Aditxt, Inc 10-Q for FY2024 Q2
Aditxt, Inc. (ADTX)
About this 10-Q
Aditxt, Inc filed this 10-Q on August 19, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $44.28K
- down 80.0% from $220.98K a year earlier
- Net loss
- $7.55M
- compared with a net loss of $5.68M a year earlier
- Diluted EPS
- -$4.19
- compared with -$36.79 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 | ||
| The |
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 August 16, 2024, the registrant had 3,602,912
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 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; |
| ● | certain technologies are 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; |
ii
| ● | customers may not adopt our products quickly, or at all; |
| ● | 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 shares of convertible preferred stock and warrants and may continue to do so in the future. The conversion and/or 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; |
| ● | 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; |
| ● | we have entered into a Common Stock Purchase Agreement with an equity line investor pursuant to which we may issue and sell up to $150 million of our common stock, which could result in significant dilution; |
| ● | while we have entered into a Share Exchange Agreement with Cellvera Global, a Merger Agreement with Evofem Biosciences, Inc. and an Arrangement Agreement with Appili Therapeutics, Inc., we cannot assure you that such transactions will be consummated or, that if one or more of such transactions are consummated, that they will be accretive to stockholder value; |
| ● | we may engage in future acquisitions or strategic transactions, including the transactions with Cellvera Global, Evofem Biosciences and Appili Therapeutics, which will require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management; |
| ● | future sales or issuances of substantial amounts of our common stock, including, potentially as a result of future acquisitions or strategic transactions, including the transactions with Evofem Biosciences, Appili Therapeutics, and Cellvera Global, could result in significant dilution; |
| ● | we received the determination from Nasdaq that we regained compliance with the Nasdaq continued listing requirements, however, we remain subject to a panel monitor of our ongoing compliance until December 29, 2024 and if we fail to comply with such requirements during the panel monitor, it could result in the delisting of our securities by Nasdaq; and |
| ● | 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.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Subscription receivable | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Fixed assets, net | ||||||||
| Intangible assets, net | ||||||||
| Deposits | ||||||||
| Right of use asset - long term | ||||||||
| Investment in Evofem | ||||||||
| Deposit on acquisition | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Notes payable - related party | ||||||||
| Notes payable, net of discount | ||||||||
| Financing on fixed assets | ||||||||
| Deferred rent | ||||||||
| Lease liability - current | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Settlement liability | ||||||||
| Lease liability - long term | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ | ||||||||
| Series A-1 Convertible Preferred stock, $ | ||||||||
| Series B Preferred stock, $ | ||||||||
| Series B-1 Convertible Preferred stock, $ | ||||||||
| Series B-2 Convertible Preferred stock, $ | ||||||||
| Series C Preferred stock, $ | ||||||||
| Series C-1 Preferred stock, $ | ||||||||
| Series D-1 Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Treasury stock, | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL ADITXT, INC. STOCKHOLDERS’ EQUITY | ||||||||
| NON-CONTROLLING INTEREST | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
1
ADITXT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | |||||||||||||
| REVENUE | ||||||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit (loss) | ||||||||||||||||
| 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 | ||||||||||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on note exchange agreement | - | ( | ) | - | ||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax provision | - | - | ||||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST | ( | ) | ( | ) | - | |||||||||||
| NET LOSS ATTRIBUTABLE TO ADITXT, INC. & SUBSIDIARIES | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ) | ||||||
See accompanying notes to the consolidated financial statements.
2
ADITXT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(unaudited)
| Preferred A-1 Shares | Preferred A-1 Shares Par | Preferred B-1 Shares | Preferred B-1 Shares Par | Preferred B-2 Shares | Preferred B-2 Shares Par | Preferred C-1 Shares | Preferred C-1 Shares Par | Preferred D-1 Shares | Preferred D-1 Shares Par | Common Shares Outstanding | Common Shares Par | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Non- Controlling Interest | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock option compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MDNA asset purchase | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Brain asset purchase | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for settlement | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock option compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock unit compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for offering, net of issuance costs | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for debt issuance costs | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Modification of warrants | - | - | - | - | - | - | - | - | - | - | - | - | - | ( | ) | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2024 (unaudited) | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
3
ADITXT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(unaudited)
| Preferred Shares Outstanding | Preferred Shares Par | Preferred
B Shares Outstanding | Preferred
B Shares Par | Preferred B-2 Shares Outstanding | Preferred B-2 Shares Par | Common Shares Outstanding | Common Shares Par | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Non- Controlling Interest | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
4
ADITXT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Six Months Ended | Six Months Ended | |||||||
| June 30, 2024 | June 30, 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Stock-based compensation | ||||||||
| Stock-based compensation from asset purchase | ||||||||
| Depreciation expense | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of debt discount | ||||||||
| Loss on note exchange agreement | ||||||||
| 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 | ( | ) | ||||||
| Investment in Evofem | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from notes - related party | ||||||||
| Proceeds from notes and convertible notes payable, net of offering costs | ||||||||
| Repayments of note payable - related party | ( | ) | ( | ) | ||||
| Repayments of note payable | ( | ) | ( | ) | ||||
| New principal from extension of notes, net of debt discount | ||||||||
| Warrants issued for cash, net of issuance cost | ||||||||
| Preferred stock, Common stock, and warrants issued for cash, net of issuance costs | ||||||||
| Cash from subscription receivable | ||||||||
| Payments on financing on fixed asset | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| NET DECREASE IN CASH | ( | ) | ( | ) | ||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest expense | $ | $ | ||||||
| Issuance of shares for the conversion of notes payable | $ | $ | ||||||
| Debt Discount from shares issued as inducement for note payable | $ | $ | ||||||
| Warrant modification | ||||||||
| Issuance of shares in asset purchase | $ | $ | ||||||
| Shares issued for settlement | $ | $ | ||||||
| Return of notes payable from Evofem merger agreement | $ | $ | ||||||
| Accrued interest rolled into notes payable | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
5
ADITXT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Company Background
Overview
Aditxt, Inc. ® is an innovation platform dedicated to discovering, developing, and deploying promising innovations. Aditxt’s ecosystem of research institutions, industry partners, and shareholders collaboratively drives their mission to “Make Promising Innovations Possible Together.” The innovation platform is the cornerstone of Aditxt’s strategy, where multiple disciplines drive disruptive growth and address significant societal challenges. Aditxt operates a unique model that democratizes innovation, ensures every stakeholder’s voice is heard and valued, and empowers collective progress.
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 majority owned subsidiary.
On April 13, 2023, the Company formed Adivir, Inc., a Delaware wholly owned subsidiary.
On August 24, 2023, the Company formed Adivue, Inc., a Delaware wholly owned subsidiary.
On October 16, 2023, the Company formed Adicure, Inc., which was renamed Adifem, Inc., a Delaware wholly owned subsidiary.
Reverse Stock Split
On August 17, 2023, the Company effectuated a
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 “August 2023 Private Placement”) of (i) pre-funded warrants (the “August Pre-Funded
Warrants”) to purchase up to
On December 29, 2023, the Company entered into
a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (“the “Purchaser”)
for the issuance and sale in a private placement (the “December 2023 Private Placement”) of (i) pre-funded warrants (the
“Pre-Funded Warrants”) to purchase up to
On May 2, 2024, the
Company entered into a Securities Purchase Agreement (the “May PIPE Purchase Agreement”) with certain accredited investors,
pursuant to which the Company agreed to issue and sell to such investors in a private placement (the “May 2024 Private Placement”)
(i) an aggregate 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.
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 six months ended June 30, 2024, the Company had a net loss of $
As of June 30, 2024, the Company had approximately
$
On November 21, 2023, the Company received written notice from Nasdaq that we had regained compliance with the Public Float Rule. On December 29, 2023, the Company received written notice from Nasdaq that we had regained compliance with the Stockholders’ Equity Rule but will be subject to a Mandatory Panel Monitor for a period of one year.
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.
The Company continues to actively pursue numerous capital raising transactions with the objective of obtaining sufficient bridge funding to meet the Company’s existing capital needs as well as more substantial capital raises to meet the Company’s longer-term needs.
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.
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 June 30, 2024 and June 30, 2023. 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.
8
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, 2023, filed with the SEC on April 16, 2024. The interim results for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ended December 31, 2024 or for any future interim periods.
Principles of Consolidation
The consolidated financial statements include the accounts of Aditxt, Inc., its wholly owned subsidiaries and, one majority owned subsidiary. All significant intercompany balances and transactions have been eliminated in the 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, the reserve on insurance billing, value of preferred shares issued, our investments in preferred shares, estimation of discounts on non-interest bearing borrowing, 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. |
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. (See Note 9)
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.
9
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.
Investments
| For the six months ended June 30, 2024 | ||||
| As of December 31, 2023 | $ | |||
| Deposit on acquisition | ||||
| Unrealized gains | ||||
| As of June 30, 2024 | $ | |||
This investment is included in its own line item on the Company’s consolidated balance sheets.
Non-marketable equity investments (for which we do not have significant influence or control) are investments without readily determinable fair values that are recorded based on initial cost minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for identical or similar securities, if any. All gains and losses on investments in non-marketable equity securities, realized and unrealized, are recognized in investment and other income (expense), net.
10
We monitor equity method and non-marketable equity investments for events or circumstances that could indicate the investments are impaired, such as a deterioration in the investee’s financial condition and business forecasts and lower valuations in recently completed or anticipated financings, and recognize a charge to investment and other income (expense), net for the difference between the estimated fair value and the carrying value. For equity method investments, we record impairment losses in earnings only when impairments are considered other-than-temporary.
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 June 30, 2024 and December 31, 2023, there was an allowance for doubtful accounts of $
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At June 30, 2024 and December 31, 2023, the Company had a full valuation allowance against its deferred tax assets.
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. Equity instruments issued as offering costs have zero net effect on the Company’s equity.
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.
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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.
