UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from ________________ to ________________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
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standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
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As of November 11, 2022, the registrant had 4,163,146 and
Table of Contents
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
| ● | we have generated no significant revenue from commercial sales to date and our future profitability is uncertain; |
| ● | if we fail to obtain the capital necessary to fund our operations, we will be unable to continue or complete our product development and you will likely lose your entire investment; |
| ● | our financial situation creates doubt whether we will continue as a going concern; |
| ● | we may need to raise additional funding, which may not be available on acceptable terms, or at all; |
| ● | even if we can raise additional funding, we may be required to do so on terms that are dilutive to you.; |
| ● | the regulatory approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of our future product candidates, if any; |
| ● | we may encounter substantial delays in completing our clinical studies which in turn will require additional costs, or we may fail to demonstrate adequate safety and efficacy to the satisfaction of applicable regulatory authorities; |
| ● | if our future pre-clinical development and future clinical Phase I/II studies are unsuccessful, we may be unable to obtain regulatory approval of, or commercialize, our product candidates on a timely basis or at all; |
| ● | even if we receive regulatory approval for any of our product candidates, we may not be able to successfully commercialize the product and the revenue that we generate from their sales, if any, may be limited; |
| ● | adverse events involving our products may lead the FDA or applicable foreign regulatory agency to delay or deny clearance for our products or result in product recalls that could harm our reputation, business and financial results; |
| ● | our technology is subject to licenses from LLU and Stanford (as defined below), each of which are revocable in certain circumstances, including in the event we do not achieve certain payments and milestone deadlines. Without these licenses, we may not be able to continue to develop our product candidates; |
| ● | if we were to lose our CLIA certification or state laboratory licenses, whether as a result of a revocation, suspension or limitation, we would no longer be able to offer our assays (including our AditxtScore™ platform), which would limit our revenues and harm our business. If we were to lose, or fail to obtain, a license in any other state where we are required to hold a license, we would not be able to test specimens from those states; |
| ● | our results of operations will be affected by the level of royalty and milestone payments that we are required to pay to third parties; |
| ● | we face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do; |
ii
| ● | our technologies and products under development, and our business, may fail if we are not able to successfully commercialize them and ultimately generate significant revenues as a result; |
| ● | customers may not adopt our products quickly, or at all; |
| ● | COVID-19 may impact our business and operations; |
| ● | the failure to obtain or maintain patents, licensing agreements and other intellectual property could materially impact our ability to compete effectively; |
| ● | some of our intellectual property may be subject to “march-in” rights by the U.S. federal government; |
| ● | we do not expect to pay dividends in the foreseeable future; |
| ● | we have issued a significant number of restricted stock awards, restricted stock units, options and warrants and may continue to do so in the future. The vesting and, if applicable, exercise of these securities and the sale of the shares of common stock issuable thereunder may dilute your percentage ownership interest and may also result in downward pressure on the price of our common stock; |
| ● | future sales or issuances of substantial amounts of our common stock, including, potentially as a result of the Share Exchange Agreement with Cellvera Global f/k/a AiPharma Global, could result in significant dilution; |
| ● | while we have entered into a Share Exchange Agreement with Cellvera Global, we cannot assure you that the transaction contemplated by the Share Exchange Agreement will be consummated or, that if such transaction is consummated, that it will be accretive to stockholder value; |
| ● | we have provided loans to Cellvera Global in the principal amount of $14.5 million, if we are unable to complete the transactions contemplated by the Share Exchange Agreement, we cannot provide any assurance that we will be able to timely collect such amounts from Cellvera Global, if at all; |
| ● | we may engage in future acquisitions or strategic transactions, including the transaction with Cellvera Global, which may require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management; |
| ● | exclusive forum provisions in our amended and restated certificate of incorporation and amended and restated bylaws. |
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition, and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes, or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles, and surveys. Industry surveys, publications, consultant surveys, and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
References to Aditxt, Inc.
Throughout this Quarterly Report on Form 10-Q, the “Company,” “Aditxt,” “we,” “us,” and “our” refers to Aditxt, Inc. and “our board of directors” refers to the board of directors of Aditxt, Inc.
iii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ADITXT, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses | ||||||||
| Note receivable | ||||||||
| Inventory | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Fixed assets, net | ||||||||
| Intangible assets, net | ||||||||
| ROU asset - long term | ||||||||
| Deposits | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Stock redemption payable - related party | ||||||||
| Notes payable – related party | ||||||||
| Financing on fixed assets – current | ||||||||
| Deferred rent | ||||||||
| Lease liability - current | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Financing on fixed assets - long term | ||||||||
| Lease liability - long term | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Treasury stock, | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the condensed financial statements.
1
ADITXT, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| REVENUE | ||||||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| General and administrative expenses, $ | ||||||||||||||||
| Research and development, includes $ | ||||||||||||||||
| Sales and marketing $ | ( | ) | ||||||||||||||
| Total operating expenses | ||||||||||||||||
| NET LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER EXPENSE | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Other income | ||||||||||||||||
| Loss on extinguishment of debt | - | ( | ) | - | ( | ) | ||||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax provision | ||||||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
See accompanying notes to the condensed financial statements.
2
ADITXT, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(Unaudited)
Preferred Outstanding | Preferred Shares Par | Preferred B Outstanding | Preferred B Shares Par | Common Outstanding | Common Par | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Balance December 31, 2021 | $ | - | $ | - | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock units for compensation | ( | ) | - | - | ||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Issuance of restricted stock units for compensation | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | |||||||||||||||||||||||||||||||||||||
| Exercise of warrants, modification of warrants, and issuance of warrants | ||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | |||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | ||||||||||||||||||||||||||||||||||||||||
| Sale of Series B Preferred shares to related party | ||||||||||||||||||||||||||||||||||||||||
| Redemption of Series B Preferred shares to related party | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued as inducement on loans, net of issuance costs | ||||||||||||||||||||||||||||||||||||||||
| Warrants issued with loans | - | - | - | |||||||||||||||||||||||||||||||||||||
| Anti-dilution reset of warrants | - | - | - | - | - | - | - | ( | ) | - | ||||||||||||||||||||||||||||||
| Issuance of shares for debt issuance costs | ||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Issuance of shares and warrants for offering, net of issuance costs | ||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for services modification | ( | ) | ( | ) | - | |||||||||||||||||||||||||||||||||||
| Issuance costs related to exercise of warrants, modification of warrants, and issuance of warrants | - | - | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||
| Rounding from reverse stock split | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
See accompanying notes to the condensed financial statements.
3
ADITXT, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(Unaudited)
|
Preferred Outstanding |
Preferred Shares Par |
Preferred B Outstanding |
Preferred B Shares Par |
Common Outstanding |
Common Par |
Treasury Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Equity |
||||||||||||||||||||||||||||||||||
| Balance December 31, 2020 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||
| Exercise of warrants | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for employee compensation | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Fair value of warrants issued with convertible note payable | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Warrant consideration for convertible note offering costs | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Balance March 31, 2021 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||
| Issuance of shares for services | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for employee compensation | |||||||||||||||||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Balance June 30, 2021 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for the settlement of debt | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares and warrants for offering, net of issuance costs | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock units for compensation | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | |||||||||||||||||||||||||||||||||||||||||||
| Down round | - | - | - | ( |
) | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Balance September 30, 2021 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||
4
ADITXT, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended | Nine Months Ended | |||||||
| September 30, 2022 | September 30, 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Stock-based compensation | ||||||||
| Depreciation expense | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of debt discount | ||||||||
| Loss on extinguishment of debt | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Deposits | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Tenant improvement allowance receivable | ( | ) | ( | ) | ||||
| Deferred acquisition costs | ( | ) | ||||||
| Notes receivable and accrued interest | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from note payable - related party | ||||||||
| Proceeds from note payable | ||||||||
| Discount on note payable from offering costs | ( | ) | ( | ) | ||||
| Repayments of note payable | ( | ) | ( | ) | ||||
| Sale of Series B Preferred shares to related party | ||||||||
| Common stock and warrants issued for cash, net of issuance costs | ||||||||
| Exercise of warrants | ||||||||
| Exercise of warrants, modification of warrants, and issuance of warrants | ||||||||
| Payments on financing on fixed asset | ( | ) | ( | ) | ||||
| Cash paid on extinguishment of note payable | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest expense | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Issuance of shares for the settlement of notes payable | $ | $ | ||||||
| Lease liability recognized from right of use asset | $ | $ | ||||||
| Original offering discount on convertible note payable | $ | $ | ||||||
| Debt discount from warrants issued with convertible note payable | $ | $ | ||||||
| Debt discount from warrant consideration for convertible debt offering costs | $ | $ | ||||||
| Debt discount from shares issued as inducement for convertible note payable | $ | $ | ||||||
| Liability recognized for financed assets | $ | $ | ||||||
| Reduction in exercise price of warrants | $ | $ | ||||||
| Shares issued for debt offering costs | $ | $ | ||||||
| Redemption of Series B Preferred shares to related party | $ | $ | ||||||
| Anti-dilution reset of warrants modification | $ | $ | ||||||
See accompanying notes to the condensed financial statements.
5
ADITXT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Company Background
Overview
Aditxt, Inc. (“Aditxt” or the “Company”), formerly known as Aditx Therapeutics, Inc., was incorporated in the State of Delaware on September 28, 2017, and the Company’s headquarters are located in Richmond, VA. The Company is a biotech innovation company with a mission of prolonging life and enhancing its quality by improving the health of the immune system.
The Company is developing biotechnologies specifically focused on improving the health of the immune system through immune reprogramming and monitoring. The Company’s immune reprogramming technologies are currently at the pre-clinical stage and are designed to retrain the immune system to induce tolerance with an objective of addressing rejection of transplanted organs, autoimmune diseases, and allergies. The Company’s immune monitoring technologies are designed to provide a personalized comprehensive profile of the immune system, and the Company plans to utilize them in its upcoming reprogramming clinical trials to monitor subjects’ immune response before, during and after drug administration.
Reverse Stock Split
On September 13, 2022, the Company effectuated a 1 for 50 reverse stock split (the “Reverse Split”). The Company’s stock began trading on a split-adjusted basis effective on the Nasdaq Stock Market on September 14, 2022. There was no change to the number of authorized shares of the Company’s common stock. All shares amounts referenced in this report are adjusted to reflect the Reverse Split.
Offerings
On August 31, 2021, the Company completed a registered
direct offering (“August 2021 Offering”). In connection therewith, the Company issued
On October 18, 2021, the Company entered into
an underwriting agreement with Revere Securities LLC, relating to the public offering (the “October 2021 Offering”) of
On December 6, 2021, we completed a public offering
for net proceeds of $
On September 20, 2022, we completed a public offering
for net proceeds of $
6
Risks and Uncertainties
The Company has a limited operating history and is in the very early stages of generating revenue from intended operations. The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, and federal governmental policy decisions. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include: changes in the biotechnology regulatory environment, technological advances that render our technologies obsolete, availability of resources for clinical trials, acceptance of technologies into the medical community, and competition from larger, more well-funded companies. These adverse conditions could affect the Company’s financial condition and the results of its operations.
On January 30, 2020, the World Health Organization declared the COVID-19 novel coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the financial impact will be to the Company, it is reasonably possible that future capital raising efforts and additional development of our technologies may be negatively affected.
NOTE 2 – GOING CONCERN ANALYSIS
Management Plans
The Company was incorporated on September 28,
2017 and has not generated significant revenues to date. During the nine months ended September 30, 2022, the Company had a net loss of
$
Because of these factors, the Company believes that this creates substantial doubt with the Company’s ability to continue as a going concern.
The condensed financial statements included in this report do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein. The Company’s ability to continue as a going concern is dependent upon the ability to complete clinical studies and implement the business plan, generate sufficient revenues and to control operating expenses. In addition, the Company is consistently focused on raising capital, strategic acquisitions and alliances, and other initiatives to strengthen the Company.
7
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the Company’s management, the accompanying condensed financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended September 30, 2022 and September 30, 2021. Although management believes that the disclosures in these unaudited condensed financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in condensed financial statements that have been prepared in accordance U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022. The interim results for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ended December 31, 2022 or for any future interim periods.
Use of Estimates
The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Significant estimates underlying the condensed financial statements include the collectability of notes receivable, collectability and reserve on accounts receivable, the reserve on insurance billing, and the fair value of stock options and warrants.
Fair Value Measurements and Fair Value of Financial Instruments
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
| Level 1 - | Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. |
| Level 2 - | Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
| Level 3 - | Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.
Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet dates.
Concentrations of Credit Risk
The Company maintains its cash accounts at financial institutions which are insured by the Federal Deposit Insurance Corporation. At times, the Company may have deposits in excess of federally insured limits.
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Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid investments.
Inventory
Inventory consists of laboratory materials and supplies used in laboratory analysis. We capitalize inventory when purchased. Inventory is valued at the lower of cost or net realizable value on a first-in, first-out basis. We periodically perform obsolescence assessments and write off any inventory that is no longer usable.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Cost includes expenditures for furniture, office equipment, laboratory equipment, and other assets. Maintenance and repairs are charged to expense as incurred. When assets are sold, retired, or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. The costs of fixed assets are depreciated using the straight-line method over the estimated useful lives or lease life of the related assets.
Intangible Assets
Intangible assets are stated at cost less accumulated amortization. For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives of the related assets. For intangible assets with indefinite lives, the assets are tested periodically for impairment.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the amount management
expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company
determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management.
As of September 30, 2022 and December 31, 2021, there was an allowance for doubtful accounts of $
Revenue Recognition
In accordance with ASC 606 (Revenue From Contracts with Customers), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:
| 1) | Identify the contract with a customer |
| 2) | Identify the performance obligations in the contract |
| 3) | Determine the transaction price |
| 4) | Allocate the transaction price to performance obligations in the contract |
| 5) | Recognize revenue when or as the Company satisfies a performance obligation |
Revenues reported from services relating to the AditxtScore™ are recognized when the AditxtScoreTM report is delivered to the customer. The services performed include the analysis of specimens received in the Company’s CLIA laboratory and the generation of results which are then delivered upon completion.
