,143 | 100.0 | % | |||||||||||
| Net loss | $ | (4,025,361 | ) | $ | (939,825 | ) | (3,085,536 | ) | 328.3 | % | ||||||
| 17 |
Operating Income. For the nine-months and three-months periods ended September 30, 2024, there has been no operating income activity.
General and Administrative Costs. During the three-months and nine-months periods ended September 30, 2024 and 2023, respectively, several factors contributed to changes in various expense categories:
| ● | Compensation Expense: The increase in compensation expense during the three-month and nine-month periods ending September 30, 2024, resulted from the recruitment of additional administrative staff, in the latter half of 2023, who are not covered by grants. 2024 results represents the ongoing costs of the additional hires in 2023. | |
| ● | Professional Fees: The increase in professional fees compared to previous periods was due to higher consulting costs related to operations and the expenses of the initial public offering. Along with higher legal, tax, audit, and consulting costs associated with completing year-end financial audits and preparing for the initial public offering. | |
| ● | Information Technology Costs: The increase in costs for the three-month and nine-month periods ending September 30, 2024, were negligible compared to the same period in the previous year. | |
| ● | Other General and Administrative Costs: The decrease in costs for the three-month and nine-month periods ending September 30, 2024, were negligible compared to the same period in the previous year . |
Research and Development Costs. For the nine-month periods ended September 30, 2024, there was an increase of $1,171,368, respectively, in research and development costs due to an increase in salaries, lab expenses and a decrease in grant funding. It is important to note that the fluctuation in grant funding was due to completion of certain grants and is expected to fluctuate throughout the year.
Consolidated Balance Sheet as of September 30, 2024 and December 31, 2023 (unaudited)
| September 30, 2024 | December 31, 2023 | $ Change | % Change | |||||||||||||
| ASSETS | ||||||||||||||||
| Cash and cash equivalents | $ | 233,935 | $ | 66,533 | $ | 167,402 | 251.6 | % | ||||||||
| Grants receivable | 553,963 | 882,319 | (328,356 | ) | (37.2 | )% | ||||||||||
| Prepaid expenses and other current assets | 634,693 | 264,762 | 369,931 | 139.7 | % | |||||||||||
| Total current assets | 1,422,591 | 1,213,614 | 208,977 | 17.2 | % | |||||||||||
| Property and equipment, net | 739,606 | 753,376 | (13,770 | ) | (1.8 | )% | ||||||||||
| Operating lease right-of-use asset, net | 1,398,168 | 1,591,519 | (193,351 | ) | (12.1 | )% | ||||||||||
| Total assets | $ | 3,560,365 | $ | 3,558,509 | $ | 1,856 | 0.1 | % | ||||||||
| LIABILITIES AND DEFICIT | ||||||||||||||||
| Accounts payable | $ | 908,606 | $ | 702,911 | $ | 205,695 | 29.3 | % | ||||||||
| Due to affiliates | 255,840 | 445,128 | (189,288 | ) | (42.5 | )% | ||||||||||
| Related party note | 3,414,093 | - | 3,414,093 | 100.0 | % | |||||||||||
| Operating lease liabilities – Current | 223,761 | 224,988 | (1,227 | ) | (0.5 | )% | ||||||||||
| SAFE Liability | 1,000,000 | 1,000,000 | - | 0.0 | % | |||||||||||
| Taxes payable | - | 42,267 | (42,267 | ) | (100.0 | )% | ||||||||||
| Total current Liabilities | 5,802,300 | 2,415,294 | 3,387,006 | 140.2 | % | |||||||||||
| Deferred grant reimbursement | 137,035 | 140,703 | (3,668 | ) | (2.6 | )% | ||||||||||
| Operating lease liabilities | 1,222,348 | 1,386,831 | (164,483 | ) | (11.9 | )% | ||||||||||
| Total liabilities | 7,161,683 | 3,942,828 | 3,218,855 | 81.6 | % | |||||||||||
| Deficit: | ||||||||||||||||
| Common shares | 6 | 6 | - | 0.0 | % | |||||||||||
| Paid-in-capital | 6,508,660 | 5,700,298 | 808,362 | 14.2 | % | |||||||||||
| Accumulated deficit | (10,109,984 | ) | (6,084,623 | ) | (4,025,361 | ) | 66.2 | % | ||||||||
| Total deficit | (3,601,318 | ) | (384,319 | ) | (3,216,999 | ) | 837.1 | % | ||||||||
| Total liabilities and deficit | $ | 3,560,365 | $ | 3,558,509 | $ | 1,856 | 0.1 | % | ||||||||
Financial Condition: The increase in assets was due to changes in several asset classes. The decrease in grants receivable was driven by completion of certain grants. The increase in prepaid expenses was due to $284,602 of deferred IPO costs between the periods. The increase in property and equipment was due to the purchase of lab equipment. The decrease in operating lease right-of-use assets resulted from the usage and payments of office space during the period.
The increase in liabilities were a result of funds loaned by the parent company to be used to fund operations. The decrease in operating lease liability was due to normal lease liability payments during the period.
