Aditxt, Inc 10-Q for FY2023 Q3
Aditxt, Inc. (ADTX)
About this 10-Q
Aditxt, Inc filed this 10-Q on November 14, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $124.49K
- down 61.5% from $323.13K a year earlier
- Net loss
- $9.75M
- compared with a net loss of $7.56M a year earlier
- Diluted EPS
- -$47.95
- compared with -$210.93 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
or
For the transition period from ________________ to ________________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions 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 | ☐ |
| ☒ | 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
As
of November 13, 2023, the registrant had 441,902 and
Table of Contents
| i |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
| ● | we have generated no significant revenue from commercial sales to date and our future profitability is uncertain; |
| ● | if we fail to obtain the capital necessary to fund our operations, we will be unable to continue or complete our product development, execute on our strategic M&A initiatives, commence our planned clinical trials and you will likely lose your entire investment; |
| ● | our financial situation creates doubt whether we will continue as a going concern; |
| ● | we may need to raise additional funding, which may not be available on acceptable terms, or at all; |
| ● | even if we can raise additional funding, we may be required to do so on terms that are dilutive to you; |
| ● | the regulatory approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of our future product candidates, if any; |
| ● | we may encounter substantial delays in completing our clinical studies which in turn will require additional costs, or we may fail to demonstrate adequate safety and efficacy to the satisfaction of applicable regulatory authorities; |
| ● | if our future pre-clinical development and future clinical Phase I/II studies are unsuccessful, we may be unable to obtain regulatory approval of, or commercialize, our product candidates on a timely basis or at all; |
| ● | even if we receive regulatory approval for any of our product candidates, we may not be able to successfully commercialize the product and the revenue that we generate from their sales, if any, may be limited; |
| ● | adverse events involving our products may lead the FDA or applicable foreign regulatory agency to delay or deny clearance for our products or result in product recalls that could harm our reputation, business and financial results; |
| ● | our technology is subject to licenses from LLU and Stanford (as defined below), each of which are revocable in certain circumstances, including in the event we do not achieve certain payments and milestone deadlines. Without these licenses, we may not be able to continue to develop our product candidates; |
| ● | if we were to lose our CLIA certification or state laboratory licenses, whether as a result of a revocation, suspension or limitation, we would no longer be able to offer our assays (including our AditxtScore™ platform), which would limit our revenues and harm our business. If we were to lose, or fail to obtain, a license in any other state where we are required to hold a license, we would not be able to test specimens from those states; |
| ● | our results of operations will be affected by the level of royalty and milestone payments that we are required to pay to third parties; |
| ● | we face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do; |
| ● | our technologies and products under development, and our business, may fail if we are not able to successfully commercialize them and ultimately generate significant revenues as a result; |
| ● | customers may not adopt our products quickly, or at all; |
| ii |
| ● | COVID-19 may impact our business and operations; |
| ● | the failure to obtain or maintain patents, licensing agreements and other intellectual property could materially impact our ability to compete effectively; |
| ● | some of our intellectual property may be subject to “march-in” rights by the U.S. federal government; |
| ● | we do not expect to pay dividends in the foreseeable future; |
| ● | we have issued a significant number of restricted stock awards, restricted stock units, options and warrants and may continue to do so in the future. The vesting and, if applicable, exercise of these securities and the sale of the shares of common stock issuable thereunder may dilute your percentage ownership interest and may also result in downward pressure on the price of our common stock; |
| ● | future sales or issuances of substantial amounts of our common stock, including, potentially as a result of future acquisitions or strategic transactions, could result in significant dilution; |
| ● | while we have entered into an Asset Purchase Agreement with Cellvera Global, we cannot assure you that the transaction contemplated by the Asset Purchase Agreement will be consummated or, that if such transaction is consummated, that it will be accretive to stockholder value; |
| ● | we have provided loans to Cellvera Global in the principal amount of $14.5 million, if we are unable to complete the transactions contemplated by the Asset Purchase Agreement, we cannot provide any assurance that we will be able to timely collect such amounts from Cellvera Global, if at all; |
| ● | we may engage in future acquisitions or strategic transactions, including the transaction with Cellvera Global, which may require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management; |
| ● | exclusive forum provisions in our amended and restated certificate of incorporation and amended and restated bylaws. |
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition, and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes, or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles, and surveys. Industry surveys, publications, consultant surveys, and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
References to Aditxt, Inc.
Throughout this Quarterly Report on Form 10-Q, the “Company,” “Aditxt,” “we,” “us,” and “our” refers to Aditxt, Inc. and “our board of directors” refers to the board of directors of Aditxt, Inc.
| iii |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ADITXT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Fixed assets, net | ||||||||
| Intangible assets, net | ||||||||
| Deposits | ||||||||
| Right of use asset - long term | ||||||||
| Deferred issuance costs | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Notes payable, net of discount | ||||||||
| Financing on fixed assets | ||||||||
| Deferred rent | ||||||||
| Lease liability - current | ||||||||
| Settlement liability | - | |||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Lease liability - long term | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, $ | ||||||||
| Series B Preferred stock, $ | ||||||||
| Series C Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Treasury stock, | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 1 |
ADITXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| REVENUE | ||||||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| General and administrative expenses $ | ||||||||||||||||
| Research and development, includes $ | ||||||||||||||||
| Sales and marketing $ | ( | ) | ||||||||||||||
| Total operating expenses | ||||||||||||||||
| NET LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER EXPENSE | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Other income | ||||||||||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax provision | ||||||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Implied Dividends | ( | ) | ( | ) | ||||||||||||
| NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
See accompanying notes to the condensed consolidated financial statements.
| 2 |
ADITXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
| Preferred Shares Outstanding | Preferred Shares Par | Preferred B Shares Outstanding | Preferred B Shares Par | Preferred C Shares Outstanding | Preferred C Shares Par | Common Shares Outstanding | Common Shares Par | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||
| Balance December 31, 2022 | $ | $ | - | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for vested restricted stock units | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Sale of common stock | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2023 | $ | $ | - | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for vested restricted stock units | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Warrants issued for cash, net of issuance costs | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2023 | $ | $ | - | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Stock option compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock units for compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Sale of Series C Preferred shares to related party | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for debt issuance costs | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants for offering, net of issuance costs | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Rounding from reverse stock split | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Modification of warrants | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Redemption of Series C Preferred shares to related party | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balance September 30, 2023 | $ | $ | - | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
| 3 |
ADITXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
| Preferred Shares Outstanding | Preferred Shares Par | Preferred B Shares Outstanding | Preferred B Shares Par | Preferred C Shares Outstanding | Preferred C Shares Par | Common Shares Outstanding | Common Shares Par | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||
| Balance December 31, 2021 | $ | $ | - | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for vested restricted stock units | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2022 | $ | $ | - | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock units for compensation | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants, modification of warrants, and issuance of warrants | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2022 | $ | $ | - | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Stock option and warrant compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Sale of Series B Preferred shares to related party | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Redemption of Series B Preferred shares to related party | - | ( | ) | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Shares issued as inducement on loans, net of issuance costs | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Warrants issued with loans | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Modification of warrants | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for debt issuance costs | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares and warrants for offering, net of issuance costs | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Issuance costs related to exercise of warrants, modification of warrants, and issuance of warrants | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Rounding from reverse stock split | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance September 30, 2022 | $ | $ | - | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
| 4 |
ADITXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended | Nine Months Ended | |||||||
| September 30, 2023 | September 30, 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Stock-based compensation | ||||||||
| Depreciation expense | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of debt discount | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Deposits | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Settlement liability | - | |||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Tenant improvement allowance receivable | ( | ) | ||||||
| Notes receivable and accrued interest | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from notes - related party | ||||||||
| Proceeds from note payable | ||||||||
| Discount on note payable from offering costs | ( | ) | ||||||
| Repayments of note payable - related party | ( | ) | ||||||
| Repayment of note payable | ( | ) | ( | ) | ||||
| Sale of Series B Preferred shares to related party | - | |||||||
| Common stock issued for cash, net of issuance costs | - | |||||||
| Warrants issued for cash, net of issuance costs | ||||||||
| Common stock and warrants issued for cash, net of issuance costs | - | |||||||
| Sale of Series C Preferred shares to related party | - | |||||||
| Exercise of warrants, modification of warrants, and issuance of warrants | ||||||||
| Payments on financing on fixed asset | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF YEAR | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest expense | $ | $ | ||||||
| Debt Discount from warrants issued with convertible note payable | $ | $ | ||||||
| Debt Discount from shares issued as inducement for note payable | $ | $ | ||||||
| Shares issued for debt offering costs | $ | $ | ||||||
| Redemption of Series B Preferred shares to related party | $ | $ | ||||||
| Warrant modification | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 5 |
ADITXT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Company Background
Overview
We are a biotech innovation company with a mission of prolonging life and enhancing its quality by improving the health of the immune system. We are an innovation company developing and commercializing technologies with a focus on monitoring and modulating the immune system. Our immune reprogramming technologies are currently at the pre-clinical stage and are designed to retrain the immune system to induce tolerance with an objective of addressing rejection of transplanted organs, autoimmune diseases, and allergies. Our immune monitoring technologies are designed to provide a personalized comprehensive profile of the immune system and we plan to utilize them in our upcoming reprogramming clinical trials to monitor subjects’ immune response before, during and after drug administration.
On January 1, 2023, the Company formed Adimune, Inc., a Delaware wholly owned subsidiary.