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 six months ended June 30, 2024 and
2023, 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 six months ended June 30, 2024 and 2023, the Company incurred research
and development costs of $
Non-controlling Interest in Subsidiary
Non-controlling interests represent the Company’s
subsidiary’s cumulative results of operations and changes in deficit attributable to non-controlling shareholders. During the six
months ended June 30, 2024 and 2023, the Company recognized $
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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.
| Instrument | Quantity Issued and Outstanding as of June 30, 2024 | Common Stock Equivalent | ||||||
| Series A Preferred Stock | ||||||||
| Preferred Series A-1 Stock | ||||||||
| Series B Preferred Stock | ||||||||
| Preferred Series B-1 Stock | ||||||||
| Preferred Series B-2 Stock | ||||||||
| Series C Preferred Stock | ||||||||
| Preferred Series C-1 Stock | ||||||||
| Preferred Series D-1 Stock | ||||||||
| Warrants | ||||||||
| Options | ||||||||
| Total Common Stock Equivalent | ||||||||
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.
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 | $ | $ | ( | ) | $ | |||||||
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Depreciation expense was $
| For the six months ended June 30, 2024 | ||||
| As of December 31, 2023 | ||||
| Brain Scientific Asset Purchase | ||||
| Additions | ||||
| As of June 30, 2024 | $ | |||
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 June 30, 2024, all lab equipment financing agreements have matured and are in default status.
NOTE 5 – INTANGIBLE ASSETS
| Cost Basis | Accumulated Amortization | Net | ||||||||||
| Proprietary Technology | $ | $ | ( | ) | $ | |||||||
| Intellectual property | ( | ) | ||||||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||
The Company’s intangible assets include the following on December 31, 2023:
| Cost Basis | Accumulated Amortization | Net | ||||||||||
| Proprietary Technology | $ | $ | ( | ) | $ | |||||||
| Intellectual property | ( | ) | ||||||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||
14
Amortization expense was $
| For the six months ended June 30, 2024 | ||||
| As of December 31, 2023 | ||||
| Additions | ||||
| As of June 30, 2024 | $ | |||
NOTE 6 – RELATED PARTY TRANSACTIONS
On November 30, 2023, Amro Albanna, the Chief
Executive Officer of the Company, loaned $
On December 6, 2023, Amro Albanna, the Chief
Executive Officer of the Company, loaned $
On December 20, 2023, Amro Albanna, the Chief
Executive Officer of the Company, loaned $
On
February 7, 2024, Amro Albanna, the Chief Executive Officer of the Company loaned $
On
February 15, 2024, Amro Albanna, the Chief Executive Officer of the Company loaned $
On February 29, 2024, Amro Albanna, the Chief
Executive Officer of the Company, and Shahrokh Shabahang, the Chief Innovation Officer of the Company, loaned $
See Note 12 for additional loans incurred or paid subsequent to June 30, 2024.
15
NOTE 7 – NOTES PAYABLE
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 $
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 $
On November 24, 2023, the Company entered into
a loan with a principal of $
On January 24, 2024, the Company entered
into a Business Loan and Security Agreement (the “January 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 March 7, 2024, Sixth Borough Capital Fund,
LP loaned $
On April 10, 2024, Sixth Borough Capital Fund,
LP (“Sixth Borough”) loaned $
On May 9, 2024, at which point the balance of
the April Sixth Borough Note was $
On June 20, 2024, at which point the balance
of the Sixth Borough Upsize Note was $
On May 20, 2024, the Company issued and sold
a senior note (the “First May Senior Note”) to an accredited investor (the “First May Senior Note Holder”) in
the original principal amount of $
16
On May 24, 2024, the Company entered into a Securities
Purchase Agreement (the “Second May Senior Note Securities Purchase Agreement”) with certain accredited investors pursuant
to which the Company issued and sold senior notes in the aggregate principal amount of $
Upon
an Event of Default (as defined in the Second May Senior Notes), the Second May Senior Notes will bear interest at a rate of
Evofem Merger
In connection with the Agreement and Plan of
Merger (the “Merger Agreement”) with Adicure, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger
Sub”) and Evofem Biosciences, Inc., a Delaware corporation (“Evofem”), the Company, Evofem and the holders (the “Holders”)
of certain senior indebtedness (the “Notes”) entered into an Assignment Agreement dated December 11, 2023 (the “Assignment
Agreement”), pursuant to which the Holders assigned the Notes to the Company in consideration for the issuance by the Company of
(i) an aggregate principal amount of $
Subject to the terms and conditions set forth
in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (i) all issued and outstanding shares
of common stock, par value $
The respective obligations of each of the Company, Merger Sub and Evofem to consummate the closing of the Merger (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) | approval by the Company’s shareholders and Evofem shareholders; |
| (ii) | the registration statement on Form S-4 pursuant to which the shares of the Company Common Stock issuable in the Merger being declared effective by the U.S. Securities and Exchange Commission; |
| (iii) | the entry into a voting agreement by the Company and certain members of Evofem management; |
| (iv) | all preferred stock of Evofem other than the Evofem Unconverted Preferred Stock shall have been converted to Evofem Common Stock; |
| (v) | Evofem shall have received agreements (the “Evofem Warrant Holder Agreements”) from all holders of Evofem warrants which provide: |
a. waivers with respect to any fundamental
transaction, change in control or other similar rights that such warrant holder may have under any such Evofem warrants, and (b) an agreement
to such Evofem warrants to exchange such warrants for not more than an aggregate (for all holders of Evofem warrants) of
17
| (vi) | Evofem shall have cashed out any other holder of Evofem warrants who has not provided an Evofem Warrant Holder Agreement; and |
| (vii) | Evofem shall have obtained waivers from the holders of the convertible notes of Evofem (the “Evofem Convertible Notes”) with respect to any fundamental transaction rights that such holder may have under the Evofem Convertible Notes, including any right to vote, consent, or otherwise approve or veto any of the transactions contemplated under the Merger Agreement. |
The obligations of the Company and Merger Sub 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) | the
Company shall have obtained agreements from the holders of Evofem Convertible Notes and purchase rights they hold to exchange such Convertible
Notes and purchase rights for not more than an aggregate (for all holders of Evofem Convertible Notes) of |
| (ii) | the Company shall have received waivers form the holders of certain of the Company’s securities which contain prohibitions on variable rate transactions; and |
| (iii) | the Company, Merger Sub and Evofem shall work together between the Execution Date and the Effective Time to determine the tax treatment of the Merger and the other transactions contemplated by the Merger Agreement. |
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) | the Company shall have regained compliance with the stockholders’ equity requirement in Nasdaq Listing Rule 5550(b)(1) and shall meet all other applicable criteria for continued listing, subject to any panel monitor imposed by Nasdaq. |
As the January 2024 Secured Notes and September
2024 Secured Notes did not contain a stated interest rate, the Company calculated an imputed interest rate of
Secured Notes Amendments and Assignment
On January 2, 2024, the Company and certain holders of the secured notes (the “Holders”) entered into amendments to the January 2024 Secured Notes (“Amendment No. 1 to January 2024 Secured Notes”), pursuant to which the maturity date of the January 2024 Notes was extended to January 5, 2024.
On January 5, 2024, the Company and the Holders
entered into amendments to the January 2024 Secured Notes (“Amendment No. 2 to January 2024 Secured Notes”) and amendments
to the September 2024 Secured Notes (“Amendment No. 1 to September 2024 Secured Notes”), pursuant to which the Company and
the Holders agreed that in consideration of a principal payment in the aggregate amount of $
On January 31, 2024, the Company and the Holders
entered into amendments to the January 2024 Secured Notes (“Amendment No. 3 to January 2024 Secured Notes”), pursuant to
which the maturity date of the January 2024 Notes was extended to February 29, 2024. In addition, on January 31, 2024, the Company and
the Holders entered into amendments to the September 2024 Secured Notes (“Amendment No. 2 to September 2024 Secured Notes”),
pursuant to which the Company and the Holders agreed that in consideration of a principal payment in the aggregate amount of $
18
Pursuant to Amendment No. 3 to the January 2024 Secured Notes, the Company was required to make the Additional Consideration payment no later than February 9, 2024. As a result of the Company’s failure to make the Additional Consideration payment by February 9, 2023, the January 2024 Secured Notes and the September 2024 Secured Notes were in default and the entire principal balance of the January 2024 Secured Notes and the September 2024 Secured Notes, without demand or notice, were due and payable.
As a result of the defaults on the January 2024
Secured Notes and the September 2024 Secured Notes, the Company was in default on the Business Loan and Security Agreement dated January
24, 2024 (the January Business Loan”), which had a current balance of approximately $
On February 26, 2024, the Company and the Holders
entered into an Assignment Agreement (the “February Assignment Agreement”), pursuant to which the Company assigned all remaining
amounts due under the January 2024 Secured Notes, the September 2024 Secured Notes and the Unsecured Notes (collectively, the “Notes”)
back to the Holders. The Company recognized a $
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 June 30, 2024 and December 31, 2023 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 Mountain
View, California where we lease approximately
We also lease approximately
Additionally, we leased approximately
The overdue amounts represent a payable of $
LS Biotech Eight Default
On May 10, 2024, the
Company received written notice (the “2024 Default Notice”) from LS Biotech Eight, LLC (the “Landlord”), the
Landlord of the Company’s CLIA-certified, CAP accredited, high complexity immune monitoring center in Richmond, Virginia, that
the Company was in violation of its obligation to (i) pay Base Rent (as defined in the Lease) and Additional Rent (as defined in the
Lease) in the amount of $
19
The Company is working with the Landlord to come to an amicable resolution. However, no assurance can be given that the parties will reach an amicable resolution on a timely basis, on favorable terms, or at all.
| Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||
| Components of total lease costs: | ||||||||
| Operating lease expense | $ | $ | ||||||
| Total lease costs | $ | $ | ||||||
Lease Positions as of June 30, 2024 and December 31, 2023
| June 30, 2024 | December 31, 2023 | |||||||
| 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 | % |
| 2024 (remaining) | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total lease payments | $ | |||
| Less imputed interest | ( | ) | ||
| Less current portion | ( | ) | ||
| Total maturities, due beyond one year | $ |
20
NOTE 9 – COMMITMENTS & CONTINGENCIES
License Agreement with Loma Linda University
On March 15, 2018, as amended on July 1, 2020, we entered into a LLU License Agreement directly with Loma Linda University.