The equity decrease was driven by the accumulated deficit generated through operational activities.
Liquidity and Capital Resources – September 30, 2024 and 2023 (unaudited)
The Company’s consolidated statements of cash flows as discussed herein are presented below.
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (2,798,123 | ) | $ | (397,590 | ) | ||
| Net cash used in investing activities | (148,809 | ) | (201,424 | ) | ||||
| Net cash provided by financing activities | 3,114,334 | 515,000 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | 167,402 | $ | (84,014 | ) | |||
On September 30, 2024, the Company had working capital of $(4,379,709), as compared to working capital of $(1,201,680) on December 31, 2023, reflecting a decrease in working capital of $3,178,029. This decrease in working capital was primarily the result of a reduction in grant reimbursements over the period and the increase in accounts due to affiliates, which were used to pay certain expenses of the Company and to cover general operating expenses. On September 30, 2024, the Company had cash of $233,935 available to fund its operation.
On November 11, 2024, the Company signed a firm commitment underwriting agreement for its IPO, in which it sold an aggregate of 1,875,000 shares of Common Stock, for gross proceeds of $15,000,000, and net proceeds of approximately $14,321,686. The proceeds will be used in the expansion of its production capabilities, staffing, R&D and other working capital requirements, and repayment of approximately $4,393,022 in intercompany loans from its parent company, MDB Capital Holdings, LLC.
In a private placement (“Concurrent Private Offering”) completed concurrently with the IPO, the Company sold to accredited investors an aggregate of 93,750 warrants to purchase up to 93,750 shares of Common Stock (the “Private Warrants”). The Private Warrants were sold at a purchase price of $0.125. The Private Warrants have an exercise price of $8.00 per share, are exercisable beginning six months after issuance, and expire five years from the date of issuance. The Private Warrants have a cashless exercise provision and registration rights for the underlying shares of Common Stock. The gross proceeds from the Concurrent Private Offering were approximately $11,719, and if the Private Warrants are fully exercised, for cash, the Company will receive up to $750,000.
In October 2024, the Company received an additional cost share grant from the Department of Defense (DOD) BioMADE initiative to help fund next steps toward cell-free biomanufacturing of isobutanol in the amount of approximately $1,000,000 against our own required expenses of an equal amount. The Company intends to pursue additional grants which will further improve its working capital position.
Based on its working capital of approximately $9,941,977 after the IPO, and its program of seeking various grants, the Company believes it will not need to raise capital in the immediate future. If, however, it does require capital, it may sell its equity securities, seek institutional and bank funding, borrow from its affiliates, for which there are no arrangements or obligations in place at this time, and sell or license various of its intellectual property rights.
| 18 |
Operating Activities. For the period ended September 30, 2024, operating activities utilized cash of $2,798,123, which was driven by an increased research and development activity, as well as increased general and administrative costs.
For the period ended September 30, 2023, operating activities utilized cash of $397,590, which was driven by a combination of increased research and development activity, as well as increased general and administrative costs.
Investing Activities. For the period ended September 30, 2024, investing activities consisted of the purchase of laboratory equipment.
Financing Activities. For the period ended September 30, 2024, financing activities consisted loans from a related party, MDB Capital Holdings, and deferred IPO expenses.
For the period ended September 30, 2023, financing activities consisted of investments from the parent company in the form of a SAFE.
Recently Issued Accounting Pronouncements
See Note 2 in the unaudited condensed consolidated financial statements for the discussion on recently accounting pronouncements.
Critical Accounting Estimates
The preparation of financial statements in conformity with general accepted accounting principles in the United States 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 the reported amounts of revenues and expenses during the reporting period. We have identified certain accounting policies as being critical because they require us to make difficult, subjective, or complex judgments about matters that are uncertain. We believe that the judgment, estimates, and assumptions used in the preparation of our unaudited condensed consolidated financial statements and unaudited condensed consolidated financial statements are appropriate given the factual circumstances at the time. However, actual results could differ, and the use of other assumptions or estimates could result in material differences in our results of operations or financial condition. Our critical accounting estimates are:
Accounting for Research Grants
Invizyne receives grant reimbursements, which are netted against research and development expenses in the unaudited condensed consolidated statement of operations. Grant reimbursements for capitalized assets are recognized over the useful life of the assets, with the unrecognized portion considered a deferred liability and are included in accounts payable and accrued expenses in the unaudited condensed consolidated balance sheet.
Grants that operate on a reimbursement basis are recognized on the accrual basis are revenues to extent of disbursements and commitments that are allowable for reimbursement of allowable expenses incurred as of September 30, 2024 and 2023 and expected to be received from funding sources in the subsequent year. Management considers such receivables at September 30, 2024 and 2023, to be fully collectable, due to the historical experience with the Federal Government of the United States of America. Accordingly, no allowance for grants receivable was recorded in the accompanying unaudited condensed consolidated financial statements.
