The accompanying unaudited condensed consolidated financial statements have been
prepared assuming the Company will continue as a going concern, which assumes
the realization of assets and satisfaction of liabilities and commitments in the
normal course of business. The Company experienced a net loss of $133,013 for
the nine months ended September 30, 2021, we had a working capital deficit of
$580,498 and an accumulated deficit of $14,025,767 as of September 30, 2021.
These factors raise substantial doubt about the Company's ability to continue as
a going concern and to operate in the normal course of business. These unaudited
condensed consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts and
classification of liabilities that might result from this uncertainty.
In March 2020, the World Health Organization declared the novel COVID-19 virus
as a global pandemic. The COVID-19 outbreak in the United States has resulted in
a significant impact to the Company's ability to secure additional debt or
equity funding to support operations in 2020. In 2021, the Company raised
$385,000 through September 30, 2021 from the sale of 1,540,000 shares of common
stock (see Note7). Since October 1, 2021, the Company has raised $125,000 (see
Note 8) and management intends to raise additional funds in 2021 to support
current operations and extend research and 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 raise additional funds in 2021, it will be forced to
severely curtail all operations and research and development activities.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements in this report have
been prepared by the Company without audit. In the opinion of management, all
adjustments necessary to present the financial position, results of operations
and cash flows for the stated periods have been made. Except as described below,
these adjustments consist only of normal and recurring adjustments. Certain
information and note disclosures normally included in the Company's consolidated
annual financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted.
8
These unaudited condensed consolidated financial statements should be read in
conjunction with a reading of the Company's consolidated audited financial
statements and notes thereto for the year ended December 31, 2020, filed on Form
10-K with the Securities and Exchange Commission on September 17, 2021. Interim
results of operations for the three and nine months ended September 30, 2021,
and 2020, are not necessarily indicative of future results for the full year.
The unaudited condensed consolidated financial statements of the Company include
the consolidated accounts of VLS and its' wholly owned subsidiary VI. All
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amount of revenues and
expenses during the reported period. Actual results could differ from those
estimates. Significant estimates included in the financial statements, include
useful the life of intangible assets, valuation allowance for deferred tax
assets and non-cash equity transactions and stock-based compensation.
Cash
The Company considers all highly liquid investments with an original term of
three months or less to be cash equivalents. The Company held no cash
equivalents as of September 30, 2021, and December 31, 2020. 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 Massachusetts General Hospital ("MGH"),
as amended (the "License Agreement"). These costs are being amortized over the
term of the License Agreement which is based on the remaining life of the
related patents being licensed.
The Company reviews these intangible assets for possible impairment when events
or changes in circumstances indicate that the assets carrying amount may not be
recoverable. In evaluating the future benefit of its intangible assets,
management performs an analysis of the anticipated undiscounted future net cash
flows of the intangible assets over the remaining estimated useful life. An
impairment loss is recorded if the carrying value of the asset exceeds the
expected future cash flows.
Long-Lived Assets
The Company reviews long-lived assets at least annually or when events or
changes in circumstances reflect the fact that the recorded value may not be
recoverable for impairment and 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.
Equity Method Investment
The Company accounts for investments in which the Company owns more than 20% or
has the ability to exercise significant influence of the investee, using the
equity method in accordance with ASC Topic 323, Investments-Equity Method and
Joint Ventures. Under the equity method, an investor initially records an
investment in the stock of an investee at cost and adjusts the carrying amount
of the investment to recognize the investor's share of the earnings or losses of
the investee after the date of acquisition.
9
The amount of the adjustment is included in the determination of net income by
the investor, 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 the investment has occurred which is other than temporary, and which
should be recognized even though the decrease in value is in excess of what
would otherwise be recognized by application of the equity method.
In accordance with ASC 323-10-35-20 through 35-22, the investor ordinarily shall
discontinue applying the equity method if the investment (and net advances) is
reduced to zero and shall not provide for additional losses unless the investor
has guaranteed obligations of the investee or is otherwise committed to provide
further financial support for the investee. An investor shall, however, provide
for additional losses if the imminent return to profitable operations by an
investee appears to be assured. For example, a material, nonrecurring loss of an
isolated nature may reduce an investment below zero even though the underlying
profitable operating pattern of an investee is unimpaired. If the investee
subsequently reports net income, the investor shall resume applying the equity
method only after its share of that net income equals the share of net losses
not recognized during the period the equity method was suspended.
