You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes appearing in this Annual Report. Some of the information contained in this
discussion and analysis or set forth elsewhere in this Annual Report, including
information with respect to our plans and strategy for our business, includes
forward-looking statements that involve risks and uncertainties. As a result of
many factors, our actual results could differ materially from the results
described in or implied by the forward-looking statements contained in the
following discussion and analysis. Forward-looking statements represent our
management's beliefs and assumptions only as of the date of this Annual Report.
Actual future results may be materially different from what we expect. We
undertake no obligation to update such statements to reflect events that occur
or circumstances that exist after the date on which they are made, except as
required by federal securities and any other applicable law.
The management's discussion and analysis of our financial condition and results
of operations are based upon our audited financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP").
The following discussion and analysis of financial condition and results of
operations of the Company is based upon, and should be read in conjunction with,
the audited financial statements and related notes elsewhere in this Annual
Report on Form 10-K.
Plan of Operations
We are an innovative biotechnology company dedicated to developing biotech
products, treatments and technologies that create a platform to combat neuronal
diseases. We seek to engage in strategic arrangements with companies and
institutions that are developing breakthrough technologies in the fields of AI,
ML, molecular biology, stem cells and tissue engineering, for deployment in the
fight against neuronal diseases Our search is focused on researchers based in
Israel, a country which is world-renowned for biotech innovations.
To date, the Company has collaborated with universities and scientists in the
fields of regenerative medicine, tissue engineering and 3D printable hydrogels
to develop a treatment that integrates proprietary, engineered MSCs, 3D
printable implant, smart materials and a novel delivery system and has two
product candidates for treating penetrating and non-penetrating
(concussion-like) TBIs, both integrating proprietary, anti-brain inflammation
synthetic hydrogel and modified MSCs.
We have not generated any revenue from the sale of products.
Results of Operations
Revenue
We have not generated any revenue since our inception and do not expect to
generate any revenue from the sale of products in the near future.
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Operating Expenses
For the years ended December 31, 2022 and 2021 we had the following operating
expenses:
For the Year ended
December 31,
2022 2021
Operating expenses:
Research and development expenses $ 194,406 $ 258,297
Professional fees
70,199 48,332
General and administrative expenses 365,024 495,323
Total operating expenses
$ 629,629 $ 801,952
Total operating expenses for the year ended December 31, 2022 were $629,629 as
compared to $801,952 for the year ended December 31, 2021. During the year ended
December 31, 2022, the Company incurred $194,406 of research and development
expenses which included service fees related to certain research and development
agreements of $160,210, software fees of $8,677, technology licensing fees of
$25,000 and purchases of expendable lab supplies and equipment of $519, as
compared to $258,297 of research and development expenses which included service
fees related to certain research and development agreements of $223,985,
software fees of $8,826, technology licensing fees of $25,000 and purchases of
expendable lab supplies and equipment of $486 incurred during the year ended
December 31, 2021. The Company incurred general and administrative expenses of
$365,024 for the year ended December 31, 2022 compared to general and
administrative expenses of $495,323 for the year ended December 31, 2021. The
decrease in general and administrative expense during the year ended December
31, 2022 was primarily due to stock-based compensation costs of $320,420 related
to the issuance of stock options to our officers and certain advisors, compared
to $435,570 in stock-based compensation to officers and advisors in the year
ended December 31, 2021. Professional fees were $70,199 for the year ended
December 31, 2022 compared to professional fees of $48,332 incurred during
fiscal 2021. The increase in professional fees in the year ended December 31,
2022 was due to certain specialized costs incurred for accounting treatment of
certain convertible notes and additional legal fees incurred in connection with
the filing of a registration statement on Form S-1 in the year ended December
31, 2021.
Other Income (Expense)
Other expenses were $103,888 in the year ended December 31, 2022, which included
a gain of $31,766 consisting of a gain of $54,559 as a result of the change in
value of derivative liabilities due to the amendment and revaluation of a
convertible note payable offset by the associated loss upon extinguishment of
debt of $22,793 and interest expense of $135,654, which is comprised of
accretion of convertible notes of $56,196 and interest on convertible notes of
$79,458. Other expenses were $266,032 in the year ended December 31, 2021, which
included a loss of $57,140 as a result of the change in value of derivative
liabilities and interest expense of $208,892, which is comprised of accretion
of convertible notes of $98,049, financing costs of $94,332 and interest on
convertible notes payable of $16,511.
Net Loss
We had a net loss of $733,517 in the year ended December 31, 2022 compared to a
net loss of $1,067,984 in the year ended December 31, 2021 primarily due to a
decrease in general and administrative expenses and interest expenses in the
year ended December 31, 2022, including a decrease in financing costs compared
to the year ended December 31, 2021.
