UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2020
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number: 000-56145
| (State or | ( | |
| Incorporation or Organization) | Identification |
| 1735 Buford Hwy, Ste 215-113 | ||
| Cumming, GA | 30041 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(972) 891-8033
(Address of principal executive offices)
N/A
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Act:None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the 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[X] No x
Indicate by check mark whether the registrant has submitted electronically and 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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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):
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [X] | Smaller reporting company Emerging growth company [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not check if a smaller reporting company)
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 August 24, 2010, there were 38,107,252 shares outstanding of the registrant’s $0.001 par value common stock par value $0.001 per share, outstanding.
Vicapsys Life Sciences, Inc.
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This reportQuarterly 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.
| ● | 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. |
Forward-looking statements include risks and uncertainties and there are important factors that could cause actual 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”.
PART I—FINANCIAL INFORMATIONVICAPSYS LIFE SCIENCES, INC.
| SSGI, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| ASSETS | ||||||||
| June 30, | December 31, | |||||||
| 2010 | 2009 | |||||||
| CURRENT ASSETS: | (unaudited) | (audited) | ||||||
| Cash and cash equivalents | $ | 104,236 | $ | 121,970 | ||||
| Restricted cash deposits | 237,918 | 507,028 | ||||||
| Contracts receivable, net | 1,720,253 | 1,091,343 | ||||||
| Costs and estimated earnings in excess of billings | ||||||||
| on uncompleted contracts | 704,060 | 57,411 | ||||||
| Prepaid expenses and other current assets | 38,785 | 89,591 | ||||||
| TOTAL CURRENT ASSETS | 2,805,252 | 1,867,343 | ||||||
| PROPERTY AND EQUIPMENT, NET | 546,370 | 347,874 | ||||||
| GOODWILL | 5,062,144 | - | ||||||
| CASH SURRENDER VALUE OF INSURANCE AND OTHER ASSETS | 785,897 | 15,538 | ||||||
| TOTAL ASSETS | $ | 9,199,663 | $ | 2,230,755 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | 2,723,811 | $ | 1,951,881 | ||||
| Billings in excess of costs and estimated earnings | ||||||||
| on uncompleted contracts | 747,123 | 251,797 | ||||||
| Current portion of long term debt | 491,984 | 111,891 | ||||||
| Promissory note payable | 893,160 | 353,691 | ||||||
| Current portion of due to stockholders | 450,000 | 11,395 | ||||||
| Term note payable, related party | 707,116 | 965,458 | ||||||
| TOTAL CURRENT LIABILITIES: | 6,013,194 | 3,646,113 | ||||||
| LONG TERM LIABILITIES | ||||||||
| Due to stockholders, net of current portion | 125,000 | 1,185,091 | ||||||
| Long term debt, net of current portion | 1,576,249 | 133,540 | ||||||
| TOTAL LIABILITIES | 7,714,443 | 4,964,744 | ||||||
| STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Common stock - $.001 Par Value, 100,000,000 shares authorized | ||||||||
| 34,187,952 and 34,687,630 issued and outstanding, respectively | 34,187 | 34,688 | ||||||
| Additional paid in capital | 8,464,836 | 3,138,628 | ||||||
| Accumulated deficit | (6,965,436 | ) | (5,907,305 | ) | ||||
| Total | 1,533,587 | (2,733,989 | ) | |||||
| Non-controlling interest in subsidiary | (48,367 | ) | - | |||||
| TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 1,485,220 | (2,733,989 | ) | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 9,199,663 | $ | 2,230,755 | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2020 | December 31, 2019 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 30,948 | $ | 264,166 | ||||
| Total Current Assets | 30,948 | 264,166 | ||||||
| Prepaid expenses | 3,685 | — | ||||||
| Intangible asset, net of accumulated amortization of $66,104 and $58,241, respectively | 426,410 | 434,273 | ||||||
| Total Assets | $ | 461,043 | $ | 698,439 | ||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 501,729 | $ | 396,482 | ||||
| Accrued salaries, related parties | 16,408 | — | ||||||
| Total Current Liabilities | 518,137 | 396,482 | ||||||