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) the requirement to have regulatory approval of an IND application to initiate first-in-human clinical
trials on or before June 30, 2023, which will be extended to June 30, 2024 with a 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 Stanford regarding 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 regarding 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.
21
We were obligated to pay and paid a fee of $
Asset Purchase Agreement
MDNA Lifesciences, Inc.
On January 4, 2024 (the “Closing Date”),
the Company completed its acquisition of certain assets and issued to MDNA Lifesciences, Inc. (“MDNA”):
On January 4, 2024, the Company, Pearsanta and
MDNA entered into a First Amendment to Asset Purchase Agreement (the “First Amendment to Asset Purchase Agreement”), pursuant
to which the parties agreed to: (i) the removal of an upfront working capital payment, (ii) the removal of a Closing Working Capital
Payment (as defined in the Purchase Agreement”), and (iii) to increase the maximum amount of payments to be made by Aditxt under
the Transition Services Agreement (as defined below) from $
On January 4, 2024, Pearsanta and MDNA entered
into a Transition Services Agreement (the “Transition Services Agreement”), pursuant to which MDNA agreed that it would perform,
or cause certain of its affiliates or third parties to perform, certain services as described in the Transition Services Agreement for
a term of six months in consideration for the payment by Pearsanta of certain fees as provided in the Transition Services Agreement,
in an amount not to exceed $
As part of this transaction, the Company acquired
$
Brain Scientific, Inc.
On January 24, 2024, the Company entered into
an Assignment and Assumption Agreement (the “Brain Assignment Agreement”) with the agent (the “Agent”) of certain
secured creditors (the “Brain Creditors”) of Brain Scientific, Inc., a Nevada corporation (“Brain Scientific”)
and Philip J. von Kahle (the “Brain Seller”), as assignee of Brain Scientific and certain affiliated entities (collectively,
the “Brain Companies”) under an assignment for the benefit of creditors pursuant to Chapter 727 of the Florida Statutes.
Pursuant to the Brain Assignment Agreement, the Agent assigned its rights under that certain Asset Purchase and Settlement Agreement
dated October 31, 2023 between the Seller and the Agent (the “Brain Asset Purchase Agreement”) to the Company in consideration
for the issuance by the Company of an aggregate of
22
In connection with the Brain Assignment Agreement, on January 24, 2024, the Company entered into a Patent Assignment with the Brain Seller (the “Brain Patent Assignment”), pursuant to which the Seller assigned all of its rights, titles and interests in certain patents and patent applications that were previously held by the Brain Companies to the Company.
As part of this transaction, the Company acquired
$
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 alleged that the investor suffered
more than $
On January 3, 2024, the Company entered into
a settlement agreement and general release with an investor (the “Settlement Agreement”), pursuant to which the Company and
the investor agreed to settle an action filed in the United States District Court in the Southern District of New York by an investor
against the Company (the “Action”) in consideration of the issuance by the Company of shares of the Company’s Common
Stock (the “Settlement Shares”). The number of Settlement Shares to be issued will be equal to $
On January 17, 2024, the Company issued
On December 29, 2023, the Company entered into
a securities purchase agreement with an institutional investor (“the “Holder”) for the issuance and sale in a private
placement of (i) pre-funded warrants (the “December Pre-Funded Warrants”) to purchase up to
The December PIPE Securities were to be registered
within a timeframe as described in the registration rights agreement. The Company failed to register the December PIPE Securities within
the agreed upon timeframe. As a result of the late registration, the holder of the December PIPE Securities was entitled to damages. On
August 7, 2024, the Company and the holder of the December PIPE Securities entered into an exchange agreement inclusive of $
EvoFem Merger Agreement
On December 11, 2023 (the “Execution Date”), Aditxt, Inc., a Delaware corporation (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Adicure, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”) and Evofem Biosciences, Inc., a Delaware corporation (“Evofem”), pursuant to which, Merger Sub will be merged into and with Evofem (the “Merger”), with Evofem surviving the Merger as a wholly owned subsidiary of the Company.
In connection with the Merger Agreement the Company
assumed $
Subject to the terms and conditions set forth
in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (i) all issued and outstanding shares
of common stock, par value $
23
On December 11, 2023 the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Adicure, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”) and Evofem Biosciences, Inc., a Delaware corporation (“Evofem”), pursuant to which, Merger Sub will be merged into and with Evofem (the “Merger”), with Evofem surviving the Merger as a wholly owned subsidiary of the Company.
On January 8, 2024, the Company, Adicure, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), and Evofem Biosciences, Inc., a Delaware corporation (“Evofem”) entered into the First Amendment (the “First Amendment to Merger Agreement”), to the Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which the parties agreed to extend the date by which the joint proxy statement would be filed with the SEC until February 14, 2024.
On January 30, 2024, the Company, Adicure and Evofem entered into the Second Amendment to the Merger Agreement (the “Second Amendment to Merger Agreement”) to amend (i) the date of the Parent Loan (as defined in the Merger Agreement) to Evofem to be February 29, 2024, (ii) to change the date by which Evofem may terminate the Merger Agreement for failure to receive the Parent Loan to be February 29, 2024, and (iii) to change the filing date for the Joint Proxy Statement (as defined in the Merger Agreement) to April 1, 2024.
On February 29, 2024, the Company, Adicure and
Evofem entered into the Third Amendment to the Merger Agreement (the “Third Amendment to Merger Agreement”) in order to (i)
make certain conforming changes to the Merger Agreement regarding the Notes, (ii) extend the date by which the Company and Evofem will
file the joint proxy statement until April 30, 2024, and (iii) remove the requirement that the Company make the Parent Loan (as defined
in the Merger Agreement) by February 29, 2024 and replace it with the requirement that the Company make an equity investment into Evofem
consisting of (a) a purchase of
Engagement Letter with Dawson James Securities, Inc.
On February 16, 2024, the Company entered into
an engagement letter (the “Dawson Engagement Letter”) with Dawson James Securities, Inc.(“Dawson”), pursuant
to which the Company engaged Dawson to serve as financial advisor with respect to one or more potential business combinations involving
the Company for a term of twelve months. Pursuant to the Dawson Engagement Letter, the Company agreed to pay Dawson an initial fee of
$
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Advance on Private Placement
On
March 5, 2024, the Company received a $
Appili Arrangement Agreement
On April 1, 2024 (the “Execution Date”), the Company, entered into an Arrangement Agreement (the “Arrangement Agreement”), subject to various closing conditions, with Adivir, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Adivir” or the “Buyer”), and Appili Therapeutics, Inc., a Canadian corporation (“Appili”), pursuant to which, Adivir will acquire all of the issued and outstanding Class A common shares of Appili (the “Appili Shares”) on the terms and subject to the conditions set forth therein. The acquisition of the Appili Shares (the “Arrangement”) will be completed by way of a statutory plan of arrangement under the Canada Business Corporation Act.
At
the effective time of the Arrangement (the “Effective Time”), each Appili Share outstanding immediately prior to the Effective
Time (other than Appili Shares held by a registered holder of Appili Shares who has validly exercised such holder’s dissent rights)
will be deemed to be assigned and transferred by the holder thereof to the Buyer in exchange for (i) $
EvoFem Reinstatement and Fourth Amendment to the Merger Agreement
On April 26, 2024, the Company received notice from Evofem (the “Termination Notice”) that Evofem was exercising its right to terminate the Merger Agreement as a result of the Company’s failure to provide the Initial Parent Equity Investment (as defined in the Merger Agreement, as amended).
On May 2, 2024, the Company, Adifem, Inc. f/k/a Adicure, Inc. and Evofem Biosciences, Inc. (“Evofem”) entered into the Reinstatement and Fourth Amendment to the Merger Agreement (the “Fourth Amendment”) in order to waive and amend, among other things, the several provisions listed below.
Amendments to Article VI: Covenants and Agreement
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Article VI of the Merger Agreement is amended to:
| ● | reinstate the Merger Agreement, as amended by the Fourth Amendment, as if never terminated; |
| ● | reflect
the Company’s payment to Evofem, in the amount of $ |
| ● | delete Section 6.3, which effectively eliminates the “no shop” provision, and the several defined terms used therein; |
| ● | add a new defined term “Company Change of Recommendation;” and |
| ● | revise section 6.10 of the Merger Agreement such that, after the Initial
Payment, and upon the closing of each subsequent capital raise by the Company (each a “Parent Subsequent Capital Raise”),
the Company shall purchase that number of shares of Evofem’s Series F-1 Preferred Stock, par value $ |
Amendments to Article VIII: Termination
Article VIII of the Merger Agreement is amended to:
| ● | extend the date after which either party may terminate from May 8, 2024 to July 15, 2024; |
| ● | revise Section 8.1(d) in its entirety to allow Company to terminate at any time after there has been a Company Change of Recommendation, provided that Aditxt must receive ten day written notice and have the opportunity to negotiate a competing offer in good faith; and |
| ● | amend
and restate Section 8.1(f) in its entirety, granting the Company the right to terminate the agreement if (a) the full $ |
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Equity Line of Credit
On May 2, 2024, the
Company entered into a Common Stock Purchase Agreement (the “ELOC Purchase Agreement”) with an equity line investor (the
“ELOC Investor”), pursuant to which the ELOC Investor has agreed to purchase from the Company, at the Company’s direction
from time to time, in its sole discretion, from and after the date effective date of the Registration Statement (as defined below) and
until the termination of the ELOC Purchase Agreement in accordance with the terms thereof, shares of the Company’s common stock
having a total maximum aggregate purchase price of $
In connection with the ELOC Purchase Agreement, the Company also entered into a Registration Rights Agreement with the Investor (the “ELOC Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the shares of common stock issued to the ELOC Investor pursuant to the ELOC Purchase Agreement (the “Registration Statement”) by the later of (i) the 30th calendar day following the closing date, and (ii) the second business day following Stockholder Approval (defined below).
