VICAPSYS LIFE SCIENCES, INC. 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. Although the Company experienced net income of
In
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
8 Use of Estimates
The preparation of financial statements in conformity with
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
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 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,
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
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
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
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. For the three months ended
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 months ended
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
The following table presents a reconciliation of basic and diluted net income
(loss) per share for the three months ended
For the three months ended March 31, 2021
2021 2020
Net income (loss) per common share - basic:
Net income (loss) available to common
shareholders $ 50,230 $ (364,459 )
Weight average common shares outstanding -
basic 17,496,083 17,483,283
Net income (loss) per common share - basic $ 0.00 $ (0.02 )
Net income (loss) per common share -
diluted:
Net income (loss) available to common
shareholders $ 50,230 $ (364,459 )
Add: stock- based compensation 2,163 -
Numerator for income (loss) per common share
- diluted $ 52,393 $ (364,459 )
Weight average common shares outstanding -
diluted
Basic 17,496,083 17,483,283
Stock Options 2,681,549 -
Warrants 1,064,000 -
Common stock to be issued 11,067,281 -
Denominator weighted average common shares
outstanding - diluted 32,308,913 17,483,283
Net income (loss) per common share - diluted $ 0.00 $ (0.02 )
The following table represents the classes of dilutive securities as of March
31, 2021 , and 2020:
March 31, March 31,
2021 2020
Common stock to be issued 11,067,281 651,281
Convertible preferred stock - 10,440,000
Stock options 1,900,000 2,450,000Warrants to purchase common stock 4,146,725 4,146,725
17,114,006 17,688,006
11
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
months ended
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, on a fully-diluted basis at that time. 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 atMarch 31, 2021 , andDecember 31, 2020 : March 31, December 31, 2021 2020 Licensed patents$ 492,514 $ 492,514 Accumulated Amortization (97,487 ) (89,665 ) Balance$ 395,027 $ 402,849
The Company recognized
Future expected amortization of intangible assets is as follows:
Fiscal year endingDecember 31, 2021 (months remaining)$ 23,477 2022 31,299 2023 31,299 2024 31,299 2025 31,299 Thereafter 246,354$ 395,027 12
NOTE 5 - RELATED PARTY TRANSACTIONS
Consulting Agreement
On
MGH License Agreement
On
As amended by the Seventh Amendment to the License Agreement on
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
round. 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 Milestone completed.
regarding the role of CXCL12 in
minimizing fibrosis formation.
(iv) Initiate and finance research Dr. Poznansky's lab was focusing on
regarding the role of CXCL12 in beta this as part of the academic
cell function and differentiation. 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.
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
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
During the three months ended
Accounts Payable, related parties and Accrued Salaries, related party
The Company incurred director fees of
The Company incurred consulting fees of
14
In
Sale of equity method investment
In
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
Consulting Agreement
On
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock
The Company has 20,000,000 authorized shares of preferred stock,
15 Series A Preferred Stock
On
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
As of
Series B Preferred Stock
On
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
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.
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
16
As of
Common Stock
The Company has 300,000,000 authorized shares of common stock,
Common Stock Issuances
On
Common Stock to be issued
On
On
As of
Stock Options
The following table summarizes activities related to stock options of the
Company for the three months ended
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 March 31, 2021 1,900,000 $ 0.66 6.59
Exercisable at March 31, 2021 1,858,333 $ 0.67 6.55
The Company did not grant any options to purchase shares of common stock during
the three months ended
17
The Company recorded stock compensation expense of
Warrants
The following table summarizes activities related to warrants of the Company for
the three months ended
Weighted- Weighted-
Average Exercise Average Remaining
Number of Price per Life
Warrants Share (Years)
Outstanding and exercisable at
December 31, 2020 4,146,725 $ 0.53 1.50
Outstanding and exercisable at March
31, 2021 4,146,725 $ 0.53 1.25
The Company did not issue any warrants during the three months ended
NOTE 8 - SUBSEQUENT EVENTS
In
18
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
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
Results of Operations - Three Months Ended
Revenues
The Company did not have any revenues from continuing operations for the three
months ended
19 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
months ended
The resignation of our former CEO in
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
Liquidity and Capital Resources
At
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
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.
20
In
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
March 31, 2021 December 31, 2020
Current Assets $ 33,378 $ 1,269
Current Liabilities 826,199 853,224
Working Capital (Deficit) $ (792,821 ) $ (851,955 )
Cash Flows
Cash activity for the three months ended March 31, 2021 , and 2020 is summarized
as follows:
Three Months Ended March 31,
2021 2020
--
Net increase (decrease) in cash $ 29,194 $ (233,218 ) As of
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
21
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 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.
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
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.
© Edgar Online, source
