UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended ☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from Commission VICAPSYS LIFE SCIENCES, INC. (972) 891-8033 ( 1735 Buford Hwy, Ste 215-113 Cumming, GA ( Securities registered under Section 12(b) of the Act: None Indicate by check mark whether the Indicate by check mark whether the registrant has submitted electronically Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, Smaller reporting company Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes The number of Vicapsys Life Sciences, Inc. TABLE OF CONTENTS SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Forward-looking statements include risks and uncertainties and there are important factors that could cause actual VICAPSYS LIFE SCIENCES, INC. (Unaudited) See accompanying notes VICAPSYS LIFE SCIENCES, INC. (Unaudited) For the three months ended June 30, For the six months ended June 30, Research and development expenses-related party See accompanying notes VICAPSYS LIFE SCIENCES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) For the six months ended June 30, 2020 and 2019 (Unaudited) Series A Preferred Stock Series B Preferred Stock Common Stock to be Issued Additional Paid-in Stockholders’ Equity Series A Preferred Stock Series B Preferred Stock Common Stock to be Issued Additional Paid-in Total Stockholders’ Equity See accompanying notes to unaudited condensed consolidated financial statements. VICAPSYS LIFE SCIENCES, INC. (Unaudited) See accompanying notes FORM(Mark One)TQuarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934March 31, 2010ORoTransition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934______________ to ____File Number 333-160700SSGI, Inc.(Exact name of registrant as specified in its charter)Florida 91-1930691 (State or other jurisdictionOther Jurisdiction of incorporation or organization)( I.R.S.IRS EmployerIncorporation or Organization) Identification No.)Number)8120 Belvedere Road, Suite 4West Palm Beach, Florida 334117778 Mcginnis Ferry Rd. #270 Suwanee, GA 30024 (Address of Principal Executive Offices) (Zip Code) Address of principal executive offices)-Including Area code (561) 333-3600Registrant’s telephone number, including area code)Title of each class Trading Symbol(s) Name of each exchange on which registered N/A N/A N/A registrantissuer (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 has 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 o☒ No xand posted on its corporate Web site, if any, 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). Yes x☒ No oor a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): o o o x(Docheck if a smaller reporting company)o☐ No xAs☒June 7, 2010, there were 34,187,252 shares outstanding of the registrant’s $0.001 par value common stock par value $0.001 per share, outstanding.SSGI,Index2Forward-Looking and Cautionary StatementsreportQuarterly Report on Form 10-Q contains certain forward-looking statements that are or may be deemedsubject to be, “forward-looking statements” within the meaningvarious risks and uncertainties. Forward-looking statements are generally identifiable by use of Section 27A of the Securities Act of 1933,forward-looking terminology such as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward looking information. Some of the statements contained in this quarterly report are forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. The words “believe,“may,” “may,“will,” “should,” “potential,” “intend,” “expect,” “outlook,” “seek,” “anticipate,” “estimate,” “continue,“approximately,” “anticipate,“believe,” “intend,“could,” “plan,“project,” “expect” and“predict,” or other similar expressions are intended to identify forward-looking statements.words or expressions. Forward-looking statements include information concerning our possibleare based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or assumedstate other forward-looking information. Our ability to predict results or the actual effect of future financial performance and results of operations.We have based these statements on our assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factorsevents, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward-looking statements are appropriate in the circumstances. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly affect expectedbased on reasonable assumptions, our actual results and actual future resultsperformance could differ materially from those describedset forth or anticipated in suchour forward-looking statements. While it isFactors that could have a material adverse effect on our forward- looking statements and upon our business, results of operations, financial condition, funds derived from operations, cash available for dividends, cash flows, liquidity and prospects include, but are not possiblelimited to, identify allthe factors referenced in this document, including those set forth below:● our lack of an operating history; ● the net losses that we expect to incur as we develop our business; ● Obtaining U.S. Food and Drug Administration (“FDA”) or other regulatory approvals or clearances for our technology; ● implementing and achieving successful outcomes for clinical trials of our products; ● convincing physicians, hospitals and patients of the benefits of our technology and to convert from current technology; ● the ability of users of our products (when and as developed) to obtain third-party reimbursement; ● any failure to comply with rigorous FDA and other government regulations; and ● securing, maintaining and defending patent or other intellectual property protections for our technology. ● decline in global financial markets and economic downturn resulting from the coronavirus COVID-19 global pandemic; ● business interruptions resulting from the coronavirus COID-19 global pandemic. future results to differ materially include thefrom those expressed or implied by such forward-looking statements. These factors, risks and uncertainties disclosedcan be found in our 2009Part I, Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K containedfor the fiscal year ended December 31, 2019, as the same may be updated from time to time, including in Part I underII, Item 1A, “Risk Factors”.ManyFactors,” of these factorsthis Quarterly Report on Form 10-Q. Readers are beyond our abilitycautioned not to control or predict. Any of these factors, or a combination of these factors, could materially and adversely affect our future financial condition or results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially and adversely from those projected in the forward-looking statements. We caution against puttingplace undue reliance on any of these forward-looking statements, or projecting any future results based on such statements or on present or prior earnings levels. In addition, each forward-looking statement speaks onlywhich reflect our views as of the date of the particular statement,this document. The matters discussed herein and elsewhere in this document could cause our actual results and performance to differ materially from those set forth or anticipated in forward-looking statements. Accordingly, we cannot guarantee future results or performance. Furthermore, except as required by law, we are under no duty to, and we undertake no obligationdo not intend to, publicly update any of our forward-looking statements after the date of this document, whether as a result of new information, future events or revise any forward-looking statement.3PART I—FINANCIAL INFORMATIONItem 1. Financial Statements.4SSGI,otherwise. March 31, December 31, (unaudited) (audited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 111,103 $ 121,970 Restricted cash deposits 237,918 507,028 Contracts receivable, net 348,401 1,091,343 Prepaid expenses 59,921 89,591 Costs and estimated earnings in excess of billings on uncompleted contracts 34,323 57,411 Total current assets 791,666 1,867,343 PROPERTY AND EQUIPMENT, NET 319,324 347,874 OTHER ASSETS 14,280 15,538 $ 1,125,270 $ 2,230,755 LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable and accrued expenses $ 1,784,029 $ 1,951,881 Current portion of notes payable 85,000 111,891 Promissory note payable 353,691 353,691 Term note payable, related party 707,116 965,458 Current portion of due to stockholders 11,624 11,395 Billings in excess of costs and estimated earnings on uncompleted contracts 228,848 251,797 Total current liabilities 3,170,308 3,646,113 OTHER LIABILITIES: Due to stockholders, net of current portion 1,217,614 1,185,091 Long term debt, net of current portion 112,142 133,540 Total liabilities 4,500,064 4,964,744 STOCKHOLDERS' DEFICIT: Common stock - $.0010 Par value, 100,000,000 shares authorized, 34,687,630 issued and outstanding 34,688 34,688 Additional paid in capital 3,160,158 3,138,628 Accumulated deficit (6,569,640 ) (5,907,305 ) Total stockholders' deficit (3,374,794 ) (2,733,989 ) $ 1,125,270 $ 2,230,755 The June 30, 2020 December 31, 2019 Assets Current Assets: Cash $ 4,986 $ 264,166 Prepaid Expenses 3,883 — Total Current Assets 8,869 264,166 Intangible asset, net of accumulated amortization of $73,966 and $58,241, respectively 418,548 434,273 Total Assets $ 427,417 $ 698,439 Liabilities and Stockholders’ Equity (Deficit) Current Liabilities: Accounts payable $ 477,812 $ 396,482 Accounts payable, related parties 153,048 — Accrued salaries, related party 79,858 — Total Current Liabilities 710,718 396,482 Stockholders’ Equity (Deficit): Preferred Stock; par value $0.001; 20,000,000 shares authorized Series A Convertible Preferred Stock; par value $0.001; 3,000,000 shares authorized; 3,000,000 shares issued and outstanding; liquidation preference $7,500,000 3,000 3,000 Series B Convertible Preferred Stock; par value $0.001; 4,440,000 shares authorized; 4,440,000 shares issued and outstanding; liquidation preference $5,550,000 4,440 4,440 Common Stock, par value $0.001; 300,000,000 