The Company recognizes revenue in the following manner for the following types of customers:
Client Payers:
Client payers include physicians or other entities for which services are billed based on negotiated fee schedules. The Company principally estimates the allowance for credit losses for client payers based on historical collection experience and the period of time the receivable has been outstanding.
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Cash Pay:
Customers are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Collection of billings is subject to credit risk and the ability of the patients to pay.
Insurance:
Reimbursements from healthcare insurers are based on fee for service schedules. Net revenues recognized consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, collection experience, and the terms of the Company’s contractual arrangements.
Leases
Under Topic 842 (Leases), operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases consisting of office space, laboratory space, and lab equipment.
Leases with an initial term of twelve months or less are not recorded on the balance sheet. We combine the lease and non-lease components in determining the lease liabilities and right of use (“ROU”) assets.
Stock-Based Compensation
The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services.
Patents
The Company incurs fees from patent licenses,
which are expensed as incurred. During the nine months ended September 30, 2022 and September 30, 2021, the Company incurred patent licensing
fees for the patents of $
Research and Development
We incur research and development costs during
the process of researching and developing our technologies and future offerings. We expense these costs as incurred unless such costs
qualify for capitalization under applicable guidance. During the nine months ended September 30, 2022 and September 30, 2021, the Company
incurred research and development costs of $
Basic and Diluted Net Loss per Common Share
Basic loss per common share is computed by dividing the net loss by
the weighted average number of shares of common stock outstanding for each period. Diluted loss per share is computed by dividing the
net loss by the weighted average number of shares of common stock outstanding plus the dilutive effect of shares issuable through the
common stock equivalents. The weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion
would be anti-dilutive. As of September 30, 2022,
Recent Accounting Pronouncements
The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our condensed financial statements.
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NOTE 4 – NOTE RECEIVABLE
Cellvera Global Note Receivable
On August 25, 2021, the Company entered into a
letter of intent (“the LOI”) to acquire AiPharma Global Holdings LLC, a Delaware limited liability company, which subsequently
changed its name to Cellvera Global Holdings LLC (“Cellvera Global”) which is commercializing COVID-19 antiviral oral therapy.
Key terms of the proposed transaction as stated in the Letter of Intent included: the completion of a proposed $
In connection with the contemplated acquisition
with Cellvera Global, the Company entered into a secured credit agreement dated August 27, 2021 (the “Credit Agreement”)
with Cellvera Global and certain affiliated entities (collectively, the “Borrower”), pursuant to which the Company made a
secured loan to Cellvera Global in the principal amount of $
The Credit Agreement was amended on multiple occasions, for which the final amendment was signed on December 31, 2021, extending the Loan’s maturity date to January 31, 2022.
The Company determined that Cellvera Global may
not have the ability to repay the note receivable. Accordingly, the Company recognized a full impairment of $
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Forbearance Agreement:
On January 31, 2022, the Company’s $
Pursuant to the Forbearance Agreement, the Company agreed to forbear from exercising its rights and remedies against Cellvera Global and certain affiliated guarantor parties until the earlier of (i) June 30, 2022 or (ii) the date of occurrence of any event of default under the Forbearance Agreement (the “Forbearance Period”). Given that the parties continue to conduct due diligence in connection with the Share Exchange Agreement, the Company and Cellvera Global also agreed that should the initial closing occur under the Share Exchange Agreement, the existing event of default will be waived. Under the Forbearance Agreement, the Company and Cellvera Global also agreed to certain amendments to the Credit Agreement, including, but not limited to: (i) the delivery by the Borrower of certain financial statements and forecasts, and (ii) certain regularly scheduled payments to be made by Cellvera Global to the Company during the Forbearance Period. As of the date of filing of this Quarterly Report, the regularly scheduled payments under the Forbearance Agreement have not been made, and the note receivable remains fully impaired.
On April 4, 2022, the Company and Cellvera Global
entered into a Forbearance Agreement and Eighth Amendment to the Credit Agreement (the “April Forbearance Agreement”) pursuant
to which among other things (i) the Company agreed to extend the forbearance period until the earlier of March 31, 2023 or the date of
occurrence of any event of default under the April Forbearance Agreement, (ii) Cellvera Global shall be permitted to factor certain receivables,
and (iii) certain conforming changes were made relating to the Revenue Sharing Agreement (as defined below). In connection with the Forbearance
Agreement, the Company entered into a series of security agreements with Cellvera Global (the “Security Agreements”) and certain
affiliated entities pursuant to which Cellvera Global enhanced the Company’s security interest in connection with the Credit Agreement.
In addition, and as a condition to entering into the April Forbearance Agreement, the Company required that Cellvera Global enter into
a Revenue Sharing Agreement (the “Revenue Sharing Agreement”), pursuant to which, among other things, Cellvera Global agreed
to pay the Company a certain portion of its revenues up to the aggregate amount of $
Concurrently with the execution of the April Forbearance Agreement and the Revenue Sharing Agreement, the Company and AiPharma Group, Ltd. entered into an Amendment to the Share Exchange Agreement (the “Share Exchange Amendment”) which amended the Share Exchange Agreement to, among other things: (i) modify the financial statements required to be delivered by AiPharma Group, Ltd. at the initial closing to include the unaudited financial statements for the three months ended March 31, 2022 and 2021, (ii) permit the Company to amend its Certificate of Incorporation without the consent of AiPharma Group, Ltd. in order to effect a reverse stock split of the Company’s common stock, if necessary, in order to maintain its listing on the Nasdaq Capital Market, and (iii) make certain other conforming changes related to the March Forbearance Agreement and Revenue Sharing Agreement.
Target Company Note Receivable
On December 10, 2021,
As of September 30, 2022, the outstanding principal
of the Target Company Loan is $
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Future Receipt Agreements Overpayment
On September 30, 2022, the Company paid off the
Future Receipts Agreement and the Agreement (as defined in Note 8). This resulted in overpayments of $
NOTE 5 – FIXED ASSETS
The Company’s fixed assets include the following on September 30, 2022:
| Cost Basis | Accumulated Depreciation | Net | ||||||||||
| Computers | $ | $ | ( | ) | $ | |||||||
| Lab Equipment | ( | ) | ||||||||||
| Office Furniture | ( | ) | ||||||||||
| Other Fixed Assets | ( | ) | ||||||||||
| Total Fixed Assets | $ | $ | ( | ) | $ | |||||||
The Company’s fixed assets include the following on December 31, 2021:
| Cost Basis | Accumulated Depreciation | Net | ||||||||||
| Computers | $ | $ | ( | ) | $ | |||||||
| Lab Equipment | ( | ) | ||||||||||
| Office Furniture | ( | ) | ||||||||||
| Other Fixed Assets | ( | ) | ||||||||||
| Total Fixed Assets | $ | $ | ( | ) | $ | |||||||
Depreciation expense was $
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NOTE 6 – INTANGIBLE ASSETS
The Company’s intangible assets include the following on September 30, 2022:
| Cost Basis | Accumulated Amortization | Net | ||||||||||
| Proprietary Technology | $ | $ | ( | ) | $ | |||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||
The Company’s intangible assets include the following on December 31, 2021:
| Cost Basis | Accumulated Amortization | Net | ||||||||||
| Proprietary Technology | $ | $ | ( | ) | $ | |||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||
Amortization expense was $
NOTE 7 – RELATED PARTY TRANSACTIONS
On January 28, 2022, the Company granted
On July 19, 2022, the Company entered into a Subscription
and Investment Representation Agreement with its Chief Executive Officer (the “Purchaser”), pursuant to which the Company agreed
to issue and sell one (1) share of the Company’s Series B Preferred Stock (the “Preferred Stock”), par value $
On July 19, 2022, the Company filed a certificate
of designation (the “Certificate of Designation”) with the Secretary of State of Delaware, effective as of the time of filing,
designating the rights, preferences, privileges and restrictions of the share of Preferred Stock. The Certificate of Designation provides
that the share of Preferred Stock will have
The Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Preferred Stock will not be entitled to receive dividends of any kind.
The outstanding share of Preferred Stock shall
be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion
or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing a reverse stock split.
Upon such redemption, the holder of the Preferred Stock will receive consideration of $
On July 21, 2022, the Chief Executive Officer
loaned $
NOTE 8 – NOTE PAYABLE
On May 27, 2022, the Company entered into an agreement
for the purchase and sale of future receipts (the “Future Receipts Agreement”) with a commercial funding source pursuant to
which the Company agreed to sell to the funder certain future trade receipts in the aggregate amount of $
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As of September 30, 2022, the principal balance and accrued interest was paid off in full.
On August 31, 2022, the Company entered into an
Agreement for the Purchase and Sale of Future Receipts (the “Agreement”) with a commercial funding source pursuant to which
the Company agreed to sell to the funder certain future trade receipts in the aggregate amount $
As of September 30, 2022, the principal balance and accrued interest was paid off in full.
Convertible Note Financing:
On August 4, 2022, the Company entered into a
Securities Purchase Agreement (the “SPA”) with certain accredited investors to purchase $
On August 11, 2022, the Company entered into a
SPA with certain accredited investors to purchase $
The August 2022 Notes have a maturity date of
twelve (12) months from the date of issuance and are convertible at the option of the Investor at any time prior to maturity in shares
of Common Stock (the “Conversion Shares”) at an initial conversion price of $
The August 2022 Warrants are exercisable for a
period of five (5) years from the period commencing on the commencement date (as defined in the August 2022 Warrant) and ending on
On August 25, 2022, the Company entered into a
First Amendment and Waiver with the holders of the August 2022 Warrants, pursuant to which the exercise price of the August 2022 Warrants
was reduced to $
Convertible Note Financing Follow On:
On September 12, 2022, the Company entered into
a SPA with a certain accredited investor to purchase $
The August 2022 Follow On Warrants are exercisable
for a period of five (5) years from the period commencing on the commencement date (as defined in the August 2022 Follow On Warrant) and
ending on
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On September 16, 2022, the exercise price of the
August 2022 Follow On Warrants was adjusted to $
As of September 30, 2022, the principal balance
of $
NOTE 9 – LEASES
Our lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. We used the incremental borrowing rate on September 30, 2022 and December 31, 2021 for all leases that commenced prior to that date. In determining this rate, which is used to determine the present value of future lease payments, we estimate the rate of interest we would pay on a collateralized basis, with similar payment terms as the lease and in a similar economic environment.
Lease Costs
| Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | |||||||
| Components of total lease costs: | ||||||||
| Operating lease expense | $ | $ | ||||||
| Total lease costs | $ | $ | ||||||
Lease Positions as of September 30, 2022 and December 31, 2021
ROU lease assets and lease liabilities for our operating leases are recorded on the balance sheet as follows:
| September 30, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Right of use asset – long term | $ | $ | ||||||
| Total right of use asset | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease liabilities – short term | $ | $ | ||||||
| Operating lease liabilities – long term | ||||||||
| Total lease liability | $ | $ | ||||||
Lease Terms and Discount Rate
| Weighted average remaining lease term (in years) – operating leases | ||||
| Weighted average discount rate – operating leases | % |
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NOTE 10 – STOCKHOLDERS’ EQUITY
Common Stock
On May 24, 2021, the Company increased the number
of authorized shares of the Company’s common stock, par value $
During the nine months ended September 30, 2022,
the Company issued
During the nine months ended September 30, 2021,
the Company issued
Preferred Stock
The Company is authorized to issue
Issuance of Series B Preferred Stock:
On July 19, 2022, the Company entered into a Subscription
and Investment Representation Agreement with its Chief Executive Officer (the “Purchaser”), pursuant to which the Company agreed
to issue and sell one (1) share of the Company’s Series B Preferred Stock (the “Preferred Stock”), par value $
On July 19, 2022, the Company filed a certificate
of designation (the “Certificate of Designation”) with the Secretary of State of Delaware, effective as of the time of filing,
designating the rights, preferences, privileges and restrictions of the share of Preferred Stock. The Certificate of Designation provides
that the share of Preferred Stock will have
The Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Preferred Stock will not be entitled to receive dividends of any kind.
The outstanding share of Preferred Stock shall be redeemed in whole,
but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion or (ii) automatically
upon the effectiveness of the amendment to the Certificate of Incorporation implementing a reverse stock split. Upon such redemption,
the holder of the Preferred Stock will receive consideration of $
17
Stock-Based Compensation
In October 2017, our Board of Directors adopted
the Aditx Therapeutics, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan provides for the grant of equity
awards to directors, employees, and consultants. The Company is authorized to issue up to
On February 24, 2021, our Board of Directors adopted
the Aditx Therapeutics, Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for grants of nonqualified
stock options, incentive stock options, stock appreciation rights, restricted stock and restricted stock units, and other stock-based
awards (collectively, the “Awards”). Eligible recipients of Awards include employees, directors or independent contractors
of the Company or any affiliate of the Company. The Compensation Committee of the Board of Directors (the “Committee”) will
administer the 2021 Plan. A total of
During the nine months ended September 30, 2022 and 2021, the Company granted no new options.
The following is an analysis of the stock option grant activity under the Plan:
| Vested and Nonvested Stock Options | Number | Weighted Average Exercise Price | Weighted Average Remaining Life | |||||||||
| Outstanding December 31, 2021 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired or forfeited | ||||||||||||
| Outstanding September 30, 2022 | $ | |||||||||||
| Nonvested Stock Options | Number | Weighted- Average Exercise Price | ||||||
| Nonvested on December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Nonvested on September 30, 2022 | $ | |||||||
The Company recognized stock-based compensation
expense related to options granted and vesting expense of $
18
Warrants
During the nine months ended September 30, 2022
the Company issued
For the nine months ended September 30, 2022, the fair value of each warrant granted was estimated using the assumption and/or factors in the Black-Scholes Model as follows:
| Exercise price | $ | |||
| Expected dividend yield | % | |||
| Risk free interest rate | | % | ||
| Expected life in years | ||||
| Expected volatility | | % |
For the nine months ended September 30, 2021, the fair value of each warrant issued was estimated using the assumption ranges and/or factors in the Black-Scholes Model as follows:
| Exercise price | $ | |||
| Expected dividend yield | % | |||
| Risk free interest rate | | % | ||
| Expected life in years | ||||
| Expected volatility | | % |
The risk-free interest rate assumption for warrants granted is based upon observed interest rates on the United States Government Bond Equivalent Yield appropriate for the expected term of warrants.