Equity and cost method investments are classified as investments. The Company
periodically evaluates its equity and cost method investments for impairment due
to declines considered to be other than temporary. If the Company determines
that a decline in fair value is other than temporary, then a charge to earnings
is recorded as an impairment loss in the accompanying consolidated statements of
operations.
The Company's equity method investment consisted of equity owned in Athens
Encapsulation Inc. ("AEI"), a Company controlled by former directors of the
Company which was given to the Company as part of an investment and
restructuring agreement entered into in May 2019. In January 2021, the Company
sold its' equity investment in AEI, back to AEI for $100,000, which is included
in gain on sale of equity method investment for the nine months ended September
30, 2021. As of September 30, 2021, the Company did not have any remaining
equity investment in AEI. During the three and nine months ended September 30,
2021, and 2020, the Company's proportionate share of net income was
insignificant.
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 September 30, 2021.
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
Revenue recognition is accounted for under ASC Topic 606, "Revenue from
Contracts with Customers" ("ASC 606") and all the related amendments. 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.
10
The Company's contracts with customers are generally on a contract and work
order basis and represent obligations that are satisfied at a point in time, as
defined in the new guidance, generally upon delivery or has services are
provided. Accordingly, revenue for each sale is recognized when the Company has
completed its performance obligations. Any costs incurred before this point in
time, are recorded as assets to be expensed during the period the related
revenue is recognized. The Company did not generate any revenue for the three
and nine months ended September 30, 2021, and 2020.
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 period the employee,
director, or non-employee is required to perform the services in exchange for
the award (presumptively, the vesting period). The ASC also requires measurement
of the cost of employee, director, and non-employee services received in
exchange for an award based on the grant-date fair value of the award. The
Company has elected to recognize forfeitures as they occur as permitted under
ASU 2016-09 Improvements to Employee Share-Based Payment.
Research and Development
Costs and expenses that can be clearly identified as research and development
are charged to expense as incurred. For the three and nine months ended
September 30, 2021, the Company incurred $-0- and $7,243, respectively, in
research and development expenses to a related party. For the three and nine
months ended September 30, 2020, research and development costs, related party,
were $-0- and $94,048, respectively.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740-10, Income
Taxes. Deferred tax assets and liabilities are recognized to reflect the
estimated future tax effects, calculated at the tax rate expected to be in
effect at the time of realization. A valuation allowance related to a deferred
tax asset is recorded when it is more likely than not that some portion of the
deferred tax asset will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of the changes in tax laws and rates of the date of
enactment.
ASC 740-10 prescribes a recognition threshold that a tax position is required to
meet before being recognized in the financial statements and provides guidance
on recognition, measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition issues. Interest and penalties are
classified as a component of interest and other expenses. To date, the Company
has not been assessed, nor paid, any interest or penalties.
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. Only 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 September 30, 2021, and 2020, the Company's dilutive
securities are convertible into 23,467,283 and 17,431,756 shares of common
stock, respectively. This amount is not included in the computation of dilutive
loss per share because their impact is antidilutive.
11
The following table represents the classes of dilutive securities as of
September 30, 2021, and 2020:
SCHEDULE OF ANTIDILUTIVE SECURITIES OF EARNINGS PER SHARE
September 30, 2021 September 30, 2020
Common stock to be issued 17,507,283 651,281
Convertible preferred stock - 10,440,000
Stock options 1,900,000 2,193,750
Warrants to purchase common stock 4,060,000 4,146,725
23,467,283 17,431,756
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 for the three
and nine months ended September 30, 2021, and 2020.
