08/19/2024 | Press release | Distributed by Public on 08/19/2024 08:09
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment no. 1)
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024OR
☐TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934From the transition period from ___________ to ____________
Commission File Number 000-54933BIOSTAX CORP
(Exact name of small business issuer as specified in its charter)
Florida | 59-3226705 | |
(State or other jurisdiction of |
(I.R.S. Employer Identification No.) |
2431 Aloma Ave., Suite 124, Winter Park, FL | 32792 | |
(Address of principal executive offices) | (Zip Code) |
888-613-8802 |
(Registrant's telephone number, including area code) |
(Former name or former address, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ | Accelerated Filer ☐ | ||
Non-Accelerated Filer☐ |
Smaller Reporting Company ☒ | |||
Emerging growth Company ☐ |
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
As of May 20, 2024, there were 83,711,316shares of common stock, $0.0001 par value per share, outstanding.
EXPLANATORY NOTE
Biostax Corp (the "Company") is filing this Amendment No. 1 on Form 10Q/A (this "Amendment") to its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024, which was originally filed with the Securities and Exchange Commission (the "SEC") on May 20, 2024 (the "Original Filing").
For convenience of the reader, this Amended 2024 Quarterly Report amends and restates the Original 2024 Quarterly Report in its entirety. As a result, it includes both items that have been changed as a result of the Restatement and items that are unchanged from the Original 2024 Quarterly Report.
Subsequent to the issuance of both the Company's (unaudited) consolidated financial statements as of and for the year ended December 31, 2023 and the Company's unaudited interim condensed consolidated financial statements as of and for the fiscal quarter ended March 31, 2024, the Company identified errors in the calculation and proper recording of a derivative instrument and an error relating to the accrual of related party liabilities.
In filing this Amended 2024 Quarterly Report, the Company is restating its previously issued unaudited interim condensed financial statements and related notes as of and for the three months ended March 31, 2024 to correct the errors in the calculation and proper recording of a derivative instrument and an error relating to the accrual of related party liabilities.
This Amended 2024 Quarterly Report sets forth our Original 2024 Quarterly Report, as amended, in its entirety. Except as required to reflect the restated amounts and related disclosures, there were no changes to any other parts of the Original 2024 Quarterly Report, and this Amended 2024 Quarterly Report does not reflect events occurring after the date of the Original 2024 Quarterly Report.
The following sections have been amended in this Amended 2024 Quarterly Report:
● | Part I, Item 1, Financial Statements | |
● | Part I, Item 2, Management's Discussion and Analysis of Financial Conditions and Results of Operations. |
The exhibit lists included in Item 6, "Exhibits" herein has been amended to contain currently dated certifications from the Company's Chief Executive Officer (as Principal Executive Officer) and Chief Financial Officer (as Principal Financial Officer), as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and filed as Exhibits 31.1/31.2 and 32.1/32.2, respectively.
TABLE OF CONTENTS
PART I - FINANCIAL STATEMENTS | ||
Item 1. | Financial Statements | 5 |
Item 2. | Management's Discussion and Analysis of Financial Conditions and Results of Operations | 16 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 21 |
Item 4. | Controls and Procedures | 21 |
PART II - OTHER INFORMATION | ||
Item 1. | Legal Proceedings | 22 |
Item 1A. | Risk Factors | 22 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
Item 3. | Default upon Senior Securities | 22 |
Item 4. | Mine Safety Disclosure | 22 |
Item 5. | Other Information | 22 |
Item 6. | Exhibits | 23 |
2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this Quarterly Report on Form 10-Q are considered forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) concerning our business, results of operations, economic performance and/or financial condition, based on management's current expectations, plans, estimates, assumptions, and projections. Forward-looking statements are included, for example, in the discussions about:
● | strategy; | |
● | new product discovery and development; | |
● | current or pending clinical trials; | |
● | our products' ability to demonstrate efficacy or an acceptable safety profile; | |
● | actions by the U.S. Food and Drug Administration and other regulatory authorities; | |
● | product manufacturing, including our arrangements with third-party suppliers; | |
● | product introduction and sales; | |
● | royalties and contract revenues; | |
● | expenses and net income; | |
● | credit and foreign exchange risk management; | |
● | liquidity; | |
● | asset and liability risk management; | |
● | the outcome of litigation and other proceedings; | |
● | intellectual property rights and protections; | |
● | economic factors; | |
● | competition; and | |
● | legal risks. |
Any statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Forward-looking statements generally are identified by the words "expects," "anticipates," "believes," "intends," "estimates," "aims," "plans," "may," "could," "will," "will continue," "seeks," "should," "predict," "potential," "outlook," "guidance," "target," "forecast," "probable," "possible" or the negative of such terms and similar expressions. Forward-looking statements are subject to change and may be affected by risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events, except as required by law, although we intend to continue to meet our ongoing disclosure obligations under the U.S. securities laws and other applicable laws.
3 |
We caution you that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements, and therefore you should not place too much reliance on them. These factors include, among others, those described herein, and elsewhere in this Quarterly Report and in our other public reports filed with the Securities and Exchange Commission. It is not possible to predict or identify all such factors, and therefore the factors that are noted are not intended to be a complete discussion of all potential risks or uncertainties that may affect forward-looking statements. If these or other risks and uncertainties materialize, or if the assumptions underlying any of the forward-looking statements prove incorrect, our actual performance and future actions may be materially different from those expressed in, or implied by, such forward-looking statements. We can offer no assurance that our estimates or expectations will prove accurate or that we will be able to achieve our strategic and operational goals.
Forward-looking statements are based on information we have when those statements are made or management's good faith belief as of that time with respect to future events and are subject to significant risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.