The Company determined the expected volatility assumption for warrants granted using the historical volatility of comparable public companies’ common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future warrant grants, until such time that the Company’s common stock has enough market history to use historical volatility.
The dividend yield assumption for warrants granted is based on the Company’s history and expectation of dividend payouts. The Company has never declared nor paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
The Company recognizes warrant forfeitures as they occur as there is insufficient historical data to accurately determine future forfeitures rates.
A summary of warrant issuances are as follows:
| Vested and Nonvested Warrants | Number | Weighted Average Exercise Price | Weighted Average Remaining Life | |||||||||
| Outstanding December 31, 2021 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Expired or forfeited | ( | ) | ||||||||||
| Rounding for Reverse Split | ||||||||||||
| Outstanding September 30, 2022 | $ | |||||||||||
19
| Nonvested Warrants | Number | Weighted- Average Exercise Price | ||||||
| Nonvested on December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Nonvested on September 30, 2022 | $ | |||||||
The Company recognized stock-based compensation
expense related to warrants granted and vesting expense of $
On June 15, 2022, the Company entered an agreement
with a holder of certain of the Series C Warrants (the “Holder”).
Restricted Stock Units
A summary of Restricted Stock Units (“RSUs”) issuances are as follows:
| Nonvested RSUs | Number | Weighted Average Price | ||||||
| Nonvested December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Nonvested September 30, 2022 | $ | |||||||
The Company recognized stock-based compensation
expense related to RSUs granted and vesting expense of $
During the nine months ended September 30, 2022, the Company granted
a total of
20
NOTE 11 – INCOME TAXES
The Company has incurred losses since inception. During the nine months ended September 30, 2022, the Company did not provide any provision for income taxes as the Company incurred losses during such period. The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. In assessing the need for a valuation allowance, the Company has considered both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely than not” standard. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Based on the Company’s review of this evidence, the Company has recorded a full valuation allowance for its net deferred tax assets as of September 30, 2022.
As of September 30, 2022, the Company did not have any amounts recorded pertaining to uncertain tax positions.
NOTE 12 – SUBSEQUENT EVENTS
Redemption of Series B Preferred Stock
On October 7, 2022, the Company paid $
Repayment of Promissory Note
On October 7, 2022, the Company fully repaid the
$
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes for the year ended December 31, 2021 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those factors set forth in the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry Data” and in the section entitled “Risk Factors” in Part II, Item 1A.
Overview
We are a biotech innovation company with a mission of prolonging life and enhancing its quality by improving the health of the immune system. We are developing biotechnologies specifically focused on improving the health of the immune system through immune reprogramming and monitoring. Our immune reprogramming technologies are currently at the pre-clinical stage and are designed to retrain the immune system to induce tolerance with an objective of addressing rejection of transplanted organs, autoimmune diseases, and allergies. Our immune monitoring technologies are designed to provide a personalized comprehensive profile of the immune system and we plan to utilize them in our upcoming reprogramming clinical trials to monitor subjects’ immune response before, during and after drug administration.
Immune Reprogramming
The discovery of immunosuppressive (anti-rejection and monoclonal) drugs over 40 years ago has made possible life-saving organ transplantation procedures and blocking of unwanted immune responses in autoimmune diseases. However, immune suppression leads to significant undesirable side effects, such as increased susceptibility to life-threatening infections and cancers, because it indiscriminately and broadly suppresses immune function throughout the body. While the use of these drugs has been justifiable because they prevent or delay organ rejection, their use for treatment of autoimmune diseases and allergies may not be acceptable because of the aforementioned side effects. Furthermore, transplanted organs often ultimately fail despite the use of immune suppression, and about 40% of transplanted organs survive no more than 5 years.
New, focused therapeutic approaches are needed that modulate only the small portion of immune cells that are involved in rejection of the transplanted organ, as this approach can be safer for patients than indiscriminate immune suppression. Such approaches are referred to as immune tolerance, and when therapeutically induced, may be safer for patients and potentially allow long-term survival of transplanted tissues and organs.
In the late 1990s, academic research on these approaches was conducted at the Transplant Center in Loma Linda University (“LLU”) in connection with a project that secured initial grant funding from the U.S. Department of Defense. The focus of that project was for skin grafting for burn victims. Twenty years of research at LLU and an affiliated incubator led to a series of discoveries that have been translated into a large patent portfolio of therapeutic approaches that may be applied to the modulation of the immune system to induce tolerance to self and transplanted organs.
We have an exclusive worldwide license for commercializing this nucleic acid-based technology (which is currently at the pre-clinical stage), named Apoptotic DNA Immunotherapy™ (ADI™) from LLU, which utilizes a novel approach that mimics the way the body naturally induces tolerance to our own tissues (“therapeutically induced immune tolerance”). While immune suppression requires continuous administration to prevent rejection of a transplanted organ, induction of tolerance has the potential to retrain the immune system to accept the organ for longer periods of time. Thus, ADI™ may allow patients to live with transplanted organs with significantly reduced immune suppression. ADI™ is a technology platform which we believe can be engineered to address a wide variety of indications.
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We are developing ADI™ products for organ transplantation including skin grafting, autoimmune diseases, and allergies, with the initial focus on skin allografts and psoriasis, as we believe these indications will be most efficient in providing safety and efficacy data in clinical trials. To submit a Biologics License Application (“BLA”) for a biopharmaceutical product, clinical safety and efficacy must be demonstrated in a series of clinical studies conducted with human subjects. For products in our class of drugs, the first-in-human trials will be a combination of Phase I (safety/tolerability) and Phase II (efficacy) in affected subjects. To obtain approval to initiate the Phase I/IIa studies, an Investigational New Drug Application will be submitted to compile non-clinical efficacy data as well as manufacturing and pre-clinical safety/toxicology data. To date, we have conducted non-clinical studies in a stringent model of skin transplantation using genetically mismatched donor and recipient animals demonstrating a 3-fold increase in the survival of the skin graft in animals that were tolerized with ADI™ compared to animals that receive immune suppression alone. Prolongation of graft life was observed despite discontinuation of immune suppression after the first 5 weeks. Additionally, in an induced non-clinical model for psoriasis, ADI™ treatment resulted in a 69% reduction in skin thickness and a 38% decrease in skin flaking (two clinical parameters for assessment of psoriasis skin lesions). The Phase I/IIa studies in psoriasis will evaluate the safety/tolerability of ADI™ in patients diagnosed with psoriasis. Since the drug will be administered in subjects diagnosed with psoriasis, effectiveness of the drug to improve psoriatic lesions will also be evaluated. In another Phase I/IIa study, patients requiring skin allografts will receive weekly intra-dermal injections of ADI™ in combination with standard immune suppression to assess safety/tolerability and possibility of reducing levels of immunosuppressive drugs as well as prolongation of graft life. Later phase trials are planned after successful completion of these studies in preparation for submission for a BLA to regulatory agencies.
Immune Monitoring
We believe that understanding the status of an individual’s immune system is key to developing and administering immunotherapies such as ADI™. We have secured an exclusive worldwide license for commercializing a technology platform named AditxtScore™, which provides a personalized comprehensive profile of the immune system. It is intended to be informative for individual immune responses to viruses, bacterial antigens, peptides, drugs, bone marrow and solid organ transplants, and cancer. It has broad applicability to many other agents of clinical interest impacting the immune system, including those not yet identified such as future infectious agents.
AditxtScore™ is being designed to allow individuals to understand, manage and monitor their immune profiles in order to be informed about attacks on or by their immune system. We believe AditxtScore™ can also assist the medical community in anticipating possible immune responses and reactions to viruses, bacteria, allergens and transplanted organs. It can be useful in anticipating attacks on the body by having the ability to determine its potential response and for developing a plan to deal with an undesirable reaction by the immune system. Its advantages include the ability to provide a simple, rapid, accurate, high throughput, single platform assay that can be multiplexed to determine the immune status with respect to several factors simultaneously, in 3-16 hours, as well as detect antigen and antibody in a single test (i.e. infectious, recovered, immune). In addition, it can determine and differentiate between various types of cellular and humoral immune responses (T and B cells). It also provides for simultaneous monitoring of cell activation and levels of cytokine release (i.e., cytokine storms).
We plan to utilize AditxtScore™ in our upcoming clinical trials to monitor subjects’ immune response before, during and after ADI™ drug administration. We are also evaluating plans to obtain FDA approval for AditxtScore™’s use as a clinical assay and seeking to secure manufacturing, marketing and distribution partnerships for application in the Infectious Diseases market, by end of 2020. To obtain FDA approval to use AditxtScore™ as a clinical assay, we plan to conduct validation studies comparing AditxtScore™ to other immunological tests to demonstrate reproducibility of data and to demonstrate the sensitivity of the assays for use in different indications (e.g., detection of antigens present in infectious agents or antibodies against infectious agents). We believe that these data will show AditxtScore™’s ability to multiplex in two ways using a single assay: (i) evaluating the immune response to multiple antigens (from different infectious agents) and (ii) measuring quantities of multiple cytokines. Furthermore, we believe that the additional validation studies will demonstrate AditxtScore™’s ability to measure the presence of several antibody isotypes against several antigens in a single reaction. Our plan is to submit a 510(K) application to the FDA after successful completion of these studies. We have engaged consultants for our communications and submissions to the FDA. Beyond 2021, we plan to develop AditxtScore™ for applications in additional markets such as Organ Rejection, Allergies, Drug/Vaccine Response, and Disease Susceptibility.
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The initial application of the platform will be AditxtScore™ for COVID-19 which has been designed to provide a more complete assessment of an individual’s infection and immunity status with respect to the SARS-CoV-2 virus. Infection status will be determined by evaluating the presence or absence of the virus, and immunity status by measuring levels of antibodies against viral antigens and their ability to neutralize the virus. We will soon be expanding the panel to measure other components of the immune response such as cellular immunity. In early 2021, we established our AditxtScore™ Immune Monitoring Center in Richmond, Virginia (the “Center”). The Center operates as a Clinical Laboratory Improvement Amendments (CLIA) certified facility for the processing of our AditxtScore™ for COVID-19 Lab Developed Test (LDT) for our prospective channel partners, including labs and hospitals.
License Agreement with Loma Linda University
On March 8, 2018, we entered into an Assignment Agreement (the “Assignment Agreement”) with Sekris Biomedical, Inc. (“Sekris”). Sekris was a party to a license agreement with LLU, entered and made effective on May 25, 2011, and amended on June 24, 2011, July 16, 2012 and December 27, 2012 (the “Original Agreement,” and together with the Assignment Agreement, the “Sekris Agreements”). Pursuant to the Assignment Agreement, Sekris transferred and assigned all of its rights, obligations and liabilities under the Original Agreement, of whatever kind or nature, to us. In exchange, on March 8, 2018, we issued a warrant to Sekris to purchase up to 10,000 shares of our common stock (the “Sekris Warrant”). The warrant was immediately exercisable and has an exercise price of $200.00 per share. The expiration date of the warrant is March 8, 2023. On March 15, 2018, as amended on July 1, 2020, we entered into a LLU License Agreement directly with Loma Linda University, which amends and restates the Sekris Agreements.
Pursuant to the LLU License Agreement, we obtained the exclusive royalty-bearing worldwide license in and to all intellectual property, including patents, technical information, trade secrets, proprietary rights, technology, know-how, data, formulas, drawings, and specifications, owned or controlled by LLU and/or any of its affiliates (the “LLU Patent and Technology Rights”) and related to therapy for immune-mediated inflammatory diseases (the ADI™ technology). In consideration for the LLU License Agreement, we issued 500 shares of common stock to LLU.
Pursuant to the LLU License Agreement, we are required to pay an annual license fee to LLU. Also, we paid LLU $455,000 in July 2020 for outstanding milestone payments and license fees. We are also required to pay to LLU milestone payments in connection with certain development milestones. Specifically, we are required to make the following milestone payments to LLU: $175,000 on March 31, 2022; $100,000 on March 31, 2024; $500,000 on March 31, 2026; and $500,000 on March 31, 2027. In lieu of the $175,000 milestone payment due on March 31, 2022, the Company paid LLU an extension fee of $100,000. Upon payment of this extension fee, an additional year will be added for the March 31, 2022 milestone. Additionally, as consideration for prior expenses incurred by LLU to prosecute, maintain and defend the LLU Patent and Technology Rights, we made the following payments to LLU: $70,000 at the end of December 2018, and a final payment of $60,000 at the end of March 2019. We are required to defend the LLU Patent and Technology Rights during the term of the LLU License Agreement. Additionally, we will owe royalty payments of (i) 1.5% of Net Product Sales (as such terms are defined under the LLU License Agreement) and Net Service Sales on any Licensed Products (defined as any finished pharmaceutical products which utilizes the LLU Patent and Technology Rights in its development, manufacture or supply), and (ii) 0.75% of Net Product Sales and Net Service Sales for Licensed Products and Licensed Services (as such terms are defined under the LLU License Agreement) not covered by a valid patent claim for technology rights and know-how for a three (3) year period beyond the expiration of all valid patent claims. We also are required to produce a written progress report to LLU, discussing our development and commercialization efforts, within 45 days following the end of each year. All intellectual property rights in and to LLU Patent and Technology Rights shall remain with LLU (other than improvements developed by or on our behalf).