The Company may, from time to time and at its sole discretion, direct the ELOC Investor to purchase shares of its common stock upon the satisfaction of certain conditions set forth in the ELOC Purchase Agreement at a purchase price per share based on the market price of the Company’s common stock at the time of sale as computed under the ELOC Purchase Agreement. There is no upper limit on the price per share that the ELOC Investor could be obligated to pay for common stock under the ELOC Purchase Agreement. The Company will control the timing and amount of any sales of its common stock to the ELOC Investor, and the ELOC Investor has no right to require us to sell any shares to it under the ELOC Purchase Agreement. Actual sales of shares of common stock to the ELOC Investor under the ELOC Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including (among others) market conditions, the trading price of its common stock and determinations by the Company as to available and appropriate sources of funding for the Company and its operations. The ELOC Investor may not assign or transfer its rights and obligations under the ELOC Purchase Agreement.
Under the applicable
Nasdaq rules, in no event may the Company issue to the ELOC Investor under the ELOC Purchase Agreement more than
In all cases, the Company
may not issue or sell any shares of common stock to the ELOC Investor under the ELOC Purchase Agreement which, when aggregated with all
other shares of the Company’s common stock then beneficially owned by the ELOC Investor and its affiliates, would result in the
ELOC Investor beneficially owning more than
The net proceeds under the ELOC Purchase Agreement to the Company will depend on the frequency and prices at which the Company sells shares of its stock to the ELOC Investor. The Company expects that any proceeds received by it from such sales to the Investor will be used for working capital and general corporate purposes.
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As consideration for the ELOC Investor’s commitment to purchase shares of common stock at the Company’s direction upon the terms and subject to the conditions set forth in the ELOC Purchase Agreement, the Company shall pay the Investor a commitment fee as outlined in the ELOC Purchase Agreement, which is payable on the later of (i) January 2, 2025 and (ii) the trading day following the date on which Stockholder Approval is obtained.
The ELOC Purchase Agreement contains customary representations, warranties and agreements of the Company and the ELOC Investor, limitations and conditions regarding sales of ELOC Purchase Shares, indemnification rights and other obligations of the parties.
There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the ELOC Purchase Agreement other than a prohibition (with certain limited exceptions) on entering into a dilutive securities transaction during certain periods when the Company is selling common stock to the ELOC Investor under the Purchase Agreement. The ELOC Investor has agreed that it will not engage in or effect, directly or indirectly, for its own account or for the account of any of its affiliates, any short sales of the Company’s common stock or hedging transaction that establishes a net short position in the Company’s common stock during the term of the ELOC Purchase Agreement.
The Company has the right to terminate the ELOC Purchase Agreement at any time after the Commencement Date (as defined in the ELOC Purchase Agreement), at no cost or penalty, upon three trading days’ prior written notice to the Investor. The Company and the ELOC Investor may also agree to terminate the ELOC Purchase Agreement by mutual written consent, provided that no termination of the ELOC Purchase Agreement will be effective during the pendency of any purchase that has not then fully settled in accordance with the ELOC Purchase Agreement. Neither the Company nor the ELOC Investor may assign or transfer the Company’s respective rights and obligations under the ELOC Purchase Agreement.
NOTE 10 – STOCKHOLDERS’ EQUITY
Common Stock
On May 24, 2021, the Company increased the number
of authorized shares of the Company’s common stock, par value $
Formed in January 2023, our majority owned subsidiary
Pearsanta™, Inc. (“Pearsanta”) seeks to take personalized medicine to a new level by delivering “Health by the
Numbers.” On November 22, 2023, Pearsanta entered into an assignment agreement with FirstVitals LLC, an entity controlled by Pearsanta’s
CEO, Ernie Lee (“FirstVitals”), pursuant to which FirstVitals assigned its rights in certain intellectual property and website
domain to Pearsanta in consideration of the issuance of
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During the six months ended June 30, 2024, the
Company issued
During the six months ended June 30, 2023, the
Company issued
Closing of Private Placement
On December 29, 2023, the Company entered into
a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (“the “December Purchaser”)
for the issuance and sale in a private placement (the “December Private Placement”) of (i) pre-funded warrants (the “December
Pre-Funded Warrants”) to purchase up to
Pursuant to the Purchase Agreement, the Company
agreed to reduce the exercise price of certain outstanding warrants to purchase Common Stock of the Company (“Certain Outstanding
Warrants”) held by the Purchaser to $
The December Private Placement closed on January
4, 2024. The net proceeds to the Company from the December Private Placement were approximately $
In addition, the Company agreed to pay H.C. Wainwright
& Co., LLC (“Wainwright”) certain expenses and issued to Wainwright or its designees warrants (the “December Placement
Agent Warrants”) to purchase up to an aggregate of
May Private Placement
On May 2, 2024, the
Company entered into a Securities Purchase Agreement (the “May PIPE Purchase Agreement”) with certain accredited investors,
pursuant to which the Company agreed to issue and sell to such investors in a private placement (the “Private Placement”)
(i) an aggregate of
The May PIPE Warrants
are exercisable commencing six months following the initial issuance date at an initial exercise price of $
29
On May 2, 2024, in connection
with the Purchase Agreement, the Company entered into a Registration Rights Agreement with the investors (the “May PIPE Registration
Rights Agreement”), pursuant to which the Company agreed to prepare and file with the Securities and Exchange Commission (the “SEC”)
a registration statement on Form S-3 (the “May PIPE Registration Statement”) covering the resale of the shares of the Company’s
common stock, par value $
In connection with the Private Placement, the Sixth Borough Note (Note 7) was converted into Series C-1 Preferred Stock.
The Private Placement
closed on May 6, 2024. The gross proceeds from the Private Placement were approximately $
Dawson James Securities
(“Dawson James”) served as the Company’s exclusive placement agent in connection with the Private Placement, pursuant
to that certain engagement letter, dated as of May 2, 2024, between the Company and Dawson James (the “Engagement Letter”).
Pursuant to the Engagement Letter, the Company paid Dawson James (i) a total cash fee equal to
May Senior Notes
On May 24, 2024, the Company entered into the
May Senior Notes. The notes had an original issuance discount of $
30
Preferred Stock
| Aditxt Preferred Share Class | Quantity Issued and Outstanding as of June 30, 2024 | |||
| Series A Preferred Stock | ||||
| Series A-1 Convertible Preferred Stock | ||||
| Series B Preferred Stock | ||||
| Series B-1 Convertible Preferred Stock | ||||
| Series B-2 Convertible Preferred Stock | ||||
| Series C Preferred Stock | ||||
| Series C-1 Preferred Stock | ||||
| Series D-1 Preferred Stock | ||||
| Total Aditxt Preferred Shares Outstanding | ||||
Issuance of Series A-1 Preferred Stock:
On December 11, 2023 (the “Execution Date”), the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Adicure, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”) and Evofem Biosciences, Inc., a Delaware corporation (“Evofem”), pursuant to which, Merger Sub will be merged into and with Evofem (the “Merger”), with Evofem surviving the Merger as a wholly owned subsidiary of the Company.
Subject to the terms and conditions set forth
in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (i) all issued and outstanding shares
of common stock, par value $
On December 22, 2023, the Company entered into
an Exchange Agreement (the “Exchange Agreement”) with the holders (the “Holders”) of an aggregate of
The following is only a summary of the Series A-1 Certificate of Designations, and is qualified in its entirety by reference to the full text of the Series A-1 Certificate of Designations, a copy of which is filed as Exhibit 3.1 to our Current Report on Form 8-K filed on December 26, 2023 and is incorporated by reference herein.
Designation, Amount, and Par Value: The number
of Series A-1 Preferred Stock designated is
31
Conversion Price: The Series A-1 Preferred Stock
will be convertible into shares of Common Stock at an initial conversion price of $
Dividends: Holders of the Series A-1 Preferred Stock shall be entitled to receive dividends when and as declared by the Board, from time to time, in its sole discretion, which Dividends shall be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms hereof, in cash, in securities of the Company or any other entity, or using assets as determined by the Board on the Stated Value of such Preferred Share.
Liquidation: In the event of a Liquidation Event
(as defined in the Series A-1 Certificate of Designation), the holders the Series A-1 Preferred Stock shall be entitled to receive in
cash out of the assets of the Company, before any amount shall be paid to the holders of any other shares of capital stock of the Company,
equal to the greater of (A)
Company Redemption: The Company may redeem all,
or any portion, of the Series A-1 Preferred Stock for cash, at a price per share of Series A-1 Preferred Stock equal to
Maximum Percentage: Holders of Series A-1 Preferred
Stock are prohibited from converting shares of Series A-1 Preferred Stock into shares of Common Stock if, as a result of such conversion,
such holder, together with its affiliates, would beneficially own in excess of
Voting Rights: The holders of the Series A-1 Preferred Stock shall have no voting power and no right to vote on any matter at any time, either as a separate series or class or together with any other series or class of share of capital stock, and shall not be entitled to call a meeting of such holders for any purpose nor shall they be entitled to participate in any meeting of the holders of Common Stock, except as expressly provided in the Certificate of Designations and where required by the DGCL.
32
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
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. See Series B Preferred Stock certificate of designation incorporated by reference to this document.