Statement of Cash Flows
The following table summarizes our cash flows for the period presented:
For the Year ended
December 31,
2022 2021
Net cash used by operating activities $ (104,496 ) $ (122,567 )
Net cash provided from (used by) investing activities - -
Net cash provided from financing activities 72,500 100,000
Decrease in cash and cash equivalents $ (31,996 ) $ (22,567 )During the year ended December 31, 2022 we used cash of $31,996 as compared to
the year ended December 31, 2021, where we used cash of $22,567.
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Cash Used in Operating Activities
Cash used in operating activities for the year ended December 31, 2022 was
$104,496 as compared to $122,567 used in the year ended December 31, 2021.
Cash used in operating activities for the year ended December 31, 2022 was the
result of net loss of $733,517, offset by non-cash items including compensation
in the form of stock options for research and development of $160,210, stock
options granted for management and advisory services of $320,420, accretion of
debt discount of $56,196, a gain from the change in derivative liabilities and
extinguishment of debt of $31,766, non-cash interest expenses of $62,100 and
changes to our operating assets and liabilities of $61,861.
Cash used in operating activities for the year ended December 31, 2021 was the
result of net loss of $1,067,984, offset by non-cash items including
compensation in the form of stock options for research and development of
$223,985, stock options granted for management and advisory services of
$435,570, financing costs of $94,332, accretion of debt discount of $98,049,
change in derivative liabilities of $57,140 and changes to our operating assets
and liabilities of $36,341.
Cash Provided by Investing Activities
There was no cash provided by investing activities for the years ended December
31, 2022 and 2021.
Cash Provided by Financing Activities
During the year ended December 31, 2022, financing activities provided cash of
$72,500 as a result of related party advances for ongoing operations.
During the year ended December 31, 2021, net cash provided by financing
activities totaled $100,000 in proceeds from convertible notes.
Liquidity and Capital Resources
As of December 31, 2022, we had cash of $3,069. We are in the early stage of
development and have experienced net losses to date and have not generated
revenue from operations which raises substantial doubt about our ability to
continue as a going concern. There are a number of conditions that we must
satisfy before we will be able to commercialize potential products and generate
revenue, including identifying and establishing strategic partners and
technologies for the successful development of product candidates, which
includes clinical trials, FDA approval, demonstration of effectiveness
sufficient to generate commercial orders by customers and licensing or acquiring
intellectual property, as well as effective marketing and sales capabilities for
our product. We do not currently have sufficient resources to accomplish any of
these conditions necessary for us to generate revenue and expect to incur
increasing operating expenses. We will require substantial additional funds for
operations, the service of debt and to fund our business objectives. There can
be no assurance that financing, whether debt or equity, will always be available
to us in the amount required at any particular time or for any particular period
or, if available, that it can be obtained on terms favorable to us. If
additional funds are raised by the issuance of equity securities, such as
through the issuance and exercise of warrants, then existing stockholders will
experience dilution of their ownership interest. If additional funds are raised
by the issuance of debt or other equity instruments, we may be subject to
certain limitations in our operations, and issuance of such securities may have
rights senior to those of the then existing stockholders. We currently have no
agreements, arrangements or understandings with any person or entity to obtain
funds through bank loans, lines of credit or any other sources.
As we monitor the full impact of the COVID-19 outbreak, we continue exploring
sources of debt and equity financings as well as available grants. We are
currently exploring and are in discussions for potential strategic alternatives
in the biotechnology field which could advance our MSCs and neurodegenerative
research. There can be no assurance the necessary financing will be available or
that a suitable strategic partner will be identified. In such event, we may
explore relationships with third parties to develop or commercialize products or
technologies that we have not previously sought to develop or commercialize,
decide to exit our existing business, cease operations altogether or pursue an
acquisition of our company. However, without additional financing, we do not
believe our resources will be sufficient to meet our operating and capital needs
beyond the second quarter of 2023.