NOTE 4 - INTANGIBLE ASSETS
The Company's intangible assets consist of costs incurred in connection with the
License Agreement with MGH, as amended (See Note 5). The consideration paid for
the rights included in the License Agreement was in the form of common stock
shares which resulted in MGH receiving approximately 20% of the total
outstanding shares of common stock of VI. 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 intangible assets consisted of the following at September 30,
2021, and December 31, 2020:
SCHEDULE OF INTANGIBLE ASSETS
September 30, 2021 December 31, 2020
Licensed patents $ 492,514 $ 492,514
Accumulated amortization (113,132 ) (89,665 )
Balance $ 379,382 $ 402,849
The Company recognized $7,823 and $23,467 of amortization expense related to the
License Agreement with MGH for the three and nine months ended September 30,
2021, and $7,862 and $23,587 for the three and nine months ended September 30,
2020, respectively.
Future expected amortization of intangible assets is as follows:
SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS
Fiscal year ending December 31,
2021 (months remaining) $ 7,823
2022 31,299
2023 31,299
2024 31,299
2025 31,299
Thereafter 246,363
Balance $ 379,382
12
NOTE 5 - RELATED PARTY TRANSACTIONS
Consulting Agreement
On June 21, 2019, the Company entered into a Consulting Agreement (the
"Consulting Agreement") with Mark Poznansky, MD, (the "Consultant") a minority
stockholder and former Director. The Company engaged the Consultant to render
consulting services with respect to informing, guiding and supervising the
development of antagonists to immune repellents or anti-fugetaxins for the
treatment of cancer. The initial term of the Consulting Agreement is for one
year (the "Initial Term") and the Company agreed to pay the Consultant $3,000
per month commencing June 1, 2019, with the fee increasing to $6,000 per month
commencing on the 1stday of the month following the completion of a $5 million
in fundraising by the Company. The Consulting Agreement was not renewed after
the Initial Term due the Company's working capital deficiencies. The Company
incurred expenses of $-0- and $18,000 for the three and nine months ended
September 30, 2020, respectively, related to the Consulting Agreement which is
included in professional fees on the unaudited condensed consolidated statements
of operations. As of September 30, 2021, and December 31, 2020, $9,000,
respectively is included in accounts payable, related parties, on the unaudited
condensed consolidated balance sheets, related to the Consulting Agreement.
MGH License Agreement
On May 8, 2013, VI and MGH, a principal stockholder (see Note 6) entered into
the License Agreement, pursuant to which MGH granted to the Company, in the
field of coating and transplanting cells, tissues and devices for therapeutic
purposes, on a worldwide basis: (i) an exclusive, royalty-bearing license under
its rights in Patent Rights (as defined in the License Agreement) to make, use,
sell, lease, import and transfer Products and Processes (each as defined in the
License Agreement); (ii) a non-exclusive, sub-licensable (solely in the License
Field and License Territory (each as defined in the License Agreement))
royalty-bearing license to Materials (as defined in the License Agreement) and
to make, have made, use, have used, Materials for only the purpose of creating
Products, the transfer of Products and to use, have used and transfer processes;
(iii) the right to grant sublicenses subject to and in accordance with the terms
of the License Agreement, and (iv) the nonexclusive right to use technological
information (as defined in the License Agreement) disclosed by MGH to the
Company under the License Agreement, all subject to and in accordance with the
License Agreement (the "License").
As amended by the Seventh Amendment to the License Agreement on December 22,
2017, the License Agreement requires that VI satisfy the following requirements
prior to the first sale of Products ("MGH License Milestones"), by certain dates
which have passed. The table below lists the MGH Milestones and the Company's
progress in satisfying or negotiating the extension of each milestone:
MILESTONE: STATUS:
(i) Provide a detailed business and The Company has provided MGH with a
development plan. 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 The Company has raised $1 million and is
round. 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 Milestone completed.
regarding the role of CXCL12 in
minimizing fibrosis formation.
(iv) Initiate and finance research Dr. Poznansky's lab was focusing on this as
regarding the role of CXCL12 in part of the academic project. The Company
beta cell function and therefore made the strategic decision to
differentiation. 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.
13
The Company and MGH have agreed to work together to restate the License
Agreement, incorporating all the relevant provisions from the seven amendments
and agreeing on a new set of milestones for future development.