The LLU License Agreement shall terminate on the last day that a patent granted to us by LLU is valid and enforceable or the day that the last patent application licensed to us is abandoned. The LLU License Agreement may be terminated by mutual agreement or by us upon 90 days written notice to LLU. LLU may terminate the LLU License Agreement in the event of (i) non-payments or late payments of royalty, milestone and license maintenance fees not cured within 90 days after delivery of written notice by LLU, (ii) a breach of any non-payment provision (including the provision that requires us to meet certain deadlines for milestone events (each, a “Milestone Deadline”)) not cured within 90 days after delivery of written notice by LLU and (iii) LLU delivers notice to us of three or more actual breaches of the LLU License Agreement by us in any 12-month period. Additional Milestone Deadlines include: (i) the requirement to have regulatory approval of an IND application to initiate first-in-human clinical trials on or before March 31, 2022, which has been extended to March 31, 2023 due to payment of a $100,000 extension fee paid in March 2022, (ii) the completion of first-in-human (phase I/II) clinical trials by March 31, 2024, (iii) the completion of Phase III clinical trials by March 31, 2026 and (iv) biologic licensing approval by the FDA by March 31, 2027.
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License Agreement with Leland Stanford Junior University (“Stanford”)
On February 3, 2020, we entered into an exclusive license agreement (the “February 2020 License Agreement”) with Stanford regarding a patent concerning a method for detection and measurement of specific cellular responses. Pursuant to the February 2020 License Agreement, we received an exclusive worldwide license to Stanford’s patent regarding use, import, offer, and sale of Licensed Products (as defined in the agreement). The license to the patented technology is exclusive, including the right to sublicense, beginning on the effective date of the agreement, and ending when the patent expires. Under the exclusivity agreement, we acknowledged that Stanford had already granted a non-exclusive license in the Nonexclusive Field of Use, under the Licensed Patents in the Licensed Field of Use in the Licensed Territory (as those terms are defined in the February 2020 License Agreement”). However, Stanford agreed to not grant further licenses under the Licensed Patents in the Licensed Field of Use in the Licensed Territory. On December 29, 2021, we entered into an amendment to the February 2020 License Agreement which extended our exclusive right to license the technology deployed in AditxtScoreTM and securing worldwide exclusivity in all fields of use of the licensed technology.
We were obligated to pay and paid a fee of $25,000 to Stanford within 60 days of February 3, 2020. We also issued 375 shares of the Company’s common stock to Stanford. An annual licensing maintenance fee is payable by us on the first anniversary of the February 2020 License Agreement in the amount of $40,000 for 2021 through 2024 and $60,000 starting in 2025 until the license expires upon the expiration of the patent. The Company is required to pay and has paid $25,000 for the issuances of certain patents. The Company will pay milestone fees of $50,000 on the first commercial sales of a licensed product and $25,000 at the beginning of any clinical study for regulatory clearance of an in vitro diagnostic product developed and a potential licensed product. The Company paid a milestone fee for a clinical study for regulatory clearance of an in vitro diagnostic product developed and a potential licensed product of $25,000 in March of 2022. We are also required to: (i) provide a listing of the management team or a schedule for the recruitment of key management positions by March 31, 2020 (which has been completed), (ii) provide a business plan covering projected product development, markets and sales forecasts, manufacturing and operations, and financial forecasts until at least $10,000,000 in revenue by June 30, 2020 (which has been completed), (iii) conduct validation studies by September 30, 2020 (which has been completed), (iv) hold a pre-submission meeting with the FDA by September 30, 2020 (which has been completed), (iv) submit a 510(k) application to the FDA, Emergency Use Authorization (“EUA”), or a Laboratory Developed Test (“LDT”) by March 31, 2021 (which has been completed), (vi) develop a prototype assay for human profiling by December 31, 2021 (which has been completed), (vii) execute at least one partnership for use of the technology for transplant, autoimmunity, or infectious disease purposes by March 31, 2022 (which has been completed) and (viii) will provide further development and commercialization milestones for specific fields of use in writing by December 31, 2022.
In addition to the annual license maintenance fees outlined above, we will pay Stanford royalties on Net Sales (as such term is defined in the February 2020 License Agreement) during the of the term of the agreement as follows: 4% when Net Sales are below or equal to $5 million annually or 6% when Net Sales are above $5 million annually. The February 2020 License Agreement may be terminated upon our election on at least 30 days advance notice to Stanford, or by Stanford if we: (i) are delinquent on any report or payment; (ii) are not diligently developing and commercializing Licensed Product; (iii) miss certain performance milestones; (iv) are in breach of any provision of the February 2020 License Agreement; or (v) provide any false report to Stanford. Should any events in the preceding sentence occur, we have a thirty (30) day cure period to remedy such violation.
Our Team
We have assembled a team of experts from a variety of scientific fields and commercial backgrounds, with many years of collective experience that ranges from founding startup biotech companies, to developing and marketing biopharmaceutical products, to designing clinical trials, and to management of private and public companies.
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Going Concern
We were incorporated on September 28, 2017 and have not generated significant revenues to date. During the nine months ended September 30, 2022 we had a net loss of $19,466,710 and cash of $9,244,876 as of September 30, 2022. The Company will require significant additional capital to operate in the normal course of business and fund clinical studies in the long-term. As a result of the January 2021 Securities Purchase Agreement, the August 2021 Offering, the October 2021 Offering, the December 2021 Offering, and September 2022 Offering we received net proceeds of approximately $52,000,000 during the last twelve months. We believe that the remaining funds on hand will not be sufficient to fund our operations for the next 12 months and such creates substantial doubt about our ability to continue as a going concern beyond one year.
Financial Results
We have a limited operating history. Therefore, there is limited historical financial information upon which to base an evaluation of our performance. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. Our condensed financial statements as of September 30, 2022, show a net loss of $19,466,710. We expect to incur additional net expenses over the next several years as we continue to maintain and expand our existing operations. The amount of future losses and when, if ever, we will achieve profitability are uncertain.
Results of Operations
Results of operations for the three months ended September 30, 2022 and 2021
We generated revenue of $323,125 and $0 for the three months ended September 30, 2022 and 2021, respectively. Cost of sales for the three months ended September 30, 2022 and 2021 was $233,684 and $0, respectively.
During the three months ended September 30, 2022, we incurred a loss from operations of $5,392,164. This is due to general and administrative expenses of $3,919,618, which includes $461,492 in stock-based compensation, research and development of $1,570,540, which includes $170,066 in stock-based compensation, and sales and marketing expenses of negative $8,553, which includes $0 in stock-based compensation. The $1,570,540 in research and development is mainly comprised of $248,012 in consulting expenses, and $974,982 in compensation.
During the three months ended September 30, 2021, we incurred a loss from operations of $6,073,145. This is due to general and administrative expenses of $4,451,545, which includes $650,325 in stock-based compensation, research and development of $1,471,544, which includes $248,989 in stock-based compensation, and sales and marketing expenses of $150,056. The $1,471,544 in research and development is comprised of $3,700 in licensing fees, $484,197 in product development, $736,997 in compensation, and $246,650 in other research and development expense.
The increase in expenses during the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was due to the Company continuing to execute its business plan and incur costs of being a public company.
Results of operations for the nine months ended September 30, 2022 and 2021
We generated revenue of $748,119 and $0 for the nine months ended September 30, 2022 and 2021, respectively. Cost of sales for the nine months ended September 30, 2022 and 2021 was $596,613 and $0, respectively.
During the nine months ended September 30, 2022, we incurred a loss from operations of $17,280,052. This is due to general and administrative expenses of $12,332,728, which includes $1,288,829 in stock-based compensation, research and development of $4,186,842, which includes $473,593 in stock-based compensation, and sales and marketing expenses of $911,988, which includes $754,699 in stock-based compensation. The $4,186,842 in research and development is mainly comprised of $1,350,384 in consulting expenses, and $2,517,836 in compensation offset by a one-time adjustment to research and development purchases. During the quarter, the Company transitioned from purchasing certain inventory items to internally manufacturing these items.
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During the nine months ended September 30, 2021, we incurred a loss from operations of $17,941,184. This is due to general and administrative expenses of $14,348,375, which includes $2,887,657 in stock-based compensation, research and development of $3,340,247, which includes $248,989 in stock-based compensation, and sales and marketing expenses of $252,562. The $3,340,247 in research and development is comprised of $76,245 in licensing fees, $1,460,086 in product development, $736,997 in compensation, and $1,066,919 in other research and development expense.
The increase in expenses during the nine months ended September 30, 2022 compared to the nine months ended September 30 2021 was due to the Company continuing to execute its business plan and incur costs of being a public company.
Liquidity and Capital Resources
We have incurred substantial operating losses since inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of September 30, 2022, we had an accumulated deficit of $86,828,138 We had working capital of $8,251,803 as of September 30, 2022. During the nine months ended September 30, 2022, we purchased $274,073 in fixed assets, for which we made cash payments of $278,256. These fixed assets were purchased to continue the buildout of our operations. Approximately $215,000 of these purchased fixed assets were lab equipment, $54,000 was for computers, and $5,000 was for office furniture.
Our condensed financial statements have been prepared assuming that we will continue as a going concern.
We have funded our operations from proceeds from the sale of equity and debt securities. On July 2, 2020, we completed our IPO and raised approximately $9.5 million in net proceeds. At the time of the IPO, we believed that these funds would be sufficient to fund our operations for the foreseeable future.
On September 10, 2020, we completed a follow-on public offering. In connection therewith, we issued 48,000 units, or Follow-On Units, excluding the underwriters’ option to cover overallotments, at an offering price of $200.00 per Follow-On Unit, resulting in gross proceeds of approximately $9.6 million.
On January 25, 2021, the Company entered into a securities purchase agreement with an institutional accredited investor (the “Investor”) for the sale of a $6,000,000 senior secured convertible note (the “Convertible Note”). The Convertible Note had a term of 24 months, was originally convertible at a price of $200.00 per share and was issued at an original issuance discount of $1,000,000. On August 30, 2021, the Company entered into a defeasance and waiver agreement with the Investor, pursuant to which the Noteholder has agreed in exchange for (a) a cash payment by the Company to the Investor of $1.2 million (the Cash Payment”), (b) a waiver, in part of the conversion price adjustment provision such that the January 2021 Note shall be convertible into 96,050 shares of common stock (without giving effect to the conversion notice received by the company form the Noteholder prior to the date hereof totaling (20,115 shares) (the “Shares”), and (c) a voluntary and permanent reduction by the Company of the exercise price of the warrant to purchase 16,000 shares of the common stock of the Company (the “January 2021 Warrant”) to $126.50 per share. As of September 30, 2022, the outstanding principle of the convertible note had been converted to 96,050 shares of common stock.
On August 30, 2021, we completed a registered direct; offering and raised approximately $10.1 million in net proceeds.
On October 20, 2021, we completed an offering for net proceeds of $3.8 million. As part of this offering, we issued 56,667 shares of the Company’s common stock
On December 6, 2021, we completed an offering for net proceeds of $16.0 million. As part of this offering, we issued 164,929 units consisting of shares of the Company’s common stock and warrant to purchase shares of the Company’s common stock and 166,572 prefunded warrants. The warrant issued as part of the units had an exercise price of $57.50 and the prefunded warrants had an exercise price of $0.001.
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On September 20, 2022, we completed a public offering for net proceeds of $18.1 million (the “September 2022 Offering”). As part of the September 2022 Offering, we issued 1,224,333 of shares of the Company’s common stock, pre-funded warrants to purchase 2,109,000 shares of the Company’s common stock and warrants to purchase 3,333,333 shares of the Company’s common stock . The warrants had an exercise price of $6.00 and the pre-funded warrants had an exercise price of $0.001.
We may need to raise significant additional capital to continue to fund our operations and the clinical trials for our product candidates. We may seek to sell common stock, preferred stock or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing. In addition, we may seek to raise cash through collaborative agreements or from government grants. The sale of equity and convertible debt securities may result in dilution to our stockholders and certain of those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible debt securities, or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights.
The source, timing, and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of our clinical development program. Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate expenses including some or all our planned development, including our clinical trials. While we may need to raise funds in the future, we believe the current cash reserves should be sufficient to fund our operation for the foreseeable future. Because of these factors, we believe that this creates doubt about our ability to continue as a going concern.
Contractual Obligations
The following table shows our contractual obligations as of September 30, 2022:
| Payment Due by Year | ||||||||||||||||||||||||
| Total | 2022 | 2023 | 2024 | 2025 | 2026 | |||||||||||||||||||
| Lease | $ | 3,676,932 | $ | 301,074 | $ | 1,149,247 | $ | 1,034,084 | $ | 708,804 | $ | 483,723 | ||||||||||||
| Financed asset | 252,221 | 140,709 | 111,512 | - | - | - | ||||||||||||||||||
| Total contractual obligations | $ | 3,929,153 | $ | 441,783 | $ | 1,260,759 | $ | 1,034,084 | $ | 708,804 | $ | 483,723 | ||||||||||||
Critical Accounting Polices and Estimates
Our condensed financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We believe that our critical accounting policies described under the heading “Management’s Discussion and Analysis of Financial Condition and Plan of Operations—Critical Accounting Policies” in our Prospectus, dated September 1, 2020, filed with the SEC pursuant to Rule 424(b), are critical to fully understanding and evaluating our financial condition and results of operations. The following involve the most judgment and complexity:
| ● | Research and development |
| ● | Stock-based compensation expense |
| ● | Fair value of common stock |
Accordingly, we believe the policies set forth above are critical to fully understanding and evaluating our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
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JOBS Act
On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
When favorable, we have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our IPO (December 31, 2025); (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Recently Issued and Adopted Accounting Pronouncements
See Note 3 - Summary of Significant Accounting Policies to the accompanying condensed financial statements for a description of other accounting policies and recently issued accounting pronouncements.
Recent Developments
See Note 12 – Subsequent Event to the accompanying condensed financial statements for a description of material recent developments.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined in Rule 229.10(f)(1).
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were (a) designed to ensure that the information we are required to disclose in our reports under the Exchange Act is recorded, processed, and reported in an accurate manner and on a timely basis and the information that we are required to disclose in our Exchange Act reports is accumulated and communicated to management to permit timely decisions with respect to required disclosure and (b) operating in an effective manner.
Change in Internal Control Over Financial Reporting
No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
Item 1A. Risk Factors
Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our most recent Annual Report on Form 10-K and in our other filings with the SEC, the occurrence of any one of which could have a material adverse effect on our actual results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Sales of Unregistered Securities
On January 31, 2022, the Company issued a consultant 60 shares of common stock for services rendered.