Important factors that could cause such differences include, but are not limited to:
● | our lack of operating history; | |
● | our current and future capital requirements and our ability to satisfy our capital needs; | |
● | our inability to keep up with industry competition; | |
● | interpretations of current laws and the passages of future laws; | |
● | acceptance of our business model by investors and our ability to raise capital; | |
● | our drug discovery and development activities may not result in products that are approved by the applicable regulatory authorities and even if our drug candidates do obtain regulatory approval, they may never achieve market acceptance or commercial success; | |
● | our reliance on key personnel and collaborative partners, including our ability to attract and retain scientists; | |
● | our reliance on third-party manufacturing to supply drugs for clinical trials and sales; | |
● | our limited distribution organization with no sales and marketing staff; | |
● | our being subject to product liability claims; | |
● | legislation or regulation that may increase the cost of our business or limit our service and product offerings; | |
● | risks related to our intellectual property, including our ability to adequately protect intellectual property rights; | |
● | risks related to government regulation, including our ability to obtain approvals for the commercialization of some or all of our drug candidates, and ongoing regulatory obligations and continued regulatory review which may result in significant additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements; and | |
● | our ability to obtain regulatory approvals to allow us to market our products internationally. |
Moreover, new risks regularly emerge, and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this Quarterly Report are based on information available to us on the date of this Quarterly Report. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether because of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this Quarterly Report.
4 |
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOSTAX CORP AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page | |
Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023 | 6 |
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (unaudited) | 7 |
Condensed Consolidated Statement of Stockholders' Equity/(Deficit) for Three Months Ended March 31, 2024 and 2023 (unaudited) | 8 |
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited) | 9 |
Notes to Condensed Consolidated Financial Statements (unaudited) | 10 |
5 |
BIOSTAX CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2024 | December 31, 2023 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 2,098 | $ | 29,785 | ||||
Total current assets | 2,098 | 29,785 | ||||||
Deposits | 5,500 | 5,500 | ||||||
Total Assets | $ | 7,598 | $ | 35,285 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 1,215,466 | $ | 1,213,982 | ||||
Accrued payroll | 336,002 | 336,002 | ||||||
Notes payable, net of debt discount | 1,149,768 | 1,129,242 | ||||||
Due to related parties | 1,165,146 | 1,069,594 | ||||||
Accrued interest | 182,440 | 152,315 | ||||||
Accrued liabilities | 418,057 | 273,057 | ||||||
License fees payable | 306,307 | 295,230 | ||||||
Derivative liability |
109,194 |
93,634 |
||||||
Total current liabilities | 4,882,379 | 4,563,056 | ||||||
Total Liabilities | 4,882,379 | 4,563,056 | ||||||
Stockholders' Deficit: | ||||||||
Common stock - par value $0.0001; 750,000,000and 750,000,000shares authorized, respectively; 83,738,939and 83,657,853shares issued and outstanding respectively | 8,374 | 8,366 | ||||||
Additional paid in capital | 380,800,619 | 380,795,003 | ||||||
Accumulated deficit | (385,683,775 | ) | (385,331,140 | ) | ||||
Total stockholders' deficit | (4,874,781 | ) | (4,527,772 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | 7,597 | $ | 35,285 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6 |
BIOSTAX CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended | ||||||||
March 31, 2024 | March 31, 2023 | |||||||
Operating expenses: | ||||||||
Selling, general and administrative | $ | 254,249 | $ | 207,517 | ||||
Research and development expense | 11,077 | 180,924 | ||||||
Depreciation and amortization expense | - | 13,377 | ||||||
Total operating expenses | 265,326 | 401,818 | ||||||
Loss from operations | (265,326 | ) | (401,818 | ) | ||||
Other (expense) income: | ||||||||
Interest expense | (71,749 | ) | (14,299 | ) | ||||
Gain (loss) on derivative liability |
(15,560 |
) |
- |
|||||
Total other (expense) income | (87,309 | ) | (14,299 | ) | ||||
Net loss | $ | (352,635 | ) | $ | (416,117 | ) | ||
Basic (loss) income per share attributable to common shareholders | $ | (0.00 | ) | $ | (0.00 | ) | ||
Diluted (loss) income per share to common shareholders | $ | (0.00 | ) | $ | (0.00 | ) | ||
Basic weighted average number of shares outstanding | 83,711,316 | 83,243,079 | ||||||
Diluted weighted average number of shares outstanding | 83,711,316 | 83,243,079 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7 |
BIOSTAX CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT)
FOR THE PERIODS ENDED MARCH 31, 2024 AND 2023
(Unaudited)
Common Stock | Additional Paid-in | Stock To Be | Accumulated | |||||||||||||||||||||
Shares | Amount | Capital | Issued | Deficit | Total | |||||||||||||||||||
Balance December 31, 2022 | 83,045,857 | $ | 8,305 | $ | 380,436,432 | $ | 10,303 | $ | (382,968,494 | ) | $ | (2,513,454 | ) | |||||||||||
Issuance of common stock for extension of patent and license agreement | 250,000 | 25 | 149,975 | - | - | 150,000 | ||||||||||||||||||
Net loss | - | - | - | - | (416,117 | ) | (416,117 | ) | ||||||||||||||||
Balance March 31, 2023 | 83,295,857 | $ | 8,330 | $ | 380,586,407 | $ | 10,303 | $ | (383,384,611 | ) | $ | (2,779,571 | ) | |||||||||||
Balance December 31, 2023 | 83,657,853 | $ | 8,366 | $ | 380,795,003 | $ | - | $ | (385,331,140 | ) | $ | (4,527,772 | ) | |||||||||||
Issuance of common stock upon conversion of notes and obligations | 81,086 | 8 | 5,617 | - | - | 5,626 | ||||||||||||||||||
Net loss | - | - | - | - | (352,635 | ) | (352,635 | ) | ||||||||||||||||
Balance March 31, 2024 | 83,738,939 | $ | 8,374 | $ | 380,800,619 | $ | - | $ | (385,683,776 | ) | $ | (4,874,781 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8 |
BIOSTAX CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended | ||||||||
March 31, 2024 | March 31, 2023 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (352,635 | ) | $ | (416,117 | ) | ||
Adjustments to reconcile net loss to net cash flows used in operating activities: | ||||||||
Amortization of intangibles | - | 13,377 | ||||||
Common stock issued for the extension of patent and license agreement | - | 150,000 | ||||||