The License Agreement also requires VI to pay to MGH a one percent (1%) royalty
rate on net sales related to the first license sub-field, which is the treatment
of Type 1 Diabetes. Future sub-fields shall carry a reasonable royalty rate,
consistent with industry standards, to be negotiated at 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 royalty is
due under the License Agreement.
The License Agreement also grants MGH the right to terminate the License
Agreement if VI fails to make any payment due under the License Agreement or
defaults in the performance of any of its other obligations under the License
Agreement, subject to certain notice and rights to cure set forth therein. MGH
may also terminate the License Agreement immediately upon written notice to VI
if VI: (i) shall make an assignment for the benefit of creditors; or (ii) or
shall have a petition in bankruptcy filed for or against it that is not
dismissed within sixty (60) days of filing. As of the date of this filing, this
License Agreement remains active and the Company has not received any
termination notice from MGH.
VI may terminate the License Agreement prior to its expiration by giving ninety
(90) days' advance written notice to MGH, and upon such termination shall,
subject to the terms of the License Agreement, immediately cease all use and
sales of Products and Processes.
The Company incurred costs to MGH of $-0- and $7,243, respectively, for the
three and nine months ended September 30, 2021, and is classified as research
and development costs, related party, on the unaudited condensed consolidated
statements of operations. For the three and nine months ended September 30,
2020, the Company incurred costs to MGH of $-0- and $94,048, respectively. As of
September 30, 2021, and December 31, 2020, $-0- and $101,180, respectively, is
included in accounts payable, related parties, on the unaudited condensed
consolidated balance sheets.
During the three and nine months ended September 30, 2021, and 2020, there have
not been any sales of Product or Process under this License Agreement.
Accounts Payable, related parties and Accrued Salaries, related party
The Company incurred director fees of $22,500 and $67,500 for the three and nine
months ended September 30, 2021, and 2020, respectively, to Federico Pier, the
Company's Chairman of the Board, which are included in personnel costs on the
unaudited condensed consolidated statements of operations. As of September 30,
2021, and December 31, 2020, $75,000 and $67,500, respectively, of these
director fees are included in accounts payable, related parties, on the
unaudited condensed consolidated balance sheets.
The Company incurred consulting fees of $15,000 and $45,000 for the three and
nine months ended September 30, 2021, and 2020, respectively, to Jeff Wright,
the Company's Chief Financial Officer, which are included in professional fees
on the unaudited condensed consolidated statements of operations. As of
September 30, 2021, and December 31, 2020, $50,180 and $45,000, respectively, is
included in accounts payable, related parties, on the unaudited condensed
consolidated balance sheets.
14
In August 2020, Frances Tonneguzzo, the Company's Chief Executive Officer (the
"former CEO") tendered her resignation as CEO. For the three and nine months
ended September 30, 2021, the Company did not incur any expenses and for the
three and nine months ended September 30, 2020, the Company incurred expenses of
$35,554 and $172,354 to the former CEO, which are included in personnel costs on
the unaudited condensed consolidated statements of operations. As of September
30, 2021, and December 31, 2020, $115,312, respectively, of unpaid salary to the
former CEO is included in accrued salaries, related party on the unaudited
condensed consolidated balance sheets.
Sale of Equity Method Investment
In January 2021, the Company sold its' equity investment in AEI back to AEI for
$100,000, which is included in gain on sale of equity method investment on the
unaudited condensed consolidated statements of operations for the nine months
ended September 30, 2021 (see Note 3).
NOTE 6- COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is not aware of any material, existing or pending legal proceedings
against our Company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial shareholder,
is an adverse party or has a material interest adverse to our interest.
MGH License Agreement
As discussed in Note 5, the Company executed a License Agreement with MGH. The
License Agreement also requires VI to pay to MGH a one percent (1%) royalty rate
on net sales related to the first license sub-field, which is the treatment of
Type 1 Diabetes. Future sub-fields shall carry a reasonable royalty rate,
consistent with industry standards, to be negotiated at the time the first such
royalty payment shall become due with respect to the applicable Products and
Processes (as defined in the License Agreement).