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 B-1 Preferred Stock Certificate of Designation
On January 24, 2024, the Company filed a Certificate of Designations for its Series B-1 Preferred Stock with the Secretary of State of Delaware (the “Series B-1 Certificate of Designations”). The following is only a summary of the Series B-1 Certificate of Designations, and is qualified in its entirety by reference to the full text of the Series B-1 Certificate of Designations, a copy of which is filed as Exhibit 3.1 to a Current Report on Form 8-K and is incorporated by reference herein.
Designation, Amount,
and Par Value: The number of Series B-1 Preferred Stock designated is
33
Conversion Price: The
Series B-1 Preferred Stock will be convertible into shares of Common Stock at an initial conversion price of $
Dividends: Holders of the Series B-1 Preferred Stock shall be entitled to receive dividends when and as declared by the Board, from time to time, in its sole discretion, which Dividends shall be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms hereof, in cash, in securities of the Company or any other entity, or using assets as determined by the Board on the Stated Value of such Preferred Share.
Liquidation: In
the event of a Liquidation Event (as defined in the Series B-1 Certificate of Designations), the holders the Series B-1 Preferred Stock
shall be entitled to receive in cash out of the assets of the Company, before any amount shall be paid to the holders of any other shares
of capital stock of the Company, equal to the greater of (A)
Company Redemption: The
Company may redeem all, or any portion, of the Series B-1 Preferred Stock for cash, at a price per share of Series B-1 Preferred Stock
equal to
Maximum Percentage:
Holders of Series B-1 Preferred Stock are prohibited from converting shares of Series B-1 Preferred Stock into shares of Common Stock
if, as a result of such conversion, such holder, together with its affiliates, would beneficially own in excess of
Voting Rights: The holders of the Series B-1 Preferred Stock shall have no voting power and no right to vote on any matter at any time, either as a separate series or class or together with any other series or class of share of capital stock, and shall not be entitled to call a meeting of such holders for any purpose nor shall they be entitled to participate in any meeting of the holders of Common Stock, except as expressly provided in the Series B-1 Certificate of Designations and where required by the DGCL.
34
Issuance of Series B-2 Preferred Stock:
On December 29, 2023, the Company entered into
an Exchange Agreement (the “Note Exchange Agreement”) with the Noteholder, pursuant to which the Noteholder agreed, subject
to the terms and conditions set forth therein, to exchange the Note, including all accrued but unpaid interest thereon, for an aggregate
of
The following is only a summary of the Series B-2 Certificate of Designations, and is qualified in its entirety by reference to the full text of the Series B-2 Certificate of Designations, a copy of which is filed as an exhibit to our Current Report on Form 8-K filed with the SEC on January 2, 2024.
Designation, Amount, and Par Value: The number
of Series B-2 Preferred Stock designated is
Conversion Price: The Series B-2 Preferred Stock
will be convertible into shares of Common Stock at an initial conversion price of $
Dividends: Holders of the Series B-2 Preferred Stock shall be entitled to receive dividends when and as declared by the Board, from time to time, in its sole discretion, which Dividends shall be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms hereof, in cash, in securities of the Company or any other entity, or using assets as determined by the Board on the Stated Value of such Preferred Share.
Liquidation: In the event of a Liquidation Event
(as defined in the Series B-2 Certificate of Designations), the holders the Series B-2 Preferred Stock shall be entitled to receive in
cash out of the assets of the Company, before any amount shall be paid to the holders of any other shares of capital stock of the Company,
equal to the greater of (A)
Company Redemption: The Company may redeem all,
or any portion, of the Series B-2 Preferred Stock for cash, at a price per share of Series B-2 Preferred Stock equal to
35
Maximum Percentage: Holders of Series B-2 Preferred
Stock are prohibited from converting shares of Series B-2 Preferred Stock into shares of Common Stock if, as a result of such conversion,
such holder, together with its affiliates, would beneficially own in excess of
Voting Rights: The holders of the Series B-2 Preferred Stock shall have no voting power and no right to vote on any matter at any time, either as a separate series or class or together with any other series or class of share of capital stock, and shall not be entitled to call a meeting of such holders for any purpose nor shall they be entitled to participate in any meeting of the holders of Common Stock, except as expressly provided in the Series B-2 Certificate of Designations and where required by the DGCL.
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
Series C-1 Preferred Stock Certificate of Designation
On May 2, 2024, the Company filed a Certificate of Designation for its Series C-1 Preferred Stock with the Secretary of State of Delaware (the “Series C-1 Certificate of Designations”). The following is only a summary of the Series C-1 Certificate of Designations, and is qualified in its entirety by reference to the full text of the Series C-1 Certificate of Designations.
Designation, Amount,
and Par Value. The number of Series C-1 Preferred Stock designated is
36
Conversion Price: The
Series C-1 Preferred Stock will be convertible into shares of Common Stock at an initial conversion price of $
Dividends: Holders of the Series C-1 Preferred Stock shall be entitled to receive dividends when and as declared by the Board, from time to time, in its sole discretion, which Dividends shall be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms hereof, in cash, in securities of the Company or any other entity, or using assets as determined by the Board on the Stated Value of such Preferred Share.
Liquidation: In the
event of a Liquidation Event (as defined in the Series C-1 Certificate of Designation), the holders the Series C-1 Preferred Stock shall
be entitled to receive in cash out of the assets of the Company, before any amount shall be paid to the holders of any other shares of
capital stock of the Company, equal to the greater of (A)
Company Redemption:
The Company may redeem all, or any portion, of the Series C-1 Preferred Stock for cash, at a price per share of Series C-1 Preferred
Stock equal to
Maximum Percentage:
Holders of Series C-1 Preferred Stock are prohibited from converting shares of Series C-1 Preferred Stock into shares of Common Stock
if, as a result of such conversion, such holder, together with its affiliates, would beneficially own in excess of
Voting Rights. The holders of the Series C-1 Preferred Stock shall have no voting power and no right to vote on any matter at any time, either as a separate series or class or together with any other series or class of share of capital stock, and shall not be entitled to call a meeting of such holders for any purpose nor shall they be entitled to participate in any meeting of the holders of Common Stock, except as expressly provided in the Certificate of Designations and where required by the General Corporation Law of the State of Delaware (the “DGCL”).
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Series D-1 Preferred Stock Certificate of Designation
On May 2, 2024, the Company filed a Certificate of Designation for its Series D-1 Preferred Stock with the Secretary of State of Delaware (the “Series D-1 Certificate of Designations”). The following is only a summary of the Series D-1 Certificate of Designations, and is qualified in its entirety by reference to the full text of the Series D-1 Certificate of Designations, a copy of which is filed as Exhibit 3.1 to a Current Report on Form 8-K and is incorporated by reference herein.
The Series D-1 Certificate
of Designations provides that the share of Preferred Stock will have
The Series D-1 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 Series D-1 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 holders of Series D-1 Preferred Stock will not be entitled to receive dividends of any kind.
The outstanding share
of Series D-1 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 increase the number of shares of
Common Stock that the Company is authorized to issue. Upon such redemption, the holder of the Preferred Stock will receive consideration
of $
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 six months ended June 30, 2024 and 2023, the Company granted no new options.
The Company recognizes option forfeitures as they occur, as there is insufficient historical data to accurately determine future forfeitures rates.
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| Vested and Nonvested Stock Options | Number | Weighted Average Exercise Price | Weighted Average Remaining Life | |||||||||
| Outstanding December 31, 2023 | $ | |||||||||||
| Granted | - | |||||||||||
| Exercised | - | |||||||||||
| Expired or forfeited | - | |||||||||||
| Outstanding June 30, 2024 | $ | |||||||||||
| Nonvested Stock Options | Number | Weighted- Average Exercise Price | ||||||
| Nonvested on December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Forfeited | ||||||||
| Nonvested on June 30, 2024 | $ | |||||||
As of June 30, 2024 there were
On December 18, 2023, our Board of Directors
adopted the Pearsanta, Inc. 2023 Omnibus Equity Incentive Plan (the “Pearsanta 2023 Plan”) and the 2023 Parent Service Provider
Equity Incentive Plan (the “Pearsanta Parent 2023 Plan”), collectively (the “Pearsanta Plans”). The Pearsanta
Plans 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 “Pearsanta Awards”). Eligible recipients of Pearsanta Awards
include employees, directors or independent contractors of the Company or any affiliate of the Company. The Board of Directors administers
the Pearsanta Plans. The Pearsanta 2023 Plan consists of a total of
During the six months ended June 30, 2024 and 2023, Pearsanta granted no new options under the Pearsanta 2023 Plan.
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| Vested and Nonvested Stock Options | Number | Weighted Average Exercise Price | Weighted Average Remaining Life | |||||||||
| Outstanding December 31, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Expired or forfeited | - | |||||||||||
| Outstanding June 30, 2024 | $ | |||||||||||
| Nonvested Stock Options | Number | Weighted- Average Exercise Price | ||||||
| Nonvested on December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Nonvested on June 30, 2024 | $ | |||||||
As of June 30, 2024, there were
The Company recognized stock-based compensation
expense related to all options granted and vesting expense of $
The Company recognized stock-based compensation
expense related to all options granted and vesting expense of $
Warrants
| Exercise price | $ | |||
| Expected dividend yield | % | |||
| Risk free interest rate | % | |||
| Expected life in years | ||||
| Expected volatility | % |
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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, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Expired or forfeited | ( | ) | - | |||||||||
| Outstanding June 30, 2024 | $ | |||||||||||
| Nonvested Warrants | Number | Weighted- Average Exercise Price | ||||||
| Nonvested on December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Nonvested on June 30, 2024 | $ | |||||||
Restricted Stock Units
| Nonvested RSUs | Number | Weighted Average Price | ||||||
| Nonvested December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Nonvested June 30, 2024 | $ | |||||||
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The Company recognized stock-based compensation
expense related to RSUs granted and vesting expense of $
The Company recognized stock-based compensation
expense related to RSUs granted and vesting expense of $
During the six months ended June 30, 2024, the
Company granted a total of
NOTE 11 – INCOME TAXES
The Company has incurred losses since inception. During the six months ended June 30, 2024, 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 June 30, 2024.