Loss (gain) on derivative liability |
15,560 |
|||||||
Interest expense from derivative liability |
20,526 |
|||||||
Changes in operating assets and liabilities: | ||||||||
Deposits | - | 38,116 | ||||||
Accounts payable | 1,484 | - | ||||||
License fees payable | 11,077 | (127,305 | ) | |||||
Accrued payroll | - | - | ||||||
Accrued interest | 30,125 | 14,299 | ||||||
Accrued liabilities |
290,000 |
15,000 | ||||||
Due to related parties | (49,448 | ) | 47,132 | |||||
Net cash used in operating activities | (33,311 | ) | (265,498 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of notes payable | 5,624 | 150,000 | ||||||
Net cash provided by financing activities | 5,624 | 150,000 | ||||||
Decrease in cash | (27,687 | ) | (115,498 | ) | ||||
Cash and cash equivalents, beginning of year | 29,785 | 150,491 | ||||||
Cash and cash equivalents, end of year | $ | 2,098 | $ | 34,993 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
9 |
Biostax Corp
Notes to the Condensed Consolidated Financial Statements
March 31, 2024
(Unaudited)
1. Company Overview
Biostax Corp. (the "Company" or "BTAX") is a Florida corporation trading on the OTC-Pink. The Company is a drug development and commercialization company. We identify, evaluate, and seek to acquire technologies in the medical device and drug development sectors with the intent to further develop them and move them to commercialization. On February 28, 2023, we received a written consent from a majority of our outstanding shareholders to change the name of our Company to "Biostax Corp." On March 27, 2023, we filed a definitive information statement on Schedule 14C and mailed the information statement to shareholders on record as of the date of the filing. We filed our name change amendment with the Secretary of State of Florida on October 5, 2023 and our new Company name and trading symbol (BTAX) became effective on October 20, 2023.
Going Concern
As of March 31, 2024, the Company had $2,098in cash on hand, negative working capital of $4,880,281and accumulated stockholders' deficit of $385,683,775. For the three months ended March 31, 2024, the Company reported a net loss attributable to common shareholders of $352,635. For the three months ended March 31, 2023, the Company reported a net loss attributable to common shareholders of $416,117.
Historically the Company has relied on the funding of operations through private equity financing and management expects operating losses and negative cash flows to continue at more significant levels in the future. As the Company continues to incur losses, transition to profitability is dependent upon the successful development, approval, and commercialization of its current or future product candidates as they become available and the achievement of a level of revenues adequate to support the Company's cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic partners or from other sources.
Working capital at March 31, 2024 is not sufficient to meet the cash requirements to fund planned operations through the next twelve months without additional sources of cash. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of liabilities in the normal course of business.
Management is continuing to develop strategies to re-capitalize the Company and position it for future growth. Key steps to this process include:
● | Improve the condition of the balance sheet via license arrangements and capital infusions. | |
● | Identify and acquire late-stage assets for commercialization. | |
● | Build out operational infrastructure to generate revenue opportunities to grow shareholder value. |
There can be no guaranties that the Company will be successful in securing adequate capital to continue operations and in identifying and acquiring assets for future development.
10 |
If the Company is unable to secure new working capital, other alternatives strategies will be required.
Historically, the Company's strategy has been to acquire and develop assets; potentially spin them out and retain both an equity stake and royalties and milestone payments. In so doing, the Company would act as an incubator for late-stage drug development. Management believes that this strategy can be successful. At this time, the Company is reviewing several opportunities which it may pursue as soon as funding is available. At present, no definitive action has been taken.
There can be no guarantees that the Company will be successful in:
● | Executing its restructuring plan; | |
● | Securing adequate capital to continue operations; or | |
● | Identifying and acquiring assets for future development. |
Company History
The Company was initially incorporated in Florida on December 2, 1993, as Resort Clubs International, Inc. ("Resort Clubs"). It was formed to manage and market golf course properties in resort markets throughout the United States. Galliano International Ltd. ("Galliano") was incorporated in Delaware on May 27, 1998 and began trading in November 1999 through the filing of a 15C-211. On November 10, 2004, Galliano merged with Resort Clubs. Resort Clubs was the surviving corporation. On August 23, 2010, Resort Clubs changed its name to pH Environmental Inc. ("pH Environmental"). On April 23, 2012, pH Environmental completed a name change to TNI BioTech, Inc., and on April 24, 2012, we executed a share exchange agreement for the acquisition of all the outstanding shares of TNI BioTech IP, Inc. On September 4, 2014, a majority of our shareholders approved an amendment to our Amended and Restated Articles of Incorporation, as amended, to change our name to Immune Therapeutics, Inc. On February 28, 2023, we received a written consent from a majority of our outstanding shareholders to change the name of our Company to "Biostax Corp." On March 27, 2023, we filed a definitive information statement on Schedule 14C and mailed the information statement to shareholders on record as of the date of the filing. We filed our name change amendment with the Secretary of State of Florida on October 5, 2023 and our new Company name and trading symbol (BTAX) became effective on October 20, 2023.
2. Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring adjustments, unless otherwise indicated) necessary to present fairly the consolidated financial position and consolidated results of operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These condensed, consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2023 (including the notes thereto) set forth in the Company's Annual Report on Form 10- K/A for that period.
Use of Estimates
The preparation of the Company's condensed, consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed, consolidated financial statements and accompanying notes. Actual results could differ from such estimates.