On January 1, 2023, the Company formed Pearsanta, Inc., a Delaware wholly owned subsidiary.
On April 13, 2023, the Company formed Adivir, Inc., a Delaware wholly owned subsidiary.
Reverse Stock Split
On September 13, 2022, the Company effectuated a 1 for 50 reverse stock split (the “2022 Reverse Split”). The Company’s stock began trading on a split-adjusted basis effective on the Nasdaq Stock Market on September 14, 2022. There was no change to the number of authorized shares of the Company’s common stock.
On August 17, 2023, the Company effectuated a 1 for 40 reverse stock split (the “2023 Reverse Split”). The Company’s stock began trading on a split-adjusted basis effective on the Nasdaq Stock Market on August 18, 2023. There was no change to the number of authorized shares of the Company’s common stock. All share amounts referenced in this report are adjusted to reflect the 2023 Reverse Split.
Offerings
On
August 31, 2021, the Company completed a registered direct offering (“August 2021 Offering”). In connection therewith, the
Company issued
On
October 18, 2021, the Company entered into an underwriting agreement with Revere Securities LLC, relating to the public offering (the
“October 2021 Offering”) of
| 6 |
On
December 6, 2021, the Company completed a public offering for net proceeds of $
On
September 20, 2022, the Company completed a public offering for net proceeds of $
On April 20, 2023, the Company entered into a
securities purchase agreement (the “April Purchase Agreement”) with an institutional investor, pursuant to which the Company
agreed to sell to such investor pre-funded warrants (the “April Pre-Funded Warrants”) to purchase up to
On August 31, 2023, the “Company entered
into a securities purchase agreement (the “August Purchase Agreement”) with an institutional investor for the issuance
and sale in a private placement (the “Private Placement”) of
Risks and Uncertainties
The Company has a limited operating history and is in the very early stages of generating revenue from intended operations. The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, and federal governmental policy decisions. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include: changes in the biotechnology regulatory environment, technological advances that render our technologies obsolete, availability of resources for clinical trials, acceptance of technologies into the medical community, and competition from larger, more well-funded companies. These adverse conditions could affect the Company’s financial condition and the results of its operations.
On January 30, 2020, the World Health Organization declared the COVID-19 novel coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus included restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the financial impact will be to the Company, it is reasonably possible that future capital raising efforts and additional development of our technologies may be negatively affected.
| 7 |
NOTE 2 – GOING CONCERN ANALYSIS
Management Plans
The
Company was incorporated on September 28, 2017 and has not generated significant revenues to date. During the nine months ended September
30, 2023, the Company had a net loss of $
As of September 30, 2023, the Company had approximately
$
On May 23, 2023, we received written notice from
Nasdaq that, based upon the stockholders equity reported by the Company in its Form 10-Q for the period ended March 31, 2023, and
as of March 31, 2023, the Company was no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires a company to maintain
a minimum of $
On June 22, 2023, we received a letter from Nasdaq
notifying the Company that it has failed to maintain compliance with the minimum bid price rule in Nasdaq Listing Rule 5550(a)(2) (the
“Minimum Bid Price Rule”) as the closing price of Company’s common stock had remained below $
In addition, on September 15, 2023, the Company
received a written notice from Nasdaq that it no longer met the minimum
On September 29, 2023, the Company received a written notice from Nasdaq that the Panel had granted the Company an exception through December 26, 2023, to allow the Company to complete its compliance with the Equity Rule. The October notification letter also confirmed that the Company had demonstrated compliance with the Minimum Bid Price Rule and granted the Company an exception through December 26, 2023 to allow the Company to demonstrate compliance with the Public Float Rule.
If we are delisted from Nasdaq, but obtain a substitute listing for our common stock, it will likely be on a market with less liquidity, and therefore experience potentially more price volatility than experienced on Nasdaq. Stockholders may not be able to sell their shares of common stock on any such substitute market in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market. As a result of these factors, if our common stock is delisted from Nasdaq, the value and liquidity of our common stock, warrants and pre-funded warrants would likely be significantly adversely affected. A delisting of our common stock from Nasdaq could also adversely affect our ability to obtain financing for our operations and/or result in a loss of confidence by investors, employees and/or business partners.
In addition, factors such as stock price, volatility, trading volume, market conditions, demand and regulatory requirements may adversely affect the Company’s ability to raise capital in an efficient manner. Because of these factors, the Company believes that this creates substantial doubt with the Company’s ability to continue as a going concern.
| 8 |
In addition to the shelf registration, the Company has the ability to raise capital from equity or debt through private placements or public offerings pursuant to a registration statement on Form S-1. We may also secure loans from related parties.
The financial statements included in this report do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein. The Company’s ability to continue as a going concern is dependent upon the ability to complete clinical studies and implement the business plan, generate sufficient revenues and to control operating expenses. In addition, the Company is consistently focused on raising capital, strategic acquisitions and alliances, and other initiatives to strengthen the Company.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the Company’s management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended September 30, 2023 and September 30, 2022. Although management believes that the disclosures in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in condensed consolidated financial statements that have been prepared in accordance U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on April 17, 2023. The interim results for the nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ended December 31, 2023 or for any future interim periods.
Principles of Consolidation
The unaudited consolidated financial statements include the accounts of Aditxt, Inc., and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the condensed consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Significant estimates underlying the financial statements include the collectability of notes receivable, collectability and reserve on accounts receivable, the reserve on insurance billing, and the fair value of stock options and warrants.
Fair Value Measurements and Fair Value of Financial Instruments
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
| Level 1 - | Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. |
| Level 2 - | Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
| Level 3 - | Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
| 9 |
The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.
Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet dates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.
The Company maintains its cash accounts at financial institutions which are insured by the Federal Deposit Insurance Corporation. At times, the Company may have deposits in excess of federally insured limits.
Substantially all the Company’s accounts receivable are with companies in the healthcare industry, individuals, and the U.S. government. However, concentration of credit risk is mitigated due to the Company’s number of customers. In addition, for receivables due from U.S. government agencies, the Company does not believe the receivables represent a credit risk as these are related to healthcare programs funded by the U.S. government and payment is primarily dependent upon submitting the appropriate documentation.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, liquid investments.
Inventory
Inventory consists of laboratory materials and supplies used in laboratory analysis. We capitalize inventory when purchased. Inventory is valued at the lower of cost or net realizable value on a first-in, first-out basis. We periodically perform obsolescence assessments and write off any inventory that is no longer usable.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Cost includes expenditures for furniture, office equipment, laboratory equipment, and other assets. Maintenance and repairs are charged to expense as incurred. When assets are sold, retired, or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. The costs of fixed assets are depreciated using the straight-line method over the estimated useful lives or lease life of the related assets.
| Computers | |
| Lab Equipment | |
| Office Furniture | |
| Other fixed assets | |
| Leasehold Improvements |
Intangible Assets
Intangible assets are stated at cost less accumulated amortization. For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives of the related assets. For intangible assets with indefinite lives, the assets are tested periodically for impairment.
| 10 |
Accounts Receivable and Allowance for Doubtful Accounts
Accounts
receivable are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral
to support customer receivables. The Company determines if receivables are past due based on days outstanding, and amounts are written
off when determined to be uncollectible by management. As of September 30, 2023 and December 31, 2022, there was an allowance for doubtful
accounts of
Offering Costs
Offering costs incurred in connection with equity are recorded as a reduction of equity and offering costs incurred in connection with debt are recorded as a reduction of debt as a debt discount.
Revenue Recognition
In accordance with ASC 606 (Revenue From Contracts with Customers), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following five steps:
| 1) | Identify the contract with a customer |
| 2) | Identify the performance obligations in the contract |
| 3) | Determine the transaction price |
| 4) | Allocate the transaction price to performance obligations in the contract |
| 5) | Recognize revenue when or as the Company satisfies a performance obligation |
Revenues reported from services relating to the AditxtScore™ are recognized when the AditxtScoreTM report is delivered to the customer. The services performed include the analysis of specimens received in the Company’s CLIA laboratory and the generation of results which are then delivered upon completion.
The Company recognizes revenue in the following manner for the following types of customers:
Client Payers:
Client payers include physicians or other entities for which services are billed based on negotiated fee schedules. The Company principally estimates the allowance for credit losses for client payers based on historical collection experience and the period of time the receivable has been outstanding.
Cash Pay:
Customers are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Collection of billings is subject to credit risk and the ability of the patients to pay.
Insurance:
Reimbursements from healthcare insurers are based on fee for service schedules. Net revenues recognized consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, collection experience, and the terms of the Company’s contractual arrangements.
| 11 |
Leases
Under Topic 842 (Leases), operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases consisting of office space, laboratory space, and lab equipment.
Leases with an initial term of twelve months or less are not recorded on the balance sheet. We combine the lease and non-lease components in determining the lease liabilities and right of use (“ROU”) assets.
Stock-Based Compensation
The Company accounts for stock-based compensation costs under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services.