As of June 30, 2024, the Company did not have any amounts recorded pertaining to uncertain tax positions.
NOTE 12 – SUBSEQUENT EVENTS
Appili Amending Agreement
On July 1, 2024, the Company, Adivir and Appili entered into an Amending Agreement (the “Amending Agreement”), pursuant to which the Parties (as defined in the Arrangement Agreement) agreed that: (i) the Outside Date (as defined in the Arrangement Agreement) would be changed to August 30, 2024; (ii) Adivir agreed that it would convene the Company Meeting (as defined in the Arrangement Agreement) no later than August 30, 2024, provided that Appili shall be under no obligation to convene the Company Meeting prior to the date that is 50 days following the date that Aditxt delivers to Appili all complete Additional Financial Disclosure (as defined in the Arrangement Agreement) required for inclusion in the Company Circular (as defined in the Arrangement Agreement); (iii) Aditxt shall use commercially reasonable efforts to complete the Financing (as defined in the Arrangement Agreement) no later than August 30, 2024; and (iv) Aditxt or Appili may terminate the Arrangement Agreement if the Financing is not completed by 5:00 p.m. (ET) on August 30, 2024 or such later date as the Parties may agree in writing.
July Notes
On July 9, 2024, the Company entered into a Securities
Purchase Agreement (the “July Notes Securities Purchase Agreement”) with an accredited investors (the “July Note Purchaser”)
pursuant to which the Company issued and sold a senior note in the principal amount of $
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Upon an Event of Default (as defined in the July
Note), the Note will bear interest at a rate of
On July 12, 2024, additional accredited investors
entered into the July Notes Securities Purchase Agreement. Pursuant to which the Company issued and sold the July Note in the principal
amount of $
Warrant Reprice
On July 9, 2024, the Company entered into an
amendment to common stock purchase warrants (the “Warrant Amendment”) with the holder (the “Repriced Holder”)
of certain of the Company’s warrants originally issued in December 2023, April 2023, September 2022, December 2021, August 2021,
and September 2020 (collectively, the “Repriced Outstanding Warrants”), pursuant to which the Company and the Repriced Holder
agreed to amend each of the Repriced Outstanding Warrants to lower the exercise price of the Outstanding Warrants to $
Amended and Restated Evofem Agreement
On July 12, 2024 (the “Execution Date”), the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with Adifem, Inc. f/k/a Adicure, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”) and Evofem, pursuant to which, Merger Sub will be merged into and with Evofem (the “Merger”), with Evofem surviving the Merger as a wholly owned subsidiary of the Company. The Merger Agreement amended and restated that certain Agreement and Plan of Merger dated as of December 11, 2023 by and among the Company, Merger Sub and Evofem (as amended, the “Original Agreement”).
Effect on Capital Stock
Subject to the terms and conditions set forth
in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (i) all issued and outstanding shares
of common stock, par value $
Any Evofem capital stock outstanding immediately prior to the Effective Time and held by an Evofem shareholder who has not voted in favor of or consented to the adoption of the Merger Agreement and who is entitled to demand and has properly demanded appraisal for such Company Capital Stock in accordance with the Delaware General Corporation Law (“DGCL”), and who, as of the Effective Time, has not effectively withdrawn or lost such appraisal rights (such Evofem capital Stock, “Dissenting Shares”) shall not be converted into or be exchangeable for the right to receive a portion of the Merger Consideration and, instead, shall be entitled to only those rights as set forth in the DGCL. If, after the Effective Time, any such holder fails to perfect or withdraws or loses his, her or its right to appraisal under the DGCL, with respect to any Dissenting Shares, upon surrender of the certificate(s) representing such Dissenting Shares, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the portion of the merger consideration, if any, to which such Evofem capital stock is entitled pursuant to the Merger Agreement, without interest.
As a closing condition for the Company, there shall be no more than 4,141,434 Dissenting Shares that are Evofem Common Stock or 98 Dissenting Shares that are Evofem Preferred Stock.
Treatment of Evofem Options and Employee Stock Purchase Plan
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At the Effective Time, each option outstanding under the Evofem 2014 Equity Incentive Plan, the Evofem 2018 Inducement Equity Incentive Plan and the Evofem 2019 Employee Stock Purchase Plan (collectively, the “Evofem Option Plans”), whether or not vested, will be canceled without the right to receive any consideration, and the board of directors of Evofem shall take such action such that the Evofem Option Plans are cancelled as of the Effective Time.
As soon as practicable following the Execution Date, Evofem will take all action that may be reasonably necessary to provide that: (i) no new offering period will commence under the Evofem 2019 Employee Stock Purchase Plan (the “Evofem ESPP”); (ii) participants in the Evofem ESPP as of the Execution Date shall not be permitted to increase their payroll deductions or make separate non-payroll contributions to the Evofem ESPP; and (iii) no new participants may commence participation in the Evofem ESPP following the Execution Date. Prior to the Effective Time, Evofem will take all action that may be reasonably necessary to: (A) cause any offering period or purchase period that otherwise be in progress at the Effective Time to be the final offering period under the Evofem ESPP and to be terminated no later than five business days prior to the anticipated closing date (the “Final Exercise Date”); (B) make any pro-rata adjustments that may be necessary to reflect the shortened offering period or purchase period; (C) cause each participant’s then-outstanding share purchase right under the Evofem ESPP to be exercised as of the Final Exercise Date; and (D) terminate the Evofem ESPP, as of and contingent upon, the Effective Time.
Representations and Warranties
The parties to the Merger Agreement have agreed to customary representations and warranties for transactions of this type.
Covenants
The Merger Agreement contains various customary covenants, including but not limited to, covenants with respect to the conduct of Evofem’s business prior to the Effective Time.
Closing Conditions
Mutual
The respective obligations of each of the Company, Merger Sub and Evofem to consummate the closing of the Merger (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) | approval by the Evofem shareholders; |
| (ii) | the entry into a voting agreement by the Company and certain members of Evofem management; |
| (iii) | all preferred stock of Evofem other than the Evofem Unconverted Preferred Stock shall have been converted to Evofem Common Stock; |
| (iv) | Evofem shall have received agreements (the “Evofem Warrant Holder Agreements”) from all holders of Evofem warrants which provide: |
| (a) | waivers with respect to any fundamental transaction, change in control or other similar rights that such
warrant holder may have under any such Evofem warrants, and (b) an agreement to such Evofem warrants to exchange such warrants for not
more than an aggregate (for all holders of Evofem warrants) of |
| (v) | Evofem shall have cashed out any other holder of Evofem warrants who has not provided an Evofem Warrant Holder Agreement; and |
| (vi) | Evofem shall have obtained waivers from the holders of the convertible notes of Evofem (the “Evofem Convertible Notes”) with respect to any fundamental transaction rights that such holder may have under the Evofem Convertible Notes, including any right to vote, consent, or otherwise approve or veto any of the transactions contemplated under the Merger Agreement. |
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| (vii) | The Company shall have received sufficient financing to satisfy its payment obligations under the Merger Agreement. |
| (viii) | The requisite stockholder approval shall have been obtained by the Company at a Special Meeting of its stockholders to approve the Parent Stock Issuance (as defined in the Merger Agreement) pursuant to the requirements of NASDAQ. |
The Company and Merger Sub
The obligations of the Company and Merger Sub 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) | the Company shall have obtained agreements from the holders of Evofem Convertible Notes and purchase rights
they hold to exchange such Convertible Notes and purchase rights for not more than an aggregate (for all holders of Evofem Convertible
Notes) of |
| (ii) | the Company shall have received waivers form the holders of certain of the Company’s securities which contain prohibitions on variable rate transactions; and |
| (iii) | the Company, Merger Sub and Evofem shall work together between the Execution Date and the Effective Time to determine the tax treatment of the Merger and the other transactions contemplated by the Merger Agreement. |
Evofem
The obligations of Evofem 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) | The Company shall be in compliance with the stockholders’ equity requirement in Nasdaq Listing Rule 5550(b)(1) and shall meet all other applicable criteria for continued listing. |
Termination
The Merger Agreement may be terminated at any time prior to the consummation of the Closing by mutual written consent of the Company and Evofem. Either the Company or Evofem may also terminate the Merger Agreement if (i) the Merger shall not have been consummated on or before 5:00 p.m. Eastern Time on September 30, 2024; (ii) if any judgment, law or order prohibiting the Merger or the Transactions has become final and non-appealable; (iii) the required vote of Evofem stockholders was not obtained; or (iv) in the event of any Terminable Breach (as defined in the Merger Agreement). The Company may terminate the Merger Agreement if (i) prior to approval by the required vote of Evofem’s shareholders if the Evofem board of directors shall have effected a Company Change in Recommendation (as defined in the Merger Agreement); or (ii) in the event that the Company determines, in its reasonable discretion, that the acquisition of Evofem could result in a material adverse amount of cancellation of indebtedness income to the Company. Evofem may terminate the Merger Agreement if (i) at any time after there has been a Company Change of Recommendation; provided, that Evofem has provided the Company ten (10) calendar days’ prior written notice thereof and has negotiated in good faith with the Company to provide a competing offer; (ii) the Company Common Stock is no longer listed for trading on Nasdaq; or (iii) any of: (A) the Initial Parent Equity Investment has not been made by the Initial Parent Equity Investment Date, (B) the Second Parent Equity Investment has not been made by the Second Parent Equity Investment Date, (C) the Third Parent Equity Investment has not been made by the Third Parent Equity Investment Date or (D) the Fourth Parent Equity Investment has not been made by the Fourth Parent Equity Investment Date (as all of such terms are defined in the Merger Agreement).
Effect of Termination
If the Merger Agreement is terminated, the Merger Agreement will become void, and there will be no liability under the Merger Agreement on the part of any party thereto.
