Attached files
| file | filename |
|---|---|
| EX-32.1 - CERTIFICATION - BIOXYTRAN, INC | f10q0320ex32-1_bioxytran.htm |
| EX-31.1 - CERTIFICATION - BIOXYTRAN, INC | f10q0320ex31-1_bioxytran.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________ to _____________
Commission file number: 001-35027
BIOXYTRAN, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 26-2797630 | |
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) |
| 233 Needham St., Ste 300, Newton, MA | 02464 | |
| (Address of principal executive offices) | (Zip Code) |
617-454-1199
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller Reporting Company | ☒ |
| Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, $0.001 par value per share | BIXT | OTCQB |
| Class | Outstanding at May 12, 2020 | |
| Common Stock, $0.001 par value per share | 97,031,673 shares |
BIOXYTRAN,
INC.
FORM 10-Q
TABLE OF CONTENTS
Except as otherwise required by the context, all references in this report to “we”, “us”, “our” or “Company” refer to the consolidated operations of BIOXYTRAN, Inc.
i
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements: BIOXYTRAN, Inc., March 31, 2020
BIOXYTRAN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2020 AND DECEMBER 31, 2019
(UNAUDITED)
| March 31, 2020 | December 31, 2019 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 43,891 | $ | 169,628 | ||||
| Other receivable | - | 50,000 | ||||||
| Total current assets | 43,891 | 219,628 | ||||||
| Total assets | $ | 43,891 | $ | 219,628 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 46,346 | $ | 71,932 | ||||
| Accounts payable related party | 116,000 | 96,000 | ||||||
| Convertible notes payable, net of premium and discount | 1,718,695 | 850,983 | ||||||
| Total current liabilities | 1,881,041 | 1,018,915 | ||||||
| Total liabilities | 1,881,041 | 1,018,915 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders’ equity (deficit): | ||||||||
| Preferred stock, $0.001 par value; 50,000,000 shares authorized, nil issued and outstanding | - | - | ||||||
| Common stock, $0.001 par value; 300,000,000 shares authorized; 88,231,673 issued and outstanding as of March 31, 2020, and 86,475,673 issued and outstanding as of December 31, 2019 | 88,232 | 86,476 | ||||||
| Additional paid-in capital | 856,418 | 1,355,542 | ||||||
| Accumulated deficit | (2,781,800 | ) | (2,241,305 | ) | ||||
| Total stockholders’ equity (deficit) | (1,837,150 | ) | (799,287 | ) | ||||
| Total liabilities and stockholders’ equity (deficit) | $ | 43,891 | $ | 219,628 | ||||
See the accompanying notes to these unaudited condensed consolidated financial statements
1
BIOXYTRAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(UNAUDITED)
| 3-Months Ended | ||||||||
| March 31, 2020 | March 31, 2019 | |||||||
| Operating expenses: | ||||||||
| General and administrative | $ | 266,043 | $ | 129,625 | ||||
| Total operating expenses | 266,043 | 129,625 | ||||||
| Loss from operations | (266,043 | ) | (129,625 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (107,730 | ) | (6,887 | ) | ||||
| Amortization of debt discount | (166,722 | ) | (54,897 | ) | ||||
| Total other income (expenses) | (274,452 | ) | (61,784 | ) | ||||
| Net loss before provision for income taxes | (540,495 | ) | (191,409 | ) | ||||
| Provision for income taxes | - | - | ||||||
| NET LOSS | $ | (540,495 | ) | $ | (191,409 | ) | ||
| Loss per common share, basic and diluted | $ | (0.01 | ) | $ | (0.00 | ) | ||
| Weighted average number of common shares outstanding, basic and diluted | 87,256,959 | 85,103,673 | ||||||
See the accompanying notes to these unaudited condensed consolidated financial statements
2
BIOXYTRAN, INC.
CONDENSED CONSOLIDATED CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(UNAUDITED)
| Additional | ||||||||||||||||||||
| Common Stock | Paid in Capital | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Common | Deficit | Equity (Deficit) | ||||||||||||||||
| December 31, 2018 | 85,103,673 | $ | 85,104 | $ | 72,412 | $ | (382,830 | ) | $ | (225,314 | ) | |||||||||
| Issuance of warrants | 45,361 | 45,361 | ||||||||||||||||||
| Debt premium on convertible note | (343,796 | ) | (343,796 | ) | ||||||||||||||||
| Debt premium accretion | 60,268 | 60,268 | ||||||||||||||||||
| Net loss | - | - | (191,409 | ) | (191,409 | ) | ||||||||||||||
| March 31, 2019 | 85,103,673 | $ | 85,104 | $ | (165,755 | ) | $ | (574,239 | ) | $ | (654,890 | ) | ||||||||
| Additional | ||||||||||||||||||||
| Common Stock | Paid in Capital | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Common | Deficit | Equity (Deficit) | ||||||||||||||||
| December 31, 2019 | 86,475,673 | $ | 86,476 | $ | 1,355,542 | $ | (2,241,305 | ) | $ | (799,287 | ) | |||||||||
| Issuance of warrants | - | - | 145,438 | - | 145,438 | |||||||||||||||
| Conversion of warrants | 750,000 | 750 | (750 | ) | - | |||||||||||||||
| Options issued - 2010 Plan | 5,004 | 5,004 | ||||||||||||||||||
| Shares issued - 2010 Plan | 656,000 | 656 | 149,841 | 150,497 | ||||||||||||||||
| Debt premium on convertible note | (937,007 | ) | (937,007 | ) | ||||||||||||||||
| Debt premium accretion | 104,568 | 104,568 | ||||||||||||||||||
| Shares issued for conversion of principal and accrued interest | 350,000 | 350 | 33,782 | 34,132 | ||||||||||||||||
| Net loss | - | - | (540,495 | ) | (540,495 | ) | ||||||||||||||
| March 31, 2020 | 88,231,673 | $ | 88,232 | $ | 856,418 | $ | (2,781,800 | ) | $ | (1,837,150 | ) | |||||||||
See the accompanying notes to these unaudited condensed consolidated financial statements
3
BIOXYTRAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(UNAUDITED)
| 3-Months Ended | ||||||||
| March 31, 2020 | March 31, 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (540,495 | ) | $ | (191,409 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Amortization of debt discount, incl. issuance of warrants | 166,722 | 54,897 | ||||||
| Stock-based compensation expense | 155,501 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
Other receivable | 50,000 | - | ||||||
| Accounts payable and accrued expenses | (8,517 | ) | 7,682 | |||||
| Accounts payable related party | 20,000 | (10,900 | ) | |||||
| Net cash used in operating activities | (156,789 | ) | (139,730 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Net cash used in investing activities | - | - | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of convertible notes payable | 264,000 | 222,250 | ||||||
| Repayment of convertible notes payable | (232,948 | ) | - | |||||
| Net cash provided by financing activities | 31,052 | 222,250 | ||||||
| Net increase (decrease) in cash | (125,737 | ) | 82,520 | |||||
| Cash, beginning of period | 169,628 | 36,411 | ||||||