shares authorized; 17,483,283 shares issued and outstanding 17,483 17,483 Common stock to be issued, par value $0.001; 651,281 shares outstanding 651 651 Additional paid-in capital 13,414,109 13,403,293 Accumulated deficit (13,722,984 ) (13,126,910 ) Total Stockholders’ Equity (Deficit) (283,301 ) 301,957 Total Liabilities and Stockholders’ Equity (Deficit) $ 427,417 $ 698,439 are an integral part of theseto unaudited condensed consolidated financial statements.4 5SSGI, Three Months Ended March 31, 2010 2009 CONTRACT REVENUES EARNED $ 738,737 $ 1,673,185 COST OF REVENUES 932,825 1,531,119 Gross profit (loss) (194,088 ) 142,066 GENERAL AND ADMINISTRATIVE EXPENSES Payroll and related costs 107,492 188,938 Insurance 71,950 53,856 Marketing and advertising 8,046 44,531 Office and technology expenses 59,362 35,587 Professional fees 107,088 52,582 Auto and truck expense 18,308 24,791 Travel and entertainment 6,528 2,349 Bad debt expense 11,586 7,829 Depreciation and amortization 10,514 16,986 Other operating expenses 28,658 3,793 Total general and admistrative expenses 429,532 431,242 Loss from operations (623,620 ) (289,176 ) OTHER INCOME (EXPENSES): Interest expense (38,735 ) (28,320 ) Interest income 20 - Other income - 566 Total other income (expenses), net (38,715 ) (27,754 ) LOSS BEFORE INCOME TAXES (662,335 ) (316,930 ) Income taxes - - NET LOSS $ (662,335 ) $ (316,930 ) Loss per share: Basic and Diluted $ (0.019 ) $ (0.009 ) Weighted Average Outstanding Shares: Basic and Diluted 34,687,630 34,679,140 The 2020 2019 2020 2019 Revenues $ - $ - $ - $ - Operating Expenses: Personnel costs 93,653 35,898 192,731 173,316 — — 94,048 — Professional fees 129,086 106,947 286,334 124,404 General and administrative expenses 8,876 8,497 22,961 17,217 Total operating expenses 231,615 151,342 596,074 314,937 Loss from continuing operations before income taxes (231,615 ) (151,342 ) (596,074 ) (314,937 ) Income taxes — — — — Loss from continuing operations (231,615 ) (151,342 ) (596,074 ) (314,937 ) Loss from discontinued operations — (96,725 ) — (375,787 ) Net Loss $ (231,615 ) $ (248,067 ) $ (596,074 ) $ (690,724 ) Basic and diluted net loss per common share Continuing operations $ (0.01 ) $ (0.02 ) $ (0.03 ) $ (0.03 ) Discontinued operations — (0.01 ) — (0.03 ) $ (0.01 ) $ (0.03 ) $ (0.03 ) $ (0.06 ) Basic and diluted weighted average common shares outstanding 17,483,283 10,050,133 17,483,283 9,850,133 are an integral part of theseto unaudited condensed consolidated financial statements.5 Common Stock Accumulated Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Balance December 31, 2018 3,000,000 $ 3,000 4,440,000 $ 4,440 9,650,133 $ 9,650 3,612,880 $ 3,613 $ 11,282,359 $ (11,556,735 ) $ (253,673 ) Deemed dividend — — — — — — 891,551 892 159,587 (160,479 ) — Net loss — — — — — — — — — (442,657 ) (442,657 ) Balance March 31, 2019 3,000,000 $ 3,000 4,440,000 $ 4,440 9,650,133 $ 9,650 4,504,431 $ 4,505 $ 11,441,946 $ (12,159,871 ) $ (696,330 ) Disposal of net liabilities to a related party — — — — — — — — 875,177 — 875,177 Shares issued in private placement — — — — 2,280,000 2,280 — — 547,720 — 550,000 Net loss — — — — — — — — — (248,067 ) (248,067 ) Balance June 30, 2019 3,000,000 $ 3,000 4,440,000 $ 4,440 11,930,133 $ 11,930 4,504,431 $ 4,505 $ 12,864,843 $ (12,407,938 ) $ 480,780 Common Stock Accumulated Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Balance December 31, 2019 3,000,000 $ 3,000 4,440,000 $ 4,440 17,483,283 $ 17,483 651,281 $ 651 $ 13,403,293 $ (13,126,910 ) $ 301,957 Stock-based compensation expense — — — — — — — — 5,408 — �� 5,408 Net loss — — — — — — — — — (364,459 ) (364,459 ) Balance March 31, 2020 3,000,000 $ 3,000 4,440,000 $ 4,440 17,483,283 $ 17,483 651,281 $ 651 $ 13,408,701 $ (13,491,369 ) $ (57,094 ) Stock-based compensation expense — — — — — — — — 5,408 — 5,408 Net loss — — — — — — — — — (231,615 ) (231,615 ) Balance June 30, 2020 3,000,000 $ 3,000 4,440,000 $ 4,440 17,483,283 $ 17,483 651,281 $ 651 $ 13,414,109 $ (13,722,984 ) $ (283,301 ) 6 SSGI, Three Months Ended March 31, 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (662,335 ) $ (316,930 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 28,550 32,838 Stock and warrants issued as compensation and fees 21,530 13,827 Estimated losses on contracts - (59,354 ) (Increase) decrease in: Restricted cash 269,110 - Contracts receivable 742,942 (253,115 ) Prepaid expenses 29,670 4,586 Costs and estimated earnings in excess of billings on uncompleted contracts 23,088 79,609 Other assets 1,259 (6,851 ) Increase (decrease) in: Accounts payable and accrued expenses (167,853 ) 48,061 Billings in excess of costs and estimated earnings on uncompleted contracts (22,949 ) 16,824 Net cash provided by (used in) in operating activities 263,012 (440,505 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment, net - (18,759 ) Net cash used in investing activities - (18,759 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of term note payable, related party and promissory note payable (306,631 ) (168,953 ) Advances from stockholders 32,752 693,500 Net cash (used in) provided by financing activities (273,879 ) 524,547 CHANGE IN CASH AND CASH EQUIVALENTS (10,867 ) 65,283 Cash and cash equivalents at beginning of the period 121,970 64,988 Cash and cash equivalents at end of the period $ 111,103 $ 130,271 SUPPLEMENTAL CASH FLOW INFORMATION Interest paid during the year $ 56,229 $ 28,320 The For the Six months ended June 30, 2020 2019 Cash Flows from Operating Activities: Net loss from continuing operations $ (596,074 ) $ (314,937 ) Net loss from discontinued operations — (375,787 ) Adjustments to reconcile net loss to net cash used in operating activities: Amortization 15,725 15,725 Stock-based compensation 10,816 — Changes in operating assets and liabilities: Prepaid Expenses (3,883 ) — Accounts payable 81,330 49,958 Accounts payable, related parties 153,048 — Accrued liabilities 79,858 — Net Cash Used in Operating Activities - continuing operations (259,180 ) (249,254 ) Net Cash Used in Operating Activities - discontinued operations — (132,830 ) Net Cash Used in Operating Activities (259,180 ) (382,084 ) Cash Flows from Financing Activities: Net Cash Provided By Financing Activities - continuing operations — 550,000 Net Cash Provided By Financing Activities - discontinued operations — 176,600 Net Cash Provided By Financing Activities — 726,600 Net increase (decrease) in Cash (259,180 ) 344,516 Cash, Beginning of period 264,166 86,330 Cash, End of period $ 4,986 $ 430,846 Assets and liabilities transferred in AEI transaction: Security deposits — (38,247 ) Property and equipment, net — (175,818 ) Accounts payable and accrued liabilities — 150,395 Payable to related party — 189,922 Advances payable, related parties — 353,092 Accrued salaries, related parties — 395,833 $ — $ 875,177 are an integral part of theseto unaudited condensed consolidated financial statements.
| 7 |
VICAPSYS LIFE SCIENCES, INC.
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of OperationsBusiness
Vicapsys Life Sciences, Inc. (the “Company”(“VLS”) was incorporated under the laws ofin the State of Florida ason July 8, 1997 under the name All Product Distribution Corp. On August 19, 1998, the Company changed its name to Phage Therapeutics International, Inc. onOn November 13, 2007, the Company changed its name to SSGI, Inc. On September 13, 2017, the Company changed its name to Vicapsys Life Sciences, Inc., effected a 1-for-100 reverse stock split of its outstanding common stock, increased the Company’s authorized capital stock to 300,000,000 shares of common stock, par value $0.001 per share, and 20,000,000 shares of “blank check” preferred stock, par value $0.001 per share. On December 26, 1996. In February 2008, through22, 2017, pursuant to a share exchange, the company acquired Surge Solutions Group,Share Exchange Agreement (the “Exchange Agreement”) by and among VLS, Michael W. Yurkowsky, ViCapsys, Inc. (“Surge”VI”) Asand the shareholders of VI, a consequenceprivate company, VI became a wholly owned subsidiary of VLS. We refer to VLS and VI together as the “Company”. VLS serves as the holding company for VI. Other than its interest in VI, VLS does not have any material assets or operations.
On May 21, 2019, the Company closed an Investment and Restructuring Agreement (see Note 3).
The Company’s strategy is to develop and commercialize, on a worldwide basis, various intellectual property rights (patents, patent applications, know how, etc.) relating to a series of encapsulated products that incorporate proprietary derivatives of the latter exchange, which qualified aschemokine CXCL12 for creating a reverse merger, Surge became the accounting acquirerzone of immunoprotection around cells, tissues, organs and the reporting entity prospectively.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S PLANS
The Company specializes in petroleum contracting and general construction in Florida including insurance restoration and new commercial construction. The Company's work is performed under cost-plus-fee contracts, fixed-price contracts, and fixed-price contracts modified by incentive and penalty provisions. The length of the Company's contracts typically range from three months or less to one year.
In March 2020, the World Health Organization declared the novel COVID-19 virus as a global pandemic. The COVID-19 outbreak in the United States has resulted in a significant impact to the Company’s ability to continue as a going concern is dependent upon its abilitysecure additional debt or equity funding to generate future profitablesupport operations in 2020. The Company has raised $365,000 (see Note 10) through August 2021 and management intends to raise additional funds in 2021 to support current operations and to obtain the necessary financing to meetextend development of its obligations and repay its liabilities arising from normal business operations.