Waiver Agreement
On July 12, 2024, the Company, Merger Sub and Evofem also entered into a Waiver Agreement (the “Waiver Agreement”), pursuant to which: (i) Evofem waived its Termination Right (as defined in the Merger Agreement) for such breaches by the Company and Merger Sub that have occurred prior to the date of the Waiver Agreement; (ii) the Company and Merger Sub waived the restrictive covenants in the Merger Agreement that would otherwise prevent Evofem from entering into and closing the transaction contemplated under that certain Asset Purchase Agreement by and between Evofem and Lupin, Inc. (the “Asset Purchase Agreement”); and (iii) the Company and Merger Sub waived the restrictive covenants in the Merger Agreement that would otherwise restrict Evofem from entering into a financing arrangement relating to its directors’ and officers’ insurance policy.
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Securities Purchase Agreement – Evofem Series F-1 Convertible Preferred Stock
On July 12, 2024 (the “Closing Date”),
the Company completed the Initial Parent Equity Investment (as defined under the Merger Agreement) and entered into a Securities Purchase
(the “Series F-1 Securities Purchase Agreement”) with Evofem, pursuant to which the Company purchased
Exchange Agreement
On August 7, 2024, the Company entered into a
Securities Exchange Agreement with the Holder (the “August Exchange Agreement”), pursuant to which the Company agreed to
exchange the certain pre-funded warrants for: (i) an aggregate of
Amendment to Certificate of Incorporation
On August 7, 2024, the Company filed with the Secretary
of State of Delaware an amendment to the Company’s Certificate of Incorporation, (the “Charter Amendment”) to increase
the number of authorized common stock from
Registered Direct Offering
On August 8, 2024, the Company entered into a
securities purchase agreement (the “Registered Direct Purchase Agreement”) with certain institutional investors, pursuant
to which the Company agreed to sell to such investors
The closing of the sales of these securities
under the Registered Direct Purchase Agreement took place on August 9, 2024. The gross proceeds from the offering were approximately
$
Amendment to EvoFem Amended and Restated Merger Agreement
On August 16, 2024, the Company, Merger Sub and
Evofem entered into Amendment No. 1 to the Amended and Restated Merger Agreement (“Amendment No. 1”), pursuant to which the
date by which the Company is to make the Third Parent Equity Investment (as defined under the Amended and Restated Merger Agreement) was
amended to the earlier of September 6, 2024 or five (5) business days of the closing of a public offering by Parent resulting in aggregate
net proceeds to Parent of no less than $
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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, 2023 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 Mountain View, California. 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.
Central to Pearsanta’s innovation is Mitomic® Technology Platform, which we acquired from MDNA in January 2024.
We acquired the assets comprising our mitomic technology platform from MDNA. This platform seeks to harness the unique properties of mitochondrial DNA (“mtDNA”) to detect disease through non-invasive, blood-based liquid biopsies. The Mitomic® Technology Platform is designed to identify specific mutations in mtDNA indicative of various diseases. Due to its high mutation rate and cell persistence, mitochondrial DNA is an excellent biomarker for early disease detection. This platform allows for the rapid and accurate identification of disease-associated biomarkers, which can significantly enhance early diagnosis and treatment. Key Products Under Development at Time of Acquisition:
Key Products Under Development at Time of Acquisition:
Mitomic® Endometriosis Test (MET™):
| ● | Purpose: To provide an accurate and non-invasive diagnosis of endometriosis, a condition that affects approximately 1 in 10 women of reproductive age worldwide. |
| ● | Clinical Validation: MET™ has demonstrated high accuracy in predicting surgical outcomes in women suspected of having endometriosis. The test has shown significant promise in reducing the diagnostic delay, which averages around ten years. |
| ● | Impact: Early and precise diagnosis through MET™ can lead to timely and effective treatment, significantly improving patient outcomes and quality of life |
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Mitomic® Prostate Test (MPT™):
| ● | Purpose: To enhance the detection of clinically significant prostate cancer, reducing reliance on PSA testing, which often results in false positives and over-diagnosis. |
| ● | Clinical Validation: MPT™ has shown the ability to predict prostate cancer accurately, distinguishing between aggressive and nonaggressive forms. This specificity is crucial in guiding treatment decisions and reducing unnecessary interventions. |
| ● | Impact: MPT™ aims to improve patient outcomes by ensuring that only those with clinically significant prostate cancer receive treatment, thereby avoiding the side effects of unnecessary procedures. To date, our primary focus with respect to the Mitomic Technology Platform has been the integration of such assets into our business. Our initial plans for the Mitomic Technology Platform are to complete product development, manufacturing and clinical validation of the MET™ and the MPT™.: |
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.
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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. |
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. Central to Adivir’s innovation is the ongoing contemplated transaction with Appili. Appili is an infectious disease biopharmaceutical company that is purposefully built, portfolio-driven, and people-focused to fulfill its mission of solving life-threatening infections. By systematically identifying urgent infections with unmet needs, Appili aims to strategically develop a pipeline of novel therapies to prevent deaths and improve lives. The Company is currently advancing a diverse range of anti-infectives, including a vaccine candidate to eliminate a severe biological weapon threat, a topical antiparasitic for the treatment of a disfiguring disease, and a novel easy to use, liquid oral formulation targeting parasitic and anaerobic infections. Appili is at the epicenter of the global fight against infection, led by a proven management team.
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.
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Going Concern
We were incorporated on September 28, 2017 and have not generated significant revenues to date. During the six months ended June 30, 2024 we had a net loss of $22,492,573 and cash of $91,223 as of June 30, 2024.
We are currently over 90 days past due on a significant number of vendor obligations. The Company will require significant additional capital to operate in the normal course of business and fund clinical studies in the long-term. We believe our 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 June 30, 2024, show a net loss of $22,492,573. 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.
Results of Operations
Results of operations for the three months ended June 30, 2024 and 2023
We generated revenue of $44,276 and $220,978 for the three months ended June 30, 2024 and 2023, respectively. Cost of goods sold for the three months ended June 30, 2024 and 2023 was $23,134 and $185,738, respectively.
During the three months ended June 30, 2024, we incurred a loss from operations of $5,975,981. This is due to general and administrative expenses of $4,419,545, which includes approximately $1,484,996 in payroll expenses, $1,183,992 in professional fees, and $4,097 in stock-based compensation. Research and development expenses were $1,553,360, which includes $978,012 in consulting expenses. Sales and marketing expenses were $24,218.
During the three months ended June 30, 2023, we incurred a loss from operations of $4,234,437. This is due to general and administrative expenses of $3,671,083, This includes approximately $1,600,000 in payroll expenses, $800,000 in professional fees, and $107,156 in stock-based compensation. Research and development expenses of $484,835, which includes $53,540 in stock-based compensation, and sales and marketing expenses of $113,759, which includes $2,532 in stock-based compensation. The $484,835 in research and development is mainly comprised of $467,664 in consulting expenses.
The increase in expenses during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was due to an increased research and development spend and $1,000,000 fee paid to Evofem as part of an amendment to a merger agreement which was recorded to general and administrative expenses.
Results of operations for the six months ended June 30, 2024 and 2023
We generated revenue of $123,956 and $439,393 for the six months ended June 30, 2024 and 2023, respectively. Cost of goods sold for the six months ended June 30, 2024 and 2023 was $88,933 and $364,047, respectively.
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During the six months ended June 30, 2024, we incurred a loss from operations of $17,511,627. This is due to general and administrative expenses of $7,783,293, which includes approximately $2,958,585 in payroll expenses, $2,329,671 in professional fees, and $28,670 in stock-based compensation. Research and development expenses were $9,698,626 which includes $1,179,591 in consulting expenses and $6,712,663 in stock-based compensation. Sales and marketing expenses were $64,731.
During the six months ended June 30, 2023, we incurred a loss from operations of $10,016,332. This is due to general and administrative expenses of $8,039,926. This includes approximately $3,500,000 in payroll expenses, $1,997,000 in professional fees, and $381,471 in stock-based compensation. Research and development expenses of $1,872,376, which includes $116,173 in stock-based compensation, and sales and marketing expenses of $179,376, which includes $5,035 in stock-based compensation. The $1,872,376 in research and development is mainly comprised of $824,303 in consulting expenses.
The increase in expenses during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due to an increased research and development spend and $1,000,000 fee paid to Evofem as part of an amendment to a merger agreement which was recorded to general and administrative expenses.
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 June 30, 2024, we had an accumulated deficit of $150,024,555. We had working capital of $(19,058,995) as of June 30, 2024. During the six months ended June 30, 2024, we purchased zero in fixed assets.
Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern.
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.
On December 29, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (“the “December Purchaser”) for the issuance and sale in a private placement (the “December Private Placement”) of (i) pre-funded warrants (the “December Pre-Funded Warrants”) to purchase up to 1,237,114 shares of the Company’s Common Stock, par value $0.001 at an exercise price of $0.001 per share, and (ii) warrants (the “December Common Warrants”) to purchase up to 2,474,228 shares of the Company’s Common Stock, at a purchase price of $4.85 per share.
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Pursuant to the Purchase Agreement, the Company agreed to reduce the exercise price of certain outstanding warrants to purchase Common Stock of the Company (“Certain Outstanding Warrants”) held by the Purchaser to $4.60 per share in consideration for the cash payment by the December Purchaser of $0.125 per share of Common Stock underlying the Certain Outstanding Warrants, effective immediately.
The December Private Placement closed on January 4, 2024. The net proceeds to the Company from the December Private Placement were approximately $5.5 million, after deducting placement agent fees and expenses and estimated offering expenses payable by the Company.
In addition, the Company agreed to pay H.C. Wainwright & Co., LLC (“Wainwright”) certain expenses and issued to Wainwright or its designees warrants (the “December Placement Agent Warrants”) to purchase up to an aggregate of 74,227 shares of Common Stock at an exercise price equal to $6.0625 per share. The December Placement Agent Warrants are exercisable immediately upon issuance and have a term of exercise equal to three years from the date of issuance.