| Cash, end of period | $ | 43,891 | $ | 118,931 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Interest paid | $ | 91,362 | $ | - | ||||
| Income taxes paid | $ | - | $ | - | ||||
| NON-CASH INVESTING & FINANCING ACTIVITIES | ||||||||
| Issuance of warrants | $ | 145,438 | $ | 45,361 | ||||
| Debt discount on convertible note | $ | (76,265 | ) | $ | (25,165 | ) | ||
| Debt premium on convertible note | $ | (937,007 | ) | $ | (343,796 | ) | ||
| Accretion of debt premium to additional paid-in capital | $ | 104,568 | $ | 60,268 | ||||
| Common shares issued for the conversion of principal and accrued interest | $ | 34,132 | $ | - | ||||
See the accompanying notes to these unaudited condensed consolidated financial statements
4
BIOXYTRAN, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(UNAUDITED)
NOTE 1 – BACKGROUND AND ORGANIZATION
Business Operations
Bioxytran, Inc. (the “Company”) is an early-stage pharmaceutical company focused on the development, manufacture and commercialization of therapeutic drugs designed to address hypoxia in humans, which is a lack of oxygen to tissues, in a safe and efficient manner. If it is not addressed, lack of oxygen to tissues, or hypoxia, results in necrosis, which is the death of cells comprising body tissue. Necrosis cannot be reversed. Our lead drug candidate, code named BXT-25, is an oxygen-carrying small molecule consisting of bovine hemoglobin stabilized with a co-polymer with intended applications to include treatment of hypoxic conditions in the brain resulting from stroke, and hypoxic conditions in wounds to prevent necrosis and to promote healing. The Company’s initial focus is the treatment of hypoxic conditions in the brain resulting from stroke, and hypoxic conditions in wounds to prevent necrosis and to promote healing. Our novel approach is intended to result in the creation of safe drug alternatives to existing therapies for effectively addressing hypoxic conditions in humans. Our drug development efforts are guided by specialists in co-polymer chemistry and other disciplines, and we intend to supplement our efforts with input from a scientific and medical advisory board whose members are leading physicians.
Organization
Bioxytan, Inc. was organized on October 5, 2017 as a Delaware corporation, with a taxing structure for U.S. federal and state income tax as a C-Corporation with 95,000,000 authorized common shares with a par value of $0.0001, and 5,000,000 preferred shares with a par value of $0.0001. On September 21, 2019, the Company went under a reorganization in form of a reverse merger and is currently registered as a Nevada corporation with a taxing structure for U.S. federal and state income tax as a C-Corporation with 300,000,000 authorized common shares with a par value of $0.001, and 50,000,000 preferred shares with a par value of $0.001
Basis of Presentation
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. Such financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) in all material respects, and have been consistently applied in preparing the accompanying financial statements. The Company has not earned any revenue from operations since inception. The Company chose December 31st as its fiscal year end.
The accompanying unaudited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim financial statements be read in conjunction with the Company’s audited financial statements and notes thereto included in its Form 10-K for the year ended December 31, 2019. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.
Basic and Diluted Earnings per Share
Pursuant to the authoritative guidance, basic net income and net loss per share are computed by dividing the net income and net loss by the weighted average number of common shares outstanding. Diluted net income and net loss per share is the same as basic net income and net loss per share when their inclusion would have an anti-dilutive effect due to our continuing net losses.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Bioxytran, Inc. a Nevada Corporation and its wholly owned subsidiary, Bioxytran, Inc. of Delaware (collectively, the “Company”). All intercompany accounts have been eliminated upon consolidation.
5
NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As of March 31, 2020, the Company had cash of $43,891 and a negative working capital of $1,837,150. As of March 31, 2020, the Company has not yet generated any revenues, and has incurred cumulative net losses of $2,781,800. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
The Company is aware that its current cash on hand will not be sufficient to fund its projected operating requirements through the month of June 2020, and is pursuing alternative opportunities to funding.
The Company intends to raise additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company, or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
The Company’s management do not foresee that COVID-19 has any impact for the Company and its ability to carry out their plans.
Accordingly, the accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.
NOTE 3 – ACCOUNTS PAYABLES AND ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
On March 31, 2020, there was $116,000 in accounts payable to related parties in form of payroll and accrued expenses. On December 31, 2019 there was $96,000 in Accounts payable to related parties.
The following table represents the major components of accounts payables and accrued expenses and other current liabilities at March 31, 2020 and December 31, 2019:
| March 31, 2020 | December 31, 2019 | |||||||
| Accounts payable related party (1) | $ | 116,000 | $ | 96,000 | ||||
| Professional fees | 30,973 | 42,963 | ||||||
| Interest | 13,982 | 14,374 | ||||||
| Payroll taxes | - | 7,344 | ||||||
| Other accounts payable | 1,391 | 7,251 | ||||||
| ASC 480 debt premium | 856,560 | 24,121 | ||||||
| Convertible notes payable | 862,135 | 826,862 | ||||||
| Total | $ | 1,881,041 | $ | 1,018,915 | ||||
| (1) | $58,000 to each the CFO and the CEO for 11 months of salary for the period ending March 31 2020, and $48,000 to each the CFO and the CEO for 8 months of salary for the period ending December 31, 2019. |
6
NOTE 4 – CONVERTIBLE NOTES PAYABLE
As long as the following convertible notes remain outstanding, the Company is restricted from incurring any indebtedness or liens, except as permitted (as defined), and cannot amend its charter in any matter that materially effects rights of noteholders, repay or repurchase more than de minimis number of shares of common stock other than conversion or warrant shares, repay or repurchase all or any portion of any indebtedness, or pay cash dividends.