Patents
The Company incurs fees from patent licenses,
which are reflected in research and development expenses, and are expensed as incurred. During the nine months ended September 30, 2023
and 2022, the Company incurred patent licensing fees of $
Research and Development
We incur research and development costs during
the process of researching and developing our technologies and future offerings. We expense these costs as incurred unless such costs
qualify for capitalization under applicable guidance. During the nine months ended September 30, 2023 and 2022, the Company incurred
research and development costs of $
Basic and Diluted Net Loss per Common Share
Basic loss per common share is computed by dividing
the net loss by the weighted average number of shares of common stock outstanding for each period. Diluted loss per share is computed
by dividing the net loss attributable of common stockholders by the weighted average number of shares of common stock outstanding plus
the dilutive effect of shares issuable through the common stock equivalents. The weighted-average number of common shares outstanding
excludes common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2023,
Recent Accounting Pronouncements
The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our financial statements.
| 12 |
NOTE 4 – FIXED ASSETS
| Cost Basis | Accumulated Depreciation | Net | ||||||||||
| Computers | $ | $ | ( | ) | $ | |||||||
| Lab Equipment | ( | ) | ||||||||||
| Office Furniture | ( | ) | ||||||||||
| Other Fixed Assets | ( | ) | ||||||||||
| Leasehold Improvements | ( | ) | ||||||||||
| Total Fixed Assets | $ | $ | ( | ) | $ | |||||||
| Cost Basis | Accumulated Depreciation | Net | ||||||||||
| Computers | $ | $ | ( | ) | $ | |||||||
| Lab Equipment | ( | ) | ||||||||||
| Office Furniture | ( | ) | ||||||||||
| Other Fixed Assets | ( | ) | ||||||||||
| Leasehold Improvements | ( | ) | ||||||||||
| Total Fixed Assets | $ | $ | ( | ) | $ | |||||||
Depreciation expense was $
Financed Assets:
In
October 2020, the Company purchased two pieces of lab equipment and financed them for a period of twenty-four months with a monthly payment
of $
In
January of 2021, the Company purchased one piece of lab equipment and financed it for a period of twenty-four months with a monthly payment
of $
In
March of 2021, the Company purchased five pieces of lab equipment and financed them for a period of twenty-four months with a monthly
payment of $
As of September 30, 2023, all lab equipment financing agreements have matured.
NOTE 5 – INTANGIBLE ASSETS
| Cost Basis | Accumulated Amortization | Net | ||||||||||
| Proprietary Technology | $ | $ | ( | ) | $ | |||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||
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| Cost Basis | Accumulated Amortization | Net | ||||||||||
| Proprietary Technology | $ | $ | ( | ) | $ | |||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||
Amortization
expense was $
NOTE 6 – RELATED PARTY TRANSACTIONS
On April 21, 2023, Amro Albanna, the Chief Executive
Officer of the Company, and Shahrokh Shabahang, the Chief Innovation Officer of the Company, loaned $
On May 25, 2023, Amro Albanna, the Chief Executive
Officer of the Company, loaned $
On June 12, 2023, Amro Albanna, the Chief Executive Officer of the
Company, and Shahrokh Shabahang, the Chief Innovation Officer of the Company, loaned $
NOTE 7 – NOTES PAYABLE
On
February 21, 2023, the Company entered into an agreement for the purchase and sale of future receipts (the “Future Receipts Agreement”)
with a commercial funding source pursuant to which the Company agreed to sell to the funder certain future trade receipts in the aggregate
amount of $
On April 4, 2023, the Company entered into a Business
Loan and Security Agreement (the “April Loan Agreement”) with a commercial funding source (the “April Lender”),
pursuant to which the Company obtained a loan from the April Lender in the principal amount of $
| 14 |
On April 24, 2023, the Company entered into a
Business Loan and Security Agreement (the “Loan Agreement”) with a commercial funding source (the “Lender”), pursuant
to which the Company obtained a loan from the Lender in the principal amount of $
On May 30, 2023, the Company entered into a Business
Loan and Security Agreement (the “May Loan Agreement”) with a commercial funding source (the “May Lender”), pursuant
to which the Company obtained a loan from the Lender in the principal amount of $
On July 3, 2023, the Company entered into a Business
Loan and Security Agreement (the “July Loan Agreement”) with a commercial funding source (the “July Lender’’),
pursuant to which the Company obtained a loan from the Lender in the principal amount of $
On August 23, 2023, the Company entered into a
Business Loan and Security Agreement (the “August Loan Agreement”) with a commercial funding source (the “August Lender’’),
pursuant to which the Company obtained a loan from the Lender in the principal amount of $
Securities Purchase Agreement
On
July 3, 2023, the Company entered into a Securities Purchase Agreement (the “First Tranche Securities Purchase Agreement”)
with an accredited investor pursuant to which the Company issued and sold a secured promissory note in the principal amount of $
| 15 |
In connection with the First Tranche Securities Purchase Agreement and the issuance of the First Tranche Note, the Company and certain of its subsidiaries also entered into a Security Agreement with the investor (the “First Tranche Security Agreement”) pursuant to which it granted the investor a security interest in certain Collateral (as defined in the First Tranche Security Agreement) to secure its obligations under the First Tranche Note. In addition, the Company entered into a registration rights agreement with the investor pursuant to which the Company agreed to prepare and file with the U.S. Securities and Exchange Commission a registration statement covering the resale of the First Tranche Commitment Shares and any shares of the Company’s common stock issuable upon conversion of the First Tranche Note within 120 days of the closing date and to have such registration statement declared effective within 150 days of the closing date. As of September 30, 2023, the First Tranche Note was fully paid off.
On July 24, 2023, the Company entered into a Securities
Purchase Agreement (the “Second Tranche Securities Purchase Agreement”) with an accredited investor pursuant to which the
Company issued and sold a secured promissory note in the principal amount of $
In connection with the Second Tranche Securities
Purchase Agreement and the issuance of the Second Tranche Note, the Company and certain of its subsidiaries also entered into a Security
Agreement with the investor (the “Second Tranche Security Agreement”) pursuant to which it granted the investor a security
interest in certain Collateral (as defined in the Second Tranche Security Agreement) to secure its obligations under the Second Tranche
Note. In addition, the Company entered into a registration rights agreement with the investor pursuant to which the Company agreed to
prepare and file with the U.S. Securities and Exchange Commission a registration statement covering the resale of the Second Tranche Commitment
Shares and any shares of the Company’s common stock issuable upon conversion of the Second Tranche Note within 90 days of the closing
date and to have such registration statement declared effective within 120 days of the closing date. As of September 30, 2023, there was
$
NOTE 8 – LEASES
Our lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. We used the incremental borrowing rate on September 30, 2023 and December 31, 2022 for all leases that commenced prior to that date. In determining this rate, which is used to determine the present value of future lease payments, we estimate the rate of interest we would pay on a collateralized basis, with similar payment terms as the lease and in a similar economic environment.
Our
corporate headquarters is located in Richmond, Virginia, where we lease approximately
We
also lease approximately
Additionally,
we lease approximately
As
of September 30, 2023, the Company is in arrears on certain lease payments in the aggregate amount of approximately $
| 16 |
| Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | |||||||
| Components of total lease costs: | ||||||||
| Operating lease expense | $ | $ | ||||||
| Total lease costs | $ | $ | ||||||
Lease Positions as of September 30, 2023 and December 31, 2022
| September 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Right of use asset – long term | $ | $ | ||||||
| Total right of use asset | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease liabilities – short term | $ | $ | ||||||
| Operating lease liabilities – long term | ||||||||
| Total lease liability | $ | $ | ||||||
| Weighted average remaining lease term (in years) – operating leases | ||||
| Weighted average discount rate – operating leases | % |
Nine Months Ended September 30, 2023
| 2023 (remaining) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total lease payments | $ | |||
| Less imputed interest | ( | ) | ||
| Less current portion | ( | ) | ||
| Total maturities, due beyond one year | $ |
NOTE 9 – COMMITMENTS & CONTINGENCIES
License Agreement with Loma Linda University
On March 8, 2018, we entered into an Assignment Agreement (the “Assignment
Agreement”) with Sekris Biomedical, Inc. (“Sekris”). Sekris was a party to a License Agreement with Loma Linda University
(“LLU”), entered into and made effective on May 25, 2011, and amended on June 24, 2011, July 16, 2012, and December 27, 2012
(the “Original Agreement,” and together with the Assignment Agreement, the “Sekris Agreements”). Pursuant to the
Assignment Agreement, Sekris transferred and assigned all of its rights and obligations in and to liabilities under the Original Agreement,
of whatever kind or nature, to us. In exchange, on March 8, 2018, we issued a warrant to Sekris to purchase up to
| 17 |
Pursuant
to the LLU License Agreement, we obtained the exclusive royalty-bearing worldwide license in and to all intellectual property, including
patents, technical information, trade secrets, proprietary rights, technology, know-how, data, formulas, drawings, and specifications,
owned or controlled by LLU and/or any of its affiliates (the “LLU Patent and Technology Rights”) and related to therapy for
immune-mediated inflammatory diseases (the ADI™ technology). In consideration for the LLU License Agreement, we issued
Pursuant
to the LLU License Agreement, we are required to pay an annual license fee to LLU. Also, we paid LLU $
The
LLU License Agreement shall terminate on the last day that a patent granted to us by LLU is valid and enforceable or the day that the
last patent application licensed to us is abandoned. The LLU License Agreement may be terminated by mutual agreement or by us upon 90
days written notice to LLU. LLU may terminate the LLU License Agreement in the event of (i) non-payments or late payments of royalty,
milestone and license maintenance fees not cured within 90 days after delivery of written notice by LLU, (ii) a breach of any non-payment
provision (including the provision that requires us to meet certain deadlines for milestone events (each, a “Milestone Deadline”))
not cured within 90 days after delivery of written notice by LLU and (iii) LLU delivers notice to us of three or more actual breaches
of the LLU License Agreement by us in any 12-month period. Additional Milestone Deadlines include: (i) submission of an IND/clinical
trial application to initiate first-in-human clinical trials on or before March 31, 2022, which was extended to March 31, 2023 due to
the payment of a $
License Agreement with Leland Stanford Junior University
On February 3, 2020, we entered into an exclusive license agreement (the “February 2020 License Agreement”) with Leland Stanford Junior University (“Stanford”) with regard to a patent concerning a method for detection and measurement of specific cellular responses. Pursuant to the February 2020 License Agreement, other than as described below, we received an exclusive worldwide license to Stanford’s patent with regard to use, import, offer, and sale of Licensed Products (as defined in the agreement). The license to the patented technology is exclusive, including the right to sublicense, beginning on the effective date of the agreement and ending when the patent expires. Under the exclusivity agreement, we acknowledged that Stanford had already granted a non-exclusive license in the Nonexclusive Field of Use, under the Licensed Patents in the Licensed Field of Use in the Licensed Territory (as those terms are defined in the February 2020 License Agreement”). However, Stanford agreed to not grant further licenses under the Licensed Patents in the Licensed Field of Use in the Licensed Territory. On December 29, 2021, we entered into an amendment to the February 2020 License Agreement which extended our exclusive right to license the technology deployed in AditxtScoreTM and securing worldwide exclusivity in all fields of use of the licensed technology.