Research grants received from organizations are subject to the contract agreement as to how Invizyne conducts its research activities, and Invizyne is required to comply with the agreement terms relating to those grants. Amounts received under research grants are nonrefundable, regardless of the success of the underlying research project, to the extent that such amounts are expended in accordance with the approved grant project. Invizyne is permitted to draw down (a process of submitting expenses for reimbursement) the research grants after incurring the related expenses. Amounts received under research grants are offset against the related research and development costs in the Company’s unaudited condensed consolidated statement of operations.
Summary of Business Activities and Plans
On November 11, 2024, the Company signed a firm commitment underwriting agreement for its initial public offering (IPO) with a closing date of November 13, 2024, which consisted of the sale of an aggregate of _1,875,000 shares of Common Stock. The public offering price was $8.00 per share, for gross proceeds of $15,000,000. The underwriter may exercise its overallotment option for up to an additional 281,250 shares until December 26, 2024. The net proceeds are estimated to be $14,321,686 as of the date of this report. The proceeds will be used for the development of Invizyne, expansion of production capabilities, increased staff and related expenses, R&D expenses, repayment of a related party loan and other general corporate and working capital requirements.
External Risks Associated with the Company’s Business Activities
Inflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy.
Supply Chain Issues. The Company does not currently expect that supply chain issues will have a significant impact on its business activities.
Potential Recession. There are various indications that the United States economy may be entering a recessionary period. Although unclear at this time an economic recession would likely impact the general business environment and the capital markets, which could, in turn, if there is a recession, such an event could affect the Company.
The Company is continuing to monitor these matters and will adjust its current business and financing plans as more information and guidance become available.
Technology. The Company endeavors to create and bring new technologies to the market may never come to fruition or might not reach a level of development sufficient for commercial viability. Even if they do achieve a commercial level of development, the acceptance of these technologies within the marketplace is uncertain. There’s a possibility that the technologies they develop may not gain widespread or timely acceptance. Moreover, technologies from our Company that undergo regulatory scrutiny, testing, and approval may ultimately fail to receive the necessary approvals from relevant regulatory bodies.
Trends, Events and Uncertainties
Other than as discussed above, we are not currently aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on our financial condition.
| 19 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company, with the participation of the Chief Executive Officer and Vice President, Finance, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on that evaluation, and as a result of the material weaknesses in internal control over financial reporting described below, the Chief Executive Officer and Chief Accounting Officer concluded that, as of September 30, 2024, the disclosure controls and procedures were not effective at the reasonable assurance level.
Ongoing Remediation of Previously Identified Material Weakness
There are no ongoing remediation of previously identified material weakness.
Changes in Internal Control Over Financial Reporting
There were no changes in the internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the nine-months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls and Procedures
The Company’s management, including the Chief Executive Officer and Vice President, Finance, believes that disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that the disclosure controls and procedures or the internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened litigation that would have a material adverse effect on our business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably. We believe that from time to time we will have commercial disputes arising in the ordinary course of our business.
Item 1A. Risk Factors
In addition to the information set forth in this Form 10-Q, you should also carefully review and consider the risk factors contained in our other registration statements, reports and periodic filings with the SEC that could materially and adversely affect our business, financial condition, and results of operations. The risk factors we have identified and discussed, however, do not identify all risks that we face because our business operations could also be affected by additional factors that are not known to us or that we currently consider to be immaterial to our operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In a private placement ( “Concurrent Private Offering”) completed concurrently with the completion of the initial public offering by the Company of its shares of Common Stock, it sold to accredited investors an aggregate of 93,750 warrants to purchase up to 93,750 shares of Common Stock (the “Private Warrants”). The Private Warrants were sold at a purchase price of $0.125. The Private Warrants have an exercise price of $8.00 per share, are exercisable beginning six months after issuance, and expire five years from the date of issuance. The Private Warrants have a demand and multiple piggy back registration rights for the underlying shares of Common Stock starting six months after issuance, may be exercised on a cashless basis, and have other terms that are typical of investor warrants such as anti-dilution rights and blocker provisions. The Private Warrants and underlying shares are subject to a one-year lock up from the date of issuance. The gross proceeds from the Concurrent Private Offering were approximately $11,719, and if the Private Warrants are fully exercised, for cash, the Company will receive up to $750,000. The offer and sale of the Private Warrants and the shares of Common Stock issuable upon exercise of the Private Warrants are not being registered under the Securities Act of 1933, as amended (the “Securities Act”) and are being offered pursuant to the exemption from registration provided in Section 4(a)(2) under the Securities Act and/or Rule 506(b) promulgated thereunder.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
The documents listed in the Exhibit Index of this Form 10-Q are incorporated by reference or are filed with this Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
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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.
| INVIZYNE TECHNOLOGIES INC. | ||
| (the “Registrant”) | ||
| Dated: November 12, 2024 | By: | /s/ Michael Heltzen |
| Michael Heltzen | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Dated: November 12, 2024 | By: | /s/ Fouad Nawaz |
| Fouad Nawaz | ||
| Vice President, Finance | ||
| (Principal Financial and Accounting Officer) | ||
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EXHIBIT INDEX
| * | Filed herewith. |
| ** | Furnished herewith. |
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