Auctus Note #1
On October 24, 2019 (the “Date of Issuance”) the Company issued a convertible promissory note (the “Auctus Note #1”) with a face value of $250,000, maturing on October 23, 2020, and a stated interest of 8% to a third-party investor. The Auctus Note #1 is convertible into common stock of the Company, par value $.001 per share (the “Common Stock”) at any time after the earlier of: (i) 180 days from the date of the Auctus Note #1, or (ii) upon effective date of a registration statement. The conversion price of the Auctus Note #1 is equal to the lesser of : (i) the lowest trading price for the twenty-day period prior to the date of the Auctus Note #1 or (ii) 65% of the average of the three lowest trading prices during the twenty days prior to a conversion notice on the applicable trading market or the closing bid price on the applicable trading market. The Auctus Note #1 was funded on October 29, 2019, when the Company received proceeds of $222,205, after disbursements for the lender’s transaction costs, fees and expenses which in aggregate resulted in a total discount of $27,795 to be amortized to interest expense over the life of the Auctus Note #1.
Additionally, the variable conversion rate component requires that the Auctus Note #1 be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the Auctus Note #1. As such, the Company recorded a premium of $343,796 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.21 per share (65% of the average of the three lowest trading prices during the 20 days preceding the note’s issuance), which computed to 1,211,828 shares of ‘if-converted’ common stock with a redemption value of $593,796 due to $0.49 per share fair market value of the Company’s stock on the Auctus Note #1’s date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital.
Along with the Auctus Note #1, on the Date of Issuance the Company issued 208,333 Common Stock Purchase Warrants (the “Warrants”), exercisable immediately at a fixed exercise price of $0.60 with an expiration date of October 23, 2023. The Company has determined that the Warrants are exempt from derivative accounting and were valued at $101,937 on the Date of Inception using the Black Scholes Options Pricing Model. Assumptions used for the Black Scholes Options Pricing Model include (1) stock price of $0.49 per share, (2) exercise price of $0.60 per share, (3) term of 5 years, (4) expected volatility of 251% and (5) risk free interest rate of 2.51%. The note proceeds of $250,000 were then allocated between the fair value of the Auctus Note #1 ($250,000) and the Warrants ($101,937), resulting in a debt discount of $72,412. As the warrants were exercisable immediately, this debt discount was amortized in its entirety to interest expense on the Date of Issuance. Upon cashless conversion on March 12, 2020 an additional 166,667 warrants were issued for a market value of $66,363.
The Auctus Note #1 was paid off on October 24, 2019, and the warrants were converted on March 12,2020
Auctus Note #2
On February 25, 2019, the Company entered into a $250,000 Senior Secured Promissory Note (“the Auctus Note #2”), dated February 25, 2019 at an interest rate of 8% per annum, maturing on February 24, 2020 (the “Maturity Date”). Issuance fees totaling $27,750 were recorded as a debt discount, resulting in net proceeds of $222,250. The Auctus Note #2 is convertible into common stock of the Company, par value $.001 per share (the “Common Stock”) at any time after the earlier of: (i) 180 days from the date of the Auctus Note #2 or (ii) upon effective date of a new registration statement. The conversion price of the Auctus Note #2 is equal to the lesser of : (i) the lowest trading price for the twenty-day period prior to the date of the Auctus Note #2 or (ii) 65% of the average of the three lowest trading prices during the twenty days prior to a conversion notice on the applicable trading market or the closing bid price on the applicable trading market. The Company may prepay the Auctus Note #2 at any time at a rate of 120% of outstanding principal and interest during the first 90 days it is outstanding and 130% of outstanding principal and interest for the next 90 days thereafter. Thereafter the prepayment amount increases 5% for each thirty-day period until 270 days from the issue date at which time it is fixed at 150% of the outstanding principal and interest on the Auctus Note #2.
Additionally, the variable conversion rate component requires that the Auctus Note #2 be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the undiscounted face value being deemed a premium to be added to the principal balance and accreted to additional paid-in capital over the life of the Auctus Note #2. As such, the Company recorded a premium of $82,500 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.20 per share (lowest trading price during the 20 days preceding the note’s issuance), which computed to 1,250,000 shares of ‘if-converted’ common stock with a redemption value of $332,500 due to $0.266 per share fair market value of the Company’s stock on the Auctus Note #2’s date of issuance. Debt discount amortization is recorded as interest expense, while debt premium accretion is recorded as an increase to additional paid-in capital. For the three months ending at March 31, 2020, the Company amortized $4,647 debt discount to operations as interest expense, and accreted $24,121 of premium to additional paid-in capital.
7
Along with the the Auctus Note #2, on the Date of Issuance the Company issued 208,333 Common Stock Purchase Warrants (the “Warrants”), exercisable immediately at a fixed exercise price of $0.60 with an expiration date of February 24, 2024. The Company has determined that the Warrants are exempt from derivative accounting and were valued at $55,417 on the Date of Inception using the Black Scholes Options Pricing Model. Assumptions used for the Black Scholes Options Pricing Model include (1) stock price of $0.27 per share, (2) exercise price of $0.60 per share, (3) term of 5 years, (4) expected volatility of 323% and (5) risk free interest rate of 2.56%. The Auctus Note #2 proceeds of $250,000 were then allocated between the fair value of the Auctus Note #2 ($250,000) and the Warrants ($55,417), resulting in a debt discount of $45,361. As the warrants are exercisable immediately, this debt discount was amortized in its entirety to interest expense on the Date of Issuance. Upon cashless conversion on March 12, 2020 an additional 166,667 warrants were issued for a market value of $66,364.
The Auctus Note #2 was paid off on February 20, 2020, and the warrants were converted on March 12,2020.