Cash, Cash Equivalents, and Short-Term Investments
The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value. At March 31, 2024 and December 31, 2023, the Company had cash and cash equivalents of $2,098and $29,785, respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. The Company is exposed to credit risk, subject to federal deposit insurance, in the event of a default by the financial institutions holding its cash and cash equivalents to the extent of amounts recorded on the condensed consolidated balance sheets. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000.
Segment and Geographic Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment and does not segment the business for internal reporting or decision making.
Fair Value of Financial Instruments
In accordance with the reporting requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 825, "Financial Instruments", the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.
Cash, cash equivalents and accounts payable are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of notes payable approximate fair value since they bear market rates of interest and other terms. None of these instruments are held for trading purposes.
11 |
Derivative Financial Instruments
FASB ASC 815, Fair Value Measurements requires bifurcation of certain embedded derivative instruments in certain debt or equity instruments, and measurement at their fair value for accounting purposes. A holder redemption feature embedded in the Company's note payable requires bifurcation from its host instrument and is accounted for as a freestanding derivative.
ASC Topic 820, "Fair Value Measurement", requires that certain financial instruments be recognized at their fair values at our balance sheet dates. However, other financial instruments, such as debt obligations, are not required to be recognized at their fair values, but GAAP provides an option to elect fair value accounting for these instruments. GAAP requires the disclosure of the fair values of all financial instruments, regardless of whether they are recognized at their fair values or carrying amounts in our balance sheets. For financial instruments recognized at fair value, GAAP requires the disclosure of their fair values by type of instrument, along with other information, including changes in the fair values of certain financial instruments recognized in income or other comprehensive income. For financial instruments not recognized at fair value, the disclosure of their fair values is provided below under "Financial Instruments."
Nonfinancial assets, such as property, plant and equipment, and nonfinancial liabilities are recognized at their carrying amounts in the Company's balance sheets. GAAP does not permit nonfinancial assets and liabilities to be remeasured at their fair values. However, GAAP requires the remeasurement of such assets and liabilities to their fair values upon the occurrence of certain events, such as the impairment of property, plant and equipment. In addition, if such an event occurs, GAAP requires the disclosure of the fair value of the asset or liability along with other information, including the gain or loss recognized in income in the period the remeasurement occurred.
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The following is a summary of activity of Level 3 liabilities for the year ended December 31, 2023 and quarter ended March 31, 2024:
Balance - December 31, 2022 | $ | - | ||
Additions | 97,380 | |||
Settlements | - | |||
Change in fair value | (3,746 | ) | ||
Balance - December 31, 2023 | 93,634 | |||
Additions | - | |||
Settlements | - | |||
Change in fair value | 15,560 | |||
Balance - March 31, 2024 | 109,194 |
Beginning on November 17, 2023, the Company issued a note payable agreement which contains conversion provisions meeting the definition of a derivative liability which therefore require bifurcation. Further, pursuant to the Company's contract ordering policy, equity linked instruments subsequent to November 17, 2023, resulted in derivative liabilities.
At December 31, 2023, the Company estimated the fair value of the conversion feature derivative embedded in the note payable and based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company's common stock of $0.0730; risk-free interest rate of 5.00%; expected volatility of the Company's common stock of 199%based on the volatility of comparable publicly traded entities; exercise price of $0.0366; and term of eight months.
At March 31, 2024, the Company estimated the fair value of the conversion feature derivative embedded in the note payable and based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company's common stock of $0.0579; risk-free interest rate of 5.00%; expected volatility of the Company's common stock of 199%based on the volatility of comparable publicly traded entities; exercise price of $0.0314; and term of five months.
Research and Development Costs
Research and development costs are charged to expense as incurred and are typically comprised of expenses associated with advancing the commercialization of our technologies. The Company incurred $11,077of research and development costs during the three months ended March 31, 2024, which solely represents interest and late fees related to the Company's license agreement with TaiwanJ Pharmaceuticals. The Company inclurred $180,924of research and development costs during the three months ended March 31, 2023 which includes legal fees related to the maintenance and prosecution of licensed and owned intellectual property as well as the fair value of common stock issued to extend the payment terms of the Company's license agreement with TaiwanJ Pharmaceuticals.
Income Taxes
The Company follows ASC Topic 740, "Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
12 |
The standard addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC Topic 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
At the date of adoption, and as of March 31, 2024 and 2023, the Company does not have a liability for unrecognized tax uncertainties. The Company's policy is to record interest and penalties on uncertain tax positions as income tax expense. As of March 31, 2024, and 2023, the Company does not have any interest or penalties related to uncertain tax positions.
Stock-Based Compensation and Issuance of Common Stock for Non-Cash Consideration
The Company measures and recognizes compensation expense for share-based awards based on estimated fair values equaling either the market value of the shares issued, or the value of consideration received, whichever is more readily determinable. Generally, the non-cash consideration pertains to services rendered by consultants and others and has been valued at the fair value of the Company's common stock at the date of the agreement.
The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC Topic 718, "Compensation-Stock Compensation." The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete.
The Company did not issue any stock-based compensation awards during the three months ended March 31, 2024 and 2023.
Net Income (Loss) per Share
For the three months ended March 31, 2024, basic and diluted net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.