Commitments and Contingencies (Note 7) | ||||||||
| 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 | 13,408,701 | 13,403,293 | ||||||
| Accumulated deficit | (13,491,369 | ) | (13,126,910 | ) | ||||
| Total Stockholders’ Equity (Deficit) | (57,094 | ) | 301,957 | |||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | 461,043 | $ | 698,439 | ||||
See accompanying notes are an integral part of theseto unaudited condensed consolidated financial statements.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||||
| CONTRACT REVENUES EARNED | $ | 2,925,691 | $ | 1,023,022 | $ | 3,664,428 | $ | 2,696,207 | |||||||||
| COST OF REVENUES EARNED | 3,159,298 | 1,001,732 | 4,092,123 | 2,532,851 | |||||||||||||
| GROSS PROFIT (LOSS) | (233,607 | ) | 21,290 | (427,695 | ) | 163,356 | |||||||||||
| GENERAL AND ADMINISTRATIVE EXPENSES | |||||||||||||||||
| Payroll and related costs | 698,949 | 277,190 | 806,441 | 466,128 | |||||||||||||
| Insurance | 52,331 | 42,671 | 124,281 | 96,527 | |||||||||||||
| Marketing and advertising | 16,010 | 25,880 | 24,056 | 70,411 | |||||||||||||
| Office and technology expenses | 116,853 | 61,738 | 176,215 | 97,325 | |||||||||||||
| Professional fees | 194,415 | 61,989 | 301,503 | 114,571 | |||||||||||||
| Travel and entertainment | 16,852 | 7,039 | 23,380 | 9,388 | |||||||||||||
| Other operating expenses | 46,152 | 31,575 | 115,218 | 84,974 | |||||||||||||
| TOTAL GENERAL AND ADMINISTRATIVE EXPENSES | 1,141,562 | 508,082 | 1,571,094 | 939,324 | |||||||||||||
| LOSS FROM OPERATIONS | (1,375,169 | ) | (486,792 | ) | (1,998,789 | ) | (775,968 | ) | |||||||||
| OTHER INCOME (EXPENSES): | |||||||||||||||||
| Interest income | - | - | 15 | 45 | |||||||||||||
| Other income | 1,009,855 | 2,063 | 1,009,855 | 2,629 | |||||||||||||
| Financing costs | - | - | - | (181,201 | ) | ||||||||||||
| Interest expense | (30,482 | ) | (45,663 | ) | (68,927 | ) | (73,983 | ) | |||||||||
| Loss on asset disposition | - | - | (285 | ) | (2,305 | ) | |||||||||||
| TOTAL OTHER INCOME (EXPENSES): | 979,373 | (43,600 | ) | 940,658 | (254,815 | ) | |||||||||||
| NET LOSS BEFORE TAXES | (395,796 | ) | (530,392 | ) | (1,058,131 | ) | (1,030,783 | ) | |||||||||
| PROVISION FOR TAXES | - | - | - | - | |||||||||||||
| LOSS BEFORE NON-CONTROLLING INTEREST IN | |||||||||||||||||
| NET LOSS OF SUBSIDIARY | (395,796 | ) | (530,392 | ) | (1,058,131 | ) | (1,030,783 | ) | |||||||||
| NON-CONTROLLING INTEREST IN NET LOSS | |||||||||||||||||
| OF SUBSIDIARY | 48,367 | - | 48,367 | - | |||||||||||||
| NET LOSS | $ | (347,429 | ) | $ | (530,392 | ) | $ | (1,009,764 | ) | $ | (1,030,783 | ) | |||||
| Earnings per share: | |||||||||||||||||
| Basic and Diluted | $ | (2,133.329 | ) | $ | (2,015.216 | ) | |||||||||||
| Weighted Average Outstanding Shares: | |||||||||||||||||
| Basic and Diluted | 496 | 512 | |||||||||||||||
| Net loss per share: | |||||||||||||||||
| Basic and Diluted | $ | (0.010 | ) | $ | (0.015 | ) | $ | (0.029 | ) | $ | (0.030 | ) | |||||
| Weighted Average Outstanding Shares: | |||||||||||||||||
| Basic and Diluted | 34,144,861 | 34,679,140 | 34,476,757 | 34,679,669 | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the three months ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Revenues | $ | - | $ | - | ||||
| Operating Expenses: | ||||||||
| Personnel costs | 99,078 | 137,418 | ||||||
| Research and development expenses | 94,048 | — | ||||||
| Professional fees | 157,248 | 17,457 | ||||||
| General and administrative expenses | 14,085 | 8,720 | ||||||
| Total operating expenses | 364,459 | 163,595 | ||||||
| Loss from continuing operations before income taxes | (364,459 | ) | (163,595 | ) | ||||
| Income taxes | — | — | ||||||
| Loss from continuing operations | (364,459 | ) | (163,595 | ) | ||||
| Loss from discontinued operations | — | (279,062 | ) | |||||
| Net Loss | (364,459 | ) | (442,657 | ) | ||||
| Deemed Dividend | — | (160,479 | ) | |||||
| Net loss available to common shareholders | $ | (364,459 | ) | $ | (603,136 | ) | ||
| Basic and diluted net loss per common share | ||||||||
| Continuing operations | $ | (0.02 | ) | $ | (0.02 | ) | ||
| Discontinued operations | — | (0.03 | ) | |||||
| $ | (0.02 | ) | $ | (0.05 | ) | |||
| Basic and diluted weighted average common shares outstanding | 17,483,283 | 9,650,133 | ||||||
See accompanying notes are an integral part of theseto unaudited condensed consolidated financial statements.