Other notes currently convertible
In the period October 24, 2019 through February 18, 2020, the Company entered into three separate Secured Promissory Note Agreements (“SPA”) with a face value of $300,000, and received net proceeds of $255,000. The Notes are convertible into common stock of the Company, par value $.001 per share (the “Common Stock”) at any time after the earlier of: (i) 180 days from the date of the Note or (ii) upon effective date of a registration statement. The conversion price of the Notes is equal to 65% of the lowest trading price at close during the twenty days prior to a conversion notice. The debt discount of $37,100 is amortized over the duration of the loans. The Debentures permit the Company to pre-pay its obligations at a premium prior to maturity. For the three months ended at March 31, 2020, the Company amortized $6,415 debt discount to operations as interest expense.
Additionally, the variable conversion rate component requires that the three notes be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the three notes. As such, the Company recorded a premium of $937,007 as a reduction to additional paid-in capital based on a discounted “if-converted” rate between $0.091- $0.12 per share (65% of the average of the three lowest trading prices during the 20 days preceding the note’s issuance), which computed to 2,962,578 shares of ‘if-converted’ common stock with a redemption value of $1,237,007 due to in between $0.265- $0.50 per share fair market value of the Company’s stock on the three notes date of issuance. Debt discount amortization is recorded as interest expense, while debt premium amortization is recorded as an increase to additional paid-in capital. For the three months ending at March 31, 2020, the Company amortized $4,376 debt discount to operations as interest expense, and accreted $80,447 of premium to additional paid-in capital.
The Company also issued the noteholders five-year warrants with cashless exercise provisions to purchase a total of 122,000 shares of Common Stock of the Company at an exercise price of $2.00 per share with cashless exercise provisions to four of the Lenders. The Company has determined that the Warrants are exempt from derivative accounting. The note proceeds of $300,000 were then allocated between the fair value of the Notes ($300,000) and the Warrants ($55,061), resulting in a debt discount of resulting in a fully amortized debt discount of $34,317. As the warrants were exercisable immediately, this debt discount was amortized in its entirety to interest expense on the Date of Issuance. For the three months ending at March 31, 2020, the Company issued 72,000 warrants, resulting in an amortized debt discount of $12,711.
Notes not yet convertible
In the period October 23, 2019 through March 18, 2020, the Company entered into seven separate Secured Promissory Note Agreements (“SPA”) with a face value of $636,800, and received net proceeds of $563,500. The Notes are convertible into common stock of the Company, par value $.001 per share (the “Common Stock”) at any time after the earlier of: (i) 180 days from the date of the Note or (ii) upon effective date of a registration statement. The conversion price of the Notes is equal to 65% of the lowest trading price at close during the twenty days prior to a conversion notice. The debt discount of $73,300 is amortized over the duration of the loans. The Debentures permit the Company to pre-pay its obligations at a premium prior to maturity. For the three months ended at March 31, 2020, the Company amortized $12,261 debt discount to operations as interest expense.
8
The Company also issued the noteholders five-year warrants with cashless exercise provisions to purchase a total of 150,000 shares of Common Stock of the Company at an exercise price of $2.00 per share with cashless exercise provisions to four of the Lenders. The Company has determined that the Warrants are exempt from derivative accounting. The note proceeds of $636,800 were then allocated between the fair value of the Notes ($636,800) and the Warrants ($97,850), resulting in a debt discount of resulting in a fully amortized debt discount of $68,910. As the warrants were exercisable immediately, this debt discount was amortized in its entirety to interest expense on the Date of Issuance. For the three months ending at March 31, 2020, the Company did not issue any warrants.
A summary of the outstanding notes at March 31, 2020, are as follows:
| Debtor | Date of Issuance | Maturity Date | Principal Amount | Net Received | Interest | Warrants Issued | Term | Exercise Price | Amortization of Warrants | Debt Discount | ||||||||||||||||||||||||||
| GS Capital | 10/30/2019 | 10/30/2020 | $ | 125,000 | $ | 109,500 | 4 | % | 50,000 | 5 | $ | 2.00 | $ | 23,867 | $ | 15,500 | ||||||||||||||||||||
| Power Up #1 | 10/24/2019 | 10/23/2020 | 106,000 | 100,000 | 8 | % | - | - | - | - | 6,000 | |||||||||||||||||||||||||
| Peak One | 10/23/2019 | 10/22/2022 | 120,000 | 103,000 | 0 | % | 50,000 | 5 | 2.00 | 21,606 | 17,000 | |||||||||||||||||||||||||
| Tangiers | 10/23/2019 | 10/22/2020 | 106,300 | 100,000 | 8 | % | 50,000 | 5 | 2.00 | 21,116 | 6,300 | |||||||||||||||||||||||||
| FirstFire | 11/20/2019 | 11/20/2020 | 125,000 | 109,500 | 4 | % | 50,000 | 5 | 2.00 | 17,979 | 15,500 | |||||||||||||||||||||||||
| Power Up #2 | 12/30/2019 | 12/30/2020 | 54,600 | 50,000 | 8 | % | - | - | - | - | 4,600 | |||||||||||||||||||||||||
| EMA Financial | 01/10/2020 | 01/10/2021 | 125,000 | 109,500 | 4 | % | 50,000 | 5 | 2.00 | 5,948 | 15,500 | |||||||||||||||||||||||||
| Crown Bridge | 02/20/2020 | 02/20/2021 | 55,000 | 42,500 | 4 | % | 22,000 | 5 | 2.00 | 10,054 | 12,500 | |||||||||||||||||||||||||
| PowerUp #3 | 02/19/2020 | 02/19/2021 | 56,600 | 52,000 | 8 | % | - | - | - | - | 4,600 | |||||||||||||||||||||||||
| PowerUp #4 | 03/18/2020 | 03/18/2021 | 64,900 | 60,000 | 8 | % | - | - | - | - | 4,900 | |||||||||||||||||||||||||
| $ | 938,400 | $ | 836,000 | 272,000 | $ | 100,570 | $ | 102,400 | ||||||||||||||||||||||||||||
Convertible notes payable consists of the following at March 31, 2020 and December 31, 2019:
| March 31, 2020 | December 31, 2019 | |||||||
| Principal balance | $ | 938,400 | $ | 886,900 | ||||
| Unamortized debt discount | (76,265 | ) | (60,038 | ) | ||||
| Unamortized debt premium | 856,560 | 24,121 | ||||||
| Outstanding, net of debt discount and premium | $ | 1,718,695 | $ | 850,983 | ||||
NOTE 5 – STOCKHOLDERS’ EQUITY
At a Board of Director’s Meeting on July 30, 2019, the Company authorized a reverse split that resulted in a reduction of the number of outstanding and issued shares of both common and preferred stock so that after the split became effective on August 13, 2019, the shares of both common and preferred stock were reduced to 1 share for each 30 shares currently issued and outstanding. The effect on the Balance Sheet is a transfer of value from stock value at par to Additional Paid-in Capital. As a result of the one (1) for thirty (30) reverse stock split, the Company will continue to be authorized to issue 300,000,000 shares of Common Stock, and 50,000,000 shares of Preferred Stock. The reverse split has been retroactively applied to all periods presented.