13 |
For the three months ended March 31, 2024, diluted income per share was calculated by dividing the net income by the weighted-average number of common shares outstanding for the period determined using the treasury-stock method. A reconciliation of the weighted average shares outstanding used in basic and diluted earnings per share for the periods ended March 31, 2024 and 2023 are as follows:
Three Months ended | ||||||||
March 31, 2024 | March 31, 2023 | |||||||
Basic EPS | ||||||||
Income (loss) available to common shareholders (Numerator) | $ | (352,635 | ) | $ | (416,117 | ) | ||
Weighted average common shares (Denominator) | 83,711,316 | 83,243,079 | ||||||
Basic EPS | $ | (0.00 | ) | $ | (0.00 | ) | ||
Diluted EPS | ||||||||
Income (loss) available to common shareholders (Numerator) | $ | (352,635 | ) | $ | (416,117 | ) | ||
Weighted average common shares (Denominator) | 83,711,316 | 83,243,079 | ||||||
Diluted EPS | $ | (0.00 | ) | $ | (0.00 | ) |
Recent Accounting Standards
The Company has reviewed the accounting pronouncements issued by the FASB during the first quarter of 2024. Applicable pronouncements will be adopted by the Company in accordance with the accounting guidance and definition. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company's consolidated financial statements.
Management does not believe there are other significant accounting pronouncements which have had or will have a material impact on the Company's consolidated financial statements.
Note 3. Notes payable
During the three month period ended March 31, 2024, the Company reported the following activity in notes and accrued interest:
Notes Payable on March 31, 2024 and December 31, 2023 are as follows:
March 31, 2024 | December 31, 2023 | |||||||
Promissory note issued in the first quarter of 2019. The note accrues interest at 6% and matured in February 2020. This note is in default. | $ | 231,478 | $ | 231,478 | ||||
Promissory note issued in 2019 for the settlement of debt in the same amount and matured in 2021. Lender earns interest at 15%. This note was modified in November 2022, extending maturity to September 2023. This note is in default. | 150,000 | 150,000 | ||||||
Promissory note issued in 2022 and matured in July 2023. Lender earns interest at 6%. This note is in default. | 65,000 | 65,000 | ||||||
Promissory note issued in 2022 and matured in July 2023. Lender earns interest at 6%. The holder of the note is a former Director and the former Chief Executive Officer of the Company. This note is in default. | 200,000 | 200,000 | ||||||
Promissory note issued in 2022 and matured in December 2023. The lender earns interest at 7.75%. This note is in default. | 50,000 | 50,000 | ||||||
Promissory note issued in March 2023 and matured in May 2023. The lender earns interest at 8%. This note was issued to H. Louis Salomonsky, a Director of the Company. This note is in default. | 100,000 | 100,000 | ||||||
Promissory note issued in March 2023 and matured in June 2023.The lender earns interest at 8%. This note is in default. | 50,000 | 50,000 | ||||||
Promissory note issued in April 2023 and matured in May 2023. The lender earns interest at 18%. This note is in default. | 250,000 | 250,000 | ||||||
Promissory note issued in June 2023 and matures in June 2024. The lender earns interest at 8%. | 15,000 | 15,000 | ||||||
Promissory note issued in July 2023 and matures in July 2025. The lender earns interest at 8.5%. This note was issued to Global Reverb Corporation, a related party of which Noreen Griffin is the sole beneficial owner. | 7,500 | 7,500 | ||||||
Promissory note issued in November 2023 and matures in August 2024. Lender earns interest at 22.0% and is convertible into shares of common stock. | 30,790 | 10,264 | ||||||
$ | 1,149,768 | $ | 1,129,242 |
At March 31, 2024 and December 31, 2023, the Company had accrued $182,441and $146,690, respectively, in unpaid interest on notes payable.
14 |
4. Capital Structure - Common Stock and Stock Purchase Warrants
Each holder of common stock is entitled to vote on all matters and is entitled to one vote for each share held. No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock or any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.
Stock Warrants
During the three months ended March 31, 2024 and March 31, 2023, no warrants were issued, exercised or modified.
The following is a summary of outstanding common stock warrants as of March 31, 2024.
Expiration Date | Number of Shares | Exercise Price | Remaining Life (years) | |||||||||
Third Quarter 2028 | 3,000 | $ | 70 | 4.50 | ||||||||
Second Quarter 2032 | 28,995 | $ | 10- 70 | 8.25 | ||||||||
31,995 | $ | 10- 70 |
Following is a summary of stock warrant activity for the three months ended March 31, 2024:
Number of Shares |
Exercise Price |
Weighted Average Price |
||||||||||
Warrants as of December 31, 2023 | 31,995 | $ | 10- 70 | $ | 56.49 | |||||||
Issued | - | $ | - | $ | - | |||||||
Expired and forfeited | - | $ | - | $ | - | |||||||
Exercised | - | $ | - | $ | - | |||||||
Warrants as of March 31, 2023 | 31,995 | $ | 10- 70 | $ | 56.49 |
5. Income Taxes - Results of Operations
There was noincome tax expense reflected in the results of operations for the periods ended March 31, 2024 and 2023 because the Company has significant net loss operating carryforwards available to offset the potential tax liabilities. Our tax rate can be affected by recurring items, such as tax rates in foreign jurisdictions and the relative amount of income we earn in jurisdictions. It may also be affected by discrete items that may occur in any given year but are not consistent from year to year.
For U.S. federal purposes the corporate statutory income tax rate was 21%, for 2024 and 2023 tax years. The Company has recognized no tax benefit for the losses generated for the periods through March 31, 2024.
ASC Topic 740 requires that a valuation allowance be provided if it is more likely than not that some portion or all a deferred tax asset will not be realized. The Company's ability to realize the benefit of its deferred tax asset will depend on the generation of future taxable income. Because the Company has yet to recognize revenue, we believe that the full valuation allowance should be provided.
6. Subsequent Events
Management of the Company has performed a review of events and transactions occurring after the condensed consolidated balance sheet date to determine if there were any such events or transactions requiring adjustment to or disclosure in the accompanying condensed consolidated financial statements and has noted none.
15 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
The following management's discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following financial information is derived from our condensed consolidated financial statements and should be read in conjunction with such condensed consolidated financial statements and notes thereto and set forth elsewhere herein.