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Quick Capital Financing
On June 15, 2021, the Company entered into a note purchase agreement with Quick
Capital, LLC, a Wyoming limited liability company ("Quick Capital"), pursuant to
which the Company issued Quick Capital a twelve-month convertible promissory
note in the principal amount of $115,000 (the "Note") for a $100,000 investment,
which included an original issuance discount of 10% and a $3,500 credit for
Quick Capital's legal and transaction costs. In connection with the Note
issuance, Quick Capital was also issued a five-year warrant (the "Warrant") to
purchase up to an aggregate of 115,000 shares of the Company's common stock at
an exercise price of $1.00 per share (the "Warrant Shares"). If there is no
effective registration statement covering the Warrant Shares, Quick Capital may
exercise the Warrant on a cashless basis. The Note is convertible into shares of
common stock at a conversion price of $0.50 per share. The Note may not be
converted, and the Warrant may not be exercised if after giving effect to such
conversion or exercise, as the case may be, Quick Capital and its affiliates
would beneficially own more than 4.99% of the outstanding common stock of the
Company. For twelve months following the issuance of the Quick Note, Quick
Capital will have the right of first refusal to participate in future financings
proposed to the Company on the same terms and participation rights to purchase
up to $115,000 of securities in other offerings. The conversion price of the
Note will be reduced if the Company issues common stock or grants derivative
securities for consideration at a price less than the conversion price to the
amount of the consideration of such dilutive issuance. The Note contains certain
restrictive covenants limiting the Company's ability to make distributions or
dividends, repurchase its securities, incur debt, sell assets, make loans, or
engage in exchange offers. If an event of default (as described in the Note)
occurs, the Note will become immediately due and payable in an amount equal to
150% of the then outstanding principal amount of the Note plus any interest or
amounts owing to Quick Capital. Quick Capital is entitled to the same terms of
future financings of the Company that are more favorable than the terms of the
Quick Note.
The Note and accrued interest totaling $124,200 was not repaid on maturity,
constituting an event of default increasing the repayment value of the note to
an amount equal to 150% of the balance outstanding or $186,300. On December 7,
2022, the Company and Quick Capital amended the Note to extend the maturity date
thereof to June 15, 2023 and amended the Warrant maturity date to June 15, 2027,
Further Quick Capital agreed to reduce the outstanding balance of the note from
$186,300 to $150,000 in consideration for the issuance of 150,000 shares of
unregistered, restricted common stock valued at $76,350. The unpaid balance of
the Note continues to accrue interest at 8% per annum.
Offering
The Company filed a registration statement on Form S-1 with the SEC on January
11, 2022, to offer and sell up to 2,500,000 shares of common stock in a
self-underwritten primary offering at a fixed price of $0.70 per share which was
declared effective on January 11, 2022. To date, no shares have been sold and
there can be no assurance that the Company will be successful in selling any of
the shares being offered.
Covid-19 Pandemic
The COVID-19 pandemic has had an adverse impact on the research and development
of our product candidates. Research facilities at Dartmouth were subject to
closures as well as laboratories at Ariel in Israel. This resulted in our
discontinuing our research at these Universities and was part of our decision to
adjust our research to be collaborative and to seek aligning with third parties
to advance our expanded goals. We do not currently know the full extent of
potential delays of research in the future as a result of the continuing
pandemic and the ultimate impact on us and our research relationships is
currently uncertain.
COVID-19 has also caused significant disruptions to the global financial
markets, which impacts our ability to raise additional capital and continues to
impact the Company's workforce and its collaborative development efforts.
Going Concern
Our financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, does not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation. Our report from
our independent registered public accounting firm for the fiscal year ended
December 31, 2022 includes an explanatory paragraph stating the Company has
recurring losses and limited operations which raise substantial doubt about its
ability to continue as a going concern. If the Company is unable to obtain
adequate capital. the Company may be required to reduce the scope, delay, or
eliminate some or all of its planned operations. These factors, among others,
raise substantial doubt about the Company's ability to continue as a going
concern.
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Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements.
Critical Accounting Policies
The preparation of our financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an on-going basis, management evaluates its
estimates and judgments which are based on historical experience and on various
other factors that are believed to be reasonable under the circumstances. The
results of their evaluation form the basis for making judgments about the
carrying values of assets and liabilities. Actual results may differ from these
estimates under different assumptions and circumstances. Our significant
accounting policies are more fully discussed in the Notes to our Financial
Statements.
Research and Development Costs: The Company charges research and development
costs to expense when incurred in accordance with FASB ASC 730, Research and
Development. Research and development costs were $194,406 for the year ended
December 31, 2022. Research and development costs were $258,297 for the year
ended December 31, 2021.
Stock Based Compensation and Other Share-Based Payments: The Company records
stock-based compensation in accordance with ASC 718, Compensation - Stock
Compensation, using the fair value method of the award on grant date. All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
equity instruments issued. The expense attributable to the Company's directors
is recognized over the period the amounts are earned and vested, and the expense
attributable to the Company's non-employees is recognized when vested, as
described in Note 9, Stock Plan.
Warrants: The Company accounts for common stock warrants in accordance with
applicable accounting guidance provided in ASC 815 Derivatives and Hedging, as
either derivative liabilities or as equity instruments depending on the specific
terms of the warrant agreement. For warrants classified as equity instruments
the Company applies the Black Scholes model and expenses the fair value as
financing costs. For warrants classified as derivative financial instruments the
Company applies the Monte Carlo model to value the warrants.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the Financial Accounting Standards
Board ("FASB"), (including its EITF, the AICPA and the SEC), did not or are not
believed by management to have a material effect on the Company's present or
future financial statements.
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