Preferred stock
As of March 31, 2020, no preferred shares have been designated nor issued.
Common stock
On January 3, 2020, 100,000 shares of common stock were issued as a result of conversion of accrued interest and principal on the Auctus Note #2 for a total of $12,000.
On February 18, 2020, 250,000 shares of common stock were issued as a result of conversion of accrued interest and principal on the Auctus Note #2 for a total of $22,132.
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On March 12, 2020, 750,000 of common stock were issued in exchange for 416,666 warrants with cashless exercise, originating from Auctus Notes #1 and #2.
For the 3 months ending March 31, 2020, 656,000 shares were awarded with an average cost per share of $0.22, under the 2010 Stock Plan for a total value of $150,497. For details, see Shares Awarded and Issued under Note 6.
As of March 31, 2020, the Company has 88,231,673 shares of common stock issued and outstanding. At December 31, 2019 there were 86,475,673 shares of common stock issued and outstanding.
Common Stock Warrants
During the three months ending March 31, 2020 the Company awarded 405,334 warrants, valued at $145,438, and 750,000 warrants were converted in a cashless exercise. During the 3 months ending March 31, 2019 the Company awarded 208,333 warrants valued at $45,361.
The following table summarizes the Company’s common stock warrant activity for the 3-months ended March 31, 2020 and March 31, 2019:
| Weighted Average | Weighted- Average Remaining | |||||||||||
| Warrants | Exercise Price | Expected Term | ||||||||||
| Outstanding as of January 1, 2019 | 208,333 | $ | 0.60 | 4.6 | ||||||||
| Granted | 208,333 | 0.60 | 4.9 | |||||||||
| Exercised | - | - | - | |||||||||
| Forfeited/Canceled | - | - | - | |||||||||
| Outstanding as of March 31, 2019 | 416,666 | $ | 0.60 | 4.7 | ||||||||
| Outstanding as of January 1, 2020 | 616,666 | $ | 1.05 | 4.0 | ||||||||
| Granted | 405,334 | 0.36 | 0.9 | |||||||||
| Exercised | (750,000 | ) | - | - | ||||||||
| Forfeited/Canceled | - | - | - | |||||||||
| Outstanding as of March 31, 2020 | 272,000 | $ | 2.00 | 4.7 | ||||||||
During the three months ending March 31, 2020, the Company awarded 48,000 options under the 2010 Stock Plan, with a fair market value of $5,004. There were no options awarded during the 3 months ending March 31, 2019.
The following table summarizes the Company’s common stock option activity for the 3 months ended at March 31, 2020. There were no stock options issued at March 31, 2019:
| Weighted Average |
Weighted- Average Remaining |
|||||||||||
| Number of Options | Exercise Price |
Expected Term |
||||||||||
| Outstanding as of January 1, 2020 | 341,000 | $ | 0.96 | 2.4 | ||||||||
| Granted | 48,000 | 0.16 | 2.8 | |||||||||
| Exercised | - | - | - | |||||||||
| Forfeited/Canceled | - | - | - | |||||||||
| Outstanding as of March 31, 2020 | 389,000 | $ | 0.86 | 2.5 | ||||||||
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NOTE 6 – STOCK OPTION PLAN AND STOCK-BASED COMPENSATION
During the year ended December 31, 2010, the Company adopted a stock option plan entitled “The 2010 Stock Plan” (2010 Plan) under which the Company may grant Options to Purchase Stock, Stock Awards or Stock Appreciation Rights up to 15% of common stock, automatically adjusted on January 1 each year. As of December 31, 2018, there were no outstanding awards under the 2010 Plan. As of December 31, 2019, there were 341,000 outstanding stock options with a fair market value of $257,143 and 1,127,000 shares issued with a fair market value of $864,551 at the time of award. At December 31, 2018, there were no outstanding stock options, nor any shares awarded.
Under the terms of the stock plans, the Board of Directors shall specify the exercise price and vesting period of each stock option on the grant date. Vesting of the options is typically immediate and the options typically expire in five years. Stock Awards may be directly issued under the Plan (without any intervening options). Stock Awards may be issued which are fully and immediately vested upon issuance.
Shares Awarded and Issued:
On January 1, 2020 the Company granted 250,000 shares with a fair market value of $0.285/share at the time of award, to a consultant for assistance with the Companies PR work, for a total of $71,250.
On January 31, 2020 the Company granted two subcontractors a total of 200,000 shares with a fair market value of $0.14/share at the time of award, as compensation for their work with the Company’s marketing efforts, for a total of $28,000.
On March 18, 2020 the Company granted 200,000 shares with a fair market value of $0.245/share at the time of award, to a consultant for assistance with the Companies PR work, for a total of $49,000.
On February 21, 2020 the Company granted 3,000 shares with a fair market value of $0.439/share to three members of the Audit Committee as compensation for their contribution in the Audit Committee, for a total of $1,317.
On March 25, 2019, the Company granted 3,000 shares with a fair market value of $0.31/share to three members of the Company Board as compensation for their contribution in the Company’s Board of Directors, for a total of $930.