NOTE 3 – INVESTMENT AND RESTRUCTURING AGREEMENT
On May 21, 2019 (the “Closing Date”), pursuant to that certain Investment and Restructuring Agreement, dated April 11, 2019 (the “IAR Agreement”), by and among the Company, YPH, LLC, (“YPH”), Stephen McCormack, the then Chief Executive Officer and a director of the Company, Steven Gorlin, then a director of the Company, Charles Farrahar, then the Chief Financial Officer of the Company, Athens Encapsulation Inc., (“AEI” and collectively with), Messrs. McCormack, Gorlin, Farrahar, the “AEI Parties”, and certain additional investors (collectively, the “Additional Investors”):
| ● | Messrs. McCormack and Gorlin resigned from the Board of Directors of the Company and from all positions as officers or employees of the Company. |
| ● | Federico Pier was appointed as the Executive Chairman of the Board of Directors of the Company. Michael Yurkowsky and Frances Toneguzzo were appointed to the Board of Directors of the Company. Ms. Toneguzzo was appointed as the Chief Executive Officer of the Company. | |
| ● | YPH and the Additional Investors (together, the “Investors”) purchased an aggregate of 3,980,000 shares of common stock of the Company at a purchase price of $0.25 per share and warrants to purchase 3,980,000 shares of common stock exercisable from the date of their respective investment dates (ranging from July 14, 2019 to September 9, 2019) (the “Investment Date”) until the third anniversary of the Investment Date for $0.50 per share. The Company received $971,500 net proceeds from the sale of the common stock and warrants. | |
| ● | The Company assigned all of the Company’s right, title and interest in a Master Services Agreement, dated October 25, 2018 between the Company and Otsuka Pharmaceutical Factory, Inc. (“Otsuka”) related work orders with its customer, Otsuka, to AEI. | |
| ● | VI assigned its lease to the Athens, Georgia Laboratory and office (the “Athens Facility”) to AEI. | |
| ● | The Company contributed to AEI all physical assets located at the Athens Facility. These contributed assets did not include intellectual property related to the use of CXCL12, and the AEI Parties agreed that neither they nor any affiliated party will use CXCL12 or any analogues in any of its activities. The Company retained the right to use any of the “encapsulation technology” utilized or developed at the Athens Facility before the IAR Agreement was executed. | |
| ● | AEI assumed certain liabilities of the Company, including, but not limited to, $189,922 owed by the Company to Aperisys, Inc., an aggregate of $353,092 in advances made by Messrs. Gorlin, Farrahar and McCormack to the Company an aggregate of $395,833 in accrued salaries owed by the Company to Messrs. McCormack and Farrahar; and an aggregate of $150,395 in trade payables attributable to the Athens Facility (the “AEI Assumed Liabilities”). | |
| ● | AEI issued an aggregate of 1,600 shares of AEI common stock (the “AEI Common Stock”) to the officer and employees of AEI (the “AEI Shareholders”), representing 80% of the outstanding capital stock of AEI. The AEI Shareholders were Messrs. Gorlin, McCormack, and Farrahar, each of which is a current shareholder of the Company, and two of whom were former Directors of the Company. | |
| ● | AEI issued 400 shares of its preferred stock (the “AEI Preferred Stock”), to the Company. Once AEI pays the AEI Assumed Liabilities noted above, the Certificate of Designation for the AEI Preferred Stock entitles the holder to receive all distributions made by AEI on any of its equity securities up to a total of $4,000,000 (the “AEI Preferred Payment”). Following the full payment of the AEI Preferred Payment, the AEI Preferred Stock shall automatically be converted into a number of shares of AEI Common Stock such that it is equal to 20% of all issued and outstanding AEI Common Stock at such time. | |
| ● | Mr. McCormack and the Company amended Mr. McCormack’s original option agreement dated March 20, 2017, to (i) reduce the number of Mr. McCormack’s option shares from 1,440,000 to 600,000; and (ii) extend the exercise period of Mr. McCormack’s options from three (3) months to three (3) years following the Closing Date. |
Due to the related party nature of the transactions described above, the net liabilities transferred in the IAR Agreement of $875,177 were recorded as an increase to additional paid-in capital.
Pursuant to the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 205-20 Presentation of Financial Statements: Discontinued Operations and amended by Accounting Standards Update (“ASU”) No. 2014-08, management has determined that this transaction meets the definition of presenting discontinued operations, as the Company disposed of a component of its obligationsbusiness (see Notes 4 and continue its9). During the six months ended June 30, 2019, the results of operations of this disposed business component have been presented as discontinued operations. Realization values may be substantially different from carrying values
NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements in this report have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as showndescribed below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company's consolidated annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with a reading of the Company's consolidated audited financial statements and donotes thereto for the year ended December 31, 2019, filed in the Form 10. Interim results of operations for the three and six months ended June 30, 2020, and 2019, are not give effect to adjustments that would be necessary tonecessarily indicative of future results for the carrying values and classificationfull year. The unaudited condensed consolidated financial statements of assets and liabilities should the Company be unable to continue as a going concern.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses.expenses during the reported period. Actual results could varydiffer from those estimates. Significant estimates included in the estimates thatfinancial statements, include useful the life of intangible assets, valuation allowance for deferred tax assets and non-cash equity transactions and stock-based compensation.
Cash
The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. The Company held no cash equivalents as of June 30, 2020, and December 31, 2019. Cash balances may, at certain times, exceed federally insured limits. If the amount of a deposit at any time exceeds the federally insured amount at a bank, the uninsured portion of the deposit could be lost, in whole or in part, if the bank were used. The significant areas requiring management’s estimates and assumptions relate to determiningfail.
Intangible Assets
Costs of intangible assets are accounted for through the fair valuecapitalization of stock-based compensation, fair value of shares issued for services and the determination of percentage of completionthose costs incurred in connection with the recognition of profit on customer contracts.
The cumulative effects ofCompany reviews these intangible assets for possible impairment when events or changes in circumstances indicate that the assets carrying amount may not be recoverable. In evaluating the future benefit of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flows of the intangible assets over the remaining estimated total contract costsuseful life. An impairment loss is recorded if the carrying value of the asset exceeds the expected future cash flows.
Long-Lived Assets
The Company reviews long-lived assets at least annually or when events or changes in circumstances reflect the fact that the recorded value may not be recoverable for impairment and revenues (change orders)recognizes impairment losses on long-lived assets used in operations when indicators of impairment are recordedpresent and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying values.
Discontinued Operations
In accordance with ASC 205-20 Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meet the criteria in paragraph 205-20-45-10.
In the period in which the facts requiringcomponent meets held-for-sale or discontinued operations criteria the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations.
At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations.
The Company disposed of a component of its business pursuant to the IAR Agreement (see Note 3) in May 2019, which met the definition of a discontinued operation. Accordingly, the operating results of the business transferred are reported as a loss from discontinued operations in the accompanying unaudited condensed consolidated statement of operations and statement of cash flows for the period ended June 30, 2019. For additional information, see Note 9- Discontinued Operations.
Equity Method Investment
The Company accounts for investments in which the Company owns more than 20% or has the ability to exercise significant influence of the investee, using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures. Under the equity method, an investor initially records an investment in the stock of an investee at cost and adjusts the carrying amount of the investment to recognize the investor’s share of the earnings or losses of the investee after the date of acquisition.
The amount of the adjustment is included in the determination of net income by the investor, and such revisions become known,amount reflects adjustments similar to those made in preparing consolidated statements including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between investor cost and underlying equity in net assets of the investee at the date of investment. The investment of an investor is also adjusted to reflect the investor’s share of changes in the investee’s capital. Dividends received from an investee reduce the carrying amount of the investment. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred which is other than temporary, and which should be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method.
In accordance with ASC 323-10-35-20 through 35-22, the investor ordinarily shall discontinue applying the equity method if the investment (and net advances) is reduced to zero and shall not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee. An investor shall, however, provide for additional losses if the imminent return to profitable operations by an investee appears to be assured. For example, a material, nonrecurring loss of an isolated nature may reduce an investment below zero even though the underlying profitable operating pattern of an investee is unimpaired. If the investee subsequently reports net income, the investor shall resume applying the equity method only after its share of that net income equals the share of net losses not recognized during the period the equity method was suspended.
Equity and cost method investments are classified as investments. The Company periodically evaluates its equity and cost method investments for impairment due to declines considered to be other than temporary. If the Company determines that a decline in fair value is other than temporary, then a charge to earnings is recorded as an impairment loss in the accompanying consolidated statements of operations.
The Company’s equity method investment consisted of equity owned in AEI which was given to the Company as part of an investment and restructuring agreement (see Note 3). In January 2021 (see Note 10), the Company sold its’ equity investment in AEI for $100,000. During the six months ended June 30, 2020 and 2019, the Company did not have any proportionate share of net income from AEI.
Fair Value of Financial Instruments
ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2020.
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued liabilities, payables with related parties, approximate their fair values because of the short maturity of these instruments.
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) and all the related amendments. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.
The Company’s contracts with customers are generally on a contract and work order basis and represent obligations that are satisfied at a point in time, as defined in the new guidance, generally upon delivery or has services are provided. Accordingly, revenue for each sale is recognized when the Company has completed its performance obligations. Any costs incurred before this point in time, are recorded as assets to be expensed during the period the related revenue is recognized.
Stock Based Compensation
Stock-based compensation is accounted for usingbased on the percentage-of-completion method. Atrequirements of ASC 718 – “Compensation –Stock Compensation,” which requires recognition in the time itfinancial statements of the cost of employee, director and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is determinedrequired to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment.