The License Agreement additionally requires VI to pay to MGH a $1.0 million
"success payment" within 60 days after the first achievement of total net sales
of Product or Process equal or exceeding $100,000,000 in any calendar year and
$4,000,000 within sixty (60) days after the first achievement of total net sales
of Product or Process equal to or exceeding $250,000,000 in any calendar year.
The Company is also required to reimburse MGH's expenses in connection with the
preparation, filing, prosecution and maintenance of all Patent Rights. No
expense reimbursements were paid to MGH during the three and nine months ended
September 30, 2021.
Consulting Agreement
On June 21, 2019, the Company entered into a Consulting Agreement (the
"Consulting Agreement") with C&H Capital, Inc. (the "Consultant"). The Company
engaged the Consultant to render consulting services to facilitate long range
strategic investor relations planning and other related services. The initial
term of the Consulting Agreement is for one year (the "Initial Term") and the
Company agreed to pay the Consultant $3,500 on the last business day for each
month of service. The Consulting Agreement was not renewed after the Initial
Term due the Company's working capital deficiencies. The Consulting Agreement
expired June 30, 2020, and was not renewed. The Company incurred expenses of
$-0- and $21,000 for the three and nine months ended September 30, 2020, related
to the Consulting Agreement and is included in professional fees on the
unaudited condensed consolidated statements of operations. On June 21, 2019, the
Consultant also received a stock option grant of 50,000 shares of common stock
that vested upon the grant, with an exercise price of $0.25 per share. As of
September 30, 2021, and December 31, 2020, the balance owed to the Consultant
was $14,000, respectively, and is included in accounts payable on the unaudited
condensed consolidated balance sheet.
15
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock
The Company has 20,000,000 authorized shares of preferred stock, $0.001 par
value per share.
Series A Preferred Stock
On December 19, 2017, the Company amended its articles of incorporation by
filing a certificate of designation with the Secretary of State of Florida
therein designating a class of preferred stock as Series A Preferred Stock,
$0.001 par value per share, consisting of 3 million (3,000,000) shares. Each
holder of shares of Series A Preferred Stock shall be entitled to the number of
votes equal to the number of votes held by the number of shares of common stock
into which such share of Series A Preferred Stock could be converted, and except
as otherwise required by applicable law, shall have the voting rights and power
equal to the voting rights and powers of the common stock. The holders of the
Series A Preferred Stock shall vote together with the holders of the common
stock of the Company as a single class and as single voting group upon all
matters required to be submitted to a class or series vote pursuant to the
protective provisions of the Certificate of Designation or under applicable law.
In the event of liquidation, dissolution or winding up of the Corporation,
either voluntarily or involuntarily, the holders of Series A Preferred Stock
shall be entitled to receive, prior and in preference to any common stock
holders, distribution of any surplus funds equal to the greater of (i) the sum
of $1.67 per share or (ii) such amount per share as would have been payable had
all shares been converted to common stock.
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.
Pursuant to the Articles of Incorporation, the shares of Series A Preferred
Stock automatically converted into 6,000,000 shares of common stock to be issued
on February 12, 2021, (the one-year anniversary of the initial filing by the
Company of the Form 10 filed with the Securities and Exchange Commission).
As of September 30, 2021, and December 31, 2020, there were -0- and 3,000,000
shares, respectively, of Series A Preferred Stock issued and outstanding.
Series B Preferred Stock
On December 19, 2017, the Company amended the articles of incorporation by
filing a certificate of designation with the Secretary of State of Florida
therein designating a class of preferred stock as Series B Preferred Stock,
$0.001 par value per share, consisting of 4.44 million (4,440,000) shares (the
"Series B Preferred Stock Certificate of Designation").