Use of Terms
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to "we," "us," "our" and the "Company" refer to Biostax Corp. a Florida corporation and its consolidated subsidiaries.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This report contains certain forward-looking statements that are based on the beliefs of management as well as assumptions made by and currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, future demand for our products and services, the successful commercialization of our products, general domestic and global economic conditions, government and environmental conditions and regulations, competition and customer strategies, changes in our business strategy or development plans, capital deployment, business disruptions, including those by fires, raw material supplies, environmental regulations, and other risks and uncertainties, certain of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those forward-looking statements. For further discussion of certain of the matters described above see the Cautionary Note Regarding Forward-Looking Statements included in our 2023 Annual Report on Form 10-K/A.
Undue reliance should not be placed on our forward-looking statements. Except as required by law, we disclaim an obligation to update any factors or to publicly announce the results of any revisions to any of the forward-looking statements contained in this quarterly report on Form 10-Q to reflect new information, future events, or other developments. The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q.
Forward-looking statements can be identified by words such as "future," "anticipates," "believes," "estimates," "expects," "intends," "will," "would," "could," "can," "may," and similar terms. Forward-looking statements are not a guarantee of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Each of the terms the "Company", "we", "us" or "our" as used herein refers collectively to Biostax Corp and its subsidiaries, unless otherwise stated.
COMPANY OVERVIEW
Biostax Corp. is a Florida corporation trading on the OTC-Pink. The Company is a drug development and commercialization company. We identify, evaluate, and seek to acquire technologies in the medical device and drug development sectors with the intent to further develop them and move them to commercialization.
Our strategy has been limited due to lack of capital. Management is seeking to secure new investment capital with which to continue to pursue the Company's strategy. There is no guarantee that the Company will be successful in securing additional capital.
GOING CONCERN
As of March 31, 2024, the Company had $2,098 in cash on hand, negative working capital of $4,880,281 and accumulated stockholders' deficit of $385,683,775. For the three months ended March 31, 2024, the Company reported a net loss attributable to common shareholders of $352,635. For the three months ended March 31, 2023, the Company reported a net loss attributable to common shareholders of $416,117.
Historically the Company has relied on the funding of operations through private equity financing and management expects operating losses and negative cash flows to continue at more significant levels in the future. As the Company continues to incur losses, transition to profitability is dependent upon the successful development, approval, and commercialization of its current or future product candidates as they become available and the achievement of a level of revenues adequate to support the Company's cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic partners or from other sources.
16 |
Working capital at March 31, 2023 is not sufficient to meet the cash requirements to fund planned operations through the next twelve months without additional sources of cash. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of liabilities in the normal course of business.
Management is continuing to develop strategies to re-capitalize the Company and position it for future growth. Key steps to this process include:
● | Improve the condition of the balance sheet via license arrangements and capital infusions. | |
● | Identify and acquire late-stage assets for commercialization. | |
● | Build out operational infrastructure to generate revenue opportunities to grow shareholder value. |
There can be no guaranties that the Company will be successful in securing adequate capital to continue operations and in identifying and acquiring assets for future development.
If the Company is unable to secure new working capital, other alternatives strategies will be required.
Historically, the Company has been able to acquire and develop assets, spin them out and retain both an equity stake and royalties and milestone payments. In so doing, the Company has acted as an incubator for late-stage drug development. Management believes that this strategy can continue to be successful. At this time, the Company is reviewing several opportunities which it may pursue as soon as funding is available. At present no definitive actions have been taken.
There can be no guarantees that the Company will be successful in:
● | Executing its restructuring plan | |
● | Securing adequate capital to continue operations. | |
● | Identifying and acquiring assets for future development. |
RESULTS FROM OF THE THREE MONTHS ENDED MARCH 31, 2023
COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2022
Revenues
We had no revenues from operations for the three months ended March 31, 2024 and 2023.
Operating Expenses
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended March 31, 2024 and 2023 were as follows:
For the three months ended March 31 |
||||||||
2024 | 2023 | |||||||
Selling, general and administrative | $ | 254,250 | $ | 207,517 | ||||
Increase (decrease) from prior year | $ | 46,733 | $ | 25,901 | ||||
Percent increase (decrease) from prior year | 23 | % | 14 | % |
During the three months ended March 31, 2024, the Company has focused on the negotiation and finalization of certain licensing transactions and business development opportunities.
For the three months ended March 31, 2024 and 2023, selling, general and administrative expenses were made up as follows:
For the three months ended March 31 |
||||||||
2024 | 2023 | |||||||
Shareholder and investor relations | $ | 3,499 | $ | 6,016 | ||||
Professional fees and consulting costs | 12,005 | 56,741 | ||||||
Consulting fees with related parties | 221,155 | 107,950 | ||||||
Board fees | 12,000 | 30,000 | ||||||
Other expenses | 5,591 | 6,810 | ||||||
Total | $ | 254,250 | $ | 207,517 | ||||
Increase from prior period | $ | 46,733 | $ | 25,901 |
17 |
The increase in selling, general and administrative expenses for the three months ended March 31, 2024 is primarily driven by consulting fees paid to the management team, offset by a reduction costs in all other areas.
Research and Development Expenses
R&D expenses and related percentages for the three months ended March 31, 2024 and 2023 were as follows:
For the three months ended March 31, |
||||||||
2024 | 2023 | |||||||
Research and development | $ | 11,077 | $ | 180,924 | ||||
Increase/(decrease) from prior year | $ | (169,847 | ) | $ | 180,924 | |||
Percent increase/(decrease) from prior year | (94 | )% | 100 | )% |
Research and development expense for the three months ended March 31, 2024 was $11,077, compared to $180,924 incurred in the same period in 2023.
The research and development expenses for the three months ended March 31, 2024 reflects amounts accrued for interest and penalties pursuant to the license of intangible assets from TaiwanJ Pharmaceuticals.