| 18 |
We
were obligated to pay and paid a fee of $
We were also required to: (i) provide a listing of the management team
or a schedule for the recruitment of key management positions by March 31, 2020 (which has been completed), (ii) provide a business plan
covering projected product development, markets and sales forecasts, manufacturing and operations, and financial forecasts until at least
$
Asset Purchase Agreement
On
April 18, 2023, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Cellvera Global
Holdings LLC (“Cellvera Global”), Cellvera Holdings Ltd. (“BVI Holdco”), Cellvera, Ltd. (“Cellvera Ltd.”),
Cellvera Development LLC (“Cellvera Development” and together with Cellvera Global, BVI Holdco, Cellvera Ltd. and Cellvera
Development (the “Sellers”), AiPharma Group Ltd. (“Seller Owner” and collectively with the Sellers, “Cellvera”),
and the legal representative of Cellvera, pursuant to which, the Company will purchase Cellvera’s
The obligations of the Company to consummate the closing are subject to the satisfaction or waiver, at or prior to the Closing of certain conditions, including but not limited to, the following:
| (i) | Satisfactory completion of due diligence; | |
| (ii) | Completion by the Company of financing sufficient to consummate the transactions contemplated by the Asset Purchase Agreement; | |
| (iii) | Receipt by the Company of all required Consents from Governmental Bodies for the Acquisition, including but not limited to, any consents required to complete the transfer and assignment of Cellvera’s membership interests in GRA; |
| 19 |
| (iv) | Receipt of executed payoff letters reflecting the amount required to be fully pay all of each of Seller’s and Seller Owner’s Debt to be paid at Closing; | |
| (v) | Receipt by the Company of a release from Agility; | |
| (iv) | Execution of an agreement acceptable to the Company with respect to the acquisition by the Company of certain intellectual property presently held by a third party; | |
| (v) | Execution of an amendment to an asset purchase agreement previously entered into by Cellvera with a third party that effectively grants the Company the rights to acquire the intellectual property from the third party under such agreement; | |
| (vi) | Receipt of a fairness opinion by the Company with respect to the transactions contemplated by the Asset Purchase Agreement; and | |
| (vii) | Receipt by the Company from the Seller Owner of written consent, whether through its official liquidator or the Board of Directors of Seller Owner, to the sale and purchase of the Acquired Assets and Assumed Liabilities pursuant to the Assert Purchase Agreement. |
Off Balance Sheet Arrangements
From time to time the Company enters into short term research and development
contracts. These contracts have payment provisions which require payment once regulatory and completion milestones are met. As of September
30, 2023, the Company has approximately $
Departure of Officer
On July 21, 2023, Matthew Shatzkes tendered his resignation as Chief
Legal Officer, General Counsel and Corporate Secretary of the Company. In connection with his resignation, the Company entered into a
Separation Agreement and General Release (the “Separation Agreement”) with Mr. Shatzkes. Pursuant to the Separation Agreement,
Mr. Shatzkes’ employment with the Company terminated on August 4, 2023 (the “Termination Date”). In addition, the Company
agreed to pay Mr. Shatzkes’ within seven days after the Termination Date: (i) $
Contingent Liability
On
September 7, 2023, the Company received a demand letter from the holder of certain warrants issued by the Company in April 2023. The
demand letter alleges that the investor suffered more than $
Letter of Intent Termination
On August 1, 2023, the Company and Natural State Genomics and Natural State Laboratories mutually agreed to terminate the Amended and Restated Non-Binding Letter of Intent dated June 12, 2023.
| 20 |
NOTE 10 – STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock
On May 24, 2021, the Company increased the number of authorized shares
of the Company’s common stock, par value $
During the nine months ended September 30, 2023, the Company issued
During the nine months ended September 30, 2022,
the Company issued
On
December 20, 2022, the Company entered into an At The Market Offering Agreement (the “ATM”) with H.C. Wainwright & Co.,
LLC as agent (the “Agent”), pursuant to which the Company may offer and sell, from time to time through the Agent, shares
of the Company’s common stock having an aggregate offering price of up to $
The offer and sale of the Shares was made pursuant to a shelf registration statement on Form S-3 and the related prospectus (File No. 333-257645) filed by the Company with the SEC on July 2, 2021, amended on July 6, 2021 and declared effective by the SEC on July 13, 2021, under the Securities Act of 1933, as amended.
For
the nine months ended September 30, 2023, the Company sold
On
April 20, 2023, the Company entered into an amendment to the ATM, pursuant to which the Company and the Agent agreed to reduce the aggregate
gross sales price of the Shares under the ATM from $
Preferred Stock
The
Company is authorized to issue
Issuance of Series B Preferred Stock:
On
July 19, 2022, the Company entered into a Subscription and Investment Representation Agreement with its Chief Executive Officer (the
“Purchaser”), pursuant to which the Company agreed to issue and sell one (1) share of the Company’s Series
B Preferred Stock (the “Preferred Stock”), par value $
| 21 |
On
July 19, 2022, the Company filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State
of Delaware, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the share of Preferred
Stock. The Certificate of Designation provides that the share of Preferred Stock will have
The Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Preferred Stock will not be entitled to receive dividends of any kind.
The
outstanding share of Preferred Stock shall be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the
Board of Directors in its sole discretion or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation
implementing a reverse stock split. Upon such redemption, the holder of the Preferred Stock will receive consideration of $
Redemption of Series B Preferred Stock
On
October 7, 2022, the Company paid $
Series C Preferred Stock
On
July 11, 2023, the Company filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State
of Delaware, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the share of Preferred
Stock. The Certificate of Designation provides that the share of Preferred Stock will have
The Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Preferred Stock will not be entitled to receive dividends of any kind.
The outstanding share of Preferred Stock shall
be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion
or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing a reverse stock split.
Upon such redemption, the holder of the Preferred Stock will receive consideration of $
On
July 11, 2023, the Company entered into a Subscription and Investment Representation Agreement (the “Subscription Agreement”)
with Amro Albanna, its Chief Executive Officer, who is an accredited investor (the “Purchaser”), pursuant to which the Company
agreed to issue and sell one (1) share of the Company’s Series C Preferred Stock, par value $
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Stock-Based Compensation
In
October 2017, our Board of Directors adopted the Aditx Therapeutics, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). The
2017 Plan provides for the grant of equity awards to directors, employees, and consultants. The Company is authorized to issue up
to
On February 24, 2021, our Board of Directors adopted the Aditx Therapeutics,
Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for grants of nonqualified stock options,
incentive stock options, stock appreciation rights, restricted stock and restricted stock units, and other stock-based awards (collectively,
the “Awards”). Eligible recipients of Awards include employees, directors or independent contractors of the Company or any
affiliate of the Company. The Compensation Committee of the Board of Directors (the “Committee”)administers the 2021 Plan.
A total of
During the three and nine months ended September 30, 2023 and 2022, the Company granted no new options.
| Vested and Nonvested Stock Options | Number | Weighted Average Exercise Price | Weighted Average Remaining Life | |||||||||
| Outstanding December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired or forfeited | ||||||||||||
| Outstanding September 30, 2023 | $ | |||||||||||
| Nonvested Stock Options | Number | Weighted- Average Exercise Price | ||||||
| Nonvested on December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Nonvested on September 30, 2023 | $ | |||||||
As of September 30, 2023 there were
The Company recognized stock-based compensation
expense related to options granted and vesting expense of $
The Company recognizes option forfeitures as they occur, as there is insufficient historical data to accurately determine future forfeitures rates.
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Warrants
| Exercise price | $ | |||
| Expected dividend yield | % | |||
| Risk free interest rate | % | |||
| Expected life in years | ||||
| Expected volatility | |
% |
The risk-free interest rate assumption for warrants granted is based upon observed interest rates on the United States Government Bond Equivalent Yield appropriate for the expected term of warrants.
The Company determined the expected volatility assumption for warrants granted using the historical volatility of comparable public companies’ common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future warrant grants, until such time that the Company’s common stock has enough market history to use historical volatility.