Each holder of shares of Series B Preferred Stock shall be entitled to the
number of votes equal to the number of votes held by the number of shares of
common stock into which such share of Series B Preferred Stock could be
converted, and except as otherwise required by applicable law, shall have the
voting rights and power equal to the voting rights and powers of the common
stock. The holders of the Series B Preferred Stock shall vote together with the
holders of the common stock of the Company as a single class and as single
voting group upon all matters required to be submitted to a class or series vote
pursuant to the protective provisions of the Series B Preferred Stock
Certificate of Designation or under applicable law. In the event of liquidation,
dissolution or winding up of the Corporation, either voluntarily or
involuntarily, the holders of Series A Preferred Stock shall be entitled to
receive, prior and in preference to any common stock holders, distribution of
any surplus funds equal to the greater of : the sum of $0.83 per share or such
amount per share as would have been payable had all shares been converted to
common stock.
The holder of Series B Preferred Stock may elect at any time to convert such
sharers into common stock of the Company. Each share of Series B Preferred Stock
is convertible into shares of common stock at a conversion rate of 1:1 (the
"Series B Conversion Rate"). The Series B Conversion Rate shall be adjusted for
stock splits, stock combinations, stock dividends or similar recapitalizations.
16
Pursuant to the Articles of Incorporation, the shares of Series B Preferred
Stock automatically converted into 4,440,000 shares of common stock to be issued
on February 12, 2021, the one-year anniversary of the initial filing by the
Company of the Form 10 filed by the Company with the Securities and Exchange
Commission.
As of September 30, 2021, and December 31, 2020, there were -0- and 4,440,000
shares, respectively, 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 September 30, 2021, and December 31, 2020, there were
17,561,550 and 17,483,283 shares, respectively, of common stock outstanding.
Common Stock Issuances
On February 12, 2021, the Company issued 6,000,000 shares of common stock to the
holders of Series A Preferred Stock, pursuant to the automatic conversion
feature of the Series A Certificate of Designation, whereby, the Series A shares
are to automatically convert on the one-year anniversary of the Company filing
its Registration Statement on Form-10. The Form-10 Registration Statement was
filed with the SEC on February 12, 2020.
On February 12, 2021, the Company issued 4,440,000 shares of common stock to the
holders of Series B Preferred Stock, pursuant to the automatic conversion
feature of the Series B Certificate of Designation, whereby, the Series B shares
are to automatically convert on the one-year anniversary of the Company filing
its Registration Statement on Form-10. The Form-10 Registration Statement was
filed with the SEC on February 12, 2020.
During the nine months ended September 30, 2021, the Company sold 1,540,000
shares of common stock pursuant to a Private Placement Memorandum (the "PPM")
for $0.25 per share and received $385,000.
Common Stock to be issued
On February 12, 2021, the Company recorded 6,000,000 shares of common stock to
be issued to the holders of Series A Preferred Stock, pursuant to the automatic
conversion feature of the Series A Certificate of Designation, whereby, the
Series A shares are to automatically convert on the one-year anniversary of the
Company filing its Registration Statement on Form-10. The Form-10 Registration
Statement was filed with the SEC on February 12, 2020.
On February 12, 2021, the Company recorded 4,440,000 shares of common stock to
be issued to the holders of Series B Preferred Stock, pursuant to the automatic
conversion feature of the Series B Certificate of Designation, whereby, the
Series B shares are to automatically convert on the one-year anniversary of the
Company filing its Registration Statement on Form-10. The Form-10 Registration
Statement was filed with the SEC on February 12, 2020.
As of September 30, 2021, and December 31, 2020, there were 17,507,283 and
651,281, respectively, shares of common stock to be issued. The September 30,
2021 amount relates to 6,000,000 shares of common stock be issued for the
automatic conversion of the Series A Preferred Stock, 4,440,000 shares of common
stock to be issued for the automatic conversion of the Series B Preferred Stock,
1,540,000 shares of common stock to be issued pursuant to stock subscription
agreements, 597,281 shares to be issued pursuant to a Stock Issuance and Release
Agreement ("SRI Agreement") executed by the Company in February 2019 to
stockholders for no consideration who purchased shares in 2018 at $1.85, and
30,000 shares of common stock to be issued to two initial shareholders of VI.
The September 30, 2020, amount relates to 621,281 shares to be issued pursuant
to the SRI Agreement and 30,000 shares of common stock to be issued to two
initial shareholders of VI.