Research and Development
Costs and expenses that a contract is expected to result in a loss; the entire estimated loss is recorded.
Income Taxes
The Company sells its services to residential, commercial, government and retail customers. On most projects, the Company has liens rights under Florida law which are typically enforced on balances not collected within 90 days. The Company includes any balances that are determined to be uncollectible alongaccounts for income taxes in accordance with a general reserve in its overall allowance for doubtful accounts.
ASC 740-10 prescribes a recognition threshold that a tax position is required to apply to taxable incomemeet before being recognized in the yearsfinancial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in which those temporary differencesinterim periods, disclosure and transition issues. Interest and penalties are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assetsclassified as a component of interest and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized by the use of a valuation allowance. A valuation allowance is applied when in management’s view it is more likely than not (50%) that such deferred tax will not be utilized.
Uncertain tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. EffectiveOnly tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized.
Earnings (Loss) Per Share
The Company reports earnings (loss) per share in accordance with ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. As of June 30, 2020 and 2019, the Company’s adoptiondilutive securities are convertible into approximately 17,688,006 and 19,841,156 shares of these provisions, interest related to the unrecognized tax benefitscommon stock, respectively. This amount is recognizednot included in the financial statementscomputation of dilutive loss per share because their impact is antidilutive. The following table represents the classes of dilutive securities as a component of income taxes. The adoption of ASC 740 did not have an impact on the Company’s financial positionJune 30, 2020 and results of operations.
| June 30, 2020 | June 30, 2019 | |||||||
| Common stock to be issued | 651,281 | 4,504,431 | ||||||
| Convertible preferred stock | 10,440,000 | 10,440,000 | ||||||
| Stock options | 2,450,000 | 2,450,000 | ||||||
| Warrants to purchase common stock | 4,146,725 | 2,446,725 | ||||||
| 17,688,006 | 19,841,156 | |||||||
Recent Accounting Pronouncements
Management does not believe it hasthat any uncertain tax positions thatrecently issued, but not yet effective accounting pronouncements, if adopted, would resulthave a material effect on the accompanying unaudited condensed consolidated financial statements.
NOTE 5 – INTANGIBLE ASSETS
The Company’s intangible assets consist of costs incurred in connection with the License Agreement with MGH, as amended (See Note 7). The consideration paid for the rights included in the Company having a liability to the taxing authorities. The Company’s tax returns are subject to examination by the federal and state tax authorities for the years ended 2007 through 2009.
The amendment now requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers. When reconciling fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. For purposes of reporting fair value measurement for each class ofCompany’s intangible assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities and should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. The amendment is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this amendment did not have a material impact on the Company’s financial statements.
Contracts receivable are as follows: | March 31, | December 31, | ||||||
| 2010 | 2009 | |||||||
| Completed contracts | $ | 218,959 | $ | 528,504 | ||||
| Contracts in progress | 167,236 | 744,284 | ||||||
| Allowance for doubtful accounts | (37,794 | ) | (181,445 | ) | ||||
| $ | 348,401 | $ | 1,091,343 | |||||
| March 31, | December 31, | |||||||
| 2010 | 2009 | |||||||
| Costs incurred on uncompleted contracts | $ | 326,716 | $ | 1,072,453 | ||||
| Estimated earnings | 73,380 | 269,282 | ||||||
| Less: Billings to date | (594,621 | ) | (1,536,121 | ) | ||||
| $ | (194,525 | ) | $ | (194,386 | ) | |||
| March 31, | December 31, | |||||||
| 2010 | 2009 | |||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 34,323 | $ | 57,411 | ||||
Billings in excess of costs and estimated on uncompleted contracts | (228,848 | ) | (251,797 | ) | ||||
| $ | (194,525 | ) | $ | (194,386 | ) | |||
| June 30, 2020 | December 31, 2019 | |||||||
| Licensed patents | $ | 492,514 | $ | 492,514 | ||||
| Accumulated Amortization | (73,966 | ) | (58,241 | ) | ||||
| Balance | $ | 418,548 | $ | 434,273 | ||||
The Company paid $6,190recognized $7,862 and $8,683 in interest$15,725 of amortization expense related to the License Agreement with MGH for the three and six months ended March 31, 2010 and 2009,June 30, 2020, respectively.
Future expected amortization of intangible assets is as follows:
| Fiscal year ending December 31, | ||||
| 2020 (months remaining) | $ | 15,574 | ||
| 2021 | 31,299 | |||
| 2022 | 31,299 | |||
| 2023 | 31,299 | |||
| 2024 | 31,299 | |||
| Thereafter | 277,778 | |||
| $ | 418,548 | |||
| 13 |
Number of Warrants Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Balance, December 31, 2009 | 3,525,053 | $ | 0.60 | 4.47 | ||||||||
| Warrants issued | 22,500 | $ | 0.60 | 6.84 | ||||||||
| Balance, March 31, 2010 | 3,547,553 | $ | 0.60 | 4.47 | ||||||||
Number of Warrants Outstanding | Exercise Price | Remaining Contractual Life (Years) | |||||||||
| 3,547,553 | $0.60 | 1.2 – 9.3 | |||||||||
| March 31, | December31, | |||
| 2010 | 2009 | |||
| Risk free interest rate | 1.3% - 1.7% | .5% - 1.8% | ||
| Expected volatility | 173% - 181% | 20% - 86% | ||
| Expected term of stock warrant in years | 3.5 | 1.5 – 5.0 | ||
| Expected dividend yield | 0% | 0% | ||
| Average value per option | .26 - .44 | .13 - .73 |
| 2010 | 2009 | |||||||
| Tax benefit at U.S. statutory rate | 34.00 | % | 34.00 | % | ||||
| State taxes, net of federal benefit | 3.63 | 3.63 | ||||||
| Change in valuation allowance | (37.63 | ) | (37.63 | ) | ||||
| - | % | - | % | |||||
| March 31, | December 31, | |||||||
| Deferred Tax Assets | 2010 | 2009 | ||||||
| Net Operating Loss Carryforward | $ | 2,255,000 | $ | 1,958,000 | ||||
| Other | 136,000 | 173,000 | ||||||
| Total Deferred Tax Assets | 2,391,000 | 2,131,000 | ||||||
| Deferred Tax Liabilities | ( 290,000 | ) | (278,000 | ) | ||||
| Net Deferred Tax Assets | 2,101,000 | 1,853,000 | ||||||
| Valuation Allowance | (2,101,000 | ) | (1,853,000 | ) | ||||
| Total Net Deferred Tax Assets | $ | - | $ | - | ||||
NOTE 96 – RELATED PARTY TRANSACTIONS
Consulting Agreement
On June 21, 2019, the Company entered into a Consulting Agreement (the “Consulting Agreement”) with Mark Poznansky, MD, (the “Consultant”) a stockholder and former Director. The Company engaged the Consultant to procure vehicle financingrender consulting services with respect to informing, guiding and leased facilities,supervising the development of antagonists to immune repellents or anti-fugetaxins for the treatment of cancer. The initial term of the Consulting Agreement is for one year (the “Initial Term”) and the Company agreed to pay the Consultant $3,000 per month commencing June 1, 2019, with the fee increasing to $6,000 per month commencing on the 1st day of the month following the completion of a $5 million in fundraising by the Company. The Consulting Agreement was not renewed after the Initial Term due the Company’s working capital deficiencies. The Company incurred expenses of $9,000 and $18,000 for the three and six months ended June 30, 2020, respectively, related to the Consulting Agreement which is included in professional fees on the unaudited condensed consolidated statements of operations. As of June 30, 2020, $9,000 is included in accounts payable, related parties related to the Consulting Agreement.
MGH License Agreement
On May 8, 2013, VI and MGH a principal stockholder (see Note 5) entered into the License Agreement, pursuant to which MGH granted to the Company, in the field of coating and transplanting cells, tissues and devices for therapeutic purposes, on a worldwide basis: (i) an exclusive, royalty-bearing license under its rights in Patent Rights (as defined in the License Agreement) to make, use, sell, lease, import and transfer Products and Processes (each as defined in the License Agreement); (ii) a non-exclusive, sub-licensable (solely in the License Field and License Territory (each as defined in the License Agreement)) royalty-bearing license to Materials (as defined in the License Agreement) and to make, have made, use, have used, Materials for only the purpose of creating Products, the transfer of Products and to use, have used and transfer processes; (iii) the right to grant sublicenses subject to and in accordance with the terms of the License Agreement, and (iv) the nonexclusive right to use technological information (as defined in the License Agreement) disclosed by MGH to the Company under the License Agreement, all subject to and in accordance with the License Agreement (the “License”).