On February 28, 2022, the Company issued a consultant 60 shares of common stock for services rendered.
On March 31, 2022, the Company issued a consultant 60 shares of common stock for services rendered.
On June 27, 2022, the Company issued a consultant 12,296 shares of common stock for services rendered.
The issuances above were made pursuant to Section 4(a)(2) of the Securities Act.
(b) Use of Proceeds from Initial Public Offering
On July 2, 2020, the Company completed its initial public offering (“IPO”). In connection therewith, the Company issued 24,534 Units (the “Units”), excluding the underwriters’ option to cover overallotments (the underwriter did not exercise their overallotment), at an offering price of $450.00 per Unit, resulting in gross proceeds of approximately $11.0 million. The Units issued in the IPO consisted of one share of common stock, one Series A warrant, and one Series B warrant. The Series A warrants originally had an exercise price of $450.00 and a term of 5 years. In addition, the Company issued a Unit Purchase Option at an exercise price of $562.50 per unit to the underwriters to purchase up to 1,350 units, with each unit consisting of (i) one share of common stock and (ii) one Series A Warrant. On August 19, 2020, the Company modified the exercise price of the Series A Warrants from $450.00 per share to $225.00 per share. The term of the Series A Warrants was not modified. The Series B warrants have an exercise price of $562.50 per share, a term of 5 years and contain a cashless exercise option upon certain criteria being met. As of September 30, 2022, substantially all of the Series B warrants issued in the IPO have been exercised pursuant to a cashless provision therein.
We received net proceeds of $8.5 million in the IPO, after deducting underwriting discounts and commissions and issuance expenses borne by us. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors pursuant to our director compensation policy. Dawson James Securities, Inc. acted as lead book-running manager of the offering and as representative of the underwriters for the offering.
There has been no material change in the planned use of proceeds from our IPO from that described in the final prospectus related to the offering, dated June 29, 2020 as filed with the SEC.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| * | This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Aditxt, Inc. | ||
| Date: November 14, 2022 | By: | /s/ Amro Albanna |
| Amro Albanna | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: November 14, 2022 | By: | /s/ Thomas J. Farley |
| Thomas J. Farley | ||
|
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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Exhibit 31.1
CERTIFICATION
I, Amro Albanna, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Aditxt, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2022 | /s/ Amro Albanna |
| Amro Albanna | |
|
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Thomas J. Farley, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Aditxt, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2022 | /s/ Thomas J. Farley |
| Thomas J. Farley | |
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Aditxt, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of Amro Albanna, Chief Executive Officer of the Company and Thomas J. Farley, Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| November 14, 2022 | /s/ Amro Albanna |
| Amro Albanna | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| November 14, 2022 | /s/ Thomas J. Farley |
| Thomas J. Farley | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Condensed Balance Sheets (Unaudited) (Parentheticals) - $ / shares |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 3,000,000 | 3,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 3,733,146 | 890,614 |
| Common stock, shares outstanding | 3,731,129 | 888,579 |
| Treasury stock | 2,017 | 2,017 |
Condensed Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| REVENUE | ||||
| Sales | $ 323,125 | $ 748,119 | ||
| Cost of goods sold | 233,684 | 596,613 | ||
| Gross Profit | 89,441 | 151,506 | ||
| OPERATING EXPENSES | ||||
| General and administrative expenses, $461,492, $650,325, $1,288,829 and $2,887,657 in stock-based compensation, respectively | 3,919,618 | 4,451,545 | 12,332,728 | 14,348,375 |
| Research and development, includes $170,066, $248,989, $473,593 and $248,989 in stock-based compensation, respectively | 1,570,540 | 1,471,544 | 4,186,842 | 3,340,247 |
| Sales and marketing $0, $0, $754,699, and $0 in stock-based compensation, respectively | (8,553) | 150,056 | 911,988 | 252,562 |
| Total operating expenses | 5,418,605 | 6,073,145 | 17,431,558 | 17,941,184 |
| NET LOSS FROM OPERATIONS | (5,392,164) | (6,073,145) | (17,280,052) | (17,941,184) |
| OTHER EXPENSE | ||||
| Interest expense | (645,381) | (38,198) | (742,701) | (74,587) |
| Interest income | 10,084 | 42,838 | 30,131 | 43,267 |
| Other income | 58,960 | |||
| Loss on extinguishment of debt | (2,500,970) | (2,500,970) | ||
| Amortization of debt discount | (1,530,102) | (1,191,254) | (1,533,048) | (1,845,358) |
| Total other expense | (2,165,399) | (3,687,584) | (2,186,658) | (4,377,648) |
| Net loss before income taxes | (7,557,563) | (9,760,729) | (19,466,710) | (22,318,832) |
| Income tax provision | ||||
| NET LOSS | $ (7,557,563) | $ (9,760,729) | $ (19,466,710) | $ (22,318,832) |
| Net loss per share - basic and diluted (in Dollars per share) | $ (5.27) | $ (28.08) | $ (18.01) | $ (73.08) |
| Weighted average number of shares outstanding during the period - basic and diluted (in Shares) | 1,433,175 | 347,610 | 1,080,661 | 305,416 |
Condensed Statements of Operations (Unaudited) (Parentheticals) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Stock-based compensation | $ 2,517,121 | $ 3,136,646 | ||
| Net loss per share - diluted (in Dollars per share) | $ (5.27) | $ (28.08) | $ (18.01) | $ (73.08) |
| Weighted average number of shares outstanding during the period - diluted (in Shares) | 1,433,175 | 347,610 | 1,080,661 | 305,416 |
| General and administrative expenses | ||||
| Stock-based compensation | $ 461,492 | $ 650,325 | $ 1,288,829 | $ 2,887,657 |
| Research and development | ||||
| Stock-based compensation | 170,066 | 248,989 | 473,593 | 248,989 |
| Sales and marketing | ||||
| Stock-based compensation | $ 0 | $ 0 | $ 754,699 | $ 0 |
Organization and Nature of Business |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| ORGANIZATION AND NATURE OF BUSINESS | NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Company Background
Overview
Aditxt, Inc. (“Aditxt” or the “Company”), formerly known as Aditx Therapeutics, Inc., was incorporated in the State of Delaware on September 28, 2017, and the Company’s headquarters are located in Richmond, VA. The Company is a biotech innovation company with a mission of prolonging life and enhancing its quality by improving the health of the immune system.
The Company is developing biotechnologies specifically focused on improving the health of the immune system through immune reprogramming and monitoring. The Company’s immune reprogramming technologies are currently at the pre-clinical stage and are designed to retrain the immune system to induce tolerance with an objective of addressing rejection of transplanted organs, autoimmune diseases, and allergies. The Company’s immune monitoring technologies are designed to provide a personalized comprehensive profile of the immune system, and the Company plans to utilize them in its upcoming reprogramming clinical trials to monitor subjects’ immune response before, during and after drug administration.
Reverse Stock Split
On September 13, 2022, the Company effectuated a 1 for 50 reverse stock split (the “Reverse Split”). The Company’s stock began trading on a split-adjusted basis effective on the Nasdaq Stock Market on September 14, 2022. There was no change to the number of authorized shares of the Company’s common stock. All shares amounts referenced in this report are adjusted to reflect the Reverse Split.
Offerings
On August 31, 2021, the Company completed a registered direct offering (“August 2021 Offering”). In connection therewith, the Company issued 91,667 shares of common stock, at a purchase price of $120.00 per share, resulting in gross proceeds of approximately $11.0 million. In a concurrent private placement, the Company issued warrants to purchase up to 91,667 shares. The warrants have an exercise price of $126.50 per share and are exercisable for a five-year period commencing six months from the date of issuance. The warrants exercise price was subsequently repriced to $75.00. In addition, the Company issued a warrant to the placement agent to purchase up to 4,584 shares of common stock at an exercise price of $150.00 per share.
On October 18, 2021, the Company entered into an underwriting agreement with Revere Securities LLC, relating to the public offering (the “October 2021 Offering”) of 56,667 shares of the Company’s common stock (the “Shares”) by the Company. The Shares were offered, issued, and sold at a price to the public of $75.00 per share under a prospectus supplement and accompanying prospectus filed with the SEC pursuant to an effective shelf registration statement filed with the SEC on Form S-3 (File No. 333-257645), which was declared effective by the SEC on July 13, 2021. The October 2021 Offering closed on October 20, 2021 for gross proceeds of $4.25 million. The Company utilized a portion of the proceeds, net of underwriting discounts of approximately $3.91 million from the October 2021 Offering to fund certain obligations under the Credit Agreement. (See Note 4)
On December 6, 2021, we completed a public offering for net proceeds of $16.0 million (the “December 2021 Offering”). As part of the December 2021 Offering, we issued 164,929 units consisting of shares of the Company’s common stock and warrant to purchase shares of the Company’s common stock and 166,572 prefunded warrants. The warrant issued as part of the units had an exercise price of $57.50 and the prefunded warrants had an exercise price of $0.001. On June 15, 2022, the Company entered an agreement with a holder of certain warrants in the December 2021 Offering. (See Note 10)
On September 20, 2022, we completed a public offering for net proceeds of $18.1 million (the “September 2022 Offering”). As part of the September 2022 Offering, we issued 1,224,333 of shares of the Company’s common stock, pre-funded warrants to purchase 2,109,000 shares of common stock, and warrants to purchase 3,333,333 shares of the Company’s common stock. The warrants had an exercise price of $6.00 and the pre-funded warrants had an exercise price of $0.001.
Risks and Uncertainties
The Company has a limited operating history and is in the very early stages of generating revenue from intended operations. The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, and federal governmental policy decisions. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include: changes in the biotechnology regulatory environment, technological advances that render our technologies obsolete, availability of resources for clinical trials, acceptance of technologies into the medical community, and competition from larger, more well-funded companies. These adverse conditions could affect the Company’s financial condition and the results of its operations.
On January 30, 2020, the World Health Organization declared the COVID-19 novel coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the financial impact will be to the Company, it is reasonably possible that future capital raising efforts and additional development of our technologies may be negatively affected. |
Going Concern Analysis |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Going Concern Analysis [Abstract] | |
| GOING CONCERN ANALYSIS | NOTE 2 – GOING CONCERN ANALYSIS
Management Plans
The Company was incorporated on September 28, 2017 and has not generated significant revenues to date. During the nine months ended September 30, 2022, the Company had a net loss of $19,466,710 and negative cash flow from operating activities of $15,672,032. As of September 30, 2022, the Company’s cash balance was $9,244,876. The Company has $67.3 million of remaining availability, subject to regulatory requirements, to raise future funds pursuant to an effective shelf registration statement filed with the SEC on Form S-3 declared effective on July 13, 2021. However, SEC regulations limit the amount of funds we can raise during any 12-month period pursuant to our effective shelf registration statement on Form S-3. We are currently subject to General Instruction I.B.6 to Form S-3, or the Baby Shelf Rule, and the amount of funds we can raise through primary public offerings of securities in any 12-month period using our shelf registration statement on Form S-3 is limited to one-third of the aggregate market value of the voting and non-voting common stock held by non-affiliates. We are currently limited by the Baby Shelf Rule as of the filing of this Quarterly Report, until such time as our public float exceeds $75 million. In addition to the shelf registration, the Company has the ability to raise capital from equity or debt through private placements or public offerings pursuant to a registration statement on Form S-1. We may also secure loans from related parties. However, factors such as stock price, volatility, trading volume, market conditions, demand and regulatory requirements may adversely affect the Company’s ability to raise capital in an efficient manner.
Because of these factors, the Company believes that this creates substantial doubt with the Company’s ability to continue as a going concern.
The condensed financial statements included in this report do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein. The Company’s ability to continue as a going concern is dependent upon the ability to complete clinical studies and implement the business plan, generate sufficient revenues and to control operating expenses. In addition, the Company is consistently focused on raising capital, strategic acquisitions and alliances, and other initiatives to strengthen the Company. |
Summary of Significant Accounting Policies |
9 Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the Company’s management, the accompanying condensed financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended September 30, 2022 and September 30, 2021. Although management believes that the disclosures in these unaudited condensed financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in condensed financial statements that have been prepared in accordance U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022. The interim results for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ended December 31, 2022 or for any future interim periods.
Use of Estimates
The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Significant estimates underlying the condensed financial statements include the collectability of notes receivable, collectability and reserve on accounts receivable, the reserve on insurance billing, and the fair value of stock options and warrants.
Fair Value Measurements and Fair Value of Financial Instruments
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.
Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet dates.
Concentrations of Credit Risk
The Company maintains its cash accounts at financial institutions which are insured by the Federal Deposit Insurance Corporation. At times, the Company may have deposits in excess of federally insured limits.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid investments.
Inventory
Inventory consists of laboratory materials and supplies used in laboratory analysis. We capitalize inventory when purchased. Inventory is valued at the lower of cost or net realizable value on a first-in, first-out basis. We periodically perform obsolescence assessments and write off any inventory that is no longer usable.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Cost includes expenditures for furniture, office equipment, laboratory equipment, and other assets. Maintenance and repairs are charged to expense as incurred. When assets are sold, retired, or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. The costs of fixed assets are depreciated using the straight-line method over the estimated useful lives or lease life of the related assets.
Intangible Assets
Intangible assets are stated at cost less accumulated amortization. For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives of the related assets. For intangible assets with indefinite lives, the assets are tested periodically for impairment.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. As of September 30, 2022 and December 31, 2021, there was an allowance for doubtful accounts of $49,233 and zero, respectively.
Revenue Recognition
In accordance with ASC 606 (Revenue From Contracts with Customers), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:
Revenues reported from services relating to the AditxtScore™ are recognized when the AditxtScoreTM report is delivered to the customer. The services performed include the analysis of specimens received in the Company’s CLIA laboratory and the generation of results which are then delivered upon completion.
The Company recognizes revenue in the following manner for the following types of customers:
Client Payers:
Client payers include physicians or other entities for which services are billed based on negotiated fee schedules. The Company principally estimates the allowance for credit losses for client payers based on historical collection experience and the period of time the receivable has been outstanding.