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Stock Options
The following table summarizes activities related to stock options of the
Company for the nine months ended September 30, 2021:
SCHEDULE OF STOCK OPTIONS ACTIVITY
Weighted- Weighted-
Average Average
Exercise Remaining
Number of Price per Life
Options Share (Years)
Outstanding at December 31, 2020 1,900,000 $ 0.66 6.83
Outstanding at September 30, 2021 1,900,000 $ 0.66 6.08
Exercisable at September 30, 2021 1,875,000 $ 0.67 6.06
The Company did not grant any options to purchase shares of common stock during
the nine months ended September 30, 2021.
The Company recorded stock compensation expense of $1,081 and $3,244 for the
three and nine months ended September 30, 2021, respectively, and $2,883 and
$13,699 for the three and nine months ended September 30, 2020, respectively. As
of September 30, 2021, 25,000 options to purchase shares of common stock remain
unvested and $3,245 of stock compensation expense remains unrecognized and will
be expensed over a weighted average period of 0.50 years.
Warrants
The following table summarizes activities related to warrants of the Company for
the nine months ended September 30, 2021:
SCHEDULE OF WARRANTS ACTIVITY
Weighted-
Average Weighted-
Exercise Average
Number of Price per Remaining Life
Warrants Share (Years)
Outstanding and exercisable at
December 31, 2020 4,146,725 $ 0.53 1.50
Expired 86,725 1.85
Outstanding and exercisable at
September 30, 2021 4,060,000 $ 0.50 0.76
The Company did not issue any warrants during the nine months ended September
30, 2021.
NOTE 8 - SUBSEQUENT EVENTS
In June 2021, the Company entered into Security Purchase Agreements ("SPA's)
with select accredited investors in connection with a private offering by the
Company to raise a maximum of $1,000,000 through the sale of common stock of the
Company at $0.25 per share. Since October 1, 2021, the Company has raised an
aggregate amount of $125,000 as of the date of these unaudited condensed
consolidated financial statements.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the notes thereto appearing in Part I, Item 1 of this Quarterly
Report. Historical results and trends that might appear in this Quarterly Report
should not be interpreted as being indicative of future operations.
Overview
Vicapsys Life Sciences, Inc. ("VLS") was incorporated in the State of Florida on
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".
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 creating a zone of immunoprotection
around cells, tissues, organs and devices for therapeutic purposes. The product
name VICAPSYN™ is the Company's proprietary product line that is applied to
transplantation therapies and related stem-cell applications in the
transplantation field.
COVID-19
In March 2020, the World Health Organization declared the spread of a novel
strain of coronavirus ("COVID-19") a global pandemic. Actions have been taken by
federal, state and local governmental authorities to combat the spread of
COVID-19, including through issuances of "stay-at-home" directives and similar
mandates for many individuals to substantially restrict daily activities and for
many businesses to curtail or cease normal operations. These measures, while
intended to protect human life, have led to significantly reduced economic
activity. At the end of 2020, two vaccines became available. While many state
and local authorities have started to reopen businesses, others have adopted
additional measures to mitigate COVID-19 and the rapid development and
uncertainty of the situation continues to preclude any prediction as to the
ultimate impact COVID-19 will have on the Company's business, financial
condition, results of operation and cash flows, which will depend largely on
future developments directly or indirectly relating to the duration and scope of
the COVID-19 outbreak in the United States.
Results of Operations - Three and Nine Months Ended September 30, 2021, and 2020
Revenues
The Company did not have any revenues from continuing operations for the three
and nine months ended September 30, 2021 and 2020.
Operating Expenses
We classify our operating expenses 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
and nine months ended September 30, 2021, were $111,181 and $233,013
respectively, compared to $89,221 and $685,295, respectively, for the three and
nine months ended September 30, 2020.
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The resignation of our former CEO in August 2020, resulted in a decrease in
personnel costs to $23,073 from $59,756 for the three months ended September 30,
2021, and to $68,532 from $252,487 for the nine months ended September 30, 2020.