As amended by the Seventh Amendment to the License Agreement on December 22, 2017, the License Agreement requires that VI satisfy the following requirements prior to the first sale of Products (“MGH License Milestones”), by certain dates which have passed. The table below lists the MGH Milestones and the Company’s progress in satisfying or negotiating the extension of each milestone:
| MILESTONE: | STATUS: | |||
| (i) | Provide a detailed business and development plan. | The Company has provided MGH with a completed Corporate pitch deck which outlines the Company’s business and development plans has been provided to MGH. | ||
| (ii) | Raise $2 million in a financing round. | The Company has raised $1 million and is currently in the process of raising the second $1 million. The Company and MGH are currently negotiating extending this milestone. | ||
| (iii) | Initiate and finance research regarding the role of CXCL12 in minimizing fibrosis formation. | Milestone completed. | ||
| (iv) | Initiate and finance research regarding the role of CXCL12 in beta cell function and differentiation. | Dr. Poznansky’s lab was focusing on this as part of the academic project. The Company therefore made the strategic decision to fund another aspect of CXCL12 biology which focuses on the role of CXCL12 in wound healing. For the time being, the Company is excused from meeting this milestone as it has provided an alternative milestone as well as a justification for not pursuing this particular milestone. | ||
The Company and MGH have agreed to work together to restate the License Agreement, incorporating all the relevant provisions from the seven amendments and agreeing on a new set of milestones for future development.
The License Agreement also requires VI to pay to MGH a one percent (1%) royalty rate on net sales related to the first license sub-field, which is the treatment of Type 1 Diabetes. Future sub-fields shall carry a reasonable royalty rate, consistent with industry standards, to be negotiated at various times the foundingtime the first such royalty payment shall become due with respect to the applicable Products and Processes (as defined in the License Agreement).
The License Agreement additionally requires VI to pay to MGH a $1.0 million “success payment” within 60 days after the first achievement of total net sales of Product or Process equal to or to exceed $100,000,000 in any calendar year and $4,000,000 within sixty (60) days after the first achievement of total net sales of Product or Process equal or exceed $250,000,000 in any calendar year. The Company is also required to reimburse MGH’s expenses in connection with the preparation, filing, prosecution and maintenance of all Patent Rights.
The License Agreement expires on the later of (i) the date on which all issued patents and filed patent applications within the Patent Rights have expired or been abandoned, and (ii) one (1) year after the last sale for which a royalty is due under the License Agreement.
The License Agreement also grants MGH the right to terminate the License Agreement if VI fails to make any payment due under the License Agreement or defaults in the performance of any of its other obligations under the License Agreement, subject to certain notice and rights to cure set forth therein. MGH may also terminate the License Agreement immediately upon written notice to VI if VI: (i) shall make an assignment for the benefit of creditors; or (ii) or shall have a petition in bankruptcy filed for or against it that is not dismissed within sixty (60) days of filing. As of the date of this filing, this License Agreement remains active and the Company has not received any termination notice from MGH.
VI may terminate the License Agreement prior to its expiration by giving ninety (90) days’ advance written notice to MGH, and upon such termination shall, subject to the terms of the License Agreement, immediately cease all use and sales of Products and Processes.
The Company incurred research and development expenses to MGH of $0 and $94,048, respectively, during the three and six months ended June 30, 2020, all of which is in accounts payable as of June 30, 2020 on the unaudited condensed consolidated balance sheets. The Company did not incur any research and development expenses to MGH for the three and six months ended June 30, 2019.
During the three and six months ended June 30, 2020 and 2019, there have not been any sales of Product or Process under this License Agreement.
Investment and Restructuring Agreement (IAR Agreement)
As discussed in Note 3, the Company transferred certain assets and liabilities to AEI, a company majority owned by three current stockholders of the Company, have acted as guarantors under such financing arrangements.
Accounts Payable and $1,196,486Accrued Salaries
The Company incurred director fees of $22,500 and $45,000 for the three and six months ended June 30, 2020, respectively, to Federico Pier, the Company’ Chairman of the Board, which is included in personnel costs on the unaudited condensed consolidated statements of operations. As of June 30, 2020, $30,000 of these director fees are included in accounts payable, related parties, on the unaudited condensed consolidated balance sheets. The Company incurred $15,000 in director fees to Federico Pier for the three and six months ended June 30, 2019. There were no amounts outstanding due related to these director fees as of December 31, 2019.
The Company incurred consulting fees of $15,000 and $30,000 for the three and six months ended June 30, 2020, respectively, to Jeff Wright, the Company’s Chief Financial Officer, which is included in professional fees on the unaudited condensed consolidated statements of operations. As of June 30, 2020, $20,000 is included in accounts payable, related parties, on the unaudited condensed consolidated balance sheets. The Company did not incur any consulting fees to Jeff Wright for the three and six months ended June 30, 2019.
In August 2020, Frances Tonneguzzo, the Company’s Chief Executive Officer (the “former CEO”) tendered her resignation as CEO (Note 10). For the three and six months ended June 30, 2020, the Company incurred expenses of $68,450 and $136,901 to the former CEO. As of June 30, 2020, $79,858 of unpaid salary to the former CEO is included in accrued salaries, related party, on the unaudited condensed consolidated balance sheets. For the three and six months ended June 30, 2019, the Company incurred expenses of $22,817 to the former CEO. All of the expenses to the former CEO are included in personnel costs on the unaudited condensed consolidated statements of operations.
NOTE 7– COMMITMENTS AND CONTINGENCIES
Lease Agreements
On March 31, 20101, 2014, the Company entered into a rental agreement with the Board of Regents of the University System of Georgia (“UGA”). As of July 1, 2016, the Company rented approximately 1,413 square feet for a monthly rent of $2,590 per month. Effective August 1, 2017, the Company rented approximately 2,771 square feet and the rent was increased to $5,542 per month and expiring July 1, 2019. The Company did not incur any rent expense under the rental agreement for the three and six months ended June 30, 2020. Rent expense under the rental agreement was $5,542 and $22,168, respectively, for the three and six months ended June 30, 2019, and is included in discontinued operations on the unaudited condensed consolidated statements of operations. The lease was assigned to AEI in May 2019.
On June 3, 2017, the Company entered into an Equipment Lease Agreement (the “Lease Agreement”) for medical equipment with a cost of $76,600 (the equipment cost). Pursuant to the Lease Agreement, the Company paid a deposit of $32,705 and agreed to twenty-four (24) monthly payments (the term) of $1,756. The Company can acquire the equipment either a) after the first 6 monthly payments for the equipment cost minus the sum of the deposit and 70% of the monthly payments, or b) by paying seven (7) additional monthly payments at the end of the term. The Company did not incur any lease expense under the Lease Agreement for the three and six months ended June 30, 2020. Equipment lease expense under the Lease Agreement was $3,877 and $9,692 for the three and six months ended June 30, 2019 and is included in discontinued operations on the condensed consolidated statement of operations. The Company returned the equipment upon the expiration of the lease in May 2019.
Legal Matters
The Company is not aware of any material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
MGH License Agreement
As discussed in Note 7, the Company executed a License Agreement with MGH. The License Agreement also requires VI to pay to MGH a one percent (1%) royalty rate on net sales related to the first license sub-field, which is the treatment of Type 1 Diabetes. Future sub-fields shall carry a reasonable royalty rate, consistent with industry standards, to be negotiated at the time the first such royalty payment shall become due with respect to the applicable Products and Processes (as defined in the License Agreement).
The License Agreement additionally requires VI to pay to MGH a $1.0 million “success payment” within 60 days after the first achievement of total net sales of Product or Process equal or exceeding $100,000,000 in any calendar year and $4,000,000 within sixty (60) days after the first achievement of total net sales of Product or Process equal to or exceeding $250,000,000 in any calendar year.
The Company is also required to reimburse MGH’s expenses in connection with the preparation, filing, prosecution and maintenance of all Patent Rights. No expense reimbursements were paid to MGH during the three and six months ended June 30, 2020.
Consulting Agreement
On June 21, 2019, the Company entered into a Consulting Agreement (the “Consulting Agreement”) with C&H Capital, Inc. (the “Consultant”). The Company engaged the Consultant to render consulting services to facilitate long range strategic investor relations planning and other related services. The initial term of the Consulting Agreement is for one year (the “Initial Term”) and the Company agreed to pay the Consultant $3,500 on the last business day for each month of service. The Consulting Agreement was not renewed after the Initial Term due the Company’s working capital deficiencies. The Company incurred expenses of $10,500 and $21,000 for the three and six months ended June 30, 2020, respectively, related to the Consulting Agreement which is included in professional fees on the unaudited condensed consolidated statements of operations. As of June 30, 2020, $14,000 is included in accounts payable related to the Consulting Agreement. The Company did not incur any expenses related to the Consulting agreement with C&H Capital, Inc. for the three and six months ended June 30, 2019.
NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
The Company has 20,000,000 authorized shares of preferred stock, $0.001 par value per share.
Series A Preferred Stock
On December 19, 2017, the Company amended its articles of incorporation by filing a certificate of designation with the Secretary of State of Florida therein designating a class of preferred stock as Series A Preferred Stock, $0.001 par value per share, consisting of 3 million (3,000,000) shares. Each holder of shares of Series A Preferred Stock shall be entitled to the number of votes equal to the number of votes held by the number of shares of common stock into which such share of Series A Preferred Stock could be converted, and except as otherwise required by applicable law, shall have the voting rights and power equal to the voting rights and powers of the common stock. The holders of the Series A Preferred Stock shall vote together with the holders of the common stock of the Company as a single class and as single voting group upon all matters required to be submitted to a class or series vote pursuant to the protective provisions of the Certificate of Designation or under applicable law. In the event of liquidation, dissolution or winding up of the Corporation, either voluntarily or involuntarily, the holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any common stock holders, distribution of any surplus funds equal to the greater of (i) the sum of $1.67 per share or (ii) such amount per share as would have been payable had all shares been converted to common stock.