Number of Shares | Fair Value per Share | Weighted Average Market Value per Share | ||||||||||
| Shares Issued as of December 31, 2019 | 471,000 | $ | 0.27 - 1.49 | $ | 0.77 | |||||||
| Shares Issued | 656,000 | 0.14 – 0.44 | 0.22 | |||||||||
| Shares Issued as of March 31, 2020 | 1,127,000 | $ | 0.14 - 1.49 | $ | 0.57 | |||||||
For the three months ended March 31, 2020, the Company recorded stock-based compensation expense of $150,497 in connection with share-based payment awards. The Company did not record any recorded stock-based compensation expense in the three first months of 2019.
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Stock options granted and vested:
On January 1, 2020 the Company granted 3,000 three-year options at an exercise price of $0.31 a Medical Advisory Board Member for his contribution in the Company’s Advisory Board. The options total fair value at the time of award was $603.
On February 1, 2020 the Company granted 45,000 three-year options at an exercise price of $0.15 a Medical Advisory Board Member for his contribution in the Company’s Advisory Board. The options total fair value at the time of award was $4,401.
The fair value of stock options granted and revaluation of non-employee consultant options for the three months ended March 31, 2020 was calculated with the following assumptions:
| 2020 | ||||
| Risk-free interest rate | 1.32 – 1.69 | % | ||
| Expected dividend yield | 0 | % | ||
| Volatility factor (weekly) | 126.37 | % | ||
| Expected life of option | 3 years | |||
For the three months ended March 31, 2020, the Company recorded compensation expense of $5,004 in connection with awarded stock options. The Company did not record any awarded option valuation as compensation expense during the three months ended March 31, 2019. As at March 31, 2020, there was no unrecognized compensation expense related to non-vested stock option awards.
The following table summarizes the Company’s stock option activity for the three months ended March 31, 2020:
| Number of Options | Exercise Price per Share | Weighted Average Exercise Price per Share | ||||||||||
| Outstanding as of December 31, 2019 | 341,000 | $ | 0.61 - 1.21 | $ | 0.96 | |||||||
| Granted | 48,000 | 0.15 - 0.31 | 0.16 | |||||||||
| Exercised | - | - | - | |||||||||
| Options forfeited/cancelled | - | - | - | |||||||||
| Outstanding as of March 31, 2020 | 389,000 | $ | 0.15 - 1.21 | $ | 0.76 | |||||||
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The following table summarizes information about stock options that are vested or expected to vest at March 31, 2020:
| Options Outstanding | Exercisable Options | |||||||||||||||||||||||||||||||||
| Exercise Price | Number of Options | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | Number of Options | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | ||||||||||||||||||||||||||
| $ | 0.15 | 45,000 | $ | 0.15 | 2.84 | $ | - | 45,000 | $ | 0.15 | 2.84 | $ | - | |||||||||||||||||||||
| 0.31 | 3,000 | 0.31 | 2.75 | - | 3,000 | 0.31 | 2.75 | - | ||||||||||||||||||||||||||
| 0.61 | 45,000 | 0.61 | 2.59 | - | 45,000 | 0.61 | 2.59 | - | ||||||||||||||||||||||||||
| 0.73 | 3,000 | 0.73 | 2.50 | - | 3,000 | 0.73 | 2.50 | - | ||||||||||||||||||||||||||
| 0.95 | 200,000 | 0.95 | 2.45 | - | 200,000 | 0.95 | 2.45 | - | ||||||||||||||||||||||||||
| 1.09 | 3,000 | 1.09 | 2.25 | - | 3,000 | 1.09 | 2.25 | - | ||||||||||||||||||||||||||
| 1.10 | 45,000 | 1.10 | 2.33 | - | 45,000 | 1.10 | 2.33 | - | ||||||||||||||||||||||||||
| 1.21 | 45,000 | 1.21 | 2.08 | - | 45,000 | 1.21 | 2.08 | - | ||||||||||||||||||||||||||
| $ | 0.15-1.21 | 389,000 | $ | 0.86 | 2.46 | $ | - | 389,000 | $ | 0.86 | 2.46 | $ | - | |||||||||||||||||||||
The following table sets forth the status of the Company’s non-vested stock options as of March 31, 2020 and December 31, 2019:
| Number of Options | Weighted- Average Grant-Date Fair Value | |||||||
| Non-vested as of December 31, 2019 | - | $ | - | |||||
| Granted | 48,000 | 0.16 | ||||||
| Forfeited | - | - | ||||||
| Vested | 48,000 | 0.16 | ||||||
| Non-vested as of March 31, 2020 | - | $ | - | |||||
The weighted-average remaining estimated life for options exercisable at March 31, 2020 is 2.46 years.
The aggregate intrinsic value for fully vested, exercisable options was $0 at March 31, 2020. The aggregate intrinsic value of options exercised for the three months ended at March 31, 2020 was $0 as no options were exercised. The actual tax benefit realized from stock option exercises for the three months ended at December 31, 2019 was no options available for exercise.
At March 31, 2020 the Company has 10,799,351 options or stock awards available for grant under the 2010 Plan.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Employment contracts
The Company’s executive officers have entered employment contracts and confidentiality, non-disclosure and assignment of invention agreements. The employment agreements do not provide for the payment of any compensation to our executive officers but provide for the payment of $100,000 in severance upon termination of employment without cause and make no provisions for any payment upon a change of control.
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Litigation
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and we accrue for adverse outcomes as they become probable and estimable.
NOTE 8 – SUBSEQUENT EVENTS
On April 16, 2020 SEC ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading of BIXT is suspended for the period April 16, through April 29, 2020.
As a result of the SEC ordered suspension the Company defaulted on outstanding Convertible Notes; resulting in an increase of the interest to 21% and the principal to increase to 168% of principal loan amount. The convertible debt increased to approximately $1,604,856 and the interest accrual to approximately $28,960/month.
The variable conversion rate component requires that the Defaulted Notes be valued at its stock redemption value (i.e., “if-converted” value) pursuant to ASC 480, Distinguishing Liabilities from Equity, with the excess over the undiscounted face value being deemed a premium to be added to the principal balance and amortized to additional paid-in capital over the life of the Notes. As such, the Company recorded a premium of $475,598 as a reduction to additional paid-in capital based on a discounted “if-converted” rate of $0.14 per share (65% of the lowest trading price during the 20 days preceding the note’s issuance), which computed to 4,454,213 shares of ‘if-converted’ common stock. The debt premium amortization is recorded as an increase to additional paid-in capital.