Interest Expense
Interest expense for the three months ended March 31, 2024 and 2023 were as follows (dollar amounts in thousands):
For the three months ended March 31, |
||||||||
2024 | 2023 | |||||||
Interest expense | $ | 71,749 | $ | 14,299 | ||||
Increase (decrease) from prior year | $ | 57,450 | $ | (77,885 | ) | |||
Percentage Decrease from prior year | 402 | % | (84 | )% |
Interest expense is comprised of accrued interest on notes payable owed by the Company, unpaid amounts owed to consultants and the amortization of the discount related to derivate instruments underlying notes payable. The increase year over year reflects the increase in outstanding notes and consulting payments as well as the increase in interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Liquidity is measured by our ability to secure enough cash to meet our contractual and operating needs as they arise. The Company does not anticipate generating sufficient cash flows from our operations to fund the next twelve months. We had cash on hand of $2,098 at March 31, 2024, compared to $29,785 at December 31, 2023.
18 |
Summary of Cash Flows
For the three months ended March 31 |
||||||||
2024 | 2023 | |||||||
Net cash used in operating activities | $ | (33,311 | ) | $ | (265,498 | ) | ||
Net cash provided by financing activities | 5,624 | 150,000 | ||||||
Net decrease in cash and cash equivalents | $ | (27,688 | ) | $ | (115,498 | ) |
Net cash used in operating activities was $33,311 for the three months ended March 31, 2024, compared to $265,498 for the corresponding period in 2023. The use of cash in these periods resulted primarily from our losses from operations, as adjusted for changes in our working capital accounts. For the period ending March 31, 2023, the net loss of $2,566,500 was adjusted by $2,282,750 loss on impairment in common stock.
Net cash provided by financing activities was $5,624 for the three months ended March 31, 2024, relating to zero cash provided from or used by investing activities during the three-month periods ended March 31, 2023.
The Company does not expect to generate revenues in the foreseeable future. If the Company is unable to raise additional working capital to meet its operating obligations and expenditures, the Company will be required to modify its business plan.
CONTRACTUAL OBLIGATIONS
Promissory Notes
The notes payable on the Company's Condensed Consolidated Balance Sheet above contains, at March 31, 2024, certain promissory notes on which the Company was in arrears on payment of principal as follows:
● | $231,478 in promissory notes issued in 2019. The notes accrue interest at 6% and matured in 2020. |
● | $150,000 promissory note issued in 2023. The note accrued interest at 8% and matured in 2023. |
● | $265,000 in promissory notes issued in 2022. The notes accrued interest at 6% and matured in 2023. |
● | $150,000 in promissory notes issued in 2023. The notes accrued interest at 8% and matured in 2023. |
● | $50,000 in promissory notes issued in 2023. The notes accrued interest at 7.75% and matured in 2023. |
● | $250,000 promissory note issued in 2023. The note accrued interest at 18% and matured in 2023. |
Please refer to Note 3 to the Condensed Consolidated Financial Statements of Part I Item 1, which is incorporated by reference, for additional details regarding these promissory notes.
OFF BALANCE SHEET ARRANGEMENTS
During the three months ended March 31, 2024 and 2023, the Company did not engage in any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial conditions, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have identified the policies below as critical to our business operations and the understanding of its results of operations. The Company's senior management has reviewed these critical accounting policies and related disclosures with the Company's board of directors. The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results.
Fair Value of Financial Instruments
In accordance with the reporting requirements of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 825, "Financial Instruments", the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the condensed consolidated financial statements when the fair value is different than the carrying value of those financial instruments.
Cash, cash equivalents and accounts payable are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of notes payable approximate fair value since they bear market rates of interest and other terms. None of these instruments are held for trading purposes.
Derivative Financial Instruments
FASB ASC 815, Fair Value Measurements requires bifurcation of certain embedded derivative instruments in certain debt or equity instruments, and measurement at their fair value for accounting purposes. A holder redemption feature embedded in the Company's note payable requires bifurcation from its host instrument and is accounted for as a freestanding derivative.
ASC Topic 820, "Fair Value Measurement", requires that certain financial instruments be recognized at their fair values at our balance sheet dates. However, other financial instruments, such as debt obligations, are not required to be recognized at their fair values, but GAAP provides an option to elect fair value accounting for these instruments. GAAP requires the disclosure of the fair values of all financial instruments, regardless of whether they are recognized at their fair values or carrying amounts in our balance sheets. For financial instruments recognized at fair value, GAAP requires the disclosure of their fair values by type of instrument, along with other information, including changes in the fair values of certain financial instruments recognized in income or other comprehensive income. For financial instruments not recognized at fair value, the disclosure of their fair values is provided below under "Financial Instruments."
Nonfinancial assets, such as property, plant and equipment, and nonfinancial liabilities are recognized at their carrying amounts in the Company's balance sheets. GAAP does not permit nonfinancial assets and liabilities to be remeasured at their fair values. However, GAAP requires the remeasurement of such assets and liabilities to their fair values upon the occurrence of certain events, such as the impairment of property, plant and equipment. In addition, if such an event occurs, GAAP requires the disclosure of the fair value of the asset or liability along with other information, including the gain or loss recognized in income in the period the remeasurement occurred.
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
19 |
The following is a summary of activity of Level 3 liabilities for the year ended December 31, 2023 and quarter ended March 31, 2024:
Balance - December 31, 2022 | $ | - | ||
Additions | 97,380 | |||
Settlements | - | |||
Change in fair value | (3,746 | ) | ||
Balance - December 31, 2023 | 93,634 | |||
Additions | - | |||
Settlements | - | |||
Change in fair value | 15,560 | |||
Balance - March 31, 2024 | 109,194 |
Beginning on November 17, 2023, the Company issued a note payable agreement which contains conversion provisions meeting the definition of a derivative liability which therefore require bifurcation. Further, pursuant to the Company's contract ordering policy, equity linked instruments subsequent to November 17, 2023, resulted in derivative liabilities.