Cash Pay:
Customers are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Collection of billings is subject to credit risk and the ability of the patients to pay.
Insurance:
Reimbursements from healthcare insurers are based on fee for service schedules. Net revenues recognized consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, collection experience, and the terms of the Company’s contractual arrangements.
Leases
Under Topic 842 (Leases), operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases consisting of office space, laboratory space, and lab equipment.
Leases with an initial term of twelve months or less are not recorded on the balance sheet. We combine the lease and non-lease components in determining the lease liabilities and right of use (“ROU”) assets.
Stock-Based Compensation
The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services.
Patents
The Company incurs fees from patent licenses, which are expensed as incurred. During the nine months ended September 30, 2022 and September 30, 2021, the Company incurred patent licensing fees for the patents of $256,589 and $76,245, respectively.
Research and Development
We incur research and development costs during the process of researching and developing our technologies and future offerings. We expense these costs as incurred unless such costs qualify for capitalization under applicable guidance. During the nine months ended September 30, 2022 and September 30, 2021, the Company incurred research and development costs of $4,186,842 and $3,340,247, respectively.
Basic and Diluted Net Loss per Common Share
Basic loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for each period. Diluted loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding plus the dilutive effect of shares issuable through the common stock equivalents. The weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2022, 44,712 stock options, 10,556 unvested restricted stock units, and 5,522,224 warrants were excluded from dilutive earnings per share as their effects were anti-dilutive. As of September 30, 2021, 42,860 stock options, 28,576 unvested restricted stock units and 205,280 warrants were excluded from dilutive earnings per share as their effects were anti-dilutive.
Recent Accounting Pronouncements
The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our condensed financial statements. |
Note Receivable |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Receivables [Abstract] | |
| NOTE RECEIVABLE | NOTE 4 – NOTE RECEIVABLE
Cellvera Global Note Receivable
On August 25, 2021, the Company entered into a letter of intent (“the LOI”) to acquire AiPharma Global Holdings LLC, a Delaware limited liability company, which subsequently changed its name to Cellvera Global Holdings LLC (“Cellvera Global”) which is commercializing COVID-19 antiviral oral therapy. Key terms of the proposed transaction as stated in the Letter of Intent included: the completion of a proposed $6.5 million secured loan from the Company to Cellvera Global by August 31, 2021, as well as the issuance of such number of shares of the Company’s common stock that yields 50% of the number of the Company’s outstanding shares post-closing of the transaction. The acquisition is subject to the satisfaction of numerous conditions, including satisfactory due diligence, the negotiation and execution of definitive agreements and other closing conditions, including board and shareholder approval and approval by Nasdaq of the listing of shares proposed to be issued in the transaction. The Company and Cellvera Global agreed to an exclusivity period until September 30, 2021 (the “Exclusivity Period”), with a view to settling the definitive agreement. On September 30, 2021, the parties entered into a letter agreement pursuant to which they agreed to extend the Exclusivity Period until October 4, 2021.
On December 28, 2021, we entered into a Share Exchange Agreement with Cellvera Global f/k/a AiPharma Global, pursuant to which we (i) will acquire 9.5% of the issued and outstanding equity interests in Cellvera Global in exchange for the issuance of 96,324 shares of our common stock of Aditxt and a cash payment of $250,000, at an initial closing upon the satisfaction or waiver of certain conditions to closing; and (ii) acquire the remaining 90.5% of the issued and outstanding equity interests in Cellvera Global in exchange for the issuance of 798,560 shares of our common stock and a cash payment of $250,000 at a secondary closing upon the satisfaction or waiver of certain conditions to closing. Additionally, we may elect to raise additional capital due to market conditions or strategic considerations.
In connection with the contemplated acquisition with Cellvera Global, the Company entered into a secured credit agreement dated August 27, 2021 (the “Credit Agreement”) with Cellvera Global and certain affiliated entities (collectively, the “Borrower”), pursuant to which the Company made a secured loan to Cellvera Global in the principal amount of $6.5 million (the “Loan”). The Loan was funded on August 31, 2021, following the closing of the Company’s August 2021 Offering. The Loan bears interest at a rate of 8% per annum and matured on November 30, 2021. The Loan is secured by certain accounts receivable and other assets of Cellvera Global and certain of its affiliates. The Credit Agreement also contains certain covenants that prohibit Cellvera Global from incurring additional indebtedness, incurring liens or making any dispositions of its property.
On October 18, 2021, the Company entered into the first amendment to the Credit Agreement with Cellvera Global and certain affiliated entities (the “Credit Agreement Amendment”), pursuant to which the Company agreed to increase the amount which Cellvera Global was permitted to borrow under the Credit Agreement by $8.5 million to an aggregate of $15.0 million, of which $6.5 million was outstanding prior to entering the Credit Agreement Amendment. The Company agreed to fund such additional borrowings, as requested by Cellvera Global, by advancing 70% of any amounts received by the Company from the exercise of existing warrants or any other capital raises, including the October Offering. As of December 31, 2021, an additional $8.0 million was advanced under the Credit Agreement for a total of $14.5 million.
The Credit Agreement was amended on multiple occasions, for which the final amendment was signed on December 31, 2021, extending the Loan’s maturity date to January 31, 2022.
The Company determined that Cellvera Global may not have the ability to repay the note receivable. Accordingly, the Company recognized a full impairment of $14.5 million as of December 31, 2021.
Forbearance Agreement:
On January 31, 2022, the Company’s $14.5 million loan to Cellvera Global became fully due and payable under the Credit Agreement. On February 14, 2022, the Company entered into a Forbearance Agreement and Seventh Amendment to Credit Agreement (the “Forbearance Agreement”) with Cellvera Global.
Pursuant to the Forbearance Agreement, the Company agreed to forbear from exercising its rights and remedies against Cellvera Global and certain affiliated guarantor parties until the earlier of (i) June 30, 2022 or (ii) the date of occurrence of any event of default under the Forbearance Agreement (the “Forbearance Period”). Given that the parties continue to conduct due diligence in connection with the Share Exchange Agreement, the Company and Cellvera Global also agreed that should the initial closing occur under the Share Exchange Agreement, the existing event of default will be waived. Under the Forbearance Agreement, the Company and Cellvera Global also agreed to certain amendments to the Credit Agreement, including, but not limited to: (i) the delivery by the Borrower of certain financial statements and forecasts, and (ii) certain regularly scheduled payments to be made by Cellvera Global to the Company during the Forbearance Period. As of the date of filing of this Quarterly Report, the regularly scheduled payments under the Forbearance Agreement have not been made, and the note receivable remains fully impaired.
On April 4, 2022, the Company and Cellvera Global entered into a Forbearance Agreement and Eighth Amendment to the Credit Agreement (the “April Forbearance Agreement”) pursuant to which among other things (i) the Company agreed to extend the forbearance period until the earlier of March 31, 2023 or the date of occurrence of any event of default under the April Forbearance Agreement, (ii) Cellvera Global shall be permitted to factor certain receivables, and (iii) certain conforming changes were made relating to the Revenue Sharing Agreement (as defined below). In connection with the Forbearance Agreement, the Company entered into a series of security agreements with Cellvera Global (the “Security Agreements”) and certain affiliated entities pursuant to which Cellvera Global enhanced the Company’s security interest in connection with the Credit Agreement. In addition, and as a condition to entering into the April Forbearance Agreement, the Company required that Cellvera Global enter into a Revenue Sharing Agreement (the “Revenue Sharing Agreement”), pursuant to which, among other things, Cellvera Global agreed to pay the Company a certain portion of its revenues up to the aggregate amount of $30 million. As of the date of filing of this Quarterly Report, the Company has not received any payments from Cellvera Global pursuant to the Revenue Sharing Agreement.
Concurrently with the execution of the April Forbearance Agreement and the Revenue Sharing Agreement, the Company and AiPharma Group, Ltd. entered into an Amendment to the Share Exchange Agreement (the “Share Exchange Amendment”) which amended the Share Exchange Agreement to, among other things: (i) modify the financial statements required to be delivered by AiPharma Group, Ltd. at the initial closing to include the unaudited financial statements for the three months ended March 31, 2022 and 2021, (ii) permit the Company to amend its Certificate of Incorporation without the consent of AiPharma Group, Ltd. in order to effect a reverse stock split of the Company’s common stock, if necessary, in order to maintain its listing on the Nasdaq Capital Market, and (iii) make certain other conforming changes related to the March Forbearance Agreement and Revenue Sharing Agreement.
Target Company Note Receivable
On December 10, 2021, the Company entered into a secured credit agreement dated December 10, 2021 (the “Target Company Credit Agreement”) and signed on December 10, 2021 with the Target Company, pursuant to which the Company made a secured loan to the Target Company in the principal amount of $500,000 (the “Target Company Loan”) and agreed to make additional secured loans, as requested by the Target Company and approved by the Company, in an amount not to exceed $4.5 million. The Target Company Loan bears interest at a rate of 8% per annum and mature on December 8, 2022, provided, that the Letter of Intent currently contemplates that the Target Company Loan will be forgivable upon the closing of the acquisition contemplated by the letter of intent. The Target Company Credit Agreement also contains certain covenants that prohibit the Target Company from incurring additional indebtedness, entering into any fundamental transactions, issuing any equity interests subject to certain limited exceptions, or making any dispositions of its property. In connection with the Target Company Credit Agreement, the Company entered into a Security Agreement with the Target Company, pursuant to which the Target Company granted the Company a security interest in all of the Target Company’s assets as security for the Target Company Loan.
As of September 30, 2022, the outstanding principal of the Target Company Loan is $500,000 and the accrued interest on the Loan is $32,438.
Future Receipt Agreements Overpayment
On September 30, 2022, the Company paid off the Future Receipts Agreement and the Agreement (as defined in Note 8). This resulted in overpayments of $56,572 and $28,800, respectively. These amounts are reflected as notes receivable and are deemed collectible. |
Fixed Assets |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FIXED ASSETS | NOTE 5 – FIXED ASSETS
The Company’s fixed assets include the following on September 30, 2022:
The Company’s fixed assets include the following on December 31, 2021:
Depreciation expense was $99,980 and $99,857, for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense was $296,684 and $266,385, for the nine months ended September 30, 2022 and 2021, respectively. None of the Company’s fixed assets serve as collateral against any loans as of September 30, 2022 and December 31, 2021, other than those subject to the financed asset liability. |
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Intangible Assets |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS | NOTE 6 – INTANGIBLE ASSETS
The Company’s intangible assets include the following on September 30, 2022:
The Company’s intangible assets include the following on December 31, 2021:
Amortization expense was $26,750 and $26,970 for the three months ended September 30, 2022 and 2021, respectively. Amortization expense was $80,250 and $80,030 for the nine months ended September 30, 2022 and 2021, respectively. None of the Company’s intangible assets serve as collateral against any loans as of September 30, 2022 and December 31, 2021. |
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Related Party Transactions |
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| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | NOTE 7 – RELATED PARTY TRANSACTIONS
On January 28, 2022, the Company granted 9,600 restricted stock units to an officer of the Company pursuant to the Company’s 2021 Equity Incentive Plan. The Company recognized $126,613 in stock-based compensation for the issuance of these vested and unvested restricted stock units during the period ended September 30, 2022. (Note 10)
On July 19, 2022, the Company entered into a Subscription and Investment Representation Agreement with its Chief Executive Officer (the “Purchaser”), pursuant to which the Company agreed to issue and sell one (1) share of the Company’s Series B Preferred Stock (the “Preferred Stock”), par value $0.001 per share, to the Purchaser for $20,000 in cash.
On July 19, 2022, the Company filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State of Delaware, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the share of Preferred Stock. The Certificate of Designation provides that the share of Preferred Stock will have 250,000,000 votes and will vote together with the outstanding shares of the Company’s common stock as a single class exclusively with respect to any proposal to amend the Company’s Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock. The Preferred Stock will be voted, without action by the holder, on any such proposal in the same proportion as shares of common stock are voted. The Preferred Stock otherwise has no voting rights except as otherwise required by the General Corporation Law of the State of Delaware.
The Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Preferred Stock will not be entitled to receive dividends of any kind.
The outstanding share of Preferred Stock shall be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing a reverse stock split. Upon such redemption, the holder of the Preferred Stock will receive consideration of $20,000 in cash. On September 13, 2022, the share was redeemed.
On July 21, 2022, the Chief Executive Officer loaned $80,000 to the Company. The loan was evidenced by an unsecured promissory note (the “Promissory Note”). Pursuant to the terms of the Promissory Note, it will accrue interest at a rate of four and three-quarters percent (4.75%) per annum, the Prime rate on the date of signing, and is due on the earlier of January 22, 2023, or an event of default. |
Note Payable |
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| Note Payable [Abstract] | |
| NOTE PAYABLE | NOTE 8 – NOTE PAYABLE
On May 27, 2022, the Company entered into an agreement for the purchase and sale of future receipts (the “Future Receipts Agreement”) with a commercial funding source pursuant to which the Company agreed to sell to the funder certain future trade receipts in the aggregate amount of $792,000 (the “Future Receipts Purchased Amount” for gross proceeds to the Company of $550,000, less origination fees of $16,500 and professional service fees of $13,500. Pursuant to the Future Receipts Agreement, the Company granted the funder a security interest in all of the Company’s present and future accounts receivable in an amount not to exceed the Future Receipts Purchased Amount. The Purchased Amount shall be repaid by the Company in 28 weekly installments of approximately $28,000 with the final payment due on December 7, 2022.
As of September 30, 2022, the principal balance and accrued interest was paid off in full.
On August 31, 2022, the Company entered into an Agreement for the Purchase and Sale of Future Receipts (the “Agreement”) with a commercial funding source pursuant to which the Company agreed to sell to the funder certain future trade receipts in the aggregate amount $288,000 (the “Purchased Amount”) for gross proceeds to the Company of $200,000, less origination fees of $20,000. Pursuant to the Agreement, the Company granted the funder a security interest in all of the Company’s present and future accounts receivable in an amount not to exceed the Purchased Amount. The Purchased Amount shall be repaid by the Company in 20 weekly installments of approximately $14,400 with the final payment due on January 18, 2023. In connection with the Agreement, the Company also issued a warrant to purchase 26,667 shares of the Company’s common stock.