The dividend yield assumption for warrants granted is based on the Company’s history and expectation of dividend payouts. The Company has never declared nor paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
The Company recognizes warrant forfeitures as they occur, as there is insufficient historical data to accurately determine future forfeitures rates.
| Vested and Nonvested Warrants | Number | Weighted Average Exercise Price | Weighted Average Remaining Life | |||||||||
| Outstanding December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Expired or forfeited | ( | ) | ||||||||||
| Outstanding September 30, 2023 | $ | |||||||||||
On
September 1, 2023, the Company recognized a deemed dividend resulting in the issuance of
On August 31, 2023, the Company entered into
a securities purchase agreement with an institutional investor for the issuance and sale in a private placement of (i) pre-funded warrants
(the “August 2023 Pre-Funded Warrants”) to purchase up to
| Nonvested Warrants | Number | Weighted- Average Exercise Price | ||||||
| Nonvested on December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Nonvested on September 30, 2023 | $ | |||||||
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The
Company recognized stock-based compensation expense related to warrants granted and vesting expense of
On April 20, 2023, the Company entered into a
securities purchase agreement (the “Purchase Agreement”) with an institutional investor, pursuant to which the Company agreed
to sell to such investor pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to
On August 31, 2023, the Company entered into a
securities purchase agreement (the “August Purchase Agreement”) with an institutional investor for the issuance and sale
in a private placement (the “Private Placement”) of
Restricted Stock Units
| Nonvested RSUs | Number | Weighted Average Price | ||||||
| Nonvested December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Rounding for Reverse Split | ||||||||
| Nonvested September 30, 2023 | $ | |||||||
The Company recognized stock-based compensation
expense related to RSUs granted and vesting expense of
During
the nine months ended September 30, 2023, the Company granted a total of
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NOTE 11 – INCOME TAXES
The Company has incurred losses since inception. During the nine months ended September 30, 2023, the Company did not provide any provision for income taxes as the Company incurred losses during such period. The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. In assessing the need for a valuation allowance, the Company has considered both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely than not” standard. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Based on the Company’s review of this evidence, the Company has recorded a full valuation allowance for its net deferred tax assets as of September 30, 2023.
As of September 30, 2023, the Company did not have any amounts recorded pertaining to uncertain tax positions.
NOTE 12 – SUBSEQUENT EVENTS
Purchase and Sale of Future Receipts
On
October 5, 2023, the Company entered into an Agreement for the Purchase and Sale of Future Receipts (the “October MCA Agreement”)
pursuant to which the existing funder (the “Funder”) increased the existing outstanding amount to $
Business Loan and Security Agreement
On
November 7, 2023, the Company entered into a Business Loan and Security Agreement (the “November Loan Agreement”) with the
lender (the “Lender”), pursuant to which the Company obtained a loan from the Lender in the principal amount of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes for the year ended December 31, 2022 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those factors set forth in the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry Data” and in the section entitled “Risk Factors” in Part II, Item 1A.
Overview and Mission
We believe the world needs—and deserves—a new approach to innovating that harnesses the power of large groups of stakeholders who work together to ensure that the most promising innovations make it into the hands of people who need them most.
We were incorporated in the State of Delaware on September 28, 2017, and our headquarters are in Richmond, Virginia. The company was founded with a mission of bringing stakeholders together, to transform promising innovations into products and services that could address some of the most challenging needs. The socialization of innovation through engaging stakeholders in every aspect of it, is key to transforming more innovations, more rapidly, and more efficiently.
At inception, the first innovation we took on was an immune modulation technology titled ADI/Adimune with a focus on prolonging life and enhancing life quality of patients that have undergone organ transplants. Since then, we expanded our portfolio of innovations, and we continue to evaluate a variety of promising health innovations.
ADIMUNE, INC.
Formed in January 2023, Adimune™, Inc. (“Adimune”) is focused on leading our immune modulation therapeutic programs. Adimune’s proprietary immune modulation product candidate, ADI-100™, based on the Apoptotic DNA Immunotherapy™ platform technology, utilizes a novel approach that mimics the way our bodies naturally induce tolerance to our own tissues. It includes two DNA molecules designed to deliver signals to induce tolerance. ADI-100 has been successfully tested in several preclinical models (e.g., skin grafting, psoriasis, type 1 diabetes, multiple sclerosis).
In May 2023, Adimune entered into a clinical trial agreement with Mayo Clinic to advance clinical studies targeting autoimmune diseases of the central nervous system (“CNS”) with the initial focus on the rare, but debilitating, autoimmune disease Stiff Person Syndrome (“SPS”). According to the National Organization of Rare Diseases, the exact incidence and prevalence of SPS is unknown; however, one estimate places the incidence at approximately one in one million individuals in the general population.
Pending approval by the International Review Board, a human trial for SPS is expected get underway in the first half of 2024 with enrollment of up to 20 patients, some of whom may also have type 1 diabetes. ADI-100 will initially be tested for safety and efficacy. ADI-100 is designed to tolerize against an antigen known as glutamic acid decarboxylase (“GAD”), which is implicated in type-1 diabetes, psoriasis, stiff person syndrome, and in many autoimmune diseases of the CNS.
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Background
The discovery of immunosuppressive (anti-rejection and monoclonal) drugs over 40 years ago has made possible life-saving organ transplantation procedures and blocking of unwanted immune responses in autoimmune diseases. However, immune suppression leads to significant undesirable side effects, such as increased susceptibility to life-threatening infections and cancers, because it indiscriminately and broadly suppresses immune function throughout the body. While the use of these drugs has been justifiable because they prevent or delay organ rejection, their use for treatment of autoimmune diseases and allergies may not be acceptable because of the aforementioned side effects. Furthermore, often transplanted organs ultimately fail despite the use of immune suppression, and about 40% of transplanted organs survive no more than five years.
Through Aditxt, Adimune has the right of use to the exclusive worldwide license for commercializing ADI nucleic acid-based technology (which is currently at the pre-clinical stage) from Loma Linda University. ADI uses a novel approach that mimics the way the body naturally induces tolerance to our own tissues (“therapeutically induced immune tolerance”). While immune suppression requires continuous administration to prevent rejection of a transplanted organ, induction of tolerance has the potential to retrain the immune system to accept the organ for longer periods of time. ADI may allow patients to live with transplanted organs with significantly reduced immune suppression. ADI is a technology platform which we believe can be engineered to address a wide variety of indications.
Advantages
ADI™ is a nucleic acid-based technology (e.g., DNA-based), which we believe selectively suppresses only those immune cells involved in attacking or rejecting self and transplanted tissues and organs. It does so by tapping into the body’s natural process of cell turnover (i.e., apoptosis) to retrain the immune system to stop unwanted attacks on self or transplanted tissues. Apoptosis is a natural process used by the body to clear dying cells and to allow recognition and tolerance to self-tissues. ADI triggers this process by enabling the cells of the immune system to recognize the targeted tissues as “self.” Conceptually, it is designed to retrain the immune system to accept the tissues, similar to how natural apoptosis reminds our immune system to be tolerant to our own “self” tissues.
While various groups have promoted tolerance through cell therapies and ex vivo manipulation of patient cells (i.e., takes place outside the body), to our knowledge, we will be unique in our approach of using in-body induction of apoptosis to promote tolerance to specific tissues. In addition, ADI treatment itself will not require additional hospitalization but only an injection of minute amounts of the therapeutic drug into the skin.
Moreover, preclinical studies have demonstrated that ADI treatment significantly and substantially prolongs graft survival, in addition to successfully “reversing” other established immune-mediated inflammatory processes.
License Agreement with Loma Linda University (“LLU”)
On March 15, 2018, we entered into a License Agreement with LLU, which was subsequently amended on July 1, 2020. Pursuant to the LLU License Agreement, we obtained the exclusive royalty-bearing worldwide license to all intellectual property, including patents, technical information, trade secrets, proprietary rights, technology, know-how, data, formulas, drawings, and specifications, owned or controlled by LLU and/or any of its affiliates (the “LLU Patent and Technology Rights”) and related to therapy for immune-mediated inflammatory diseases (the ADI™ technology). In consideration for the LLU License Agreement, we issued 25,000 shares of common stock to LLU.
PEARSANTA, INC.
Formed in January 2023, our subsidiary Pearsanta™, Inc. (“Pearsanta”) seeks to take personalized medicine to a whole new level by delivering “Health by the Numbers.” Since its founding, Pearsanta has been building the platform for enabling our vision of lab quality testing, anytime, anywhere. Our plan for Pearsanta’s platform is for it to be the transactional backbone for sample collection, sample processing (on- and off-site), and reporting. This will require the development and convergence of multiple components developed by Pearsanta, or through transactions with third parties, including collection devices, “lab-on-a-chip” technologies, Lab Developed Test (LDT) assays, a data-driven analysis engine, and telemedicine. According to a comprehensive research report by Market Research Future, the clinical and consumer diagnostic market is estimated to hit $429.3 billion by 2030.
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We believe that timely and personalized testing enables far more informed treatment decisions. Pearsanta’s platform is being developed as a seamless digital healthcare solution. This platform will integrate at-location sample collection, Point-of-Care (“POC”) and LDT assays, and an analytical reporting engine, with telemedicine-enabled visits with licensed physicians to review test results and, if necessary, order a prescription. Pearsanta’s goal of extending its platform to enable consumers to monitor their health more proactively as the goal is to provide a more complete picture about someone’s dynamic health status, factoring in genetic makeup and their response to medication. The POC component of Pearsanta would enable diagnostic testing at-home, at work, in pharmacies, and more to generate results quickly so that an individual can access necessary treatment faster. With certain infections, prescribing the most effective treatment according to one’s numbers can prevent hospital emergency room admissions and potentially life-threatening consequences.