The holder of Series A Preferred Stock may elect at any time to convert such shares into common stock of the Company. Each share of Series A Preferred Stock is convertible into shares of common stock at a conversion Rate of 2:1 (the “Series A Conversion Rate”). The Series A Conversion Rate shall be adjusted for stock splits, stock combinations, stock dividends or similar recapitalizations. The shares of Series A Preferred Stock shall automatically convert into shares of common stock on February 12, 2021 (the one-year anniversary of the initial filing by the Company of a Form 10 filed with the Securities and Exchange Commission).
The holders of the Series A Preferred Stock shall be entitled to participate with the holders of the common stock in any dividends paid or set aside for payment (other than dividends payable solely in shares of common stock) so that the holders of the Series A Preferred Stock shall receive with respect to each share of Series A Preferred Stock an amount equal to (x) the dividend payable with respect to each share of common stock multiplied by (y) the number of share of common stock into which such share of Series A Preferred Stock is convertible as of the record date for such dividend.
Any such dividend shall be paid with respect to all then outstanding shares of common stock and Series A Preferred Stock on a pari passu basis and on as-converted basis. No dividends shall be paid on the common stock or the Series B Preferred Stock unless an equivalent dividend is paid with respect to the Series A Preferred Stock.
In addition to any other rights and restrictions provided by applicable law, without first obtaining the affirmative vote or written consent of the holders of a majority of the then-outstanding shares of Series A Preferred Stock, the Company shall not amend or repeal any provision of, add any provision to, the Company’s Articles of Incorporation or the Series A Preferred Stock Certificate of Designation if such action would adversely alter or change the preferences, rights, privileges or power of, or restrictions provided for the benefit of, the Series A Preferred Stock.
Unless otherwise prohibited by applicable law, the Board of Directors of the Company shall have the authority to repeal any provision of, or add any provision to, the Company’s Articles of Incorporation or Series A Preferred Stock Certificate of Designation if such action would not adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series A Preferred Stock.
As of June 30, 2020, and 2019, there were 3,000,000 shares of Series A Preferred Stock issued and outstanding.
Series B Preferred Stock
On December 19, 2017, the Company amended the articles of incorporation by filing a certificate of designation with the Secretary of State of Florida therein designating a class of preferred stock as Series B Preferred Stock, $0.001 par value per share, consisting of 4.44 million (4,440,000) shares (the “Series B Preferred Stock Certificate of Designation).
Each holder of shares of Series B Preferred Stock shall be entitled to the number of votes equal to the number of votes held by the number of shares of common stock into which such share of Series B Preferred Stock could be converted, and except as otherwise required by applicable law, shall have the voting rights and power equal to the voting rights and powers of the common stock. The holders of the Series B Preferred Stock shall vote together with the holders of the common stock of the Company as a single class and as single voting group upon all matters required to be submitted to a class or series vote pursuant to the protective provisions of the Series B Preferred Stock Certificate of Designation or under applicable law. In the event of liquidation, dissolution or winding up of the Corporation, either voluntarily or involuntarily, the holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any common stock holders, distribution of any surplus funds equal to the greater of : the sum of $0.83 per share or such amount per share as would have been payable had all shares been converted to common stock.
The holder of Series B Preferred Stock may elect at any time to convert such sharers into common stock of the Company. Each share of Series B Preferred Stock is convertible into shares of common stock at a conversion rate of 1:1 (the “Series B Conversion Rate”). The Series B Conversion Rate shall be adjusted for stock splits, stock combinations, stock dividends or similar recapitalizations. The shares of Series B Preferred Stock shall automatically convert into shares of common stock on February 12, 2021 (the one-year anniversary of the initial filing by the Company of a Form 10 filed with the Securities and Exchange Commission).
The holders of the Series B Preferred Stock shall be entitled to participate with the holders of the common stock in any dividends paid or set aside for payment (other than dividends payable solely in shares of common stock) so that the holders of the Series B Preferred Stock shall receive with respect to each share of Series B Preferred Stock an amount equal to (x) the dividend payable with respect to each share of common stock multiplied by (y) the number of share of common stock into which such share of Series B Preferred Stock is convertible as of the record date for such dividend. Any such dividend shall be paid with respect to all then outstanding shares of common stock and Series B Preferred Stock on a pari passu basis and on as-converted basis. No dividends shall be paid on the common stock or the Series B Preferred Stock unless an equivalent dividend is paid with respect to the Series B Preferred Stock.
In addition to any other rights and restrictions provided by applicable law, without first obtaining the affirmative vote or written consent of the holders of a majority of the then-outstanding shares of Series B Preferred Stock, the Company shall not amend or repeal any provision of, add any provision to, the Company’s Articles of Incorporation or the Series B Preferred Stock Certificate of Designation if such action would adversely alter or change the preferences, rights, privileges or power of, or restrictions provided for the benefit of, the Series B Preferred Stock.
Unless otherwise prohibited by applicable law, the Board of Directors of the Company shall have the authority to repeal any provision of, or add any provision to, the Company’s Articles of Incorporation or Series B Preferred Stock Certificate of Designation if such action would not adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series B Preferred Stock.
As of June 30, 2020 and 2019, there were 4,440,000 shares of Series B Preferred Stock issued and outstanding.
Common Stock
The Company has 300,000,000 authorized shares of common stock, $0.001 par value per share. As of June 30, 2020, and December 31, 2009, respectively. Beginning in November 2008, these stockholder loans accrued interest at rates ranging from 7.5% to 8.5%. Interest accrued on these loans at March 31, 2010 was $84,910.
Common Stock Issuance
During the six months ended June 30, 2019, the Company sold 2,280,000 units, consisting of one share of common stock and one warrant to purchase a share of common stock (the “Units”). The Company sold 2,280,000 units at $0.25 to accredited investors. The Company received net proceeds of $550,000, net of $20,000 of issuance costs. The warrant has a three- year exercise term at a price per share of common stock of $0.50.
The Company did not issue any shares of common stock during the six months ended June 30, 2020.
Common Stock to be issued
As of June 30, 2020 and 2019, there were 651,281 and 4,504,431, respectively, shares of common stock to be issued. As of June 30, 2020, 621,281 of the shares are to be issued under the IAR Agreements (see above), and 30,000 shares of common stock are to be issued to two initial shareholders of VI.
During the period ended June 30, 2019, 891,551 shares of common stock were to be issued pursuant to a Stock Issuance and Release Agreement (“SRI Agreement”) executed by the Company to stockholders who purchased insurance throughshares in 2018 at $1.85 per share for no consideration. The Company recorded a deemed dividend to stockholders of $160,479 for the spouseshares to be issued under the SRI Agreements, at $0.18 per share, based upon the estimated underlying value of the common stock of $0.18 per share based upon recent Units sold by the Company. As of June 30, 2019, the remaining common stock to be issued consists of 3,612,880 shares to be issued to MGH pursuant to the License Agreement (see Notes 5, 6 and 7).
Stock Options
The following table summarizes activities related to stock options of the Company for the six months ended June 30, 2020:
| Number of Options | Weighted-Average Exercise Price per Share | Weighted-Average Remaining Life (Years) | ||||||||||
| Outstanding at December 31, 2019 | 2,450,000 | $ | 0.57 | 8.20 | ||||||||
| Outstanding at June 30, 2020 | 2,450,000 | $ | 0.57 | 7.71 | ||||||||
| Exercisable at June 30,2020 | 2,116,667 | $ | 0.62 | 7.52 | ||||||||
The Company did not grant any options to purchase shares of common stock during the three and six months ended June 30, 2020. The Company recorded stock compensation expense of $5,408 and $10,816 during the three and six months ended June 30, 2020, respectively. The Company did not record any stock-based compensation expense during the three and six months ended June 30, 2019, respectively. As of June 30, 2020, 333,333 options to purchase shares of common stock remain unvested and $43,261 of stock compensation expense remains unrecognized and will be expensed over a weighted average period of 2.50 years.
| 19 |
Warrants
The following table summarizes activities related to warrants of the Company for the six months ended June 30, 2020:
| Number of Warrants | Weighted-Average Exercise Price per Share | Weighted-Average Remaining Life (Years) | ||||||||||
| Outstanding and exercisable at December 31, 2019 | 4,146,725 | $ | 0.53 | 2.50 | ||||||||
| Outstanding and exercisable at June 30, 2020 | 4,146,725 | $ | 0.53 | 2.01 | ||||||||
The Company did not issue any warrants during the six- month period ended June 30,2020.
NOTE 9 – DISCONTINUED OPERATIONS
In April 2019, the Company’s board of directors approved the IAR Agreement (See Note 3), whereby the Company, in effect transferred a segment of its business and the related assets and liabilities to AEI, a related party. The transaction was completed on May 21, 2019.
ASC 205-20 “Discontinued Operations” establishes that the disposal or abandonment of a corporate officer viacomponent of an arm’s length transaction.