On May 2, 2024, the Company entered into a Securities Purchase Agreement (the “May PIPE Purchase Agreement”) with certain accredited investors, pursuant to which the Company agreed to issue and sell to such investors in a private placement (the “Private Placement”) (i) an aggregate of 4,186 shares of the Company’s Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred Stock”), (ii) an aggregate of 4,186 shares of the Company’s Series D-1 Preferred Stock (the “Series D-1 Preferred Stock”), and (iii) warrants (the “May PIPE Warrants”) to purchase up to an aggregate of 1,613,092 shares of the Company’s common stock. The Private Placement closed on May 6, 2024. The gross proceeds from the Private Placement were approximately $4.2 million, prior to deducting the placement agent’s fees and other offering expenses payable by the Company. The Company used $1.0 million of the net proceeds to fund certain obligations under its merger agreement with Evofem Biosciences, Inc. and the remainder of the net proceeds from the offering for working capital and other general corporate purposes.
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.
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Contractual Obligations
The following table shows our contractual obligations as of June 30, 2024:
| Payment Due by Year | ||||||||||||||||
| Total | 2024 | 2025 | 2026 | |||||||||||||
| Lease | $ | 1,513,576 | $ | 379,100 | $ | 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.
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.
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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 have not materially changed since the Company determined that we did not maintain effective internal controls over financial reporting and the following weaknesses still exist as of June 30, 2024.
| ● | We did not maintain adequate controls over the documentation of accounting and financial reporting policies and procedures. Specifically, we did not maintain policies and procedures to ensure account reconciliations were adequately prepared and reviewed by management. |
| ● | We did not retain individuals and/or entities with extensive knowledge to recognize and record technical and complex accounting issues. |
| ● | We did not maintain the sufficient procedures for the identification and cutoff of accounts payable. |
These material weaknesses resulted in material misstatements to the financial statements, which were corrected. There were no changes to previously released financial results. We are in the process of remediating these material weaknesses.
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 June 30, 2024 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, 2023 and 2022, the Company had a net loss of $32,390,447 and $27,649,876, respectively. Our condensed consolidated financial statements as of June 30, 2024, show a net loss of $22,492,573. Our cash and cash equivalents were approximately $91,223 as of June 30, 2024. 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.
We are currently over 90 days past due on a significant amount of vendor obligations. We may not be able to refinance, extend or repay our substantial indebtedness owed to our secured and unsecured lenders, which would have a material adverse effect on our financial condition and ability to continue as a going concern.
As of June 30, 2024, we have approximately $12.8 million in accounts payable with approximately $7.2 million that is over 90 days past due. If we are unable to repay these amounts, as well as our existing debt obligations at maturity, and we are otherwise unable to extend the maturity dates or refinance these obligations, we would be in default. We cannot provide any assurances that we will be able to raise the necessary amount of capital to repay these obligations or that we will be able to extend the maturity dates or otherwise refinance these obligations. Upon a default, our secured lenders would have the right to exercise their rights and remedies to collect, which would include foreclosing on our assets. Accordingly, a default would have a material adverse effect on our business, and we would likely be forced to seek bankruptcy protection.
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We may not be able to effect the transactions contemplated under the Merger Agreement with Evofem or the Arrangement Agreement with Appili . If we are unable to do so, we will incur substantial costs associated with withdrawing from the transaction.
In connection with the Merger Agreement with Evofem and the Arrangement Agreement with Appili, we have incurred substantial costs planning and negotiating the transactions. These costs include, but are not limited to, costs associated with employing and retaining third-party advisors who perform financial, auditing and legal services required before we were able to enter into such agreements and which services will continue to be utilized as we seek to complete such transactions. If, for whatever reason, such transactions fail to close, we will still be responsible for these costs, which could adversely affect our liquidity and financial results.
We will need to raise substantial additional capital, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts and strategic M&A initiatives, or cease operations.
We do not expect that our current cash position will be sufficient to fund our current operations for the next 12 months. We also do not presently have sufficient cash to fund certain obligations under our Merger Agreement with Evofem or our Arrangement Agreement with Appili. In addition, we are required to complete an equity or debt financing with minimum gross proceeds of at least $20 million in order to close the transactions contemplated under our Arrangement Agreement with Appili. Our operating plan may change because of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. In any event, we will require additional capital to obtain regulatory approval for, and to commercialize, our product candidates. Raising funds in the current economic environment may present additional challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities may dilute our existing stockholders. The incurrence of indebtedness would result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay, or discontinue one or more of our research or development programs or the commercialization of any product candidate or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.
A significant number of shares of our common stock may be issued and sold upon the exercise of outstanding options, warrants, and upon the conversion of the Company’s convertible preferred stock.
As of June 30, 2024, there were 45,572 shares of common stock issuable under outstanding options, 6,887,581 shares of common stock issuable upon exercise of outstanding warrants at various exercise prices and approximately 17,286,209 shares of common stock reserved for issuance upon conversion of outstanding convertible preferred stock. To the extent that holders of existing options, warrants or convertible preferred stock sell the shares of common stock issued upon the exercise of options or warrants or conversion of the convertible preferred stock, the market price of our common stock may decrease due to the additional selling pressure in the market. The risk of dilution from issuances of shares of common stock underlying existing options, warrants and convertible preferred stock may cause shareholders to sell their common stock, which could further decline in the market price.
We have entered into a Purchase Agreement with an equity line investor. If we sell shares of our common stock under the Purchase Agreement, our existing stockholders will experience immediate dilution and, as a result, our stock price may go down.
Pursuant to the Purchase Agreement, we have agreed to sell up to $150,000,000 of shares of our common stock at our option and subject to certain limitations. In addition, we may issue up to 2,250,000 shares of our common stock as a commitment fee under the Purchase Agreement. As of the date hereof, we have not issued or sold any shares of our common stock under the Purchase Agreement. The sale of shares of our common stock pursuant to the Purchase Agreement will have a dilutive impact on our existing stockholders. The equity line investor may resell some or all of the shares we issue to it under the Purchase Agreement and such sales could cause the market price of our common stock to decline, which decline could be significant.
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Even if we can raise additional funding, we may be required to do so on terms that are dilutive to you.
The capital markets have been unpredictable in the past for unprofitable companies such as ours. In addition, it is generally difficult for development stage companies to raise capital under current market conditions. The amount of capital that a company such as ours is able to raise often depends on variables that are beyond our control. As a result, we may not be able to secure financing on terms attractive to us, or at all. If we can consummate a financing arrangement, the amount raised may not be sufficient to meet our future needs. If adequate funds are not available on acceptable terms, or at all, our business, including our results of operations, financial condition and our continued viability will be materially adversely affected.
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.
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 June 30, 2024, approximately $7.7 million was owed to such secured creditors. Under such agreements, we are required to pay $277,800 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 June 30, 2023, and as of June 30, 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. On December 29, 2023, the Company received written notice from Nasdaq that we had regained compliance with the Stockholders’ Equity Rule, but will be subject to a Mandatory Panel Monitor for a period of one year.
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.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5.
As reported in a Current Report filed by the Company, on May 2, 2024, the Company entered into a Securities Purchase Agreement with certain accredited investors pursuant to which the Company issued and sold, in a private placement (i) an aggregate of 4,186 shares of the Company’s Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred Stock”), (ii) an aggregate of 4,186 shares of the Company’s Series D-1 Preferred Stock (the “Series D-1 Preferred Stock”), and (iii) warrants (the “Warrants”) to purchase up to an aggregate of 1,613,092 shares of the Company’s common stock. In connection with such transaction, the Company was obligated to pay H.C. Wainwright & Co., LLC (“Wainwright”) pursuant to its engagement letter with Wainwright dated December 3, 2023 as amended as of December 29, 2023, a cash fee of $324,312.96 or 7.75% of the gross proceeds from the private placement (the “Wainwright Cash Fee”), and issue to Wainwright warrants to purchase 96,786 shares of the Company’s common stock at an exercise price of $3.2438 per share, commencing six months following issuance for a term of five years from the date of issuance (the “Wainwright Warrants”).
On August 14, 2024, the Company entered into a Payment Agreement with Wainwright (the “Payment Agreement”), pursuant to which the Company agreed (i) on or prior to September 15, 2024, to pay Wainwright $162, 206.96 of the Wainwright Cash Fee and to issue the Wainwright Warrants and (ii) on or prior to October 15, 2024, to pay the remaining $162,206 of the Wainwright Cash Fee. In addition, pursuant to the Payment Agreement, the Company agreed to make one-time cash payment of $190,000 to Wainwright in satisfaction of certain obligations of Evofem Biosciences, Inc. (“Evofem”) to Wainwright no later than five days following the closing of the Company’s merger with Evofem (the “Wainwright Evofem Payment”), provided however, that the Company shall not be obligated to pay the Wainwright Evofem Payment in the event that the merger has not closed by October 15, 2024 or the merger is terminated.
On August 16, 2024, the Company, Merger Sub and Evofem entered into Amendment No. 1 to the Amended and Restated Merger Agreement (“Amendment No. 1”), pursuant to which the date by which the Company is to make the Third Parent Equity Investment (as defined under the Amended and Restated Merger Agreement) was amended to the earlier of September 6, 2024 or five (5) business days of the closing of a public offering by Parent resulting in aggregate net proceeds to Parent of no less than $20,000,000. Except as set forth herein, the terms and conditions of the Amended and Restated Merger Agreement have not been modified.
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Item 6. Exhibits
| Exhibit | ||
| Number | Exhibit Description | |
| 2.1 | Amendment No. 1 to Amended and Restated Merger Agreement | |
| 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. |
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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: August 19, 2024 | By: | /s/ Amro Albanna |
| Amro Albanna | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: August 19, 2024 | By: | /s/ Thomas J. Farley |
| Thomas J. Farley | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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