Examples of indication-focused tests for the Test2Treat platform will include the evaluation for advanced urinary tract infections (“UTIs”), COVID-19/flu/respiratory syncytial virus, sexually transmitted infections, gut health, pharmacogenomics (i.e., how your genes affect the way your body responds to certain therapeutics), and sepsis. We believe that these offerings are novel and needed as the current standard of care using broad spectrum antibiotic treatment can be ineffective and potentially life-threatening. For example, improperly prescribed antibiotics may approach 50% of outpatient cases. Further, according to an article published in Physician’s Weekly, only 1% of board-certified critical care medicine physicians are trained in infectious disease.
Licensed Technologies – AditxtScoreTM
We intend to sublicense to Pearsanta an exclusive worldwide sub-license for commercializing the AditxtScore™ technology which provides a personalized comprehensive profile of the immune system. AditxtScore is intended to detect individual immune responses to viruses, bacteria, peptides, drugs, supplements, bone marrow and solid organ transplants, and cancer. It has broad applicability to many other agents of clinical interest impacting the immune system, including those not yet identified such as emerging infectious agents.
AditxtScore is being designed to enable individuals and their healthcare providers to understand, manage and monitor their immune profiles and to stay informed about attacks on or by their immune system. We believe AditxtScore can also assist the medical community and individuals by being able to anticipate the immune system’s potential response to viruses, bacteria, allergens, and foreign tissues such as transplanted organs. This technology may be able to serve as a warning signal, thereby allowing for more time to respond appropriately. Its advantages include the ability to provide simple, rapid, accurate, high throughput assays that can be multiplexed to determine the immune status with respect to several factors simultaneously, in approximately 3-16 hours. In addition, it can determine and differentiate between distinct types of cellular and humoral immune responses (e.g., T and B cells and other cell types). It also provides for simultaneous monitoring of cell activation and levels of cytokine release (i.e., cytokine storms).
We are actively involved in the regulatory approval process for AditxtScore assays for clinical use and securing manufacturing, marketing, and distribution partnerships for application in the various markets. To obtain regulatory approval to use AditxtScore as a clinical assay, we have conducted validation studies to evaluate its performance in detection of antibodies and plan to continue conducting additional validation studies for new applications in autoimmune diseases.
Advantages
The sophistication of the AditxtScore technology includes the following:
| ● | greater sensitivity/specificity. |
| ● | 20-fold higher dynamic range, greatly reducing signal to noise compared to conventional assays. |
| ● | ability to customize assays and multiplex a large number of analytes with speed and efficiency. |
| ● | ability to test for cellular immune responses (i.e., T and B cells and cytokines). |
| ● | proprietary reporting algorithm. |
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License Agreement with Leland Stanford Junior University (“Stanford”)
On February 3, 2020, we entered into an exclusive license agreement (the “February 2020 License Agreement”) with Stanford with regard to a patent concerning a method for detection and measurement of specific cellular responses. Pursuant to the February 2020 License Agreement, we received an exclusive worldwide license to Stanford’s patent with regard to use, import, offer, and sale of Licensed Products (as defined in the agreement). The license to the patented technology is exclusive, including the right to sublicense, beginning on the effective date of the agreement, and ending when the patent expires. Under the exclusivity agreement, we acknowledged that Stanford had already granted a non-exclusive license in the Nonexclusive Field of Use, under the Licensed Patents in the Licensed Field of Use in the Licensed Territory (as those terms are defined in the “February 2020 License Agreement”). However, Stanford agreed not to grant further licenses under the Licensed Patents in the Licensed Field of Use in the Licensed Territory. On December 29, 2021, we entered into an amendment to the February 2020 License Agreement which extended our exclusive right to license the technology deployed in AditxtScoreTM and securing worldwide exclusivity in all fields of use of the licensed technology.
ADIVIR, INC.
Formed in April of 2023, Adivir™, Inc., is Aditxt’s most recently formed wholly owned subsidiary, dedicated to the clinical and commercial development efforts of innovative antiviral products, which have the potential to address a wide range of infectious diseases, including those that currently lack viable treatment options.
Background
On April 18, 2023, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Cellvera Global Holdings LLC (“Cellvera Global”), Cellvera Holdings Ltd. (“BVI Holdco”), Cellvera, Ltd. (“Cellvera Ltd.”), Cellvera Development LLC (“Cellvera Development” and together with Cellvera Global, BVI Holdco, Cellvera Ltd. and Cellvera Development (the “Sellers”), AiPharma Group Ltd. (“Seller Owner” and collectively with the Sellers, “Cellvera”), and the legal representative of Cellvera, pursuant to which, the Company will purchase Cellvera’s 50% ownership interest in G Response Aid FZE (“GRA”), certain other intellectual property and all goodwill related thereto (the “Acquired Assets”). Unless expressly stated otherwise herein, capitalized terms used but not defined herein have the meanings ascribed to them in the Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, the consideration for the Acquired Assets consists of (A) $24.5 million, comprised of: (i) the forgiveness of the Company’s $14.5 million loan to Cellvera Global, and (ii) approximately $10 million in cash, and (B) future revenue sharing payments for a term of seven years. GRA holds an exclusive, worldwide license for the antiviral medication, Avigan® 200mg, excluding Japan, China and Russia. The other 50% interest in GRA is held by Agility, Inc. (“Agility”).
Additionally, upon the closing, the Share Exchange Agreement previously entered into as of December 28, 2021, between Cellvera Global Holdings, LLC f/k/a AiPharma Global Holdings, LLC (together with other affiliates and subsidiaries) and the Company, and all other related agreements will be terminated.
The obligations of the Company to consummate the Closing under the Asset Purchase Agreement are subject to the satisfaction or waiver, at or prior to the Closing of certain conditions, including but not limited to, the following:
| (i) | Satisfactory completion of due diligence; |
| (ii) | Completion by the Company of financing sufficient to consummate the transactions contemplated by the Asset Purchase Agreement; |
| (iii) | Receipt by the Company of all required Consents from Governmental Bodies for the Acquisition, including but not limited to, any consents required to complete the transfer and assignment of Cellvera’s membership interests in GRA; |
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| (iv) | Receipt of executed payoff letters reflecting the amount required to be fully pay all of each of Seller’s and Seller Owner’s Debt to be paid at Closing; |
| (v) | Receipt by the Company of a release from Agility; |
| (vi) | Execution of an agreement acceptable to the Company with respect to the acquisition by the Company of certain intellectual property presently held by a third party; |
| (vii) | Execution of an amendment to an asset purchase agreement previously entered into by Cellvera with a third party that effectively grants the Company the rights to acquire the intellectual property from the third party under such agreement; |
| (viii) | Receipt of a fairness opinion by the Company with respect to the transactions contemplated by the Asset Purchase Agreement; and |
| (ix) | Receipt by the Company from the Seller Owner of written consent, whether through its official liquidator or the Board of Directors of Seller Owner, to the sale and purchase of the Acquired Assets and Assumed Liabilities pursuant to the Assert Purchase Agreement. |
There can be no assurance that the conditions to closing will be satisfied or that the proposed acquisition will be completed as proposed or at all.
Our commitment to building our antiviral portfolio is strategic and timely. We believe that there has never has there been a more important time to address the growing global need to uncover new treatments or commercialize existing ones that treat life-threatening global viral infections.
Our Team
Aditxt has assembled an entrepreneurial team of experts from a variety of different business, engineering, and scientific fields, and commercial backgrounds, with collective experience that ranges from founding startup innovation companies, to developing and marketing biopharmaceutical and diagnostic products, to designing clinical trials, and management of private and public companies. We have deep experience in identifying and accessing promising health innovations and developing them into products and services with the ability to scale. We understand the capital markets, both public and private, as well as M&A and facilitating complex IPOs.
Going Concern
We were incorporated on September 28, 2017 and have not generated significant revenues to date. During the nine months ended September 30, 2023 we had a net loss of $21,412,626 and cash of $1,651,354 as of September 30, 2023. The Company will require significant additional capital to operate in the normal course of business and fund clinical studies in the long-term. As a result of the September 2022 Offering, the April Purchase Agreement, and the August Purchase Agreement, we received net proceeds of approximately $28,000,000 during the last twelve months. We believe that the remaining funds on hand will not be sufficient to fund our operations for the next 12 months and such creates substantial doubt about our ability to continue as a going concern beyond one year.
Financial Results
We have a limited operating history. Therefore, there is limited historical financial information upon which to base an evaluation of our performance. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. Our condensed consolidated financial statements as of September 30, 2023, show a net loss of $20,412,626. We expect to incur additional net expenses over the next several years as we continue to maintain and expand our existing operations. The amount of future losses and when, if ever, we will achieve profitability are uncertain.
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Results of Operations
Results of operations for the three months ended September 30, 2023 and 2022
We generated revenue of $124,486 and $323,125 for the three months ended September 30, 2023 and 2022, respectively. Cost of sales for the three months ended September 30, 2023 and 2022 was $106,922 and $233,684, respectively.
During the three months ended September 30, 2023, we incurred a loss from operations of $8,095,209. This is due to general and administrative expenses of $7,169,863, which includes approximately $3,351,000 in payroll expenses, $1,128,000 in professional fees, and $103,031 in stock-based compensation. Research and development expenses were $898,724, which includes $151,605 in consulting expenses and $49,209 in stock-based compensation. Sales and marketing expenses were $44,186, which includes $1,752 in stock-based compensation.