At December 31, 2023, the Company estimated the fair value of the conversion feature derivative embedded in the note payable and based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company's common stock of $0.0730; risk-free interest rate of 5.00%; expected volatility of the Company's common stock of 199% based on the volatility of comparable publicly traded entities; exercise price of $0.0366; and term of eight months.
At March 31, 2024, the Company estimated the fair value of the conversion feature derivative embedded in the note payable and based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company's common stock of $0.0579; risk-free interest rate of 5.00%; expected volatility of the Company's common stock of 199% based on the volatility of comparable publicly traded entities; exercise price of $0.0314; and term of five months.
Research and Development Costs
Research and development costs are charged to expense as incurred and are typically comprised of expenses associated with advancing the commercialization of our technologies.
Income Taxes
The Company follows ASC Topic 740, "Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Stock-Based Compensation and Issuance of Stock for Non-Cash Consideration
The Company measures and recognizes compensation expense for share-based awards based on estimated fair values equaling either the market value of the shares issued, or the value of consideration received, whichever is more readily determinable. Generally, the non-cash consideration pertains to services rendered by consultants and others and has been valued at the fair value of the Company's common stock at the date of the agreement.
The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC Topic 718, "Compensation-Stock Compensation." The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete.
Recent Accounting Standards
The Company has reviewed the accounting pronouncements issued by the FASB during the three months ended March 31, 2024. Applicable pronouncements will be adopted by the Company in accordance with the accounting guidance and definition. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company's consolidated financial statements.
Management does not believe there are other significant accounting pronouncements which have had or will have a material impact on the Company's condensed consolidated financial statements.
20 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based on this evaluation, the principal executive officer and the principal financial officer concluded that, because of the weakness in internal control over financial reporting described below, our disclosure controls and procedures are ineffective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Management assessed the effectiveness of our internal control over financial reporting using the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this assessment, management concluded that our internal control over financial reporting was not effective. The reportable conditions and material weakness relate to a limited segregation of duties and lack of an audit committee. The limited segregation of duties within the Company and the lack of an audit committee are due to the small number of employees. Management has determined that this control deficiency constitutes a material weakness. This material weakness could result in material misstatements of significant accounts and disclosures that would result in a material misstatement to our interim or annual financial statements that would not be prevented or detected. In addition, due to limited staffing, we are not always able to detect minor errors or omissions in reporting.
Going forward, management anticipates that additional staff will be necessary to remediate these weaknesses, as well as other planned improvements. Additional staff will enable us to document and apply transactional and periodic controls procedures, permit a better review and approval process and improve quality of financial reporting. However, the potential addition of new staff is contingent on obtaining additional financing, and there is no assurance that we will be able to do so.
Limitations on the Effectiveness of Disclosure Controls and Procedures and Internal Control Over Financial Reporting
Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
21 |
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not party to any material pending legal proceedings. From time to time, we may be involved in legal proceedings which arise during the ordinary course of business.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the quarter ended March 31, 2024, the Company issued the following securities:
The Company issued 81,086 shares of common stock to Ira Gaines, pursuant to the Second Amendment to Promissory Note issued on October 1, 2019.
We did not repurchase any shares of our common stock during the three months ended March 31, 2024.
The issuances of shares of common stock described above will not be registered under the Securities Act of 1933, as amended, or the Securities Act, in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act, and/or Regulation D promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Refer to Note 3 to the Condensed Consolidated Financial Statements of Part I Item 1, which is incorporated by reference, for additional details. The notes payable on the Company's Condensed Consolidated Balance Sheet above contains, at March 31, 2024, certain promissory notes on which the Company was in arrears on payment of principal as follows:
● | $231,478 in promissory notes issued in 2019. The notes accrue interest at 6% and matured in 2020. |
● | $150,000 promissory note issued in 2023. The note accrued interest at 8% and matured in 2023. |
● | $265,000 in promissory notes issued in 2022. The notes accrued interest at 6% and matured in 2023. |
● | $150,000 in promissory notes issued in 2023. The notes accrued interest at 8% and matured in 2023. |
● | $50,000 in promissory notes issued in 2023. The notes accrued interest at 7.75% and matured in 2023. |
● | $250,000 promissory note issued in 2023. The note accrued interest at 18% and matured in 2023. |
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
22 |
ITEM 6. EXHIBITS
The following exhibits are filed with this Quarterly Report:
Exhibit | Description | |
3.1 | Articles of Incorporation and Amendments Thereto (incorporated by reference to Exhibit 3.1 to Amendment No. 1 to Form 10 filed with the SEC on June 7, 2013). | |
3.2 | Bylaws (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Form 10 filed with the SEC on June 7, 2013). | |
10.1 | Intellectual Property License Agreement, dated September 30, 2022, between Immune Therapeutics, Inc. and TaiwainJ Pharmaceuticals Co. Ltd. (incorporated by reference to Form 8-K filed on October 12, 2022).*** | |
31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1** | Certification of Chief Executive Officer pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2** | Certification of Chief Financial Officer pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS* | Inline XBRL Instance Document | |
101.SCH* | Inline XBRL Taxonomy Extension Schema | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase | |
104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith
** Furnished herewith
*** Portions of this exhibit have been omitted in compliance with Regulation S-K Item 601(b)(10)(iv) because the Company has determined that the information is not material and is the type that the Company treats as private or confidential.
23 |
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.
Biostax Corp | ||
Date: August 19, 2024 | By: | /s/ Noreen Griffin |
Name: | Noreen Griffin | |
Title: | Chief Executive Officer |
Biostax Corp | ||
Date: August 19, 2024 | By: | /s/ Glen Farmer |
Name: | Glen Farmer | |
Title: | Chief Financial Officer |
24 |