As of September 30, 2022, the principal balance and accrued interest was paid off in full.
Convertible Note Financing:
On August 4, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors to purchase $1,277,778 in principal amount 10% Senior Secured Promissory Notes (the “August 2022 Notes”), resulting in gross proceeds to the Company of $1,150,000, exclusive of placement agent commission and fees and other offering expenses. In connection therewith, the Company issued, 25,556 shares of common stock as commitment fees and warrants (the “August 2022 Warrants”) to purchase up to 108,517 shares of the Company’s common stock.
On August 11, 2022, the Company entered into a SPA with certain accredited investors to purchase $555,556 in principal amount of August 2022 Notes, resulting in gross proceeds to the Company of $500,000. In connection therewith, the Company issued 11,112 shares of common stock as commitment fees and August 2022 Warrants to purchase up to 47,182 shares of the Company’s common stock.
The August 2022 Notes have a maturity date of twelve (12) months from the date of issuance and are convertible at the option of the Investor at any time prior to maturity in shares of Common Stock (the “Conversion Shares”) at an initial conversion price of $11.78 per share, subject to adjustments.
The August 2022 Warrants are exercisable for a period of five (5) years from the period commencing on the commencement date (as defined in the August 2022 Warrant) and ending on 5:00 p.m. eastern standard time on the date that is five (5) years after the date of issuance, at an initial exercise price of $11.78, subject to adjustment provided therein (including cashless exercise).
On August 25, 2022, the Company entered into a First Amendment and Waiver with the holders of the August 2022 Warrants, pursuant to which the exercise price of the August 2022 Warrants was reduced to $7.50 per share and the August 2022 Warrants were modified such that they are not exercisable unless and until the Company obtains stockholder approval of the issuance of any shares of common stock upon exercise of the August 2022 Warrants. On September 16, 2022, the exercise price of the August 2022 Warrants was further adjusted to $6.00 per share.
Convertible Note Financing Follow On:
On September 12, 2022, the Company entered into a SPA with a certain accredited investor to purchase $555,555 in principal amount of August 2022 Notes, resulting in gross proceeds to the Company of $500,000. In connection therewith, the Company issued 11,112 shares of common stock as commitment fees and warrants (the “August 2022 Follow On Warrants”) to purchase up to 74,074 shares of the Company’s common stock.
The August 2022 Follow On Warrants are exercisable for a period of five (5) years from the period commencing on the commencement date (as defined in the August 2022 Follow On Warrant) and ending on 5:00 p.m. eastern standard time on the date that is five (5) years after the date of issuance, at an initial exercise price of $7.50, subject to adjustments.
On September 16, 2022, the exercise price of the August 2022 Follow On Warrants was adjusted to $6.00 per share.
As of September 30, 2022, the principal balance of $2,388,889, prepayment penalty of $238,889 and accrued interest of $119,444 relating to the August 2022 Notes was paid off in full. |
Leases |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | NOTE 9 – LEASES
Our lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. We used the incremental borrowing rate on September 30, 2022 and December 31, 2021 for all leases that commenced prior to that date. In determining this rate, which is used to determine the present value of future lease payments, we estimate the rate of interest we would pay on a collateralized basis, with similar payment terms as the lease and in a similar economic environment.
Lease Costs
Lease Positions as of September 30, 2022 and December 31, 2021
ROU lease assets and lease liabilities for our operating leases are recorded on the balance sheet as follows:
Lease Terms and Discount Rate
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Stockholders’ Equity |
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| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS’ EQUITY | NOTE 10 – STOCKHOLDERS’ EQUITY
Common Stock
On May 24, 2021, the Company increased the number of authorized shares of the Company’s common stock, par value $0.001 per share, from 27,000,000 to 100,000,000 (the “Authorized Shares Increase”) by filing a Certificate of Amendment (the “Certificate of Amendment”) to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. In accordance with the General Corporation Law of the State of Delaware, the Authorized Shares Increase and the Certificate of Amendment were approved by the stockholders of the Company at the Company’s Annual Meeting of Stockholders on May 19, 2021. On September 13, 2022, the Company effectuated a 1 for 50 reverse stock split (the “Reverse Split”). The Company’s stock began trading at the Reverse Split price effective on the Nasdaq Stock Market on September 14, 2022. There was no change to the number of authorized shares of the Company’s common stock.
During the nine months ended September 30, 2022, the Company issued 16,476 shares of common stock and recognized expense of $253,719 in stock-based compensation for consulting services. The Company also granted 11,644 Restricted Stock Units and, 15,153 Restricted Stock Units vested which resulted in the issuance of shares. As a result, the Company recognized expense of $993,462 in stock-based compensation. The stock-based compensation for shares issued or RSU’s granted during the period were valued based on the fair market value on the date of grant. The Company issued 58,257 shares in relation to the issuance of notes (See Note 8). The Company issued 1,224,333 shares of common stock as part of the September 2022 Offering. The Company also issued 1,337,000 shares of common stock as a result of the exercise of prefunded warrants from the September 2022 Offering.
During the nine months ended September 30, 2021, the Company issued 1,779 shares of common stock and recognized expense of $238,264 in stock-based compensation for consulting services. The Company also issued 23,272 shares of common stock upon the exercise of warrants and received $3,718,956 in cash proceeds. The Company granted 9,300 shares of restricted common stock for employee compensation and recognized expense of $1,443,700 in stock-based compensation. The Company also granted 28,908 Restricted Stock Units, of which 320 vested and resulted in the issuance of shares, as a result, the Company recognized expense of $674,265 in stock-based compensation. The Company issued 96,050 shares of common stock for the conversion of a convertible note. The Company issued 91,667 shares of common stock as part of the August 2021 Offering. The stock-based compensation for shares issued or RSU’s granted during the period, were valued based on the fair market value on the date of grant.
Preferred Stock
The Company is authorized to issue 3,000,000 shares of preferred stock, par value $0.001 per share. There were no shares of preferred stock outstanding as of September 30, 2022 and December 31, 2021, respectively.
Issuance of Series B Preferred Stock:
On July 19, 2022, the Company entered into a Subscription and Investment Representation Agreement with its Chief Executive Officer (the “Purchaser”), pursuant to which the Company agreed to issue and sell one (1) share of the Company’s Series B Preferred Stock (the “Preferred Stock”), par value $0.001 per share, to the Purchaser for $20,000 in cash.
On July 19, 2022, the Company filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State of Delaware, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the share of Preferred Stock. The Certificate of Designation provides that the share of Preferred Stock will have 250,000,000 votes and will vote together with the outstanding shares of the Company’s common stock as a single class exclusively with respect to any proposal to amend the Company’s Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock. The Preferred Stock will be voted, without action by the holder, on any such proposal in the same proportion as shares of common stock are voted. The Preferred Stock otherwise has no voting rights except as otherwise required by the General Corporation Law of the State of Delaware.
The Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Preferred Stock will not be entitled to receive dividends of any kind.
The outstanding share of Preferred Stock shall be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing a reverse stock split. Upon such redemption, the holder of the Preferred Stock will receive consideration of $20,000 in cash. On September 13, 2022, the share was redeemed.
Stock-Based Compensation
In October 2017, our Board of Directors adopted the Aditx Therapeutics, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan provides for the grant of equity awards to directors, employees, and consultants. The Company is authorized to issue up to 2,500,000 shares of our common stock pursuant to awards granted under the 2017 Plan. The 2017 Plan is administered by our Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board of Directors. All shares of our common stock pursuant to awards under the 2017 Plan have been awarded.
On February 24, 2021, our Board of Directors adopted the Aditx Therapeutics, Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock and restricted stock units, and other stock-based awards (collectively, the “Awards”). Eligible recipients of Awards include employees, directors or independent contractors of the Company or any affiliate of the Company. The Compensation Committee of the Board of Directors (the “Committee”) will administer the 2021 Plan. A total of 60,000 shares of common stock, par value $0.001 per share, of the Company may be issued pursuant to Awards granted under the 2021 Plan. The exercise price per share for the shares to be issued pursuant to an exercise of a stock option will be no less than one hundred percent (100%) of the Fair Market Value (as defined in the 2021 Plan) of a share of Common Stock on the date of grant. The 2021 Plan was submitted and approved by the Company’s stockholders at the 2021 annual meeting of stockholders, held on May 19, 2021.
During the nine months ended September 30, 2022 and 2021, the Company granted no new options.
The following is an analysis of the stock option grant activity under the Plan:
The Company recognized stock-based compensation expense related to options granted and vesting expense of $660,191 during the nine months ended September 30, 2022, of which $472,156 is included in general and administrative expenses and $188,035 is included in research and development expenses in the accompanying statements of operations. The remaining value to be expensed is $310,887 with a weighted average vesting term of 0.88 years as of September 30, 2022. The Company recognized stock-based compensation expense related to options issued and vesting of $616,781 during the nine months ended September 30, 2021, which $556,817 is included in general and administrative expenses and $59,964 is included in research and development expenses in the accompanying statements of operations.
Warrants
During the nine months ended September 30, 2022 the Company issued 6,423,456 warrants. During the nine months ended September 30, 2021, the Company issued 113,750 warrants.
For the nine months ended September 30, 2022, the fair value of each warrant granted was estimated using the assumption and/or factors in the Black-Scholes Model as follows:
For the nine months ended September 30, 2021, the fair value of each warrant issued was estimated using the assumption ranges and/or factors in the Black-Scholes Model as follows:
The risk-free interest rate assumption for warrants granted is based upon observed interest rates on the United States Government Bond Equivalent Yield appropriate for the expected term of warrants.
The Company determined the expected volatility assumption for warrants granted using the historical volatility of comparable public companies’ common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future warrant grants, until such time that the Company’s common stock has enough market history to use historical volatility.
The dividend yield assumption for warrants granted is based on the Company’s history and expectation of dividend payouts. The Company has never declared nor paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
The Company recognizes warrant forfeitures as they occur as there is insufficient historical data to accurately determine future forfeitures rates.
A summary of warrant issuances are as follows:
The Company recognized stock-based compensation expense related to warrants granted and vesting expense of $609,748 during the nine months ended September 30, 2022, of which $105,049 is included in general and administrative and $504,699 is included in sales and marketing in the accompanying Statements of Operations. The Company recognized stock-based compensation expense related to warrants granted and vesting expense of $163,637 during the nine months ended September 30, 2021, which is included in general and administrative in the accompanying Statements of Operations. The remaining value to be expensed is zero as of September 30, 2022. The weighted average vesting term is zero as of September 30, 2022.
On June 15, 2022, the Company entered an agreement with a holder of certain of the Series C Warrants (the “Holder”). Pursuant to the agreement, the Holder has agreed to exercise in cash 179,419 of its Series C Warrants at a reduced exercise price of $7.50 per Share (reduced from $57.50 per share), for gross proceeds to the Company of approximately $1.35 million. As an inducement to such exercise, the Company has agreed to reduce the exercise price of the Holder’s remaining Series C Warrants to purchase up to 49,153 Shares from $57.50 to $12.395 per share, which will be non-exercisable for a period of six months following the closing date. The modification of this exercise price resulted in an increase of $344,158 to the fair value of the Series C Warrants. This modification was an inducement on the transaction and as such was recoded to equity resulting in no net change to additional paid in capital. In addition, the Company issued to the Holder a new warrant to purchase up to 407,991 shares of the Company’s common stock at an exercise price of $12.395 per share, which will be non-exercisable for a period of six months following issuance date and have a term of five and one-half years. This inducement resulted in a total increase of $3,759,044 to the fair value of the warrants.
Restricted Stock Units
A summary of Restricted Stock Units (“RSUs”) issuances are as follows:
The Company recognized stock-based compensation expense related to RSUs granted and vesting expense of $993,462 and $674,265 during the nine months ended September 30, 2022 and September 30, 2021, respectively, of which, $707,904 is included in general and administrative and $285,558 is included in research and development in the accompanying Statements of Operations. The remaining value to be expensed is $551,684 with a weighted average vesting term of 0.57 years as of September 30, 2022.
During the nine months ended September 30, 2022, the Company granted a total of 11,644 RSUs. As of September 30, 2022, 15,513 RSUs vested and the Company issued 15,153 shares of common stock for the 15,153vested RSUs. |
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Income Taxes |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Income Taxes [Abstract] | |
| INCOME TAXES | NOTE 11 – INCOME TAXES
The Company has incurred losses since inception. During the nine months ended September 30, 2022, the Company did not provide any provision for income taxes as the Company incurred losses during such period. The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. In assessing the need for a valuation allowance, the Company has considered both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely than not” standard. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Based on the Company’s review of this evidence, the Company has recorded a full valuation allowance for its net deferred tax assets as of September 30, 2022.
As of September 30, 2022, the Company did not have any amounts recorded pertaining to uncertain tax positions. |
Subsequent Events |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 12 – SUBSEQUENT EVENTS
Redemption of Series B Preferred Stock
On October 7, 2022, the Company paid $20,000 in consideration for the one share of Preferred Stock which was redeemed on September 13, 2022.
Repayment of Promissory Note
On October 7, 2022, the Company fully repaid the $80,000 Promissory Note and $812 of accrued interest to its Chief Executive Officer. The Chief Executive Officer and the Company entered the Promissory Note on July 21, 2022. |
Accounting Policies, by Policy (Policies) |
9 Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||
| Accounting Policies [Abstract] | |||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the Company’s management, the accompanying condensed financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended September 30, 2022 and September 30, 2021. Although management believes that the disclosures in these unaudited condensed financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in condensed financial statements that have been prepared in accordance U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022. The interim results for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ended December 31, 2022 or for any future interim periods.
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| Use of Estimates | Use of Estimates
The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Significant estimates underlying the condensed financial statements include the collectability of notes receivable, collectability and reserve on accounts receivable, the reserve on insurance billing, and the fair value of stock options and warrants.