A reconciliation of the major classes of line items constituting the loss from discontinued operations, net of income taxes as is a party in legal proceedingspresented in the ordinary courseunaudited condensed consolidated statements of business. At March 31, 2010, thereoperations for the three and six months ended June 30, 2020 and 2019 are summarized below:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenues | $ | — | $ | — | $ | — | $ | 50,000 | ||||||||
| Operating expenses: | ||||||||||||||||
| Personnel costs | — | 84,648 | — | 291,453 | ||||||||||||
| Travel expenses | — | 239 | — | 20,892 | ||||||||||||
| Laboratory expenses | — | 3,905 | — | 55,227 | ||||||||||||
| General and administrative expenses | — | 7,933 | — | 58,215 | ||||||||||||
| Total operating expenses | — | 96,725 | — | 425,787 | ||||||||||||
| Loss from discontinued operations | $ | — | $ | (96,725 | ) | $ | — | $ | (375,787 | ) | ||||||
There were no legal proceedings against the Company. The Company has filed a lawsuit against several customers for non-paymentcarrying amounts of contract revenuesmajor classes of assets and has been awarded summary judgments in various cases. While the outcomeliabilities of continuing collection efforts is unknown, it is the opinion of management that the Company will be successfulclassified as discontinued operations in collecting a majority of court ordered awards.
NOTE 1110 – SUBSEQUENT EVENTS
In August 2020, Frances Tonneguzzo, the Company’s former CEO tendered her resignation as CEO. The resignation was not a result of any disagreement with the Company has evaluated subsequent events throughor its policies or practices. The total compensation incurred for 2020, prior to the date the financial statements were available for issuance.
In January 2021, the Company sold the 400 shares of AEI preferred stock, a related party, received as part of the Company. In connection withIAR agreement (see Note 3) for $100,000.
On February 12, 2021, the resignation, the Company and the former Chairman3,000,000 shares of the Board, President and Chief Executive Officer enteredSeries A Preferred Stock automatically converted into a Modification Agreement that required the former officer to surrender to the Company all6,000,000 shares of common stock, held withand the exception4,440,000 shares of 4,000,000 shares. The former officer also forgaveSeries B Preferred Stock automatically converted into 4,440,000 shares of common stock.
In June 2021, the Company for all except for $125,000 of remaining principal and accrued interest of previous loans made by the former officer to the Company. The $125,000 not forgiven is evidenced byentered into Security Purchase Agreements (“SPA’s) with select accredited investors in connection with a promissory note bearing interest at 5% and payable in full on December 31, 2011. The Modification Agreement also requires the former officer to provide certain transitional consulting services to the Company, on a limited basis, for 12 months in exchange for a consulting fee of $9,333 per month as well as the issuance of 500,000 warrants to purchase the Company’s common stock at $0.60 per share exercisable for five years. The Company also agreed, as part of the Modification Agreement, to use its best efforts to repay outstanding credit card indebtedness incurredprivate offering by the Company and personally guaranteed byto raise a maximum of $1,000,000 through the former officer and director.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The purpose of management’sfollowing discussion and analysis (“MD&A”) is to increase the understanding of the reasons for material changes in our financial condition since the most recent fiscal year-end and results of operations during the current fiscal period as compared to the corresponding period of the preceding fiscal year. The MD&A should be read in conjunction with the condensed consolidated financial statements and accompanyingthe notes thereto appearing in Part I, Item 1 of this Quarterly Report. Historical results and our 2009 Annualtrends that might appear in this Quarterly Report on Form 10-K.
Overview
Vicapsys Life Sciences, Inc. (the “Company”, “we”(“VLS”) was incorporated under the laws ofin the State of Florida ason July 8, 1997 under the name All Product Distribution Corp. On August 19, 1998, the Company changed its name to Phage Therapeutics International, Inc. On November 13, 2007, the Company changed its name to SSGI, Inc. On September 13, 2017, the Company changed its name to Vicapsys Life Sciences, Inc., effected a 1-for-100 reverse stock split of its outstanding common stock, increased the Company’s authorized capital stock to 300,000,000 shares of common stock, par value $0.001 per share, and 20,000,000 shares of “blank check” preferred stock, par value $0.001 per share. On December 22, 2017, pursuant to a Share Exchange Agreement (the “Exchange Agreement”) by and among VLS, Michael W. Yurkowsky, ViCapsys, Inc. (“VI”) and the shareholders of VI, a private company, VI became a wholly owned subsidiary of VLS. We refer to VLS and VI together as the “Company”.
On May 21, 2019 the Company closed an Investment and Restructuring Agreement (see Note 3 to the unaudited consolidated financial statements).
The Company’s strategy is to develop and commercialize, on December 26, 1996. In February 2008, through a share exchange, the company acquired Surge Solutions Group, Inc.. Asworldwide basis, various intellectual property rights (patents, patent applications, know how, etc.) relating to a consequenceseries of encapsulated products that incorporate proprietary derivatives of the latter exchange, which qualified aschemokine CXCL12 for creating a reverse merger, wezone of immunoprotection around cells, tissues, organs and devices for therapeutic purposes. The product name VICAPSYN™ is the Company’s proprietary product line that is applied to transplantation therapies and related stem-cell applications in the transplantation field.
COVID-19
In March 2020, the World Health Organization declared the spread of a novel strain of coronavirus (“COVID-19”) a global pandemic. Actions have been taken by federal, state and local governmental authorities to combat the spread of COVID-19, including through issuances of “stay-at-home” directives and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. These measures, while intended to protect human life, have led to significantly reduced economic activity. At the end of 2020, two vaccines became the accounting acquireravailable although they are not yet in wide distribution. While many state and local authorities have started to reopen businesses, others have adopted additional measures to mitigate COVID-19 and the reporting entity prospectively.
Results of Operations – Three and maintenance of retail petroleum facilities. The consideration paid by the Company to the Majority B&M Shareholder consisted of (a) $1,000,000 in cash, payable $300,000 at closing, $250,000 withinSix Months Ended June 30, days of the closing date, $250,000 within 60 days of the closing date,2020 and $200,000 within 90 days of the closing date, 2019
plusRevenues (b) $1,173,473 represented by a Promissory Note bearing interest at 4% per annum and payable in forty-eight (48) equal monthly installments, commencing on the 30th day following the closing date, plus (c) 4,124,622 shares of the Company’s common stock. The consideration paid by the Company to the Minority B&M Shareholders consisted of (in the aggregate) (a) 2,000,000 shares of the Company’s common stock, and (b) warrants to purchase 250,000 shares of the Company’s common stock exercisable for five years at an exercise price of $0.75 per share. In addition, at the closing of the acquisition, the Minority B&M Shareholders became employees of Surge.
The Company did not have a term note payable to related partiesany revenues from continuing operations for the three and six months ended March 31, 2009.
Operating Expenses
We classify our operating expenses associated with amortizing loans for the purchase of vehicles decreased approximately 34% between the two years due to reduction in the principal.
The increase was mainly due to the interest expensereorganization of VI under the Investment and Restructuring Agreement in May 2019, resulting in an increase in personnel costs from $35,898 and $173,316, for the three and six months ended March 31, 2010, $0.019 million was allocated directlyJune 30, 2019, respectively, to cost of revenues earned$93,653 and included in$192,731 for the gross loss as reported in the Company’s statement of operations at March 31, 2010. Also contributing to the net loss was the 104%three and six months ended June 30, 2020, respectively, an increase in professional fees betweenfrom $106,917 and $124,404 for the two periods. Thesethree and six months ended June 30, 2019, respectively, to $129,086 and $286,334 for the three and six months ended June 30, 2020, respectively, due to increased consulting services and other professional fees were incurredrelated to being a public company, an increase in general and administrative expenses from $8,497 and $17,217 for the three and six months ended June 30 2019, respectively, to $8,876 and $22,961 for the three and six months ended June 30, 2020, respectively, and an increase in research and development expenses from $0 for the three and six months ended June 30, 2019 to $0 and $94,048 for the three and six months ended June, 2020. The increase in research and development expenses is attributable to reaching the completion of certain milestones of sponsored projects with MGH.
Funding Requirements
We anticipate that substantial additional equity or debt financings or funding from collaborative agreements or from foundations, government grants or other sources, will be needed to complete preclinical and animal testing necessary to file an Investigational New Drug Application with the U.S. Food and Drug Administration, and that further funding beyond such amounts will be required to commence trials and other activities necessary to begin the process of development and regulatory approval of a product for the continued growth of the Company. Additional capital will also be required for the clinical development of the recently discovered anti-fibrotic applications and corporate partnerships will be necessary to move Company products into advanced clinical development and commercialization. We also anticipate our cash expenditures will increase as we continue to operate as a result of our litigation on delinquent accounts and fees incurred for its regulatory filings.
Liquidity and Capital Resources
At June 30, 2020, we had total current assets of approximately $0.79 million, comprised$4,986 of cash contracts receivable, prepaid expenseson hand and costs and estimated earnings in excessan accumulated deficit of billings$13,722,984.
We do not believe that we have enough cash on uncompleted contracts. This compares with current assets inhand to operate our business during the same categoriesnext 12 months. We anticipate we will need to raise an additional $1 million through the issuance of approximately $1.87 milliondebt or equity securities to sustain base operations during the next 12 months, excluding development work. There can be no assurance that we will be able to obtain additional funding on commercially reasonable terms, or at December 31, 2009. Contracts receivable decreased 68% from $1.09 million asall. To the extent that we raise additional capital through the sale of December 31, 2009 to $.35 million at March 31, 2010. Costs and estimated earnings in excess of billings on uncompleted contracts decreased 40% from $0.057 million to $0.034 million as of December 31, 2009 and March 31, 2010, respectively. These decreases are a resultequity or convertible debt securities, the ownership interests of our lack of capital resources to commence construction of several of our contractscommon stockholders will be diluted, and because of this we were unable to bill for new contracts. The Company also used, as required by terms of its term note payable to related party, approximately $0.27 million of its restricted cash deposits to reduce principal and interest on its term note payable to a related party. Prepaid expenses decreased $0.03 million, or 34% from $0.09 million as of December 31, 2009 to $0.06 as of March 31, 2010. This decrease is due primarily to reduction in prepaid insurance. The insurance expense was associated with our auto, general liability and directors and officers liability insurance policies. At March 31, 2010, property and equipment, net, decreased approximately 8% due to depreciation expense incurred during the three months ended March 31, 2010.