The Company’s management is taking all reasonable steps to get the Company traded on the OTCQB exchange again, in accordance with regulations as outlined by the SEC, see further:
https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_tradingsuspensions
https://www.sec.gov/investor/alerts/tradingsuspensions.pdf
Stock options and shares granted under the 2010 Stock Plan:
On April 1, 2020 the Company granted 3,000 three-year options at an exercise price of $0.32 a Medical Advisory Board Member for his contribution in the Company’s Advisory Board. The options total fair value at the time of the award was $646.
On May 1, 2020 the Company granted 45,000 three-year options at an exercise price of $0.001 a Medical Advisory Board Member for his contribution in the Company’s Advisory Board. The options total fair value at the time of the award was $45.
On May 1, 2020 the Company appointed Mr. Mike Sheikh as EVP of Business Development.
Mr. Sheikh is committed on a full-time basis. He currently has a compensation of $6,000 per month. The employment agreement provides for the payment of $100,000 in severance upon termination of employment without cause and make no provisions for any payment upon a change of control. Mr. Sheikh was issued 8,800,000 shares to be equally vested over a period of 3 years, but fully vested upon a change of control. The shares total fair value at the time of the award was $8,800.
The Company’s management has evaluated events occurring after the date of the accompanying balance sheets through the date the financial statements were available to be issued and did not identify any further subsequent events requiring disclosure.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is based on, and should be read in conjunction with, the audited financial statements and the notes thereto for the two years ended December 31, 2019 included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 18, 2020. This discussion contains forward-looking statements. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so, except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
Overview
We do not currently have sufficient capital resources to fund operations. To stay in business and to continue the development of our products, we will need to raise additional capital through public or private sales of our securities, debt financing or short-term bank loans, or a combination of the foregoing. We believe that if we can raise $3,700,000 in our currently effective public offering, we will have sufficient working capital to repay the ten convertible notes and develop our business over the next approximately 15 months. At funding raised that is significantly less than $3,700,000, we can likely repay the ten convertible notes and continue to develop our business over the same 15-month period, but funding at that level will delay the development of our technology and business.
Bioxytran, Inc. is headquartered in Newton, Massachusetts. The Company’s initial product pipeline is focused on developing and commercializing therapeutic molecules for stroke. BXT-25 will be designed to be an injectable anti-necrosis drug specifically designed to treat a person immediately after that person suffers an ischemic stroke. The drug is designed to be injected intravenously to travel to the lungs to pick up oxygen molecules to carry to the brain. Like a red blood cell, the drug will cross the blood brain barrier, which is a protective semi-permeable membrane allowing some material to cross but preventing others from crossing. BXT-25 will be designed to diffuse oxygen into the brain tissues. We expect the BXT-25 molecule to be 5,000 times smaller than a red blood cell.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has limited resources and operating history. As described in Note 4 of the financial statements, the Company has taken up ten convertible loans at a total value of $938,400 maturing between 10/22/2020 and 3/18/2021, in order to finance the Company until we start raising equity. As shown in the accompanying consolidated financial statements, the Company had an accumulated deficit of $2,781,800 as of March 31, 2020. The accumulated deficit as of December 31, 2019 was $2,241,305.
The future of the Company is dependent upon its ability to obtain financing to develop its new business opportunities and support the cost of the drug development including clinical trials and regulatory submission to the FDA.
The Company’s management do not foresee that COVID-19 has any impact for the Company and its ability to carry out their plans.
15
Management plans to seek additional capital through private placements and public offerings of its common stock. There can be no assurance that the Company will be successful in accomplishing its objectives. Without such additional capital or the establishment of strategic relationships with established pharmaceutical companies, the Company may be required to cease operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue operations.
Results of Operations
We are a start-up company. Historically, Bioxytran was engaged in formation, fund raising and identifying and consulting with the scientific community regarding the development, formulation and testing of its products.
General and Administrative
General and administrative (G&A) expenses for the three months ended March 31, 2020 were $266,043, while for the three months ended March 31, 2019, they were $129,625. The Company only started its activities in October 2018. The components of G&A expenses are as follows:
| - | Payroll and related expenses for the three months ended March 31, 2020 were $36,000, as compared to $36,000 for the three months ended March 31, 2019. |
| - | Costs for legal, accounting and other professional services for the three months ended March 31, 2020 were $22,574, as compared to $40,811 for the three months ended March 31, 2019. The decrease was due to reduced use of external corporate counsel. |
| - | Sales and marketing expense for the three months ended March 31, 2020 were $9,489, as compared to $17,050 for the three months ended March 31, 2019. The decrease was due to the web-site build-up in the first quarter of 2019. |
| - |
Stock compensation mounted to $155,501 for the three months ended March 31, 2020. There was no stock compensation for the three months ended March 31, 2019. The increase was due to increased P.R. activities with up-front payment in order to better position the company in upcoming activities.
| |
| - | The remaining miscellaneous G&A expenses totaled $42,479 for the three months ended March 31, 2020, as compared to $35,764 for the three months ended March 31, 2019. The increase was due to attendance at JPM Conference in January 2020. |
Interest Expense and Amortization of Debt Discount and Premium
During the three months ended March 31, 2020, the Company recorded $104,568 of premium accretion to additional paid-in capital, and $21,284 in amortization of debt discount and $145,438 in warrant amortization to interest expense, as compared to, $60,268 of premium accretion and a debt discount amortization of $9,536 and warrant amortization of $45,361 for the three months ended March 31, 2019. The interest for the ten convertible notes outstanding amounted to $107,730, including a pre-pay fee of $91,362 for the early payment of a convertible note, as compared to $6,887 for the three months ended March 31, 2019.
Net Loss
The Company generated a net loss for the three months ended March 31, 2020 of $540,495. In comparison, for the three months ended March 31, 2019, the Company generated a net loss of $191,409. The increased loss is mainly linked to current quarter costs for legal, accounting and other professional services, as well as the amortization of debt discounts applied to warrants issued in connection with convertible debt and the related loan fees.