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| Fair Value Measurements and Fair Value of Financial Instruments | Fair Value Measurements and Fair Value of Financial Instruments
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.
Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet dates.
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| Concentrations of Credit Risk | Concentrations of Credit Risk
The Company maintains its cash accounts at financial institutions which are insured by the Federal Deposit Insurance Corporation. At times, the Company may have deposits in excess of federally insured limits.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid investments.
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| Inventory | Inventory
Inventory consists of laboratory materials and supplies used in laboratory analysis. We capitalize inventory when purchased. Inventory is valued at the lower of cost or net realizable value on a first-in, first-out basis. We periodically perform obsolescence assessments and write off any inventory that is no longer usable.
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| Fixed Assets | Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Cost includes expenditures for furniture, office equipment, laboratory equipment, and other assets. Maintenance and repairs are charged to expense as incurred. When assets are sold, retired, or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. The costs of fixed assets are depreciated using the straight-line method over the estimated useful lives or lease life of the related assets.
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| Intangible Assets | Intangible Assets
Intangible assets are stated at cost less accumulated amortization. For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives of the related assets. For intangible assets with indefinite lives, the assets are tested periodically for impairment.
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| Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. As of September 30, 2022 and December 31, 2021, there was an allowance for doubtful accounts of $49,233 and zero, respectively.
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| Revenue Recognition | Revenue Recognition
In accordance with ASC 606 (Revenue From Contracts with Customers), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:
Revenues reported from services relating to the AditxtScore™ are recognized when the AditxtScoreTM report is delivered to the customer. The services performed include the analysis of specimens received in the Company’s CLIA laboratory and the generation of results which are then delivered upon completion.
The Company recognizes revenue in the following manner for the following types of customers:
Client Payers:
Client payers include physicians or other entities for which services are billed based on negotiated fee schedules. The Company principally estimates the allowance for credit losses for client payers based on historical collection experience and the period of time the receivable has been outstanding.
Cash Pay:
Customers are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Collection of billings is subject to credit risk and the ability of the patients to pay.
Insurance:
Reimbursements from healthcare insurers are based on fee for service schedules. Net revenues recognized consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, collection experience, and the terms of the Company’s contractual arrangements.
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| Leases | Leases
Under Topic 842 (Leases), operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases consisting of office space, laboratory space, and lab equipment.
Leases with an initial term of twelve months or less are not recorded on the balance sheet. We combine the lease and non-lease components in determining the lease liabilities and right of use (“ROU”) assets.
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| Stock-Based Compensation | Stock-Based Compensation
The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services.
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| Patents | Patents
The Company incurs fees from patent licenses, which are expensed as incurred. During the nine months ended September 30, 2022 and September 30, 2021, the Company incurred patent licensing fees for the patents of $256,589 and $76,245, respectively.
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| Research and Development | Research and Development
We incur research and development costs during the process of researching and developing our technologies and future offerings. We expense these costs as incurred unless such costs qualify for capitalization under applicable guidance. During the nine months ended September 30, 2022 and September 30, 2021, the Company incurred research and development costs of $4,186,842 and $3,340,247, respectively.
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| Basic and Diluted Net Loss per Common Share | Basic and Diluted Net Loss per Common Share
Basic loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for each period. Diluted loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding plus the dilutive effect of shares issuable through the common stock equivalents. The weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2022, 44,712 stock options, 10,556 unvested restricted stock units, and 5,522,224 warrants were excluded from dilutive earnings per share as their effects were anti-dilutive. As of September 30, 2021, 42,860 stock options, 28,576 unvested restricted stock units and 205,280 warrants were excluded from dilutive earnings per share as their effects were anti-dilutive.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our condensed financial statements. |
Fixed Assets (Tables) |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of fixed assets |
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Intangible Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of intangible assets |
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Leases (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases (Tables) [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of lease costs |
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| Schedule of ROU lease assets and lease liabilities for our operating leases |
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| Schedule of lease terms and discount rate |
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Stockholders’ Equity (Tables) |
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| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of analysis of the stock option grant activity under the plan |
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| Schedule of fair value of each warrant granted |
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| Schedule of fair value of each warrant granted was estimated using the assumption and/or factors in the Black-Scholes Model |
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Organization and Nature of Business (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | ||||
|---|---|---|---|---|---|
Oct. 20, 2021 |
Oct. 18, 2021 |
Aug. 31, 2021 |
Sep. 20, 2022 |
Dec. 06, 2021 |
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| Organization and Nature of Business (Details) [Line Items] | |||||
| Gross proceeds | $ 4,250 | $ 11,000 | |||
| Company issued | 56,667 | 91,667 | 1,224,333 | 164,929 | |
| Purchase price per share | $ 120 | ||||
| Issued warrants to purchase of shares | 91,667 | ||||
| Debt instrument term, description | The warrants have an exercise price of $126.50 per share and are exercisable for a five-year period commencing six months from the date of issuance. | ||||
| Warrants exercise price | $ 75 | $ 6 | $ 57.5 | ||
| Purchase of common stock | 4,584 | 3,333,333 | |||
| Exercise price per share | $ 75 | $ 150 | |||
| Net of underwriting discounts | $ 3,910 | ||||
| Net proceeds | $ 18,100 | $ 16,000 | |||
| Prefunded warrants shares | 2,109,000 | 166,572 | |||
| Pre funded warrants price per share | $ 0.001 | ||||
| Warrant [Member] | |||||
| Organization and Nature of Business (Details) [Line Items] | |||||
| Warrants exercise price | $ 126.5 | ||||
| Pre funded warrants price per share | $ 0.001 | ||||
Going Concern Analysis (Details) |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
| |
| Going Concern Analysis [Abstract] | |
| Net loss cash flow from operating activities | $ 19,466,710 |
| Net Income (Loss) Available to Common Stockholders, Basic | (15,672,032) |
| Cash | 9,244,876 |
| Future funds | 67,300,000 |
| Exceeds amounts | $ 75,000,000 |
Summary of Significant Accounting Policies (Details) - USD ($) |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Accounting Policies [Abstract] | |||
| Allowance for doubtful accounts | $ 49,233 | $ 0 | |
| Licensing fees | 256,589 | $ 76,245 | |
| Research and development expense | $ 4,186,842 | $ 3,340,247 | |
| Stock options issued | 44,712 | 42,860 | |
| Restricted stock units | 10,556 | ||
| Dilutive earning shares | 5,522,224 | 28,576 | |
| Warrants | 205,280 | ||
Note Receivable (Details) - USD ($) |
1 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Apr. 04, 2022 |
Dec. 10, 2021 |
Dec. 28, 2021 |
Oct. 18, 2021 |
Aug. 25, 2021 |
Sep. 30, 2022 |
Dec. 31, 2021 |
Jan. 31, 2022 |
Nov. 30, 2021 |
Aug. 27, 2021 |
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| Note Receivable (Details) [Line Items] | ||||||||||
| Completion of a proposed | $ 6,500,000 | |||||||||
| Common stock yields percentage | 50.00% | |||||||||
| Share exchange agreement description | On December 28, 2021, we entered into a Share Exchange Agreement with Cellvera Global f/k/a AiPharma Global, pursuant to which we (i) will acquire 9.5% of the issued and outstanding equity interests in Cellvera Global in exchange for the issuance of 96,324 shares of our common stock of Aditxt and a cash payment of $250,000, at an initial closing upon the satisfaction or waiver of certain conditions to closing; and (ii) acquire the remaining 90.5% of the issued and outstanding equity interests in Cellvera Global in exchange for the issuance of 798,560 shares of our common stock and a cash payment of $250,000 at a secondary closing upon the satisfaction or waiver of certain conditions to closing. | |||||||||
| Principal amount | $ 6,500,000 | |||||||||
| Interest rate per annum | 8.00% | |||||||||
| Credit agreement amendment, description | On October 18, 2021, the Company entered into the first amendment to the Credit Agreement with Cellvera Global and certain affiliated entities (the “Credit Agreement Amendment”), pursuant to which the Company agreed to increase the amount which Cellvera Global was permitted to borrow under the Credit Agreement by $8.5 million to an aggregate of $15.0 million, of which $6.5 million was outstanding prior to entering the Credit Agreement Amendment. The Company agreed to fund such additional borrowings, as requested by Cellvera Global, by advancing 70% of any amounts received by the Company from the exercise of existing warrants or any other capital raises, including the October Offering. | |||||||||
| Advanced credit agreement | $ 8,000,000 | |||||||||
| Credit agreement | 14,500,000 | |||||||||
| Note receivable amount | $ 14,500,000 | |||||||||
| Loan | $ 14,500,000 | |||||||||
| Aggregate amount | $ 30,000,000 | |||||||||
| Credit agreement description | the Company entered into a secured credit agreement dated December 10, 2021 (the “Target Company Credit Agreement”) and signed on December 10, 2021 with the Target Company, pursuant to which the Company made a secured loan to the Target Company in the principal amount of $500,000 (the “Target Company Loan”) and agreed to make additional secured loans, as requested by the Target Company and approved by the Company, in an amount not to exceed $4.5 million. The Target Company Loan bears interest at a rate of 8% per annum and mature on December 8, 2022, provided, that the Letter of Intent currently contemplates that the Target Company Loan will be forgivable upon the closing of the acquisition contemplated by the letter of intent. The Target Company Credit Agreement also contains certain covenants that prohibit the Target Company from incurring additional indebtedness, entering into any fundamental transactions, issuing any equity interests subject to certain limited exceptions, or making any dispositions of its property. In connection with the Target Company Credit Agreement, the Company entered into a Security Agreement with the Target Company, pursuant to which the Target Company granted the Company a security interest in all of the Target Company’s assets as security for the Target Company Loan. | |||||||||
| Outstanding Principal loan | $ 500,000 | |||||||||
| Accured interest loan | 32,438 | |||||||||
| Future Receipts Agreement [Member] | ||||||||||
| Note Receivable (Details) [Line Items] | ||||||||||
| Over payments of company | 56,572 | |||||||||
| Agreement [Member] | ||||||||||
| Note Receivable (Details) [Line Items] | ||||||||||
| Over payments of company | $ 28,800 | |||||||||
Fixed Assets (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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| Property, Plant and Equipment [Abstract] | ||||
| Depreciation expense | $ 99,980 | $ 99,857 | $ 296,684 | $ 266,385 |
Fixed Assets (Details) - Schedule of fixed assets - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Cost Basis | $ 2,932,563 | $ 2,654,307 |
| Accumulated Depreciation | (683,695) | (387,010) |
| Net | 2,248,868 | 2,267,297 |
| Computers [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Cost Basis | 370,029 | 312,489 |
| Accumulated Depreciation | (166,635) | (75,053) |
| Net | 203,394 | 237,436 |
| Lab Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Cost Basis | 2,497,273 | 2,240,252 |
| Accumulated Depreciation | (509,267) | (306,688) |
| Net | 1,988,006 | 1,933,564 |
| Office Furniture [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Cost Basis | 56,656 | 90,757 |
| Accumulated Depreciation | (6,784) | (4,857) |
| Net | 49,872 | 85,900 |
| Other Fixed Assets [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Cost Basis | 8,605 | 10,809 |
| Accumulated Depreciation | (1,009) | (412) |
| Net | $ 7,596 | $ 10,397 |
Intangible Assets (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Amortization expense | $ 26,750 | $ 26,970 | $ 80,250 | $ 80,030 |
Intangible Assets (Details) - Schedule of intangible assets - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| Total Intangible Assets, Cost Basis | $ 321,000 | $ 321,000 |
| Total Intangible Assets, Accumulated Amortization | (187,250) | (107,000) |
| Total Intangible Assets, Net | 133,750 | 214,000 |
| Proprietary Technology [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Total Intangible Assets, Cost Basis | 321,000 | 321,000 |
| Total Intangible Assets, Accumulated Amortization | (187,250) | (107,000) |
| Total Intangible Assets, Net | $ 133,750 | $ 214,000 |
Related Party Transactions (Details) - USD ($) |
1 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Jul. 19, 2022 |
Jul. 19, 2022 |
Jan. 28, 2022 |
Sep. 30, 2022 |
Jul. 21, 2022 |
|
| Related Party Transactions (Details) [Line Items] | |||||
| Restricted stock of shares (in Shares) | 9,600 | ||||
| Preferred stock value per share (in Dollars per share) | $ 0.001 | $ 0.001 | |||
| Cash | $ 20,000 | ||||
| Preferred stock votes (in Shares) | 250,000,000 | 250,000,000 | |||
| Consideration cash | $ 20,000 | ||||
| Company loan amount | 80,000 | ||||
| Accrued interest rate percentage | 4.75% | ||||
| RSUs [Member] | |||||
| Related Party Transactions (Details) [Line Items] | |||||
| Restricted stock issued | $ 126,613 | ||||
Leases (Details) - Schedule of lease costs - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Components of total lease costs: | ||
| Operating lease expense | $ 988,381 | $ 515,956 |
| Total lease costs | $ 988,381 | $ 515,956 |
Leases (Details) - Schedule of ROU lease assets and lease liabilities for our operating leases - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Assets | ||
| Right of use asset – long term | $ 3,426,746 | $ 4,097,117 |
| Total right of use asset | 3,426,746 | 4,097,117 |
| Liabilities | ||
| Operating lease liabilities – short term | 1,122,869 | 1,145,126 |
| Operating lease liabilities – long term | 2,112,362 | 2,765,933 |
| Total lease liability | $ 3,235,231 | $ 3,911,059 |
Leases (Details) - Schedule of lease terms and discount rate |
Sep. 30, 2022 |
|---|---|
| Schedule Of Lease Terms And Discount Rate Abstract | |
| Weighted average remaining lease term (in years) – operating leases | 1 year 9 months 18 days |
| Weighted average discount rate – operating leases | 8.00% |
Subsequent Events (Details) - Subsequent Event [Member] |
Oct. 07, 2022
USD ($)
|
|---|---|
| Subsequent Events (Details) [Line Items] | |
| Consideration paid | $ 20,000 |
| Promissory note | 80,000 |
| Accrued interest | $ 812 |