| SSGI, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Unaudited) | ||||||||
| Six Months Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (1,009,764 | ) | $ | (1,030,783 | ) | ||
| Non-controlling interest in net loss of subsidiaries | (48,367 | ) | - | |||||
| Loss before non-controlling interest in net loss of subsidiaries | (1,030,783 | ) | ||||||
| Adjustments to reconcile net loss to net cash and cash | ||||||||
| equivalents used in operating activities: | ||||||||
| Depreciation and amortization | 70,352 | 62,330 | ||||||
| Gain on asset disposition | 285 | - | ||||||
| Provision for bad debts | 11,586 | - | ||||||
| Warrants issued for compensation | 89,731 | 166,086 | ||||||
| Warrants issued as financing costs | - | 181,201 | ||||||
| Estimated losses on contracts | - | (59,354 | ) | |||||
| Loan forgiveness from stockholder loans | (866,055 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in assets: | ||||||||
| Contracts receivable | 796,585 | (166,106 | ) | |||||
| Costs and estimated earnings in excess of billings | ||||||||
| on uncompleted contracts | (13,698 | ) | (52,128 | ) | ||||
| Prepaid expenses and other current assets | 178,739 | 44,508 | ||||||
| Cash surrender value of insurance and other assets | 12,607 | 812 | ||||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable and accrued expenses | (334,645 | ) | (152,929 | ) | ||||
| Billings in excess of costs and estimated earnings | ||||||||
| on uncompleted contracts | 309,889 | 83,371 | ||||||
| Net cash used in operating activities | (802,755 | ) | (922,992 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Proceeds from sale of equipment | 6,200 | 34,924 | ||||||
| Release (deposits of) restricted cash | 269,110 | (367,036 | ) | |||||
| Purchase of subsidiary | (550,000 | ) | - | |||||
| Purchase of equipment | (10,114 | ) | (20,354 | ) | ||||
| Net cash used in investing activities | (284,804 | ) | (352,466 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Borrowings under term note payable, related party and promissory note | 925,000 | |||||||
| Issuance of common stock | 851,000 | - | ||||||
| Payments for term note payable, related party and promissory note | (322,825 | ) | ||||||
| Advances from stockholders | - | 696,007 | ||||||
| Net cash provided by financing activities | 1,069,825 | 1,298,182 | ||||||
| CHANGE IN CASH AND CASH EQUIVALENTS | (17,734 | ) | 22,724 | |||||
| Cash and cash equivalents at beginning of the period | 121,970 | 64,988 | ||||||
| Cash and cash equivalents at end of period | $ | 104,236 | $ | 87,712 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Interest paid during the period | $ | 68,927 | $ | 73,983 | ||||
| CHANGES IN NON-CASH FINANCING ACTIVITIES: | ||||||||
| Common stock issued for acquisition of subsidiary | $ | 3,974,773 | $ | - | ||||
| Promissory note issued for acquisition of subsidiary | $ | 1,173,473 | $ | - | ||||
| Warrants issued for acquisition of subsidiary | $ | 171,592 | $ | - | ||||
| Note payable issued for acquisition of subsidiary | $ | 700,000 | $ | - | ||||
| Warrants issued for loan forgiveness | $ | 244,898 | $ | - | ||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the three months ended March 31, 2020
(Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Common Stock to be Issued | Additional Paid-in | Accumulated | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance December 31, 2018 | 3,000,000 | $ | 300 | 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 | 891 | 159,588 | (160,479 | ) | — | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | (442,657 | ) | (442,657 | ) | |||||||||||||||||||||||||||||||
| Balance March 31, 2019 | 3,000,000 | $ | 300 | 4,440,000 | $ | 4,440 | 9,650,133 | $ | 9,650 | 4,504,431 | $ | 4,504 | $ | 11,441,947 | $ | (12,159,871 | ) | $ | (696,330 | ) | ||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Common Stock to be Issued | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
| 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 | ) | ||||||||||||||||||||||||
See accompanying notes are an integral part of theseto unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the three months ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss from continuing operations | $ | (364,459 | ) | $ | (163,595 | ) | ||
| Net loss from discontinued operations | (279,062 | ) | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization | 7,863 | 7,821 | ||||||
| Stock-based compensation | 5,408 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid Expenses | (3,685 | ) | — | |||||
| Accounts payable | 105,247 | 13,416 | ||||||
| Accrued liabilities | 16,408 | — | ||||||
| Net Cash Used in Operating Activities - continuing operations | (233,218 | ) | (142,358 | ) | ||||
| Net Cash Used in Operating Activities - discontinued operations | — | (45,380 | ) | |||||
| Net Cash Used in Operating Activities | (233,218 | ) | (187,738 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Net Cash Provided By Financing Activities - discontinued operations | — | 104,500 | ||||||
| Net Cash Provided By Financing Activities | — | 104,500 | ||||||
| Net Decrease in Cash | (233,218 | ) | (83,238 | ) | ||||
| Cash, Beginning of period | 264,166 | 86,330 | ||||||
| Cash, End of period | $ | 30,948 | $ | 3,092 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
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. 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”. 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 December 26, 1996. In February 2008, through a share exchange, the company acquired Surge Solutions Group, Inc. (“Surge”worldwide basis, various intellectual property rights (patents, patent applications, know how, etc.). As relating to a consequenceseries of encapsulated products that incorporate proprietary derivatives of the latter exchange, which qualified aschemokine CXCL12 for creating a reverse merger; Surge becamezone of immunoprotection around cells, tissues, organs and devices for therapeutic purposes. The product name VICAPSYN™ is the accounting acquirerCompany’s proprietary product line that is applied to transplantation therapies and the reporting entity prospectively.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S PLANS
The Company specializes in the design and construction of industrial and commercial buildings in the petroleum industry; and in the maintenance of retail petroleum facilities in Florida and Georgia. The Company's work is performed under various fee arrangements including cost plus fee contracts, fixed price contracts, fixed price contracts with incentive and penalty provisions, and straight hourly fee contracts. These contracts are undertaken by the Company alone or in conjunction with other contracts. The length of the Company's contracts typically range from three months or less to one year.