Cash-Flows
Net cash used in operating activities was $156,789 and $139,730 for the three months ended March 31, 2020 and 2019, respectively. The increase was due to attendance at JPM Conference in January 2020 and increased operational activities.
The Company did not engage in any investing activities during the three months ended March 31, 2020 or 2019.
Cash flows from financing activities were $31,052 and $222,250 for the three months ended March 31, 2020 and 2019, respectively. The significant change was due to repayment of an outstanding convertible note on February 20, 2020.
16
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2020, our only asset was $43,891 in cash. We had total liabilities of $1,881,041, which were all current liabilities, and which consisted of $162,346 in accounts payable and accrued expenses (of which $116,000 was payable to related parties), and $1,718,695 in the form of ten convertible loans of $938,400, maturing between October 22, 2020 and March 18, 2021 (which includes unamortized debt premium of $856,560, and which has been netted with unamortized debt discounts totaling $76,265). The equivalent numbers at December 31, 2019, were $169,628 in cash and total liabilities of $1,018,915, which were all current liabilities, and which consisted of $167,932 in accounts payable and accrued expenses (of which $96,000 was payable to related parties), and $850,983 (which includes unamortized debt premium of $24,121, and which has been netted with unamortized debt discounts totaling $60,038) in the form of seven convertible loans, maturing between February 25, 2020 and 12/30/2020.
At March 31, 2020, we had total working capital of negative $1,837,150 and an accumulated deficit of $2,781,800. Comparatively, on December 31, 2019, we had total working capital of negative $799,287 and an accumulated deficit of $2,241,305. We believe that we must raise not less than $3,700,000 in our currently effective public offering in addition to current cash on hand to be able to continue our business operations for approximately the next 15 months and repay the ten convertible notes.
We have no current commitment from our officers and directors or any of our shareholders, to supplement our operations or provide us with financing in the future. If we are unable to raise additional capital from conventional sources and/or additional sales of stock in the future, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results. In the future, we may be required to seek additional capital by selling debt or equity securities, selling assets, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders. We provide no assurance that financing will be available in amounts or on terms acceptable to us, or at all.
Contractual Obligations
Our contractual obligations include ten convertible notes, for a total of $938,400, described under Note 4 to the Financial Statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.
CRITICAL ACCOUNTING POLICIES
In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the majority of our businesses operate in environments where we pay a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.
17
Stock Based Compensation
The Company has share-based compensation plans under which non-employees, consultants and suppliers may be granted restricted stock, as well as options to purchase shares of Company common stock at the fair market value at the time of grant. Stock-based compensation cost is measured by the Company at the grant date, based on the fair value of the award over the requisite service period.
The Company applies ASC 718 for options, common stock and other equity-based grants to its employees and directors. ASC 718 requires measurement of all employee equity-based payment awards using a fair-value method and recording of such expense in the consolidated financial statements over the requisite service period. The fair value concepts have not changed significantly in ASC 718; however, in adopting this standard, companies must choose among alternative valuation models and amortization assumptions. After assessing alternative valuation models and amortization assumptions, the Company will continue using both the Black-Scholes valuation model and straight-line amortization of compensation expense over the requisite service period for each separately vesting portion of the grant.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 3 is not applicable to us because we are a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) reviewed the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and concluded that as of March 31, 2020, (i) the Company’s disclosure controls and procedures were not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “Commission”), and (ii) the Company’s controls and procedures have not been designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective due primarily to a material weakness in the segregation of duties in the Company’s internal controls.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with our evaluation of these controls as of the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
The Company’s management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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The Company may become involved in certain legal proceedings and claims which arise in the normal course of business. The Company is not aware of any outstanding or pending litigation.
There have not been any material changes in the risk factors from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of equity securities sold during the period covered by this Report that were not previously included in a Current Report on Form 8-K.
The Company claims an exemption from the registration requirements of the Securities Act of 1933 (the “Securities Act”) for the private placement of these securities pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
On May 1, 2020 the Company appointed Mr. Mike Sheikh as EVP of Business Development.
Mr. Mike Sheikh, is a US Air Force Academy graduate and pilot. He has a Bachelor’s of Science in Economics and flew KC-135 tankers and worked as a budget officer in the comptroller’s squadron. He worked for Dean Witter and National Securities as a broker and eventually research analyst. After the brokerage industry, he was a business development officer for a variety of specialty finance companies that did factoring and purchase order financing. He is a long-time Biotech Consultant expertise for public or private biotech companies with disruptive technologies. Mr. Sheikh the founder of Falcon Strategic Research, which focuses on small-cap and micro-cap companies that are not covered by traditional analysts on Wall Street. He is also the founder of an Investor Relations Firm which services include handling investor calls or emails, drafting press releases, editing investor decks, social media outreach, and developing a strategic awareness plan. DTCC analysis of position report with a specialty in uncovering short positions. He is capable of bridging the gap between science and investors generating awareness to the target community and also able to take complex interactions and distill them into a format that is easy to understand. Mr. Sheikh has also been the interim CFO for various public companies and he is a blog commenter and author at Seeking Alpha and Streetwise Reports.
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| Exhibit No. | Title of Document | |
| 31.1 | Certification of Principal Executive and Financial Officers pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended. * | |
| 32.1 | Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive and Financial Officer). ** | |
| 100 | The following financial statements from the Quarterly Report on Form 10-Q of BIOXYTRAN, Inc. for the quarter ended March 31, 2020 formatted in XBRL: (i) Condensed Balance Sheets (unaudited), (ii) Condensed Statements of Operations (unaudited), (iii) Condensed Statements of Cash Flows (unaudited), and (iv) Notes to Condensed Financial Statements (unaudited), tagged as blocks of text. * |
| * | Filed as an exhibit hereto. |
| ** | These certificates are furnished to, but shall not be deemed to be filed with, the Securities and Exchange Commission. |
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In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
| BIOXYTRAN, INC. | ||
| Date: May 13, 2020 | By: | /s/ David Platt |
| David Platt | ||
| Chief Executive Officer | ||
| /s/ Ola Soderquist | ||
| Ola Soderquist | ||
| Chief Financial Officer | ||
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