To date, we have financed our operations through our sale of the principal balance as a result of monthly installment payments.
We have no revenues as of the date of this quarterly report, and no substantial revenues are anticipated until we have hadimplemented our full plan of operations. To implement our strategy to use mostgrow and expand per our business plan, we intend to generate working capital via a private placement of our cash resources fromequity or debt securities, or secure a loan. If we are unsuccessful in raising capital, we could be required to cease business operations to pay general and administrative expenses. At March 31, 2010,investors would lose all of their investment.
In June 2021, the current liabilities exceed current assets by $2.4 million. IncludedCompany entered into a Security Purchase Agreements (“SPA’s) with select accredited investors in the current assets is $0.24 million of restricted cash deposits that are used to satisfy term notes payable to related parties and will not be available to be utilizedconnection with a private offering by the Company to fund operations inraise a maximum of $1,000,000 through the future.
| For the three months ended March 31, | ||||||||
| 2010 | 2009 | |||||||
| Net cash provided (used) in operating activities | $ | 263 | $ | (441 | ) | |||
| Net cash used in investing activities | - | (19 | ) | |||||
| Net cash provided (used) by financing activities | (274 | ) | 525 | |||||
| Net increase (decrease) in cash | $ | (11 | ) | $ | 65 | |||
Additionally, we will have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. Our management will have to spend additional time on policies and procedures to make sure our Company is compliant with various regulatory requirements.
This additional corporate governance time required of management could limit the amount of time management has to implement our business plan and may impede the speed of our operations.
Working Capital (Deficit) Surplus
| June 30, 2020 | December 31, 2019 | |||||||
| Current Assets | $ | 8,869 | $ | 264,166 | ||||
| Current Liabilities | 710,718 | 396,482 | ||||||
| Working Capital (Deficit) | $ | (701,849 | ) | $ | (132,316 | ) | ||
Cash Flows
Cash activity for the six months ended June 30, 2020 and 2019 is summarized as follows:
| Six Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| Net Cash used in operating activities – continued operations | $ | (259,181 | ) | $ | (249,254 | ) | ||
| Net Cash used in operating activities – discontinued operations | — | (132,830 | ) | |||||
| Net Cash used in operating activities | (259,181 | ) | (382,084 | ) | ||||
| Cash provided by financing activities – continued operations | — | 550,000 | ||||||
| Cash provided by financing activities – discontinued operations | — | 176,600 | ||||||
| Net Cash provided by financing activities | — | 726,600 | ||||||
| Net increase (decrease) in cash | $ | (259,181 | ) | $ | 344,516 | |||
As of June 30, 2020, the Company had $4,986 of cash on hand.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4) during the periods presented, investments in special-purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic leases.
Contractual Obligations
MGH License Agreement
The Company executed a License Agreement with MGH. The License Agreement also requires VI to pay to MGH a one (1%) royalty rate on net sales related to the first license sub-field, which is the treatment of Type 1 Diabetes. Future sub-fields shall carry a reasonable royalty rate, consistent with industry standards, to be negotiated at the time the first such royalty payment shall become due with respect to the applicable Products and Processes (as defined in the License Agreement). The License Agreement additionally requires VI to pay to MGH a $1.0 million “success payment” within 60 days after the first achievement of total net sales of Product or Process equal or exceed $100,000,000 in cash. On May 25, 2010, we accepted $0.18 millionany calendar year and $4,000,000 within sixty (60) days after the first achievement of total net sales of Products or process equal or exceed $250,000,000 in cash for 1.8 million shares from 5 accredited investors. From May 27any calendar year. The Company is also required to June 2, 2010, we accepted subscriptions for 1.69 million sharesreimburse MGH’s expenses in connection with the preparation, filing, prosecution and maintenance of common stock from 6 accredited investors for $0.169 million in cash. There were no warrants attached to these shares.
Critical Accounting Estimates
Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted accounting principles. Thosein the United States of America. The preparation of these consolidated financial statements and related disclosures requires us to make estimates and assumptionsjudgments that affect the reported amounts of assets, liabilities, expenses, and related disclosure of contingent assets and liabilities. We evaluate, on an ongoing basis, our estimates and judgments, including those related to the useful life of the assets. We base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported revenues and expenses.that are not readily apparent from other sources. Actual results could varymay differ from these estimates.
The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the estimatesresults that we report in our consolidated financial statements. The Securities and Exchange Commission (the “SEC”), considers an entity’s most critical accounting policies to be those policies that are used. Theboth most important to the portrayal of a company’s financial condition and results of operations and those that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain at the time of estimation.
We believe the following critical accounting policies, among others, require significant areas requiring management’sjudgments and estimates and assumptions relateused in the preparation of our interim condensed consolidated financial statements.
Our significant accounting policies are described in more detail in the notes to determiningour consolidated financial statements for the fair value of stock-based compensation, fair value of sharesfiscal year ended December 31, 2019, included in the Company’s Annual Report filed on Form 10/A.
Recent Accounting Pronouncements
Management does not believe that any recently issued, for services andbut not yet effective accounting pronouncements, if adopted, would have a material effect on the determination of percentage of completion in connection with the recognition of profit on customer contracts.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Pursuant to Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Evaluation of Disclosure Controls and Procedures
The Company maintains “disclosure controls and procedures (asprocedures” as defined in RuleRules 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of the Exchange Act)1934, as of the end of the period covered by this report. Based onamended (the “Exchange Act”), that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2010, these disclosure controls and procedures were ineffectiveare designed to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i)is recorded, processed, summarized and reported within the time periods specified in the Commission’s ruleSEC’s rules and forms;forms, and (ii)that such information is accumulated and communicated to ourthe Company’s management, including ourits Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating the Company’s disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and the Company necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.
The Company’s management, including its Chairman of the Board and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2020 and concluded that the Company has a material weakness in disclosure controls and procedures as of June 30, 2020.
The Company has an ineffective control environment due to a lack of internal resources with expertise to determine entries and disclosures related to some of the Company’s more complex equity transactions.
Management believes this lack of internal expertise has been historically mitigated by continuing to retain consultants with this expertise when needed. This material weakness in the Company’s disclosure controls and procedures will be further remediated with future capital raises.
Changes in Internal Control Over Financial Reporting
During the three and six months ended June 30, 2020, there were no material changes in the Company’s internal control over financial reporting that occurred during(as defined in Rule 13a-15(f) and 15d-15(f) under the first fiscal quarterExchange Act) that have materially affected, or that are reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.
The Company is not a party to any pending legal proceedings to which we areproceeding, nor is the Company’s property the subject of a party or to which any of our property is subject, nor are there any such proceedings known to be contemplated by governmental authorities.pending legal proceeding. None of ourthe Company’s directors, officers or affiliates isare involved in a proceeding adverse to our business or has a material interest adverse to ourthe Company’s business.
As a smaller reporting company, the Company is not required to disclose material changes to the risk factors that were contained in the Company’s Form 10 registration statement originally filed with the SEC on February 12, 2020, as amended (the “Form 10”). However, in light of the recent coronavirus (COVID-19) pandemic, set forth below is a risk factor relating to COVID-19. Other than as set forth below, as of the filing date of this Quarterly Report on Form 10-Q, there have been no material changes fromto the risk factors faced by the Company from those previously disclosed in Part I, Item 1Athe Form 10.
COVID-19
In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. We are monitoring this closely, and although operations have not been materially affected by the COVID-19 outbreak to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and our business is uncertain. Accordingly, while we do not anticipate an impact on our operations, we cannot estimate the duration of the pandemic and potential impact on our business. In addition, a severe or prolonged economic downturn could result in a variety of risks to our business, including a possible delay in our Annual Reportability to raise money. At this time, the Company is unable to estimate the impact of this event on Form 10-K for 2009, which is incorporated herein by reference, for the three months ended March 31, 2010.
None.
None.
Not applicable.
| Exhibit No. | Description | |
| 31.1 | Section 302 Certification of Principal Executive |
| 31.2 | Section 302 Certification of Principal Financial |
| 32.1 | Section | |
| 101.INS | XBRL Instance Document ** | |
| 101.SCH | XBRL Taxonomy Extension Schema Document ** | |
| 101.CAL | XBRL Taxonomy Calculation Linkbase Document ** | |
| 101.LAB | XBRL Taxonomy Labels Linkbase Document ** | |
| 101.PRE | XBRL Taxonomy Presentation Linkbase Document ** | |
| 101.DEF | XBRL Definition Linkbase Document ** |
| Filed herewith. | |
| ** | Pursuant to Rule 406T of Regulation S-T adopted by the SEC, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise are not subject to liability under these sections. |
| *** | This certification is being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, |
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.
Date: September 9, 2021
| By: | /s/ | |
Executive Chairman of the Board (Principal Executive Officer) | ||
| By: | /s/ Jeffery Wright | |
| Jeffery Wright | ||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||
| 26 |