During the three months ended September 30, 2022, we incurred a loss from operations of $5,392,164. This is due to general and administrative expenses of $3,919,618, which includes $461,492 in stock-based compensation; research and development of $1,570,540, which includes $170,066 in stock-based compensation, and sales and marketing expenses of $(8,553), which includes $0 in stock-based compensation. The $1,570,540 in research and development is mainly comprised of $974,982 in compensation and $248,012 in consulting expenses, offset by a one-time adjustment to research and development purchases. During the quarter, the Company transitioned from purchasing certain inventory items to internally manufacturing these items.
The decrease in expenses during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was due to decreased research and development spend and the termination of a sales and marketing vendor.
Results of operations for the nine months ended September 30, 2023 and 2022
We generated revenue of $563,879 and $748,119 for the nine months ended September 30, 2023 and 2022, respectively. Cost of sales for the nine months ended September 30, 2023 and 2022 was $470,969 and $596,613, respectively.
During the nine months ended September 30, 2023, we incurred a loss from operations of $18,111,541. This is due to general and administrative expenses of $15,209,789. This includes approximately $7,682,000 in payroll expenses, $3,063,000 in professional fees, and $484,502 in stock-based compensation. Research and development expenses were $2,771,100, which includes $1,034,698 in consulting expenses and $165,382 in stock-based compensation. Sales and marketing expenses were $223,562, which includes $6,787 in stock-based compensation.
During the nine months ended September 30, 2022, we incurred a loss from operations of $17,280,052. This is due to general and administrative expenses of $12,332,728, which includes $1,288,829 in stock-based compensation, research and development of $4,186,842, which includes $473,593 in stock-based compensation, and sales and marketing expenses of $911,988, which includes $754,699 in stock-based compensation. The $4,186,842 in research and development is mainly comprised of $1,350,384 in consulting expenses, and $2,517,836 in compensation offset by a one-time adjustment to research and development purchases. During the quarter, the Company transitioned from purchasing certain inventory items to internally manufacturing these items.
The decrease in expenses during the nine months ended September 30, 2023 compared to the three months ended September 30, 2022 was due to decreased research and development spend and the termination of a sales and marketing vendor.
Liquidity and Capital Resources
We have incurred substantial operating losses since inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of September 30, 2023, we had an accumulated deficit of $116,620,157. We had working capital of $(7,815,514) as of September 30, 2023. During the nine months ended September 30, 2023, we purchased $14,407 in fixed assets, for which we made cash payments of $14,407. Of the $14,407, $12,356 of these purchased fixed assets were lab equipment and $2,051 was for computers.
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Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern.
We have funded our operations from proceeds from the sale of equity and debt securities. On July 2, 2020, we completed our IPO and raised approximately $9.5 million in net proceeds. At the time of the IPO, we believed that these funds would be sufficient to fund our operations for the foreseeable future.
On September 10, 2020, we completed a follow-on public offering. In connection therewith, we issued 1,200 units, or Follow-On Units, excluding the underwriters’ option to cover overallotments, at an offering price of $8,000.00 per Follow-On Unit, resulting in gross proceeds of approximately $9.6 million.
On January 25, 2021, the Company entered into a securities purchase agreement with an institutional accredited investor (the “Investor”) for the sale of a $6,000,000 senior secured convertible note (the “Convertible Note”). The Convertible Note had a term of 24 months, was originally convertible at a price of $8,000.00 per share and was issued at an original issuance discount of $1,000,000. On August 30, 2021, the Company entered into a defeasance and waiver agreement with the Investor, pursuant to which the Noteholder has agreed in exchange for (a) a cash payment by the Company to the Investor of $1.2 million (the Cash Payment”), (b) a waiver, in part of the conversion price adjustment provision such that the January 2021 Note shall be convertible into 2,401 shares of common stock (without giving effect to the conversion notice received by the company form the Noteholder prior to the date hereof totaling (503 shares) (the “Shares”), and (c) a voluntary and permanent reduction by the Company of the exercise price of the warrant to purchase 400 shares of the common stock of the Company (the “January 2021 Warrant”) to $5,060 per share. As of December 31, 2022, the outstanding principle of the convertible note had been converted to 2,401 shares of common stock.
On August 30, 2021, the Company completed a registered direct offering and raised approximately $10.1 million in net proceeds.
On October 20, 2021, the Company completed a public offering for net proceeds of $3.8 million. As part of this offering, we issued 1,417 shares of the Company’s common stock
On December 6, 2021, the Company completed a public offering for net proceeds of $16.0 million. As part of this offering, we issued 4,123 units consisting of shares of the Company’s common stock and warrant to purchase shares of the Company’s common stock and 4,164 pre-funded warrants. The warrant issued as part of the units had an exercise price of $2,300.00 and the prefunded warrants had an exercise price of $0.001.
On September 20, 2022, the Company completed a public offering for net proceeds of $18.1 million (the “September 2022 Offering”). As part of the September 2022 Offering, we issued 30,608 of shares of the Company’s common stock, pre-funded warrants to purchase 52,725 shares of the Company’s common stock and warrants to purchase 83,333 shares of the Company’s common stock. The warrants have an exercise price of $240.00 and the pre-funded warrants have an exercise price of $0.004.
On April 20, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor, pursuant to which the Company agreed to sell to such investor pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 39,634 shares of common stock of the Company (the “Common Stock”) at a purchase price of $48.76 per Pre-Funded Warrant. Concurrently with the sale of the Pre-Funded Warrants, pursuant to the Purchase Agreement in a concurrent private placement, for each Pre-Funded Warrant purchased by the investor, such investor received from the Company an unregistered warrant (the “Warrant”) to purchase two shares of Common Stock. The warrants have an exercise price of $34.40 per share and are exercisable for a three-year period. In addition, the Company issued a warrant to the placement agent to purchase up to 2,378 shares of common stock at an exercise price of $61.00 per share.
On August 31, 2023, the Company entered into a securities purchase agreement (the “August Purchase Agreement”) with an institutional investor for the issuance and sale in a private placement (the “Private Placement”) of (i) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $0.001 per share, and (ii) warrants (the “Common Warrants”) to purchase up to 1,000,000 shares of the Company’s Common Stock at an exercise price of $10.00 per share. The Private Placement closed on September 6, 2023. The net proceeds to the Company from the Private Placement were approximately $9 million, after deducting placement agent fees and expenses and estimated offering expenses payable by the Company. The Company utilized net proceeds received from the Private Placement for (i) payment of approximately $3.1 million in outstanding obligations, (ii) repayment of approximately $0.4 million of outstanding debt, and (iii) continuing operating expenses and working capital.
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We will need significant additional capital to continue to fund our operations and the clinical trials for our product candidates. We may seek to sell common stock, preferred stock or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing. In addition, we may seek to raise cash through collaborative agreements or from government grants. The sale of equity and convertible debt securities may result in dilution to our stockholders and certain of those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible debt securities, or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights.
The source, timing, and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of our clinical development program. Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate expenses including some or all our planned development, including our clinical trials. While we may need to raise funds in the future, we believe the current cash reserves should be sufficient to fund our operation for the foreseeable future. Because of these factors, we believe that this creates doubt about our ability to continue as a going concern.
Contractual Obligations
The following table shows our contractual obligations as of September 30, 2023:
| Payment Due by Year | ||||||||||||||||||||
| Total | 2023 | 2024 | 2025 | 2026 | ||||||||||||||||
| Lease | $ | 2,425,449 | $ | 285,991 | $ | 1,004,982 | $ | 710,546 | $ | 423,930 | ||||||||||
Critical Accounting Polices and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We believe that our critical accounting policies described under the heading “Management’s Discussion and Analysis of Financial Condition and Plan of Operations—Critical Accounting Policies” in our Prospectus, dated September 1, 2020, filed with the SEC pursuant to Rule 424(b), are critical to fully understanding and evaluating our financial condition and results of operations. The following involve the most judgment and complexity:
| ● | Research and development |
| ● | Stock-based compensation expense |
Accordingly, we believe the policies set forth above are critical to fully understanding and evaluating our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
JOBS Act
On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
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When favorable, we have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our IPO (December 31, 2025); (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Recently Issued and Adopted Accounting Pronouncements
See Note 3 - Summary of Significant Accounting Policies to the accompanying condensed consolidated financial statements for a description of other accounting policies and recently issued accounting pronouncements.
Recent Developments
See Note 12 – Subsequent Event to the accompanying condensed consolidated financial statements for a description of material recent developments.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were (a) designed to ensure that the information we are required to disclose in our reports under the Exchange Act is recorded, processed, and reported in an accurate manner and on a timely basis and the information that we are required to disclose in our Exchange Act reports is accumulated and communicated to management to permit timely decisions with respect to required disclosure and (b) operating in an effective manner.
Change in Internal Control Over Financial Reporting
No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
Item 1A. Risk Factors
Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth below and in our most recent Annual Report on Form 10-K and in our other filings with the SEC, the occurrence of any one of which could have a material adverse effect on our actual results.
Our financial situation creates doubt whether we will continue as a going concern.