In 2020, management intends to raise additional funds to support current operations and extend development of its product line. No assurance can be given that the Company will be successful in this effort. If the Company is unable to obtainraise additional funds in 2020, it will be forced to severely curtail all 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 necessary financingCompany, 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 the Master Service Agreement and 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 | |
| ● | 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 preferred stock (the “AEI Preferred Stock”), to the Company. Once AEI pays the 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. |
Pursuant to meetthe Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 205-20Presentation 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 repay its liabilities arising from normal9). During the quarter ended March 31, 2019, the results of operations of this disposed business component have been presented as discontinued operations.
NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements have beenare prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of AmericaU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuredisclosures of contingent assets and liabilities at the date of the financial statements and the reported amountsamount of revenues and expenses during the reportingreported period. Actual results could differ from those estimates. The most significant management estimate relates toSignificant estimates for the determinationthree months ended March 31, 2020, and December 31, 2019, include useful life of percentage of completion in connection with the recognition of profit on contracts.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturityan original term of three months or less when purchased to be cash equivalents. Cash andThe Company held no cash equivalents include money market accountsas of March 31, 2020, and investmentsDecember 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 to fail.
Intangible Assets
Costs of intangible assets are accounted for through the capitalization of those costs incurred in connection with developing or obtaining such assets. Capitalized costs are included in intangible assets in the unaudited condensed consolidated balance sheets. The Company’s intangible assets consist of costs incurred in connection with securing an Exclusive Patent License Agreement with The General Hospital Corporation, d/b/a repurchase agreement backed by government securities.
The Company reviews these intangible assets for possible impairment when events or changes in circumstances 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 useful life. An impairment loss is subject to some credit risk through short termrecorded if the carrying value of the asset exceeds the expected future cash investments which are placed with high credit quality financial institutions. 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 recognizes impairment losses on long-lived assets used in operations when indicators of impairment are present 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 205-20Presentation 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 entered into(or will have) a major effect on an overnight repurchaseentity’s operations and cash management agreement with a financial institution to invest idle fundsresults when the components of an entity meets the criteria in US government securities. paragraph 205-20-45-10. In the period in which the component 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 maintainsdisposed of a component of its cash accountsbusiness pursuant to the IAR Agreement (see Note 3) in several commercial banks located in Central Florida. The Federal Deposit Insurance Corporation (FDIC) guarantees accountsMay 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 financial institution up to $250,000. At various times throughoutaccompanying unaudited condensed consolidated statement of operations and statement of cash flows for the period the Company had cash balances that exceeded the FDIC limit.
Equity Method Investment
The Company accounts for treasuryinvestments 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 par value. Under this method,cost and adjusts the treasury stock accountcarrying 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 increasedincluded in the determination of net income by the parinvestor, and such 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 eachthe 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 common stock reacquired.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 consists of equity owned in AEI which was given to the Company as part of an investment and restructuring agreement (see Note 3). Therefore, as of March 31, 2020, the Company has no cost basis in the investment. During the three months ended March 31, 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 March 31, 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 excess paid per sharecosts 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 based on the requirements of ASC 718 –“Compensation –Stock Compensation,” which requires recognition in the financial statements of the cost of employee, director and non-employee services received in exchange for an award of equity instruments over the par valueperiod the employee, director, or non-employee is debitedrequired to additional paid-in capitalperform the services in exchange for the amount per shareaward (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 2016-09Improvements to Employee Share-Based Payment.
Research and Development
Costs and expenses that was originally credited. Any remaining excess is chargescan be clearly identified as research and development are charged to retained earnings.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740-10, Income taxes are accounted for under the asset and liability method as stipulated by Accounting Standards Codification (“ASC”) 740 formerly Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”.Taxes. Deferred tax assets and liabilities are recognized forto reflect the estimated future tax consequences attributableeffects, calculated at the tax rate expected to differences betweenbe in effect at the financial statement carrying amountstime of existing assets and liabilities and their respectiverealization. A valuation allowance related to a deferred tax bases and operating loss andasset is recorded when it is more likely than not that some portion of the deferred tax credit carry forwards.asset will not be realized. Deferred tax assets and liabilities are measured using enactedadjusted for the effects of the changes in tax laws and rates expectedof the date of enactment.
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 March 31, 2020 and 2019, the Company’s dilutive securities are convertible into approximately 17,688,006 and 17,672,656 shares of common stock, respectively. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive. The following table represents the classes of dilutive securities as of March 31, 2020 and 2019:
| March 31, 2020 | March 31, 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 | 2,641,500 | ||||||
| Warrants to purchase common stock | 4,146,725 | 86,725 | ||||||
| 17,688,006 | 17,672,656 | |||||||
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have 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 License Agreement was in the form of common stock shares. The estimated value of the common stock is being amortized over the term of the License Agreement which is based on the remaining life of the related patents being licensed which is approximately 16 years.
The Company’s adoptionintangible assets consisted of these provisions, interestthe following at March 31, 2020, and December 31, 2019:
March 31, 2020 | December 31, 2019 | |||||||
| Licensed patents | $ | 492,514 | $ | 492,514 | ||||
| Accumulated Amortization | (66,104 | ) | (58,241 | ) | ||||
| Balance | $ | 426,410 | $ | 434,273 | ||||
The Company recognized $7,862 and $7,821 of amortization expense related to the unrecognized tax benefits is recognized in the financial statements as a component of income taxes. The adoption of ASC 740 did not have an impact on the Company’s financial position and results of operations.
Future expected amortization of intangible assets is as follows:
| Fiscal year ending December 31, | ||||
| 2020 (months remaining) | $ | 23,437 | ||
| 2021 | 31,299 | |||
| 2022 | 31,299 | |||
| 2023 | 31,299 | |||
| 2024 | 31,299 | |||
| Thereafter | 277,777 | |||
| $ | 426,410 | |||
NOTE 6 – RELATED PARTY TRANSACTIONS
Consulting Agreement
On June 30, 2010 and 2009 were $24,056 and $70,411, respectively.
Equity Based PaymentsMGH License Agreement
On May 8, 2013, VI and MGH entered into the License Agreement, pursuant to Non-employees, formerly EITF No. 96-18, Accounting for Equity Instruments that are Issuedwhich MGH granted to other than Employees for Acquiring, or in Conjunction with Selling Goods or Services.
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 deposits cashand 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 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 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 percentageroyalty 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 contract pricedate 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 $94,048 during the three months ended March 31, 2020, all of which is in accounts payable as of March 31, 2020. The Company did not incur any research and development expenses to MGH for the three months ended March 31, 2019.
During the three months ended March 31, 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 shareholders of the Company, two of which were also former Directors and one was an officer of the Company. As a result of the IAR Agreement, the Company received 400 shares of preferred stock in AEI.
NOTE 7– COMMITMENTS AND CONTINGENCIES
Lease Agreements
On March 1, 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 months ended March 31, 2020. Rent expense under the rental agreement was $16,626 for the three months ended March 31,2019 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 independent thirdEquipment 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 months ended March 31, 2020. Equipment lease expense under the Lease Agreement was $5,815 for the three months ended March 31, 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 bonding agencyor 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 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 $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.
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. Either party may terminate the Consulting Agreement upon thirty (30) days prior written notice in the event the other party violates a material provision of the Consulting Agreement and fails to cure such breach within ten (10) days of written notice of such violation from the non-breaching party. The Company incurred expenses of $10,500 and $0, respectively, for the three months ended March 31, 2020 and 2019 related to the Consulting Agreement and is included in professional fees on the consolidated statement of operations.
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 ability to raise money. At this time, the Company is unable to estimate the impact of this event on its operations.
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 : the sum of $1.67 per share or 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. Under certain conditions, each share of Series A Preferred Stock shall automatically convert into shares of common stock at its then Series A Conversion Rate.
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 holds the depositsholders 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 state agencySeries 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 municipality that has awarded the contractadd any provision to, the Company. The Company also pays a fee to guarantee performance onCompany’s Articles of Incorporation or Series A Preferred Stock Certificate of Designation if such action would not adversely alter or change the percentagepreferences, rights, privileges or powers of, or restrictions provided for the benefit of the contract not coveredSeries A Preferred Stock.
As of March 31, 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 cash deposit. Following successful completionnumber of the contract, the bonding agency has up to 90 days to return the deposited cash along with interest in accordance with the contract.
| June 30, 2010 | December 31, 2009 | |||||||
| Contract billings | $ | 1,813,478 | $ | 1,272,788 | ||||
| Allowance for doubtful accounts | (93,225 | ) | (181,445 | ) | ||||
| Total | $ | 1,720,253 | $ | 1,091,343 | ||||
| June 30, 2010 | December 31, 2009 | |||||||
| Costs incurred on uncompleted contracts | $ | 4,846,097 | $ | 1,072,453 | ||||
| Estimated earnings | 490,320 | 269,282 | ||||||
| 5,336,417 | 1,341,735 | |||||||
| Less billings to date | 5,379,480 | 1,536,121 | ||||||
| Total | $ | (43,063 | ) | $ | (194,386 | ) | ||
| June 30, 2010 | December 31, 2009 | |||||||
| Costs and estimated earnings in excess of | ||||||||
| billings on uncompleted contracts | $ | 704,060 | $ | 57,411 | ||||
| Billings in excess of costs and estimated | ||||||||
| earnings on uncompleted contracts | (747,123 | ) | (251,797 | ) | ||||
| Total | $ | (43,063 | ) | $ | (194,386 | ) | ||
| Current Assets | $ | 2,221,217 | ||
| Property and Equipment | 265,209 | |||
| Other Assets | 785,798 | |||
| Goodwill | 5,062,144 | |||
| Liabilities Assumed | (2,314,540 | ) | ||
| $ | 6,019,838 |
| Warrants | $ | 171,592 | ||
| Stock | 3,674,773 | |||
| Cash | 1,000,000 | |||
| Note Payable | 1,173,473 | |||
| $ | 6,019,838 |
The former officer also forgaveholder 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 2:1 (the “Series B Conversion Rate”). The Series B Conversion Rate shall be adjusted for stock splits, stock combinations, stock dividends or similar recapitalizations. Under certain conditions, each share of Series B Preferred Stock shall automatically convert into shares of common stock at its then Series B Conversion Rate.
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 March 31, 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 March 31, 2020, and December 31, 2019, there were 17,483,283 shares of common stock outstanding.
Common Stock to be issued
As of March 31, 2020 and 2019, there were 651,281 and 4,505,431, respectively, shares of common stock to be issued. As of March 31, 52020, 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 March 31, 2019, 891,551 shares of common stock were to be issued pursuant to Stock Issuance and Release Agreement (“SRI”) executed by the Company to shareholders who purchased shares in 2018 at $1.85 per share. The Company recorded a deemed dividend to stockholders of $160,479 for the shares 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 shares of common stock sold by the Company. As of March 31, 2019, the remaining common stock to be issued consists of 3,612,880 shares issued to MGH pursuant to a License Agreement (see Notes 5, 6 and 7).
Stock Options
The following table summarizes activities related to stock options of the Company for all except for $125,000the three months ended March 31, 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 March 31, 2020 | 2,450,000 | $ | 0.57 | 7.96 | ||||||||
| Exercisable at March 31,2020 | 2,075,000 | $ | 0.63 | 7.73 | ||||||||
The Company did not grant any options to purchase shares of remaining principalcommon stock during the three months ended March 31, 2020. The Company recorded stock compensation expense of $5,408 and accrued interest$0, respectively during the three months ended March 31, 2020 and 2019. As of previous loans made by the former officerMarch 31, 2020, 375,000 options to the Company. purchase shares of common stock remain unvested and $48,668 of stock compensation expense remains unrecognized and will be expensed over a weighted average period of 2.25 years.
Warrants
The $125,000 not forgiven is evidenced by a promissory note bearing interest at 5% and payable in full on December 31, 2011. The Modification Agreement also requires the former officerfollowing table summarizes activities related to provide certain transitional consulting services towarrants of the Company on a limited basis, for 12the three months in exchange for a consulting fee of $9,333 perended March 31, 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 March 31, 2020 | 4,146,725 | $ | 0.53 | 2.25 | ||||||||
The Company did not issue any warrants during the three month as well as the issuance of 500,000 warrants to purchaseperiod ended March 31,2020.
NOTE 9 – DISCONTINUED OPERATIONS
In April 2019, the Company’s common stock at $0.60 per share exercisable for five years.
ASC 205-20 “Discontinued Operations” establishes that the Company’s common stock at $0.60 per share exercisabledisposal or abandonment of a component of an entity or a group of components of an entity should be reported in 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. As a result, the component’s results of operations as of March 31, 2019 have been reclassified as discontinued operations on the condensed consolidated statements of operations. The results of operations of this component are separately reported as “discontinued operations” for five years. The Company also agreed, as part of the Modification Agreement, to use its best efforts to repay outstanding credit card indebtedness incurred bythree months ended March 31, 2020. There have been no transactions between the Company and personally guaranteed byAEI since the former officer and director. The former officer also forgaveIAR Agreement.
A reconciliation of the Company for all remaining principal and accrued interestmajor classes of previous loans made byline items constituting the employee toloss from discontinued operations, net of income taxes as is presented in the Company.
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Revenues | $ | — | $ | 50,000 | ||||
| Operating expenses: | ||||||||
| Personnel costs | — | 206,805 | ||||||
| Travel expenses | — | 20,653 | ||||||
| Laboratory expenses | — | 51,322 | ||||||
| General and administrative expenses | — | 50,282 | ||||||
| Total operating expenses | — | 329,062 | ||||||
| Loss from discontinued operations | $ | — | $ | (279,062 | ) | |||
There were no carrying amounts of other income resulted from adjustments to outstandingmajor classes of assets and liabilities held by the Company.
| June 30, 2010 | December 31, 2009 | |||||||
| 5.00% note payable to a former stockholder, $9,317 principal and interest payments monthly, through June 2015 | $ | 491,748 | $ | - | ||||
| 5.00% note payable to a former stockholder, $2,097 principal and interest payments monthly, through June 2015 | 111,125 | - | ||||||
| 3.25% note payable to a former stockholder, | ||||||||
| $2,357 principal and interest payments monthly, | ||||||||
| through January 2016. | 144,600 | - | ||||||
| 4.00% note payable to a former stockholder, $26,496 principal and interest payable monthly, through May 2014. | 1,150,889 | - | ||||||
| 7.99% note payable to Chrysler Financial collateralized by vehicle and guaranteed by founding stockholders. Due in monthly installments of $293 including interest through May 2012. | 6,240 | 15,435 | ||||||
| 8.75% to 8.99% notes payable to Ford Credit collateralized by vehicles and guaranteed by founding stockholders. Due in monthly installments of $2,918 including interest through 2013. | 38,931 | 47,002 | ||||||
| 6.50% to 7.15% notes payable to Wachovia Bank collateralized by vehicles and guaranteed by founding stockholders. Due in monthly installments of $5,654 including interest through 2012. | 86,509 | 113,170 | ||||||
| 7.50% note payable to Wells Fargo collateralized by a vehicle and equipment. Due in monthly installments of $967 including interest through 2012. | 22,320 | 28,759 | ||||||
| 5.40% note payable to Premium Financing Specialists. Due in monthly installments of $11,952 including interest through 2010 paid in June. | - | 23,743 | ||||||
7.65% note payable to SunTrust Bank collateralized by a vehicle. Due in monthly installments of $349 including interest through 2014. | 15,871 | 17,322 | ||||||
| 2,068,233 | 245,431 | |||||||
| Less current portion | 491,984 | 111,891 | ||||||
| Total | $ | 1,576,249 | $ | 133,540 | ||||
| 2011 | $ | 491,984 | ||
| 2012 | 494,199 | |||
| 2013 | 457,274 | |||
| 2014 | 446,134 | |||
| 2015 and thereafter | 178,642 | |||
| $ | 2,068,233 |
| Weighted Average | ||||||||||||
| Number of | Remaining | |||||||||||
| Warrants | Weighted Average | Contractual Life | ||||||||||
| Outstanding | Exercise Price | (Years) | ||||||||||
| Balance, December 31, 2009 | 3,525,053 | $ | 0.60 | 4.47 | ||||||||
| Warrants Issued | 1,295,000 | $ | 0.63 | 4.88 | ||||||||
| Balance, June 30, 2010 | 4,820,053 | $ | 0.61 | 4.39 | ||||||||
| Number of | Remaining | |||||||||
| Warrants | Contractual Life | |||||||||
| Outstanding | Exercise Price | (Years) | ||||||||
| 4,820,053 | $ | 0.61 | 1.0 – 9.0 | |||||||
| June 30, | December31, | |||||||
| 2010 | 2009 | |||||||
| Risk free interest rate | 1.12% - 1.63 | % | .5% - 1.8 | % | ||||
| Expected volatility | 231% - 297 | % | 20% - 86 | % | ||||
| Expected term of stock warrant in years | 2.5 - 3.5 | 1.5 – 5.0 | ||||||
| Expected dividend yield | 0 | % | 0 | % | ||||
| Average value per option | .02 - .69 | .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 | ) | ||||
| - | % | - | % | |||||
| June 30, | December 31, | |||||||
| Deferred Tax Assets | 2010 | 2009 | ||||||
| Net Operating Loss Carryforward | $ | 2,365,000 | $ | 1,958,000 | ||||
| Other | 88,000 | 173,000 | ||||||
| Total Deferred Tax Assets | 2,453,000 | 2,131,000 | ||||||
| Deferred Tax Liabilities | ( 313,000 | ) | (278,000 | ) | ||||
| Net Deferred Tax Assets | 2,140,000 | 1,853,000 | ||||||
| Valuation Allowance | (2,140,000 | ) | (1,853,000 | ) | ||||
| Total Net Deferred Tax Assets | $ | - | $ | - | ||||
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 December 26, 1996. In February 2008, throughOn 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 share exchange, the company acquired Surge Solutions Group, Inc.. As a consequence1-for-100 reverse stock split of the latter exchange, which qualified as a reverse merger, we became the accounting acquirer and the reporting entity prospectively.
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 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 chemokine CXCL12 for all exceptcreating a zone of immunoprotection around cells, tissues, organs and devices for $125,000 of remaining principaltherapeutic purposes. The product name VICAPSYN™ is the Company’s proprietary product line that is applied to transplantation therapies and accrued interest of previous loans maderelated stem-cell applications in the transplantation field.
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 former officerCOVID-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 ability to raise money. At this time, the Company is unable to estimate the impact of this event on its operations.
Results of Operations - Three Months Ended March 31, 2020 and 2019
Revenues
The Company did not have any revenues from continuing operations for the three months ended March 31, 2020 and 2019.
Operating Expenses
We classify our operating expenses from continuing operations into four categories: personnel costs, research and development expenses, professional fees, and general and administrative expenses. The Company’s total operating expenses for the three months ended March 31, 2020 were $364,459, compared to $163,595 for the three months ended March 31, 2019. The increase was mainly due to the Company. The $125,000 not forgiven is evidenced byreorganization of VI under the Investment and Restructuring Agreement in May 2019, resulting in a promissory note bearing interest at 5% and payabledecrease in full on December 31, 2011. The Modification Agreement also requirespersonnel costs from $137,418 for 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 incurred by the Company and personally guaranteed by the former officer and director.
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 publicly traded entity.
Liquidity and Capital Resources
At March 31, 2020, we had $30,948 of cash on hand and an accumulated deficit of $13,491,369.
We do not believe that we have enough cash on hand to operate our business during the next 12 months. We anticipate we will need to raise an additional $1 million through the issuance of debt 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 all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our future revenue streams, products or therapeutic candidates or to grant licenses on terms that may not be favorable to us.
To date, we have financed our operations through our sale of equity and debt securities. Failure to generate revenue or to raise funds could cause us to go out of business, which would result in the complete loss of your investment.
We have no revenues as of the date of this quarterly report, and no substantial revenues are anticipated until we have implemented our full plan of operations. To implement our strategy to grow and expand per our business plan, we intend to generate working capital via a private placement of equity or debt securities, or secure a loan. If we are unsuccessful in raising capital, we could be required to cease business operations and investors would lose all of their investment.
We have no agreements or commitments for any of the above-listed financing options, and we have no material commitments for the next 12 months. We will however require additional capital to meet our liquidity needs.
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.
| 20 |
Working Capital (Deficit) Surplus
| March 31, 2020 | December 31, 2019 | |||||||
| Current Assets | $ | 30,948 | $ | 264,166 | ||||
| Current Liabilities | 518,137 | 396,482 | ||||||
| Working Capital (Deficit) Surplus | $ | (487,189 | ) | $ | 132,316 | |||
Cash Flows
Cash activity for the three months ended March 31, 2020 and 2019 is summarized as follows:
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Net Cash used in operating activities – continued operations | $ | (233,218 | ) | $ | (142,358 | ) | ||
| Net Cash used in operating activities – discontinued operations | — | (45,380 | ) | |||||
| Net Cash used in operating activities | (233,218 | ) | (187,738) | |||||
| Cash provided by financing activities – discontinued operations | — | 104,500 | ||||||
| Net decrease in cash | $ | (233,218 | ) | $ | (83,238 | ) | ||
As of March 31, 2020, the Company had $30,498 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 ended June 30.
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 Expenses
| For the six months ended June 30, | ||||||||
| 2010 | 2009 | |||||||
| Net cash used in operating activities | $ | ( 802 | ) | $ | ( 923 | ) | ||
| Net cash used in investing activities | ( 284 | ) | ( 352 | ) | ||||
| Net cash provided by financing activities | 1,069 | 1,298 | ||||||
| Net increase (decrease) in cash | $ | ( 17 | ) | $ | 23 | |||
th day following the closing date. We also issued Mr. Moore 4,124,622 shares of the Company’s common stock. Mr. Lee, Mr. Denmark and Mr. Finch were issued 2,000,000 shares of the our common stock and .25 million warrants to purchase our common stock at $0.75 exercisable for five years in payment for their shares in B & M Construction Co, Inc.
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.
Not applicable to smaller reporting company as defined in Regulation S-K, and are not required to provide the information under this item.
ItemITEM 4. Controls and Procedures.CONTROLS AND PROCEDURES.
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 Principal Financial Officer have concluded that, as of June 30, 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 PrincipalChief 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 Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2020 and concluded that the Company has a material weakness in disclosure controls and procedures as of March 31, 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 transactions. Management believes this lack of internal expertise has been somewhat mitigated by continuing to retain consultants with this expertise in the quarter ended March 31, 2020. This material weakness in the Company’s disclosure controls and procedures will be further remediated in 2020.
Changes in Internal Control Over Financial Reporting
During the three months ended March 31, 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 prevent or detect material misstatements on a timely basis. Also, projections ofparty to any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
ItemITEM 1A. Risk Factors.RISK FACTORS.
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 June 30, 2010.
None.
ItemITEM 3. Defaults Upon Senior Securities.DEFAULTS UPON SENIOR SECURITIES.
None.
Not applicable.
Exhibit No. | Description | |
| 31.1 | ||
| Officer* | ||
| 31.2 | ||
| Officer* | ||
| 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: May 15, 2020
| Frances Toneguzzo | ||
Chief Executive Officer (Principal Executive Officer) | ||
| By: | /s/Jeffery Wright | |
| Jeffery Wright | ||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||
| 23 |