The decreases in research and development and general and administrative
expenses was primarily due to the negative impact of COVID-19, which hindered
the Company's ability to raise the additional capital necessary to maintain
regular operating activities. The increase in professional fees to $79,204 from
$15,925 for the three months ended September 30, 2021 compared to the three
months ended September 30, 2020, respectively, was primarily due to accounting
and legal fees incurred to bring the Company current with all public filing
requirements pursuant to The Securities and Exchange Commission (the "SEC")
adopting amendments to Rule 15c2-11 which, in part, required issuers to be
current and publicly available for broker-dealers to quote their securities in
the OTC market by September 28, 2021. However, the overall impact of COVID-19
resulted in a decrease in professional fees to $130,526 from $302,259, for the
nine months ended September 30, 2021, compared to the nine months ended
September 30, 2020, respectively.
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 September 30, 2021, we had $165,549 of cash on hand and an accumulated
deficit of $14,025,767.
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 for investors in our
Company.
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.
In January 2021, the Company sold its' equity investment in AEI, back to AEI for
$100,000, which is included in other income for the nine months ended September
30, 2021. In June 2021, the Company entered into Security Purchase Agreements
("SPA's) with select accredited investors in connection with a private offering
by the Company to raise a maximum of $1,000,000 through the sale of common stock
of the Company at $0.25 per share. During the nine months ended September 30,
2021, the Company has raised an aggregate amount of $385,000 from the sale of
1,540,000 shares of common stock, and since October 31, 2021, the Company has
raised an additional $125,000 from the sale of 500,000 shares of common stock as
of the date these unaudited condensed consolidated financial statements. We will
still require additional capital to meet our liquidity needs.
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Additionally, we will have to meet all the financial disclosure and reporting
requirements associated with being a publicly reporting company. Our management
will have to spend additional time on policies and procedures to make sure our
Company is compliant with various regulatory requirements.
This additional corporate governance time required of management could limit the
amount of time management has to implement our business plan and may impede the
speed of our operations.
Working Capital Deficit
September 30, 2021 December 31, 2020
Current Assets $ 165,549 $ 1,269
Current Liabilities 746,047 853,224
Working Capital Deficit $ (580,498 ) $ (851,955 )
Cash Flows
Cash activity for the nine months ended September 30, 2021, and 2020 is
summarized as follows:
Nine Months Ended September 30,
2021 2020
Net cash used in operating activities $ (320,720 ) $ (262,512 )
Net cash provided by investing activities
100,000 -
Net cash provided by financing activities 385,000 -
Net increase (decrease) in cash $ 164,280 $ (262,512 )
As of September 30, 2021, the Company had $165,549 of cash on hand.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Regulation S-K
Item 303(a)(4) during the periods presented, investments in special-purpose
entities or undisclosed borrowings or debt. Additionally, we are not a party to
any derivative contracts or synthetic leases.
Contractual Obligations
MGH License Agreement
The Company executed a License Agreement with MGH, a principal stockholder. The
License Agreement also requires VI to pay to MGH a one (1%) royalty rate on net
sales related to the first license sub-field, which is the treatment of Type 1
Diabetes. Future sub-fields shall carry a reasonable royalty rate, consistent
with industry standards, to be negotiated at the time the first such royalty
payment shall become due with respect to the applicable Products and Processes
(as defined in the License Agreement). The License Agreement additionally
requires VI to pay to MGH a $1.0 million "success payment" within 60 days after
the first achievement of total net sales of Product or Process equal or exceed
$100,000,000 in any calendar year and $4,000,000 within sixty (60) days after
the first achievement of total net sales of Products or process equal or exceed
$250,000,000 in 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 tights.
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Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations is
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these consolidated financial statements and related
disclosures requires us to make estimates and judgments 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 that are
not readily apparent from other sources. Actual results may differ from these
estimates.
The methods, estimates and judgments we use in applying our most critical
accounting policies have a significant impact on the results 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 both 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 judgments and estimates used in the preparation of our interim
condensed consolidated financial statements.
Our significant accounting policies are described in more detail in the notes to
our consolidated financial statements for the fiscal year ended December 31,
2020, included in the Company's Annual Report filed on Form 10-K with the SEC on
September 17, 2021.
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.
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