The Company was incorporated on September 28, 2017 and through the date of this report has generated no significant revenues. For the years ended December 31, 2022 and 2021, the Company had a net loss of $27,649,876 and $46,371,364, respectively. Our condensed consolidated financial statements as of September 30, 2023, show a net loss of $21,412,626. Our cash and cash equivalents were approximately $1,651,354 as of September 30, 2023. There can be no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or additional financing through private placements, public offerings and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on acceptable terms. These conditions raise substantial doubt about our ability to continue as a going concern. If adequate working capital is not available, we may be forced to discontinue operations, which would cause investors to lose their entire investment.
If we fail to obtain the capital necessary to fund our operations, we will be unable to continue or complete our product development and you will likely lose your entire investment.
We will need to continue to seek capital from time to time to continue development of our lead drug candidate beyond our initial combined Phase I/IIa clinical trial and to acquire and develop other product candidates. Once approved for commercialization, we cannot provide any assurances that any revenues it may generate in the future will be sufficient to fund our ongoing operations.
Our business or operations may change in a manner that would consume available funds more rapidly than anticipated and substantial additional funding may be required to maintain operations, fund expansion, develop new or enhance products, acquire complementary products, business or technologies, or otherwise respond to competitive pressures and opportunities, such as a change in the regulatory environment or a change in preferred treatment modalities. In addition, we may need to accelerate the growth of our sales capabilities and distribution beyond what is currently envisioned, and this would require additional capital. However, we may not be able to secure funding when we need it or on favorable terms. We may not be able to raise sufficient funds to commercialize the product candidates we intend to develop.
If we cannot raise adequate funds to satisfy our capital requirements, we will have to delay, scale back or eliminate our research and development activities, clinical studies, or future operations. We may also be required to obtain funds through arrangements with collaborators, which arrangements may require us to relinquish rights to certain technologies or products that we otherwise would not consider relinquishing, including rights to future product candidates or certain major geographic markets. This could result in sharing revenues which we might otherwise retain for ourselves. Any of these actions may harm our business, financial condition, and results of operations.
The amount of capital we may need depends on many factors, including the progress, timing and scope of our product development programs; the progress, timing and scope of our preclinical studies and clinical trials; the time and cost necessary to obtain regulatory approvals; the time and cost necessary to further develop manufacturing processes and arrange for contract manufacturing; our ability to enter into and maintain collaborative, licensing and other commercial relationships; and our partners’ commitment of time and resources to the development and commercialization of our products.
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Our obligations to certain of our creditors are secured by security interests in our assets, so if we default on those obligations, our creditors could foreclose on some or all of our assets.
Our obligations to certain of our creditors are secured by security interests in our assets. As of September 30, 2023, approximately $4.0 million was owed to such secured creditors. Under such agreements, we are required to pay $201,857 on a weekly basis to such creditors. If we default on our obligations under these agreements, our secured creditors could foreclose on its security interests and liquidate some or all of these assets, which would harm our financial condition and results of operations and would require us to reduce or cease operations and possibly seek Bankruptcy Protection.
In the event we pursue Bankruptcy Protection, we will be subject to the risks and uncertainties associated with such proceedings.
In the event we file for relief under the United States Bankruptcy Code, our operations, our ability to develop and execute our business plan and our continuation as a going concern will be subject to the risks and uncertainties associated with bankruptcy proceedings, including, among others: our ability to execute, confirm and consummate a plan of reorganization; the additional, significant costs of bankruptcy proceedings and related fees; our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan post-emergence, and our ability to comply with terms and conditions of that financing; our ability to continue our operations in the ordinary course; our ability to maintain our relationships with our consumers, business partners, counterparties, employees and other third parties; our ability to obtain, maintain or renew contracts that are critical to our operations on reasonably acceptable terms and conditions; our ability to attract, motivate and retain key employees; the ability of third parties to use certain limited safe harbor provisions of the United States Bankruptcy Code to terminate contracts without first seeking Bankruptcy Court approval; the ability of third parties to force us to into Chapter 7 proceedings rather than Chapter 11 proceedings and the actions and decisions of our stakeholders and other third parties who have interests in our bankruptcy proceedings that may be inconsistent with our operational and strategic plans. Any delays in our bankruptcy proceedings would increase the risks of our being unable to reorganize our business and emerge from bankruptcy proceedings and may increase our costs associated with the bankruptcy process or result in prolonged operational disruption for us. Also, we would need the prior approval of the bankruptcy court for transactions outside the ordinary course of business during the course of any bankruptcy proceedings, which may limit our ability to respond timely to certain events or take advantage of certain opportunities. Because of the risks and uncertainties associated with any bankruptcy proceedings, we cannot accurately predict or quantify the ultimate impact of events that could occur during any such proceedings. There can be no guarantees that if we seek Bankruptcy Protection we will emerge from Bankruptcy Protection as a going concern or that holders of our common stock will receive any recovery from any bankruptcy proceedings.
In the event we are unable to pursue Bankruptcy Protection under Chapter 11 of the United States Bankruptcy Code, or, if pursued, successfully emerge from such proceedings, it may be necessary to pursue Bankruptcy Protection under Chapter 7 of the United States Bankruptcy Code for all or a part of our businesses.
In the event we are unable to pursue Bankruptcy Protection under Chapter 11 of the United States Bankruptcy Code, or, if pursued, successfully emerge from such proceedings, it may be necessary for us to pursue Bankruptcy Protection under Chapter 7 of the United States Bankruptcy Code for all or a part of our businesses. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the United States Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to our stakeholders than those we might obtain under Chapter 11 primarily because of the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern.
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We received a written notice from Nasdaq that we have failed to comply with certain listing requirements of the Nasdaq Stock Market, which could result in our Common Stock being delisted from the Nasdaq Stock Market.
On May 23, 2023, we received written notice from Nasdaq that, based upon the stockholders equity reported by the Company in its Form 10-Q for the period ended March 31, 2023, and as of March 31, 2023, the Company was no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires a company to maintain a minimum of $2,500,000 in stockholders’ equity, a market value of listed securities of at least $35 million, or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years (the “Continued Listing Requirements”). The May notification letter further provided that the Company has 45 calendar days, or until July 7, 2023, to submit a plan to regain compliance and if the plan is accepted by Nasdaq, an extension of up to 180 calendar days, or until November 19, 2023 to evidence compliance. On June 22, 2023, we received a letter from Nasdaq notifying the Company that it has failed to maintain compliance with the minimum bid price rule in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”) as the closing price of Company’s common stock has remained below $1.00 for over 30 consecutive trading days. On June 29, 2023, we submitted an appeal to Nasdaq, which stays the delisting and suspension of our securities pending the decision of the Nasdaq Hearings Panel (the “Panel”). At the hearing, which was held on August 31, 2023, which represented the tenth trading day that the closing of the Company’s common stock was above $1.00 per share. At the hearing, the Company also presented its plans to regain compliance with the Equity Rule to the Panel. In addition, on September 15, 2023, the Company received a written notice form Nasdaq that it no longer meets the minimum 500,000 publicly held shares requirement for The Nasdaq Capital Market and it no longer complies with Nasdaq Listing Rule 5550(a)(4) (the “Public Float Rule”). The September notification letter stated that the Panel will consider this matter in their decision regarding the Company’s continued listing on The Nasdaq Capital Market.
On September 29, 2023, the Company received a written notice from Nasdaq that the Panel had granted the Company an exception through December 26, 2023, to allow the Company to complete its compliance with the Equity Rule. The October notification letter also confirmed that the Company had demonstrated compliance with the Minimum Bid Price Rule and granted the Company an exception through December 26, 2023 to allow the Company to demonstrate compliance with the Public Float Rule.
If we are delisted from Nasdaq, but obtain a substitute listing for our common stock, it will likely be on a market with less liquidity, and therefore experience potentially more price volatility than experienced on Nasdaq. Stockholders may not be able to sell their shares of common stock on any such substitute market in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market. As a result of these factors, if our common stock is delisted from Nasdaq, the value and liquidity of our common stock, warrants and pre-funded warrants would likely be significantly adversely affected. A delisting of our common stock from Nasdaq could also adversely affect our ability to obtain financing for our operations and/or result in a loss of confidence by investors, employees and/or business partners.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
| (a) | Sales of Unregistered Securities |
On March 17, 2023, the Company issued a consultant 4,675 shares of common stock for services rendered.
The issuance above was made pursuant to an exemption from registration under the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| Exhibit | ||
| Number | Exhibit Description | |
| 31.1* | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1** | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104* | Cover Page Interactive Data File (the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 is formatted as Inline XBRL and contained in the Exhibit 101 XBRL Document Set). |
| * | Filed herewith. |
| ** | Furnished herewith. |
| 39 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Aditxt, Inc. | ||
| Date: November 14, 2023 | By: | /s/ Amro Albanna |
| Amro Albanna | ||
| Chief
Executive Officer (Principal Executive Officer) | ||
| Date: November 14, 2023 | By: | /s/ Thomas J. Farley |
| Thomas J. Farley | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| 40 |
Exhibit 31.1
Certification of Chief Executive Officer of Aditxt, Inc.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Amro Albanna, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Aditxt, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2023 | /s/ Amro Albanna |
| Amro Albanna | |
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
Certification of Chief Executive Officer of Aditxt, Inc.
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Thomas J. Farley, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Aditxt, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2023 | /s/ Thomas J. Farley |
| Thomas J. Farley | |
Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Aditxt, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of Amro Albanna, Chief Executive Officer of the Company and Thomas J. Farley, Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| November 14, 2023 | /s/ Amro Albanna |
| Amro Albanna | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| November 14, 2023 | /s/ Thomas J. Farley |
| Thomas J. Farley | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |