BioCorRx Inc 10-Q for FY2023 Q3
BioCorRx Inc. (BICX)
About this 10-Q
BioCorRx Inc filed this 10-Q on November 14, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $10.15K
- down 89.3% from $94.44K a year earlier
- Net loss
- $867.35K
- compared with a net loss of $951.01K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ___________
Commission file number:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
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(Address of principal executive offices) |
| (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
N/A |
| N/A |
| N/A |
Indicate by check 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 pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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 |
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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
As of November 13, 2023, there were
TABLE OF CONTENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Unless expressly indicated or the context requires otherwise, the terms “BioCorRx,” “Company,” “we,” “us,” and “our” in this document refer to BioCorRx Inc., a Nevada corporation, and, where appropriate, its wholly owned subsidiaries.
| 2 |
| Table of Contents |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOCORRX INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
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| September 30, |
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| 2022 |
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ASSETS |
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Current assets: |
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Cash |
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Accounts receivable |
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Grant receivable |
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Prepaid expenses |
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Total current assets |
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Property and equipment, net |
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Right to use assets |
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Other assets: |
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Patents, net |
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Software development costs |
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Deposits, long term |
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Total other assets |
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Total assets |
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LIABILITIES AND DEFICIT | ||||||||
Current liabilities: |
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Accounts payable and accrued expenses, including related party payables of $ |
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Deferred revenue, short term |
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Lease liability, short term |
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Notes payable, net of debt discount of $ |
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Notes payable, related parties, net of debt discount of $ |
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Total current liabilities |
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Long term liabilities: |
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Economic Injury Disaster loan, long term |
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Royalty obligation, net of discount of $ |
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Lease liability, long term |
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Deferred revenue, long term |
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Total liabilities |
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Commitments and contingencies |
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Deficit: |
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Preferred stock, no par value, |
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Series A convertible preferred stock, no par value; |
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Series B convertible preferred stock, no par value; |
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Common stock, $ |
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Common stock subscribed |
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Additional paid in capital |
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Accumulated deficit |
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Total deficit attributable to BioCorRx Inc. |
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Non-controlling interest |
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Total deficit |
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Total liabilities and deficit |
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| $ |
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See the accompanying notes to the unaudited condensed consolidated financial statements
| 3 |
| Table of Contents |
BIOCORRX INC. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(UNAUDITED) |
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| Nine months ended |
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| September 30, |
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| September 30, |
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| 2023 |
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Revenues, net |
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Operating expenses: |
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Cost of implants and other costs |
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Research and development |
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Selling, general and administrative |
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Impairment of intellectual property |
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Depreciation and amortization |
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Total operating expenses |
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Loss from operations |
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Other income (expenses): |
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Interest expense - related parties |
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Interest expense, net |
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Loss on settlement of debt |
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Grant income |
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Other miscellaneous income |
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Total other income |
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Loss before provision for income taxes |
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Income taxes |
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Net loss |
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Non-controlling interest |
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Net loss attributable to BioCorRx Inc. |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Net loss per common share, basic and diluted |
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Weighted average number of common shares outstanding, basic and diluted |
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See the accompanying notes to the unaudited condensed consolidated financial statements
| 4 |
| Table of Contents |
BIOCORRX INC. |
CONDENSED CONSOLIDATED STATEMENT OF DEFICIT |
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 |
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| Series A |
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| Series B |
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| Common |
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| Convertible |
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| Stock |
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| Common |
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| Additional |
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| Non- |
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| Preferred stock |
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| Preferred stock |
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| Common stock |
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| Subscription |
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| stock |
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| Paid in |
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| Accumulated |
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| Controlling |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Receivable |
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| Subscribed |
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| Capital |
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| Deficit |
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| Interest |
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| Total |
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Balance, December 31, 2022 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||||||
Common stock issued for services rendered |
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| - |
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| - |
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Common stock issued in connection with issuance of promissory notes |
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| - |
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Common stock issued in connection with subscription agreement |
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| - |
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| - |
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Share-based compensation |
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| - |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| - |
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Balance, March 31, 2023 (unaudited) |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||||||
Common stock issued for services rendered |
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| - |
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| - |
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Common stock issued in connection with conversion of promissory notes and accounts payable |
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Common stock issued in connection with subscription agreement |
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Share-based compensation |
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| - |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| - |
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Balance, June 30, 2023 (unaudited) |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||||||
Common stock issued for services rendered |
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| - |
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| - |
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Common stock issued in connection with issuance of promissory notes |
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Warrants issued in connection with issuance of promissory notes |
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| - |
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| - |
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Share-based compensation |
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| - |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| - |
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| ( | ) |
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Balance, September 30, 2023 (unaudited) |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| 5 |
| Table of Contents |
BIOCORRX INC . |
CONDENSED CONSOLIDATED STATEMENT OF DEFICIT |
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 |
|
| Series A |
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| Series B |
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| Convertible |
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| Convertible |
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| Common |
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| Additional |
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| Non- |
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| Preferred stock |
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| Preferred stock |
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| Common stock |
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| stock |
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| Paid in |
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| Accumulated |
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| Controlling |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Subscribed |
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| Capital |
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| Deficit |
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| Interest |
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| Total |
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Balance, December 31, 2021 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||||||
Common stock issued for services rendered |
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| - |
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| - |
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Common stock issued in connection with subscription agreement |
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| - |
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| - |
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| |||||||||
Share-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
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| ||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
Balance, March 31, 2022 (unaudited) |
|
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|
| $ |
|
|
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|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||||||
Common stock issued for services rendered |
|
| - |
|
|
|
|
|
| - |
|
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| |||||||||
Common stock issued in connection with subscription agreement |
|
| - |
|
|
|
|
|
| - |
|
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| |||||||||
Warrants issued in connection with loan default |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
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| ||||||||
Warrants issued in connection with loan default – related party |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
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|
|
|
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|
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|
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|
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|
| ||||||||
Share-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
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|
|
|
| ||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
Balance, June 30, 2022 (unaudited) |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||||||
Common stock issued for services rendered |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
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|
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| |||||||||
Common stock issued in connection with conversion of promissory notes and accounts payable |
|
| - |
|
|
|
|
|
| - |
|
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| |||||||||
Common stock issued in connection with issuance of promissory notes |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
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|
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| |||||||||
Share-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
| ||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
Balance, September 30, 2022 (unaudited) |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements
| 6 |
| Table of Contents |
BIOCORRX INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(UNAUDITED) |
|
| Nine Months ended |
| |||||
|
| September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
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| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to cash flows used in operating activities: |
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Depreciation and amortization |
|
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| ||
Amortization of discount on royalty obligation |
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Amortization of debt discount |
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Impairment of intellectual property |
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Amortization of right-of-use asset |
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Loss on settlement of debt |
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| ||
Stock based compensation |
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| ||
Gain on forgiveness of debt |
|
|
|
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| ( | ) | |
Warrants issued in connection with loan default |
|
|
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| ||
Changes in operating assets and liabilities: |
|
|
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|
|
|
Accounts receivable |
|
|
|
|
| ( | ) | |
Grant receivable |
|
|
|
|
| ( | ) | |
Prepaid expenses |
|
|
|
|
| ( | ) | |
Accounts payable and accrued expenses |
|
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| ||
Lease liability |
|
| ( | ) |
|
| ( | ) |
Deferred revenue |
|
| ( | ) |
|
| ( | ) |
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
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|
CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from common stock subscription and royalty agreement |
|
|
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| ||
Payment to Economic Injury Disaster loan |
|
| ( | ) |
|
| ( | ) |
Payment of notes payable – related party |
|
| ( | ) |
|
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| |
Proceeds from notes payable |
|
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| ||
Proceeds from notes payable – related party |
|
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| ||
Net cash provided by financing activities |
|
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| ||
|
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|
Net increase (decrease) in cash and restricted cash |
|
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| ( | ) | |
Cash and restricted cash, beginning of the period |
|
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| ||
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|
Cash and restricted cash, end of period |
| $ |
|
| $ |
| ||
|
|
|
|
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|
|
|
|
Cash and restricted cash consist of the following, end of period: |
|
|
|
|
|
|
|
|
Cash |
| $ |
|
| $ |
| ||
Restricted cash |
|
|
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| ||
Total |
| $ |
|
| $ |
| ||
|
|
|
|
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|
|
|
|
Cash and restricted cash consist of the following, beginning of the period: |
|
|
|
|
|
|
|
|
Cash |
| $ |
|
| $ |
| ||
Restricted cash |
|
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| ||
Total |
| $ |
|
| $ |
| ||
|
|
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|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
| $ |
|
| $ |
| ||
Taxes paid |
| $ |
|
| $ |
| ||
Common stock issued in connection with conversion of promissory notes and accounts payable |
| $ |
|
| $ |
| ||
Warrants issued in connection with issuance of promissory notes |
| $ |
|
| $ |
| ||
Common stock issued in connection with issuance of promissory notes |
| $ |
|
| $ |
| ||
See the accompanying notes to the unaudited condensed consolidated financial statements
| 7 |
| Table of Contents |
BIOCORRX INC .
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(UNAUDITED)
NOTE 1 - BUSINESS
BioCorRx Inc., through its subsidiaries, develops and provides innovative treatment programs for substance abuse and related disorders. The BioCorRx ® Recovery Program is a non-addictive, medication-assisted treatment (MAT) program for substance abuse that includes peer recovery support. The UnCraveRx™ Weight Loss Management Program is a medically assisted weight management program that is combined with a virtual platform application. The full program officially launched October 1, 2019. The Company’s majority owned subsidiary BioCorRx Pharmaceuticals Inc. is also engaged in the research and development of sustained release naltrexone products for the treatment of addiction and other possible disorders. Specifically, the Company is developing an injectable (BICX101) and implantable naltrexone with the goal of future regulatory approval with the Food and Drug Administration. On May 7, 2021, the U.S. Food and Drug Administration (FDA) cleared the Company’s Investigational New Drug Application (IND) for its implantable naltrexone (BICX104) candidate. On October 31, 2020, the Company entered into a written management services agreement with Joseph DeSanto MD, Inc. (“Medical Corporation”) under which the Company provides management and other administrative services to the Medical Corporation. These services include billing, collection of accounts receivable, accounting, management and human resource functions. Pursuant to the management services agreement, a management fee equal to 65% of the Medical Corporation’s gross collected monthly revenue. Through this arrangement, the Company is directing the activities that most significantly impact the financial results of the respective Medical Corporation; however, all clinical treatment decisions are made solely by licensed healthcare professionals. The Company has determined that it is the primary beneficiary, and, therefore, has consolidated the Medical Corporation as variable interest entity (“VIE”). The medical corporation: (i) had not yet generated any revenues and (ii) had no significant assets or liabilities since inception through September 30, 2023.
On July 28, 2016, BioCorRx Inc. formed BioCorRx Pharmaceuticals, Inc., a Nevada Corporation, for the purpose of developing certain business lines. In connection with the formation, the sub issued
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The following (a) condensed consolidated balance sheet as of December 31, 2022, which has been derived from audited financial statements, and (b) the unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of results that may be expected for the year ending December 31, 2023. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 31, 2023.
Basis of presentation
The consolidated financial statements include the accounts of: (i) BioCorRx Inc. and its wholly owned subsidiary, Fresh Start Private, Inc., (ii) its majority owned subsidiary, BioCorRx Pharmaceuticals, Inc., and (iii) and the Medical Corporation (“VIE”) (collectively, “the Company”) under which the Company provides management and other administrative services pursuant to the management services agreement in which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation.
| 8 |
| Table of Contents |
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board “FASB” Accounting Standards Codification “ASC” 606. A five-step analysis a must be met as outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.
The Company has elected the following practical expedients in applying ASC 606:
| · | Unsatisfied Performance Obligations - all performance obligations relate to contracts with a duration of less than one year. The Company has elected to apply the optional exemption provided in ASC 606 and therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. |
|
|
|
| · | Contract Costs - all incremental customer contract acquisition costs are expensed as they are incurred as the amortization period of the asset that the Company otherwise would have recognized is one year or less in duration. |
|
|
|
| · | Significant Financing Component - the Company does not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. |
|
|
|
| · | Sales Tax Exclusion from the Transaction Price - the Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from the customer. |
|
|
|
| · | Shipping and Handling Activities - the Company elected to account for shipping and handling activities as a fulfillment cost rather than as a separate performance obligation. |
The Company’s net sales are disaggregated by product category. The sales/access fees consist of product sales, which is recognized upon the transfer of promised goods to customers. The project support income is generated from administrative support to Biotechnology research customers, which is recognized upon the transfer of promised services to customers. The distribution rights income consists of the income recognized from the amortization of distribution agreements entered into for its products. The membership/program fees are generated from the Company’s UnCraveRx™ Weight Loss Management Program, which is recognized upon the transfer of promised goods to customers.
The following table presents the Company’s net sales by product category for the three and nine months ended September 30, 2023 and 2022:
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Sales/access fees |
| $ |
|
| $ |
| ||
Project support income |
|
|
|
|
|
| ||
Distribution rights income |
|
|
|
|
|
| ||
Membership/program fees |
|
|
|
|
|
| ||
Net sales |
| $ |
|
| $ |
| ||
| 9 |
| Table of Contents |
|
| Nine Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Sales/access fees |
| $ |
|
| $ |
| ||
Project support income |
|
|
|
|
|
| ||
Distribution rights income |
|
|
|
|
|
| ||
Membership/program fees |
|
|
|
|
|
| ||
Net sales |
| $ |
|
| $ |
| ||
Deferred revenue
The Company licenses proprietary products and protocols to customers under licensing agreements that allow those customers to access the products and protocols in services they provide to their customers during the term of the license agreement. The timing and amount of revenue recognized from license agreements depends upon a variety of factors, including the specific terms of each agreement. Such agreements are reviewed for multiple performance obligations. Performance obligations can include amounts related to initial non-refundable license fees for the use of the Company’s products and protocols and additional royalties on covered services.
The Company granted license and sub-license agreements for various regions or States in the United States allowing the licensee to market, distributes and sell solely in the defined license territory, as defined, the products provided by the Company. The agreements are granted for a defined period or perpetual and are effective as long as annual milestones are achieved.
Terms for payments for licensee agreements vary from full cash payment to defined terms. In cases where license or sub-license fees are uncollected and deferred; the Company nets those uncollected fees with the deferred revenue for balance sheet presentation.
The Company amortizes license fees over the shorter of the economic life of the related contract life or contract terms for each licensee.
On October 1, 2019, the Company launched the UnCraveRx™ Weight Loss Management Program. Customers are charged a membership fee and are requested to pay for three training programs at inception. The payments are recorded as deferred revenue until earned.
The following table presents the changes in deferred revenue, reflected as current and long term liabilities on the Company’s unaudited condensed consolidated balance sheet:
Balance as of December 31, 2022 |
|
|
| |
Short term |
| $ |
| |
Long term |
|
|
| |
Total as of December 31, 2022 |
| $ |
| |
Net sales recognized |
|
| ( | ) |
Balance as of September 30, 2023 |
|
|
| |
Less short term |
|
|
| |
Long term |
| $ |
| |
Deferred Revenue-Grant
The Company recognizes grant revenues in the period during which the related research and development costs are incurred. The timing and amount of revenue recognized from reimbursement for research and development costs depends upon the specific terms for the contracted work. Such costs are reviewed for multiple performance obligations which can include amounts related to contracted work performed or as milestones have been achieved.
| 10 |
| Table of Contents |
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles 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 expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions used in the fair value of other equity and debt instruments.
Accounts Receivable
Accounts receivable are recorded at original invoice amount less an allowance for uncollectible accounts that management believes will be adequate to absorb estimated losses on existing balances. Management estimates the allowance based on collectability of accounts receivable and prior bad debt experience. Accounts receivable balances are written off against the allowance upon management’s determination that such accounts are uncollectible. Recoveries of accounts receivable previously written off are recorded when received. Management believes that credit risks on accounts receivable will not be material to the financial position of the Company or results of operations. The allowance for doubtful accounts was $
Fair Value of Financial Instruments
The Company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the notes to the consolidated financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of cash, accounts receivable, grant receivable, accounts payable and accrued expenses, and notes payable approximate their carrying amounts due to the relatively short maturity of these instruments. The carrying value of lease liability and royalty obligation also approximates fair value since these instruments bear market rates of interest. None of these instruments are held for trading purposes.
See Note 13 and 14 for stock based compensation and other equity instruments.
Segment Information
Accounting Standards Codification subtopic Segment Reporting 280-10 (“ASC 280-10”) establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information related to the Company’s principal operating segment.
Long-Lived Assets
The Company follows a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of the assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. No impairments were recognized for the three and nine months ended September 30, 2023 and 2022.
| 11 |
| Table of Contents |
Intangible Assets
Intangible assets with finite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized, but are tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. $
Software Development Costs
The Company has adopted the provision of ASC 985-20-25, Costs of Software to Be Sold, Leased or Marketed, whereby costs incurred to establish the technological feasibility of a computer software product to be sold, leased or marketed are research and development costs. Research costs are expensed as incurred; costs of producing product masters incurred subsequent to establishing technological feasibility are capitalized; and costs incurred when the product is available for general release to the customers are expensed as incurred. Upgrades and enhancements are capitalized if they result in added functionality which enables the software to perform tasks it was previously incapable of performing.
On July 1, 2021, the Company began development of a proprietary cloud based app that will be marketed and commercialized, for which $
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset’s estimated useful life of
Leases
The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets (“ROU assets”) and short-term and long-term lease liabilities are included on the face of the consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date over the respective lease term in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. For lease agreements with terms less than 12 months, the Company has elected the short-term lease measurement and recognition exemption, and it recognizes such lease payments on a straight-line basis over the lease term.
Net (loss) Per Share
The Company accounts for net loss per share in accordance with Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”), which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS.
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. It excludes the dilutive effects of any potentially issuable common shares. The effect of common stock equivalents is anti-dilutive with respect to losses and therefore basic and dilutive is the same.
| 12 |
| Table of Contents |
Diluted net loss per share is calculated by including any potentially dilutive share issuances in the denominator. The following securities are excluded from the calculation of weighted average diluted shares at September 30, 2023 and 2022, respectively, because their inclusion would have been anti-dilutive.
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Shares underlying options outstanding |
|
|
|
|
|
| ||
Shares underlying warrants outstanding |
|
|
|
|
|
| ||
Convertible preferred stock outstanding |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Advertising
The Company follows the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $
Grant Income
On January 17, 2019, the Company received a Notice of Award from the United States Department of Health and Human Services for a grant from the National Institutes of Health (“NIH”) in support of BICX102 from the National Institute on Drug Abuse. The grant provides for (i) $
Research and development costs
The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $
| 13 |
| Table of Contents |
Stock Based Compensation
Share-based compensation issued to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The Company measures the fair value of the share-based compensation issued to non-employees at the grant date using the stock price observed in the trading market (for stock transactions) or the fair value of the award (for non-stock transactions), which were considered to be more reliably determinable measures of fair value than the value of the services being rendered.
Income Taxes
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is more likely than not that these deferred income tax assets will not be realized.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than
Variable Interest Entity
The Company evaluates all interests in the VIE for consolidation. When the Company’s interests are determined to be variable interests, an assessment is made on whether the Company is deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required to consolidate the VIE. Accounting Standards Codification (“ASC”) 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. Variable interests are considered in making this determination. Where both of these factors are present, the Company is deemed to be the primary beneficiary and the Company consolidates the VIE.
Non-Controlling Interest
A non-controlling interest should be allocated its share of net income or loss, and its respective share of each component of other comprehensive income, in accordance with ASC 810-10-45-20.
Royalty Obligations, net
| 14 |
| Table of Contents |
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 on January 1, 2022. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements. Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach on expected losses to estimate credit losses on certain financial instruments, including trade receivables and available-for-sale debt securities. The new guidance was originally due to become effective for the Company beginning in the first quarter of 2020, however the FASB in November 2019 issued ASU 2019-10 which moved the effective date for smaller reporting companies to the first quarter of 2023. The Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have an impact on the Company’s financial statements.
There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.
NOTE 3 - GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As of September 30, 2023, the Company had cash of $
The Company’s primary source of operating funds since inception has been from proceeds from private placements of convertible and other debt and the sale of common stock. The Company intends to raise additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company, or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company is unable to determine if it will have a material impact to its operations.
During the nine months ended September 30, 2023, the Company entered into three subscription agreements pursuant to which the Company issued an aggregate of
| 15 |
| Table of Contents |
During the nine months ended September 30, 2023, the Company issued one note payable to a third party for a principal of $
During the nine months ended September 30, 2023, the Company received $
During the nine months ended September 30, 2023, the Company received $
On April 3, 2023, the Company entered into an Exchange Agreement (the “Louis 2023 Exchange Agreement”) with Mr. Lucido, pursuant to which Mr. Lucido
On June 1, 2023, the Company entered into an Exchange Agreement (the “Consultant Exchange Agreement”) with one consultant, pursuant to which the consultant agreed to exchange of the unpaid service fees of $
On August 29, 2023, the Company issued an unsecured promissory note payable to Louis C Lucido for $
On September 6, 2023, the Company issued an unsecured promissory note payable to one third party for $
Accordingly, the accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.
| 16 |
| Table of Contents |
NOTE 4 - PREPAID EXPENSES
The Company’s prepaid expenses consisted of the following at September 30, 2023 and December 31, 2022:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Prepaid insurance |
| $ |
|
| $ |
| ||
Prepaid subscription services |
|
|
|
|
|
| ||
Prepaid research and development |
|
|
|
|
|
| ||
Other prepaid expenses |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
NOTE 5 - PROPERTY AND EQUIPMENT
The Company’s property and equipment consisted of the following at September 30, 2023 and December 31, 2022:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Office equipment |
| $ |
|
| $ |
| ||
Computer equipment |
|
|
|
|
|
| ||
Manufacturing equipment |
|
|
|
|
|
| ||
Leasehold improvement |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less accumulated depreciation |
|
| ( | ) |
|
| (117,979 | ) |
|
| $ |
|
| $ |
| ||
Depreciation expense charged to operations amounted to $
NOTE 6 - LEASE
Operating leases
Prior to 2020,
On June 16, 2020, the Company entered into a lease agreement, whereby the Company agreed to lease office space in Costa Mesa, California for a term of
Lease liability is summarized below:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Total lease liability |
| $ |
|
| $ |
| ||
Less: short term portion |
|
|
|
|
|
| ||
Long term portion |
| $ |
|
| $ |
| ||
| 17 |
| Table of Contents |
Maturity analysis under these lease agreements are as follows:
|
| Total |
| |
2023 |
| $ |
| |
2024 |
|
|
| |
2025 |
|
|
| |
Subtotal |
|
|
| |
Less: Present value discount |
|
| ( | ) |
Lease liability |
| $ |
| |
Lease expense for the three and nine months ended September 30, 2023 and 2022 was comprised of the following:
|
| Three Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Operating lease expense |
| $ |
|
| $ |
| ||
|
| $ |
|
| $ |
| ||
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Operating lease expense |
| $ |
|
| $ |
| ||
|
| $ |
|
| $ |
| ||
During the nine months ended September 30, 2023 and 2022, the Company paid $
Weighted-average remaining lease term and discount rate for operating leases are as follows:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Weighted-average remaining lease term |
|
|
|
|
|
| ||
NOTE 7 - INTELLECTUAL PROPERTY/ LICENSING RIGHTS
On October 12, 2018 the Company’s majority owned subsidiary, BioCorRx Pharmaceuticals Inc. acquired six patent families for sustained delivery platforms for the local delivery of biologic and small molecule drugs for an aggregate purchase price of $
The future amortization of the patents are as follows:
Year |
| Amount |
| |
2023 |
|
|
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 and after |
|
|
| |
|
| $ |
| |
| 18 |
| Table of Contents |
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following as of September 30, 2023 and December 31, 2022:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Accounts payable |
| $ |
|
| $ |
| ||
Interest payable on notes payable |
|
|
|
|
|
| ||
Interest payable on notes payable, related parties |
|
|
|
|
|
| ||
Deferred insurance |
|
|
|
|
|
| ||
Accrual of loss on contingency |
|
|
|
|
|
| ||
Interest payable on EIDL loan |
|
|
|
|
|
| ||
Accrued expenses |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
NOTE 9 - NOTES PAYABLE
As of September 30, 2023 and December 31, 2022, the Company had an advance from a third party. The advance bears no interest and is due on demand. The balance outstanding as of September 30, 2023 and December 31, 2022 is $
On September 9, 2021, the Company issued an unsecured promissory note payable to one third party for $
On October 6, 2022, the Company issued an unsecured promissory note payable to a third party for $
On January 25, 2023, the Company issued an unsecured promissory note payable to a third party for $
| 19 |
| Table of Contents |
On September 6, 2023, the Company issued an unsecured promissory note payable to one third party for $
The interest expense during the three months ended September 30, 2023 and 2022 were $
The outstanding notes payables as of September 30, 2023 and December 31, 2022 were summarized as below:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Advances from a third party |
| $ |
|
| $ |
| ||
Promissory note payable dated September 9, 2021 |
|
|
|
|
|
| ||
Promissory note payable dated October 6, 2022, net of debt discount of $430 and $23,878, respectively |
|
|
|
|
|
| ||
Promissory note payable dated January 25, 2023, net of debt discount of $1,907 and $0, respectively |
|
|
|
|
|
| ||
Promissory note payable dated September 6, 2023, net of debt discount of $110,905 and $0, respectively |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
NOTE 10 - NOTES PAYABLE-RELATED PARTIES
As of September 30, 2023 and December 31, 2022, the Company had advances from Kent Emry (Chairman of the Company). The balance outstanding as of September 30, 2023 and December 31, 2022 was $
On January 22, 2013, the Company issued an unsecured promissory note payable to Kent Emry (Chairman of the Board) for $
On September 9, 2021, the Company issued an unsecured promissory note payable to Kent Emry for $
| 20 |
| Table of Contents |
On September 20, 2022, the Company received $
On November 1, 2022, the Company issued an unsecured promissory note payable to Louis C Lucido for $
On December 8, 2022, the Company received $
On March 16, 2023, the Company received $
During the nine months ended September 30, 2023, the Company received $
On August 29, 2023, the Company issued an unsecured promissory note payable to Louis C Lucido for $
The interest expense – related parties during the three months ended September 30, 2023 and 2022 were $
| 21 |
| Table of Contents |
The outstanding notes payables to related parties as of September 30, 2023 and December 31, 2022 were summarized as below:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Advances from Kent Emry |
| $ |
|
| $ |
| ||
Advances from Louis C Lucido |
|
|
|
|
|
| ||
Advances from Lourdes Felix |
|
|
|
|
|
| ||
Promissory notes payables to Kent Emry |
|
|
|
|
|
| ||
Promissory note payable to Louis C Lucido, net of debt discount of $106,802 and $49,473, respectively |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
NOTE 11 - ECONOMIC INJURY DISASTER LOAN
On July 17, 2020, the Company executed the standard loan documents required for securing a loan from SBA under its Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Pursuant to the loan agreement, the principal amount of the Economic Injury Disaster Loan (“EIDL”) is $
In accordance with the terms of the note: (i) interest accrues at the rate of
On April 28, 2020, the Company received $
The interest expense during the three months ended September 30, 2023 and 2022 was $
During the nine months ended September 30, 2023 and 2022, the Company made interest payment of $
The future principal payments are as follows:
Year |
| Amount |
| |
2023 |
| $ |
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 and after |
|
|
| |
|
| $ |
| |
| 22 |
| Table of Contents |
NOTE 12 - ROYALTY OBLIGATIONS, NET
In March 2019, the Company entered into two Subscription and Royalty Agreements (the “Subscription and Royalty Agreements”). One was with Louis and Carolyn Lucido CRT LLC, managed by Mr. Lucido, a member of the Company’s Board of Directors and the other one was with the J and R Galligan Revocable Trust, managed by Mr. Galligan, a holder of between
The Company accounted for this transaction as debt in accordance with ASC 470-10-25 and derived a debt discount, which is amortized using the straight line method over the expected life of the arrangement, which is
During the three months ended September 30, 2023 and 2022, the Company amortized $
NOTE 13 - STOCKHOLDERS’ EQUITY/(DEFICIT)
Convertible Preferred stock
The Company is authorized to issue
As of September 30, 2023 and December 31, 2022,
As of September 30, 2023 and December 31, 2022,
Common stock
Nine months ended September 30, 2022
During the nine months ended September 30, 2022, the Company issued an aggregate of
During the nine months ended September 30, 2022, the Company issued an aggregate of
| 23 |
| Table of Contents |
During the nine months ended September 30, 2022, the Company issued an aggregate of
During the nine months ended September 30, 2022, the Company issued an aggregate of
During the nine months ended September 30, 2022, the Company issued
Nine months ended September 30, 2023
During the nine months ended September 30, 2023, the Company issued an aggregate of
During the nine months ended September 30, 2023, the Company issued an aggregate of
During the nine months ended September 30, 2023, the Company issued
During the nine months ended September 30, 2023, the Company issued
As of September 30, 2023 and December 31, 2022, the Company had
NOTE 14 - STOCK OPTIONS AND WARRANTS
Options
On November 13, 2014, our Board of Directors authorized and approved the adoption of the Plan effective November 13, 2014 (2014 Stock Option Plan) under which an aggregate of
On June 15, 2016, our Board of Directors authorized and approved the adoption of the Equity Incentive Plan effective June 15, 2016 (2016 Equity Incentive Plan) under which an aggregate of
| 24 |
| Table of Contents |
On May 15, 2018, the Board of Directors approved and adopted the BioCorRx Inc. 2018 Equity Incentive Plan (2018 Stock Option Plan) under which an aggregate of
On April 22, 2022, the Board of Directors approved and adopted the BioCorRx Inc. 2022 Equity Incentive Plan (2022 Stock Option Plan) under which an aggregate of
During the nine months ended September 30, 2023, the Company approved the grant of
Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from using the Company’s historical stock prices. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options.
In applying the Black-Scholes option pricing model, the Company used the following assumptions in 2023:
Risk-free interest rate |
| % | ||
Expected term (years) |
|
|
| |
Expected volatility |
| % | ||
Expected dividends |
|
|
| |
The following table summarizes the stock option activity for the nine months ended September 30, 2023:
|
|
|
|
|
|
|
| Weighted- |
|
|
|
| ||||
|
|
|
|
| Weighted- |
|
| Average |
|
|
|
| ||||
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| ||||
|
|
|
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
|
| Shares |
|
| Price |
|
| Term |
|
| Value |
| ||||
Outstanding at December 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Expired |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| |
Grants |
|
|
|
|
|
|
|
|
|
|
| - |
| |||
Outstanding at September 30, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Exercisable at September 30, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $
The following table presents information related to stock options at September 30, 2023:
Options Outstanding |
|
| Options Exercisable |
| ||||||||||||
|
|
|
|
| Weighted |
|
|
|
|
| Weighted |
| ||||
|
|
|
|
| Average |
|
| Exercisable |
|
| Average |
| ||||
Exercise |
| Number of |
|
| Remaining Life |
|
| Number of |
|
| Remaining Life |
| ||||
Price |
| Options |
|
| In Years |
|
| Options |
|
| In Years |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
$ 0.01-2.50 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
2.51-5.00 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
5.01 and up |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| 25 |
| Table of Contents |
The stock-based compensation expense related to option grants were $
As of September 30, 2023, stock-based compensation related to options of $
Warrants
On May 5, 2022, the Company entered into a Subscription Agreement (the “DeCsepel 2022 Subscription Agreement”) with David DeCsepel, a consultant of the Company. Pursuant to the DeCsepel 2022 Subscription Agreement, Mr. DeCsepel purchased shares of the Company’s common stock, par value
On June 8, 2022, the Company issued a warrant that entitles a third party to purchase
On June 8, 2022, the Company issued a warrant that entitles Kent Emry (Chairman of the Company) to purchase
On March 29, 2023, pursuant to the Lucido 2023 Subscription Agreement, the Company issued a warrant that entitles the holder to purchase 171,296 common stock at an exercise price of $
On March 29, 2023, pursuant to the Galligan 2023 Subscription Agreement, the Company issued a warrant that entitles the holder to purchase
On April 4, 2023, the Company entered into a Subscription Agreement (the “2023 Q2 Subscription Agreement”) with a third party. Pursuant to the 2023 Q2 Subscription Agreement, the third party purchased shares of the Company’s common stock, par value
The fair value of warrants issued due to loan default was estimated using the Black-Scholes option model with a volatility figure derived from using the Company’s historical stock prices. The Company accounts for the expected life of warrants based on the contractual life of warrants. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the warrants.
| 26 |
| Table of Contents |
On August 29, 2023, the Company issued an unsecured promissory note payable to Louis C Lucido for $
On September 6, 2023, the Company issued an unsecured promissory note payable to one third party for $
In applying the Black-Scholes option pricing model, the Company used the following assumptions in 2023:
Risk-free interest rate |
| % | ||
Expected term (years) |
|
|
| |
Expected volatility |
| % | ||
Expected dividends |
|
|
| |
The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock:
Warrants Outstanding |
|
| Warrants Exercisable |
| ||||||||||||||||||
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
|
| Weighted |
| ||||||
Weighted |
|
|
|
|
| Average |
|
| Weighted |
|
|
|
|
| Average |
| ||||||
Average |
|
|
|
|
| Remaining |
|
| Average |
|
|
|
|
| Remaining |
| ||||||
Exercise |
|
| Number |
|
| Contractual |
|
| Exercise |
|
| Number |
|
| Contractual |
| ||||||
Price |
|
| Outstanding |
|
| Life (Years) |
|
| Price |
|
| Exercisable |
|
| Life (Years) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
| ||||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
| ||||||
The following table summarizes the warrant activity for the nine months ended September 30, 2023:
|
|
|
|
| Weighted |
| ||
|
|
|
|
| Average |
| ||
|
|
|
|
| Exercise |
| ||
|
| Number of |
|
| Price Per |
| ||
|
| Shares |
|
| Share |
| ||
Outstanding at December 31, 2022 |
|
|
|
| $ |
| ||
Grants |
|
|
|
|
|
| ||
Outstanding at September 30, 2023 |
|
|
|
| $ |
| ||
Exercisable at September 30, 2023 |
|
|
|
| $ |
| ||
| 27 |
| Table of Contents |
NOTE 15 - RELATED PARTY TRANSACTIONS
On July 28, 2016, the Company formed BioCorRx Pharmaceuticals, Inc. for the purpose of developing certain business lines. In connection with the formation, the newly formed sub issued 24.2% ownership to current or former officers of the Company, with the Company retaining
On September 22, 2021, BioCorRx Inc. and BioCorRx Pharmaceuticals, Inc. entered into a Inter-Company License Agreement whereby the Company granted to BioCorRx Pharmaceuticals an exclusive, perpetual and sub-licensable license to use all patented or unpatented inventions, discoveries and other intellectual property owned by the Company related to BICX101, BICX102, BICX104 and any other naltrexone pellets (implants) being developed or that will be developed for FDA approval and commercialization in support of products in the fields of substance use disorder, weight loss and other indications identified including but not limited to pain management, obsessive compulsive disorders, and other addictive behaviors.
The licensing fee is payable by BioCorRx Pharmaceuticals starting in the calendar year of the first commercial sale of licensed products and is the percentage of gross sales (less certain amounts) equal to the Company’s ownership interest in BioCorRx Pharmaceuticals. In addition, the Company will invoice BioCorRx Pharmaceuticals for certain management, administrative and corporate services, and facilities and equipment that the Company will provide to BioCorRx Pharmaceuticals. Expenses will be allocated based on actual utilization or appropriate and reasonable methods for the relevant expense.
On December 10, 2015, the Company entered into a royalty agreement with Alpine Creek Capital Partners LLC (“Alpine Creek”). The Company is in the business of selling a distinct implementation of the BioCorRx Recovery Program, a two-tiered comprehensive MAT program, which includes a counseling program, coupled with its proprietary Naltrexone Implant (the “Treatment”). On or about January 1, 2021, Mr. Galligan, acquired from Alpine Creek the rights to the subscription and royalty agreement by and between the Company and Alpine Creek.
On January 3, 2022, the Company entered into a Subscription Agreement (the “Lucido 2022 Subscription Agreement”) with Louis C Lucido and Carolyn M. Lucido, or their Successors, as Trustee of the Lucido Family Trust, Dated May 23, 2017, managed by Mr. Lucido, a member of the Company’s Board of Directors. Pursuant to the Lucido 2022 Subscription Agreement, Mr. Lucido purchased shares of the Company’s common stock, par value $
On January 3, 2022, the Company entered into a Subscription Agreement (the “Galligan 2022 Subscription Agreement”) with The J and R Galligan Revocable Trust, managed by Mr. Galligan, a holder of between
On March 29, 2023, the Company entered into a Subscription Agreement (the “Lucido 2023 Subscription Agreement”) with Louis C Lucido and Carolyn M. Lucido, or their Successors, as Trustee of the Lucido Family Trust, Dated May 23, 2017, managed by Mr. Lucido, a member of the Company’s Board of Directors. Pursuant to the Lucido 2023 Subscription Agreement, Mr. Lucido purchased shares of the Company’s common stock, par value $
On March 29, 2023, the Company entered into a Subscription Agreement (the “Galligan 2023 Subscription Agreement”) with The J and R Galligan Revocable Trust, managed by Mr. Galligan, a holder of between
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As of September 30, 2023 and December 31, 2022, the Company’s related party payable was $
During the nine months ended September 30, 2023 and 2022, the Company issued
NOTE 16 - CONCENTRATIONS
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and trade receivables. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.
The Company’s revenues earned from sale of products and services for the three months ended September 30, 2023 included
The Company’s revenues earned from sale of products and services for the three months ended September 30, 2022 included
The Company’s revenues earned from sale of products and services for the nine months ended September 30, 2023 included
The Company’s revenues earned from sale of products and services for the nine months ended September 30, 2022 included
At September 30, 2023, one customer accounted for
NOTE 17 - NON-CONTROLLING INTEREST
On July 28, 2016, the Company formed BioCorRx Pharmaceuticals, Inc., a Nevada Corporation, for the purpose of developing certain business lines. In connection with the formation, the, the newly formed sub issued
On October 31, 2020, the Company entered into a written management services agreement with Joseph DeSanto MD, Inc. (“Medical Corporation”) under which the Company provides management and other administrative services to the Medical Corporation. These services include billing, collection of accounts receivable, accounting, management and human resource functions. Pursuant to the management services agreement,
A reconciliation of the BioCorRx Pharmaceuticals, Inc. and Joseph DeSanto MD, Inc. non-controlling loss attributable to the Company:
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Net loss attributable to the non-controlling interest for the three months ended September 30, 2023:
|
| BioCorRx Pharmaceuticals, Inc. |
|
| Joseph DeSanto MD |
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Average Non-controlling interest percentage of profit/losses |
|
| % |
|
| % | ||
Net loss attributable to the non-controlling interest |
| $ | ( | ) |
| $ | ( | ) |
Net loss attributable to the non-controlling interest for the three months ended September 30, 2022:
|
| BioCorRx Pharmaceuticals, Inc. |
| |
Net loss |
| $ | ( | ) |
Average Non-controlling interest percentage of profit/losses |
|
| % | |
Net loss attributable to the non-controlling interest |
| $ | ( | ) |
Net loss attributable to the non-controlling interest for the nine months ended September 30, 2023:
|
| BioCorRx Pharmaceuticals, Inc. |
|
| Joseph DeSanto MD |
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Average Non-controlling interest percentage of profit/losses |
|
| % |
|
| % | ||
Net loss attributable to the non-controlling interest |
| $ | ( | ) |
| $ | ( | ) |
Net loss attributable to the non-controlling interest for the nine months ended September 30, 2022:
|
| BioCorRx Pharmaceuticals, Inc. |
| |
Net loss |
| $ | ( | ) |
Average Non-controlling interest percentage of profit/losses |
|
| % | |
Net loss attributable to the non-controlling interest |
| $ | ( | ) |
The following table summarizes the changes in non-controlling interest for the nine months ended September 30, 2023:
Balance, December 31, 2022 |
| $ | ( | ) |
Net loss attributable to the non-controlling interest |
|
| ( | ) |
Balance, September 30, 2023 |
| $ | ( | ) |
The following table summarizes the changes in non-controlling interest for the nine months ended September 30, 2022:
Balance, December 31, 2021 |
| $ | ( | ) |
Net loss attributable to the non-controlling interest |
|
| ( | ) |
Balance, September 30, 2022 |
| $ | ( | ) |
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NOTE 18 - COMMITMENTS AND CONTINGENCIES
Royalty agreement
Alpine Creek Capital Partners LLC
On December 10, 2015, the Company entered into a royalty agreement with Alpine Creek Capital Partners LLC (“Alpine Creek”). The Company is in the business of selling a distinct implementation of the BioCorRx Recovery Program, a two-tiered comprehensive MAT program, which includes a counseling program, coupled with its proprietary Naltrexone Implant (the “Treatment”).
In consideration for the payment, with the exception of treatments conducted in certain territories, the Company will pay Alpine Creek fifty percent (
On any other proprietary implant distribution, that excludes the “treatment”, for alcohol and opioid addiction and for which no other payment is due, the
BICX Holding Company LLC
Effective September 30, 2019, the Company entered into a Conversion Agreement (the “Conversion Agreement”) with BICX Holding Company LLC (“BICX”), an entity controlled by Alpine Creek, pursuant to which the parties agreed to the conversion (the “Conversion”) of the Senior Secured Convertible Promissory Note in the principal amount of $
In accordance with the Conversion Agreement, the Company cannot enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or common stock equivalents at an issuance price below $
Charles River Laboratories, Inc.
On May 24, 2019, the Company entered into a Master Services Agreement (the “MSA”) with Charles River Laboratories, Inc. (“Charles River”). Pursuant to the MSA, Charles River will be conducting studies with regard to BICX102. Studies will be conducted pursuant to Statements of Work entered into by the Company and Charles River.
On May 30, 2019, the Company and Charles River entered into two separate Statements of Work pursuant to which Charles River is conducting a total of six studies. The Company will pay Charles River the total amended consideration of $
The remaining commitment to Charles River is $
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Orange County Research Center
On January 11, 2022, the Company entered into a Master Clinical Trial Agreement (the “MCTA”) with Memorial Research Medical Clinic dba Orange County Research Center (the “OCRC”). Researchers at the OCRC will perform Phase 1 clinical trial with BICX104. The total consideration the Company will pay MCTA for the Phase 1 clinical trial is $
Pursuant to a Task Order entered into in February 2022 the first payment owed to the OCRC equaling approximately $
The MCTA will terminate upon either party giving 30 days’ written notice (provided, in the case of the OCRC, it has performed all Task Orders or they have been terminated by the Company for good cause). The Company can suspend a clinical trial for any reason and the OCRC can suspend a clinical trial if it deems, using good medical judgment, it is appropriate to do so.
The total consideration paid to OCRC as of September 30, 2023 is $
Agreements
As of September 30, 2023, one 24-month consulting agreement for services which the consultant shall receive a one-time grant of
As of September 30, 2023, the Company has entered into seven scientific advisory board agreements. In compensation for services, each advisory board member shall receive common stock equivalent to $
The Company initiated litigation in 2019 based on a claim that Pellecome and Dr. Orbeck utilized the Company’s confidential information to advance their own weight loss product.
The Company dismissed this litigation without prejudice in July 2021.
On March 30, 2022, the court entered judgment in favor of Pellecome as an individual defendant whereby the Company was ordered to pay Pellecome total costs and attorneys’ fees of $
The Company has not yet paid any amount to Pellecome. On May 27, 2022, the Company filed a notice of appeal with California Superior Court for Orange County regarding the March 30, 2022 judgment entered in favor of Pellecome. On February 2, 2023, the Company filed a motion requesting the California Superior Court for Orange County reverse and remand its prior ruling, including reversing the granting of Pellecome $
NOTE 19 - SUBSEQUENT EVENTS
As of November 13, 2023 the Company issued an aggregate of
On October 30, 2023, the Company’s board of directors approved a request from Brady Granier for a paid administrative leave of absence for the period between October 30, 2023 and January 30, 2024. Mr. Granier will remain a member of the Board during this period. Lourdes Felix assumed Mr. Granier’s responsibilities during his absence.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management’s current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of its management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to us could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that its assumptions are based upon reasonable data derived from and known about our business and operations and the business and operations of the Company. No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions. Factors that could cause differences include, but are not limited to, expected market demand for the Company’s services, fluctuations in pricing for materials, and competition.
Business Overview
BioCorRx Inc., through its subsidiaries, develops and provides innovative treatment programs for substance abuse and related disorders. The BioCorRx® Recovery Program is a non-addictive, medication-assisted treatment (MAT) program for substance abuse that includes peer recovery support. The UnCraveRx™ Weight Loss Management Program is a medically assisted weight management program that is combined with a virtual platform application. The Company is also engaged in the research and development of sustained release naltrexone products for the treatment of addiction and other possible disorders. Specifically, the company is developing its product candidate (BICX101) a sustained release, injectable naltrexone for the treatment of opioid abuse and alcoholism. The company is also developing an implantable naltrexone treatment (BICX104) a long-acting naltrexone implant that can last several months for the treatment of opioid dependence and alcohol use disorders with the goal of future regulatory approval with the Food and Drug Administration.
The BioCorRx® Recovery Program is a comprehensive addiction program which includes peer support and Cognitive Behavioral Therapy (CBT) modules (typically completed in 16 sessions on average but not limited to), coupled with a naltrexone implant. CBT is an evidence based method that can be used to change thoughts, feelings, behaviors and improve overall life satisfaction. The implant is specifically compounded with a prescription from a medical doctor for each individual and is designed to release naltrexone into the body over multiple months. The naltrexone implant means a single administration, long acting naltrexone pellet(s) that consists of a naltrexone formulation in a biodegradable form that is suitable for subcutaneous implantation in a particular patient.
BioCorRx is not a licensed health care provider and does not provide health care services to patients. BioCorRx does not operate substance abuse clinics. BioCorRx makes the BioCorRx Recovery Program and UnCraveRx® Weight Loss Management Program available to health care providers to utilize when the health care provider determines it is medically appropriate and indicated for his or her patients. Any physician or medical professional is solely responsible for treatment options prescribed or recommended to his or her patients. At all times, such providers retain complete and exclusive authority, responsibility, supervision and control over their medical practice, their patients, the treatment that their patients receive and any decision to prescribe the implant to any of the provider’s patients.
BioCorRx does not condition its license to health care providers accessing the implant on their making available the Counseling Program to the providers’ patients although BioCorRx certainly encourages that providers do so.
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BioCorRx has issued several license and distribution agreements to several unrelated third parties involving the establishment of alcoholism and opioid addiction rehabilitation and treatment centers and creating certain addiction rehabilitation programs. There are 15 licensed providers throughout the United States that offer the BioCorRx Recovery Program and 12 providers throughout the United States that offer the UnCraveRx® Weight Loss Management Program. The company’s current focus will continue on wider distribution across the United States, branding of the BioCorRx Recovery Program and acquisition of healthcare related products and services. The Company is committed to continuing to provide excellent rehabilitation products and related services to healthcare providers nationwide as it expands the distribution of the BioCorRx Recovery Program and UnCraveRx® Weight Loss Management Program to a network of independent licensed clinics and licensed healthcare professionals.
The Company’s subsidiary, BioCorRx Pharmaceuticals, is focused on acquiring and the development of products for the treatment of addiction and other possible disorders. Specifically, the company is developing injectable and implantable naltrexone with the goal of future regulatory approval with the Food and Drug Administration. The Company’s pipeline includes BICX101 for the treatment of opioid addiction and alcoholism as well as BICX104 for the same indications.
In August 2017, the Company announced that it had decided to seek U.S. Food and Drug Administration (the “FDA”) approval on BICX102 in advance of BICX101. Product candidate BICX102 is a long-acting naltrexone implant that can last several months being developed for opioid dependence and alcohol use disorders. The pre-IND meeting date for BICX102 took place on January 24, 2018. On February 12, 2018, the Company announced that the FDA deemed the 505(b)(2) pathway as an acceptable route for approval for BICX102; the Company plans to apply for dual indications, both opioid use disorder and alcohol use disorder, within the same application. A grant application was submitted to the National Institutes of Health on May 14, 2018 for funding the development and study plans for BICX102. On January 17, 2019, the Company received a Notice of Award from the United States Department of Health and Human Services for a grant from the National Institutes of Health (“NIH”) in support of BICX102 from the National Institute on Drug Abuse. The grant provided for (i) $2,842,430 in funding during the first year and (ii) $2,831,838 during the second year subject to the terms and conditions specified in the grant, including satisfactory progress of project and the availability of funds. In January 2020, the Company was awarded a second year of funding from the National Institute on Drug Abuse (“NIDA”) to support the development of a 3-month implantable depot pellet of naltrexone for the treatment of Opioid Use Disorder, which the Company refers to as BICX102. The grant provided for $2,831,838 during the second year subject to the terms and conditions specified in the grant, including satisfactory progress of project and availability of funds. On August 27, 2021, the Company received a Notice of Award from the United States Department of Health and Human Services for a grant from National Institute on Drug Abuse. The grant provides for $3,453,367 in funding during the third year subject to the terms and conditions specified in the grant, including satisfactory progress of project and the availability of funds. On March 31, 2022, the Company received a Notice of Award from the United States Department of Health and Human Services for a grant from National Institute on Drug Abuse. The grant provides for $99,431 in additional funding during the third year subject to the terms and conditions specified in the grant, including satisfactory progress of project and the availability of funds. Grant receivables were $4,991 and $122,652 as of September 30, 2023 and December 31, 2022, respectively. Deferred revenues related to the grant were $0 as of September 30, 2023 and December 31, 2022. $300,985 and $390,857 were recorded as grant income during the three months ended September 30, 2023 and 2022, respectively. $790,140 and $1,250,231 were recorded as grant income during the nine months ended September 30, 2023 and 2022, respectively.
The UnCraveRx® Weight Loss Management Program is a comprehensive 3-month medically assisted weight management program that helps to reduce food cravings combined with on-demand virtual lifestyle support, fitness and nutrition.
If determined medically appropriate by a patient’s treating physician and under his/her medical supervision, an anti-craving medication may be prescribed to help reduce food cravings. The benefits of using the anti-craving time released mediation is that it may aid in compliance. BioCorRx® does not sell, manufacture, or compound any drugs or pharmaceuticals for the program.
Training is required to assist the treating physician in making the best medical decision regarding the use of the anti-craving medication and determine whether the program is right for the patient.
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Recent Developments
On August 29, 2023, the Company issued an unsecured promissory note payable to Louis C Lucido for $150,000 with principal and interest due August 29, 2024, with a stated interest rate of 8% per annum. The promissory note, together with all accrued interest, shall be converted into common shares at a conversion price of $2.00 per share on or before August 29, 2024. The balance outstanding as of September 30, 2023 was $150,000. The interest expense during the three months ended September 30, 2023 was $1,052. The interest expense during the nine months ended September 30, 2023 was $1,052. In connection with the issuance of the promissory note, the Company issued the warrant that entitles Mr. Lucido to purchase 150,000 common shares. The warrant shall have a term of three years with an exercise price of $2.00 and shall be equitably adjusted to offset the effect of any stock splits and similar events. The Company allocated the proceeds based on the relative fair value of the debt and the warrants, resulting in the recognition of $87,724 of debt discount on such promissory note. As additional consideration for the debt, the Company issued 18,000 shares of common stock valued at $29,340, which was also recognized as debt discount. During the three months ended September 30, 2023, the Company amortized $10,262 of debt discount as interest expense. During the nine months ended September 30, 2023, the Company amortized $10,262 of debt discount as interest expense.
On September 6, 2023, the Company issued an unsecured promissory note payable to one third party for $150,000 with principal and interest due September 6, 2024, with a stated interest rate of 8% per annum. The third party has the option to select the repayment in cash or in stock of the Company at $2.00 per share. The balance outstanding as of September 30, 2023 was $150,000. The interest expense during the three months ended September 30, 2023 was $822. The interest expense during the nine months ended September 30, 2023 was $822. If the Company fails to make any payment due under the terms of the promissory note, the interest rate shall increase to 15% per annum. In connection with the issuance of the promissory note, the Company issued the warrant that entitles the third party to purchase 150,000 common shares. The warrant shall have a term of three years with an exercise price of $2.00 and shall be equitably adjusted to offset the effect of any stock splits and similar events. The Company allocated the proceeds based on the relative fair value of the debt and the warrants, resulting in the recognition of $88,820 of debt discount on such promissory note. As additional consideration for the debt, the Company issued 18,000 shares of common stock valued at $30,240, which was also recognized as debt discount. During the three months ended September 30, 2023, the Company amortized $8,155 of debt discount as interest expense. During the nine months ended September 30, 2023, the Company amortized $8,155 of debt discount as interest expense.
On October 30, 2023, the Company’s Board of Directors approved Brady Granier’s request for a paid administrative leave of absence from his position as the President of the Company for the period between October 30, 2023 and January 30, 2024. Mr. Granier will remain a member of the the Company’s Board of Directors during this period.
Effective as of October 30, 2023, Lourdes Felix, the Company’s Chief Executive Officer and Chief Financial Officer, assumed Mr. Granier’s responsibilities during his paid administrative leave of absence. Ms. Felix’s compensation remains unchanged.
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Results of Operations
Three Months ended September 30, 2023 Compared with Three Months ended September 30, 2022
|
| 2023 |
|
| 2022 |
| ||
Revenues, net |
| $ | 10,145 |
|
| $ | 94,441 |
|
Total operating expenses |
|
| (972,013 | ) |
|
| (1,123,569 | ) |
Interest expense - related parties |
|
| (169,582 | ) |
|
| (239,487 | ) |
Interest expense, net |
|
| (36,883 | ) |
|
| (13,624 | ) |
Loss on settlement of debt |
|
| - |
|
|
| (198,939 | ) |
Grant income |
|
| 300,985 |
|
|
| 390,857 |
|
Other miscellaneous income |
|
| - |
|
|
| 139,315 |
|
Net loss |
|
| (867,348 | ) |
|
| (951,006 | ) |
Non-controlling interest |
|
| 1,068 |
|
|
| 1,888 |
|
Net loss attributable to BioCorRx Inc. |
| $ | (866,280 | ) |
| $ | (949,118 | ) |
Revenues
Total net revenues for the three months ended September 30, 2023 were $10,145 compared with $94,441 for the three months ended September 30, 2022, reflecting a decrease of 89.3%. Sales/access fees for the three months ended September 30, 2023 and 2022 were $390 and $2,250, respectively, reflecting a decrease of $1,860. The primary reason for the decrease in the third quarter of 2023 is directly related to the decreased number of patients treated at licensed clinics during the third quarter of 2023. Project support income for the three months ended September 30, 2023 and 2022 were $0 and $79,263, respectively, reflecting a decrease of $79,263. The project support income is generated from administrative support to Biotechnology research customers, which is recognized upon the transfer of promised goods to customers. The primary reason for the decrease in 2023 is directly related to a decrease in project support income. Distribution rights income for the three months ended September 30, 2023 and 2022 were $8,817 and $11,129, respectively, reflecting a decrease of $2,312. The primary reason for the decrease in distribution rights income was due to the deferred revenues from certain licenses were fully amortized. Membership/program fees for the three months ended September 30, 2023 and 2022 were $938 and $1,799, respectively. The primary reason for the decrease in 2023 was due to the decrease in number of customers of the Company’s UnCraveRx™ Weight Loss Management Program.
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Total Operating Expenses
Total operating expenses for the three months ended September 30, 2023 and 2022 were $972,013 and $1,123,569, respectively, reflecting a decrease of $151,556.
The reasons for the decrease in 2023 are primarily due to (i) a decrease of $80,227 in advertising expenses from $106,073 for the three months ended September 30, 2022 to $25,846 for the three months ended September 30, 2023, (ii) a decrease of $55,591 in research and development expense, from $342,553 for the three months ended September 30, 2022 to $286,962 for the three months ended September 30, 2023, and (iii) a decrease of $32,878 in payroll expenses due to less employees employed in 2023, from $229,388 for the three months ended September 30, 2022 to $196,510 for the three months ended September 30, 2023.
Interest Expense - Related Parties
Interest expense - related parties for the three months ended September 30, 2023 and 2022 were $169,582 and $239,487, respectively. The decrease of interest expense is mainly due to the amortization of the debt discount on one promissory note issued during 2022. In connection with issuance of such promissory note, the Company issued 33,000 shares as additional consideration for the issuance of a promissory note. The 33,000 shares of common stock were valued at an aggregate value of $76,890, which was recognized as debt discount and fully amortized during the three months ended September 30, 2022.
Interest Expense
Interest expense for the three months ended September 30, 2023 and 2022 were $36,883 and $13,624, respectively. The increase of interest expense is mainly due to the amortization of the debt discount on the promissory notes issued during the fourth quarter of 2022, the first quarter of 2023, and the third quarter of 2023.
Loss on settlement of debt
Loss on settlement of debt for the three months ended September 30, 2023 and 2022 were $0 and $198,939, respectively. During the three months ended September 30, 2022, the Company issued an aggregate of 485,220 shares of its common stock in connection with conversion of promissory notes and accounts payable. The 485,220 shares of common stock were valued at an aggregate value of $1,062,632, resulting in $198,939 of loss on settlement of debt recognized for the difference between the fair value of common stock issued and the carrying value of the debt.
Grant Income
During the three months ended September 30, 2023, the Company recognized grant income of $300,985 as compared to $390,857 for the comparable period last year. The larger grant income in 2022 was due on May 7, 2021, the FDA cleared the Company’s Investigational New Drug Application (IND) application for BICX104. On August 27, 2021, the Company received a Notice of Award from the United States Department of Health and Human Services for a grant from National Institute on Drug Abuse. The grant provides for $3,453,367 in funding during the third year subject to the terms and conditions specified in the grant, including satisfactory progress of project and the availability of funds. The funds are available to reimburse the Company for certain incurred direct costs and 17% of indirect costs. Indirect costs are costs that are not directly related to the project itself but are required to conduct the research and are critical to the success of the project and organization as a whole.
Other Miscellaneous Income
Other miscellaneous income for the three months ended September 30, 2023 and 2022 were $0 and $139,315, respectively. The other miscellaneous income during the three months ended September 30, 2022 was mainly generated by the forgiveness of the PPP loan on August 22, 2022.
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Net Loss
For the three months ended September 30, 2023, the Company experienced a net loss of $867,348 compared with a net loss of $951,006 for the three months ended September 30, 2022. The decrease in net loss is primarily due to the decreased operating expenses, net the decreased revenue.
Nine Months ended September 30, 2023 Compared with Nine Months ended September 30, 2022
|
| 2023 |
|
| 2022 |
| ||
Revenues, net |
| $ | 70,222 |
|
| $ | 130,961 |
|
Total operating expenses |
|
| (3,035,306 | ) |
|
| (3,643,119 | ) |
Interest expense - related parties |
|
| (501,787 | ) |
|
| (765,105 | ) |
Interest expense, net |
|
| (90,412 | ) |
|
| (127,226 | ) |
Loss on settlement of debt |
|
| (34,338 | ) |
|
| (198,939 | ) |
Grant income |
|
| 790,140 |
|
|
| 1,250,231 |
|
Other miscellaneous income |
|
| - |
|
|
| 139,381 |
|
Net loss |
|
| (2,801,481 | ) |
|
| (3,213,816 | ) |
Non-controlling interest |
|
| 3,108 |
|
|
| 4,195 |
|
Net loss attributable to BioCorRx Inc. |
| $ | (2,798,373 | ) |
| $ | (3,209,621 | ) |
Revenues
Total net revenues for the nine months ended September 30, 2023 were $70,222 compared with $130,961 for the nine months ended September 30, 2022, reflecting a decrease of 46.4%. Sales/access fees for the nine months ended September 30, 2023 and 2022 were $10,645 and $12,810, respectively, reflecting a decrease of $2,165. The primary reason for the decrease in 2023 is directly related to the decreased number of patients treated at licensed clinics during 2023. Project support income for the nine months ended September 30, 2023 and 2022 were $25,817 and $79,263, respectively, reflecting a decrease of $53,446. The project support income is generated from administrative support to Biotechnology research customers, which is recognized upon the transfer of promised goods to customers. The primary reason for the decrease in 2023 is directly related to a decrease in project support income. Distribution rights income for the nine months ended September 30, 2023 and 2022 were $26,164 and $28,476, respectively, reflecting a decrease of $2,312. The primary reason for the decrease in distribution rights income was due to the deferred revenues from certain licenses were fully amortized. Membership/program fees for the nine months ended September 30, 2023 and 2022 were $7,596 and $10,412, respectively. The primary reason for the decrease in 2023 was due to the decreased customers of the Company’s UnCraveRx™ Weight Loss Management Program.
Total Operating Expenses
Total operating expenses for the nine months ended September 30, 2023 and 2022 were $3,035,306 and $3,643,119, respectively, reflecting a decrease of $607,813.
The reasons for the decrease in 2023 are primarily due to (i) a decrease of $206,486 in advertising expenses from $295,119 for the nine months ended September 30, 2022 to $88,633 for the nine months ended September 30, 2023, (ii) a decrease of $160,586 in research and development expense, from $923,354 for the nine months ended September 30, 2022 to $762,768 for the nine months ended September 30, 2023, (iii) a decrease of $130,687 in payroll expenses due to less employees employed in 2023, from $733,823 for the nine months ended September 30, 2022 to $603,136 for the nine months ended September 30, 2023, and (iv) a decrease of $64,986 in consulting fees due to decreased consulting services during 2023, from $563,521 for the nine months ended September 30, 2022 to $498,535 for the nine months ended September 30, 2023.
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Interest Expense - Related Parties
Interest expense - related parties for the nine months ended September 30, 2023 and 2022 were $501,787 and $765,105, respectively. During 2022, one promissory note issued to a related party went into default. Based on the terms of the promissory note, the Company issued warrants to the related party as additional consideration to cure the default. The decrease of related parties interest expense is mainly due to the recognition of the fair value of such warrants as interest expense.
Interest Expense
Interest expense for the nine months ended September 30, 2023 and 2022 were $90,412 and $127,226, respectively. During 2022, one promissory note issued to a third party went into default. Based on the terms of the promissory note, the Company issued warrants to the third party as additional consideration to cure the default. The decrease of interest expense is mainly due to the recognition of the fair value of such warrants as interest expense.
Loss on settlement of debt
Loss on settlement of debt for the nine months ended September 30, 2023 and 2022 were $34,338 and $198,939, respectively.
During the nine months ended September 30, 2023, the Company issued an aggregate of 183,606 shares of its common stock in connection with conversion of promissory notes and accrued interest, resulting in $34,338 of loss on settlement of debt recognized for the difference between the fair value of common stock issued and the carrying value of the debt.
During the nine months ended September 30, 2022, the Company issued an aggregate of 485,220 shares of its common stock in connection with conversion of promissory notes and accounts payable, resulting in $198,939 of loss on settlement of debt recognized for the difference between the fair value of common stock issued and the carrying value of the debt.
Grant Income
During the nine months ended September 30, 2023, the Company recognized grant income of $790,140 as compared to $1,250,231 for the comparable period last year. The larger grant income in 2022 was due on May 7, 2021, the FDA cleared the Company’s Investigational New Drug Application (IND) application for BICX104. On August 27, 2021, the Company received a Notice of Award from the United States Department of Health and Human Services for a grant from National Institute on Drug Abuse. The grant provides for $3,453,367 in funding during the third year subject to the terms and conditions specified in the grant, including satisfactory progress of project and the availability of funds. The funds are available to reimburse the Company for certain incurred direct costs and 17% of indirect costs. Indirect costs are costs that are not directly related to the project itself but are required to conduct the research and are critical to the success of the project and organization as a whole.
Other Miscellaneous Income
Other miscellaneous income for the nine months ended September 30, 2023 and 2022 were $0 and $139,381, respectively. The other miscellaneous income during the nine months ended September 30, 2022 was mainly generated by the forgiveness of the PPP loan on August 22, 2022.
Net Loss
For the nine months ended September 30, 2023, the Company experienced a net loss of $2,801,481 compared with a net loss of $3,213,816 for the nine months ended September 30, 2022. The decrease in net loss is primarily due to the decreased operating expenses, net of decreased revenues.
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Liquidity and Capital Resources
As of September 30, 2023, the Company had cash of $156,409. The following table provides a summary of the Company’s net cash flows from operating, investing, and financing activities.
|
| 2023 |
|
| 2022 |
| ||
Net cash used in operating activities |
| $ | (1,319,446 | ) |
| $ | (1,592,197 | ) |
Net cash provided by financing activities |
|
| 1,407,240 |
|
|
| 1,569,888 |
|
Net increase (decrease) in cash |
|
| 87,794 |
|
|
| (22,309 | ) |
Cash and restricted cash, beginning of period |
|
| 68,615 |
|
|
| 85,838 |
|
Cash and restricted cash, end of period |
| $ | 156,409 |
|
| $ | 63,529 |
|
The Company has historically sought and continue to seek financing from private sources to move its business plan forward. In order to satisfy the financial commitments, the Company had relied upon private party financing that has inherent risks in terms of availability and adequacy of funding. During the nine months ended September 30, 2023 and 2022, the Company received $900,000 and $1,250,000, respectively, proceeds from common stock subscription agreement.
On January 25, 2023, the Company issued an unsecured promissory note payable to a third party for $50,000 with principal and interest due January 25, 2024, with a stated interest rate of 12.5% per annum. Under the terms of the note the Company shall pay quarterly interest payments of $1,563. The balance outstanding as of September 30, 2023 was $50,000. The interest expense during the three months ended September 30, 2023 was $1,576. The interest expense during the nine months ended September 30, 2023 was $4,264. The Company made an interest payment of $3,125 during the nine months ended September 30, 2023. If the Company fails to make any payment due under the terms of the promissory note, the stated interest rate of the note shall be increased to 20%. As additional consideration for the loan the Company issued 4,285 shares of common stock and valued at $6,000, which was recognized as debt discount. During the three months ended September 30, 2023, the Company amortized $1,513 of debt discount as interest expense. During the nine months ended September 30, 2023, the Company amortized $4,093 of debt discount as interest expense.
On March 16, 2023, the Company received $50,000 advances from Mr. Lucido. The balance outstanding as of September 30, 2023 was $50,000.
During the nine months ended September 30, 2023, the Company received $143,273 advances from Lourdes Felix. The balance outstanding as of September 30, 2023 was $108,273.
On August 29, 2023, the Company issued an unsecured promissory note payable to Louis C Lucido for $150,000 with principal and interest due August 29, 2024, with a stated interest rate of 8% per annum. The promissory note, together with all accrued interest, shall be converted into common shares at a conversion price of $2.00 per share on or before August 29, 2024. The balance outstanding as of September 30, 2023 was $150,000. The interest expense during the three months ended September 30, 2023 was $1,052. The interest expense during the nine months ended September 30, 2023 was $1,052. In connection with the issuance of the promissory note, the Company issued the warrant that entitles Mr. Lucido to purchase 150,000 common shares. The warrant shall have a term of three years with an exercise price of $2.00 and shall be equitably adjusted to offset the effect of any stock splits and similar events. The Company allocated the proceeds based on the relative fair value of the debt and the warrants, resulting in the recognition of $87,724 of debt discount on such promissory note. As additional consideration for the debt, the Company issued 18,000 shares of common stock valued at $29,340, which was also recognized as debt discount. During the three months ended September 30, 2023, the Company amortized $10,262 of debt discount as interest expense. During the nine months ended September 30, 2023, the Company amortized $10,262 of debt discount as interest expense.
On September 6, 2023, the Company issued an unsecured promissory note payable to one third party for $150,000 with principal and interest due September 6, 2024, with a stated interest rate of 8% per annum. The third party has the option to select the repayment in cash or in stock of the Company at $2.00 per share. The balance outstanding as of September 30, 2023 was $150,000. The interest expense during the three months ended September 30, 2023 was $822. The interest expense during the nine months ended September 30, 2023 was $822. If the Company fails to make any payment due under the terms of the promissory note, the interest rate shall increase to 15% per annum. In connection with the issuance of the promissory note, the Company issued the warrant that entitles the third party to purchase 150,000 common shares. The warrant shall have a term of three years with an exercise price of $2.00 and shall be equitably adjusted to offset the effect of any stock splits and similar events. The Company allocated the proceeds based on the relative fair value of the debt and the warrants, resulting in the recognition of $88,820 of debt discount on such promissory note. As additional consideration for the debt, the Company issued 18,000 shares of common stock valued at $30,240, which was also recognized as debt discount. During the three months ended September 30, 2023, the Company amortized $8,155 of debt discount as interest expense. During the nine months ended September 30, 2023, the Company amortized $8,155 of debt discount as interest expense.
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For the next twelve months, the Company anticipates that it will need to supplement its revenues with additional capital investment or debt to ensure that the Company will have adequate cash to provide the minimum operating cash requirements to continue as a going concern. There can be no guarantee or assurance that the Company can raise adequate capital from outside sources. If the Company is unable to raise funds when required or on acceptable terms, it has to significantly scale back, or discontinue its operations.
Net Cash Flow from Operating Activities
Net cash used in operating activities was $1,319,446 for the nine months ended September 30, 2023 compared to $1,592,197 used in operating activities for the nine months ended September 30, 2022. The decrease was primarily due to a decrease in net loss of $416,250 and a decrease in operating assets of $285,936, net a decrease in operating liabilities of $87,624 and non-cash adjustments of $341,811.
Net Cash Flow from Financing Activities
Net cash provided by financing activities decreased by $162,648, from $1,569,888 provided by financing activities for the nine months ended September 30, 2022 to $1,407,240 cash provided by financing activities for the nine months ended September 30, 2023.
During the nine months ended September 30, 2023, the Company entered into three subscription agreements pursuant to which the Company issued an aggregate of 517,001 shares of common stock for gross proceeds of $900,000. The Company issued 340,505 shares of common stock for proceeds of $1,250,000 during the nine months ended September 30, 2022.
On January 25, 2023, the Company issued an unsecured promissory note payable to a third party for $50,000 with principal and interest due January 25, 2024, with a stated interest rate of 12.5% per annum. Under the terms of the note the Company shall pay quarterly interest payments of $1,563. The balance outstanding as of September 30, 2023 was $50,000.
On March 16, 2023, the Company received $50,000 advances from Mr. Lucido. The balance outstanding as of September 30, 2023 was $50,000.
On August 29, 2023, the Company issued an unsecured promissory note payable to Louis C Lucido for $150,000 with principal and interest due August 29, 2024, with a stated interest rate of 8% per annum. The promissory note, together with all accrued interest, shall be converted into common shares at a conversion price of $2.00 per share on or before August 29, 2024. The balance outstanding as of September 30, 2023 was $150,000.
On September 6, 2023, the Company issued an unsecured promissory note payable to one third party for $150,000 with principal and interest due September 6, 2024, with a stated interest rate of 8% per annum. The third party has the option to select the repayment in cash or in stock of the Company at $2.00 per share. The balance outstanding as of September 30, 2023 was $150,000.
During the nine months ended September 30, 2023, the Company received $143,273 advances from Lourdes Felix. The balance outstanding as of September 30, 2023 was $108,273.
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Going Concern
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of September 30, 2023, the Company had a working capital deficit of $(5,700,878), and an accumulated deficit of $77,134,478. The Company has not yet generated any significant revenues, and has incurred net losses since inception. The Company also defaulted on several promissory notes agreements and cured the defaults by issuing warrants. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve-month period since the date of the financial statements were issued.
The Company believes that its current cash on hand will not be sufficient to fund its projected operating requirements for the next twelve months since the date of the issuance of the financial statements.
The Company will be dependent upon the raising of additional capital through placement of its common stock in order to implement the Company’s business plan or by using outside financing. There can be no assurance that the Company will be successful in these situations in order to continue as a going concern. The Company is funding its operations by additional borrowings and some shareholder advances.
Off Balance Sheet Arrangements
The Company does not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in its securities.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these unaudited condensed consolidated financial statements requires our management to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These estimates are based on management’s historical and industry experience and on various other assumptions that are believed to be reasonable under the circumstances. On a regular basis, we evaluate these accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results may differ from our estimates, and such differences could be material.
A full discussion of our significant accounting policies is contained in Note 2 to our unaudited condensed consolidated financial statements. We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our financial results. These estimates require our most difficult, subjective or complex judgments because they relate to matters that are inherently uncertain. We have reviewed these critical accounting policies and estimates and related disclosures with our Audit Committee
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board “FASB” Accounting Standards Codification “ASC” 606. A five-step analysis a must be met as outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.
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The Company has elected the following practical expedients in applying ASC 606:
| · | Unsatisfied Performance Obligations - all performance obligations relate to contracts with a duration of less than one year. The Company has elected to apply the optional exemption provided in ASC 606 and therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. |
|
|
|
| · | Contract Costs - all incremental customer contract acquisition costs are expensed as they are incurred as the amortization period of the asset that the Company otherwise would have recognized is one year or less in duration. |
|
|
|
| · | Significant Financing Component - the Company does not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. |
|
|
|
| · | Sales Tax Exclusion from the Transaction Price - the Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from the customer. |
|
|
|
| · | Shipping and Handling Activities - the Company elected to account for shipping and handling activities as a fulfillment cost rather than as a separate performance obligation. |
The Company’s net sales are disaggregated by product category. The sales/access fees consist of product sales, which is recognized upon the transfer of promised goods to customers. The project support income is generated from administrative support to Biotechnology research customers, which is recognized upon the transfer of promised services to customers. The distribution rights income consists of the income recognized from the amortization of distribution agreements entered into for its products. The membership/program fees are generated from the Company’s UnCraveRx™ Weight Loss Management Program, which is recognized upon the transfer of promised goods to customers.
The following tables present the Company’s net sales by product category for the three and nine months ended September 30, 2023 and 2022:
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Sales/access fees |
| $ | 390 |
|
| $ | 2,250 |
|
Project support income |
|
| - |
|
|
| 79,263 |
|
Distribution rights income |
|
| 8,817 |
|
|
| 11,129 |
|
Membership/program fees |
|
| 938 |
|
|
| 1,799 |
|
Net sales |
| $ | 10,145 |
|
| $ | 94,441 |
|
|
| Nine Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Sales/access fees |
| $ | 10,645 |
|
| $ | 12,810 |
|
Project support income |
|
| 25,817 |
|
|
| 79,263 |
|
Distribution rights income |
|
| 26,164 |
|
|
| 28,476 |
|
Membership/program fees |
|
| 7,596 |
|
|
| 10,412 |
|
Net sales |
| $ | 70,222 |
|
| $ | 130,961 |
|
Deferred revenue
The Company licenses proprietary products and protocols to customers under licensing agreements that allow those customers to access the products and protocols in services they provide to their customers during the term of the license agreement. The timing and amount of revenue recognized from license agreements depends upon a variety of factors, including the specific terms of each agreement. Such agreements are reviewed for multiple performance obligations. Performance obligations can include amounts related to initial non-refundable license fees for the use of the Company’s products and protocols and additional royalties on covered services.
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The Company granted license and sub-license agreements for various regions or States in the United States allowing the licensee to market, distributes and sell solely in the defined license territory, as defined, the products provided by the Company. The agreements are granted for a defined period or perpetual and are effective as long as annual milestones are achieved.
Terms for payments for licensee agreements vary from full cash payment to defined terms. In cases where license or sub-license fees are uncollected or deferred; the Company nets those uncollected fees with the deferred revenue for balance sheet presentation.
The Company amortizes license fees over the shorter of the economic life of the related contract life or contract terms for each licensee.
On October 1, 2019, the Company launched the UnCraveRx™ Weight Loss Management Program. Customers are charged a membership fee and are requested to pay for three training programs at inception. The payments are recorded as deferred revenue until earned.
The following table presents the changes in deferred revenue, reflected as current and long term liabilities on the Company’s unaudited condensed consolidated balance sheet:
Balance as of December 31, 2022 |
|
|
| |
Short term |
| $ | 33,256 |
|
Long term |
|
| 4,045 |
|
Total as of December 31, 2022 |
| $ | 37,301 |
|
Net sales recognized |
|
| (26,164 | ) |
Balance as of September 30, 2023 |
|
| 11,137 |
|
Less short term |
|
| 7,092 |
|
Long term |
| $ | 4,045 |
|
Deferred Revenue-Grant
The Company recognizes grant revenues in the period during which the related research and development costs are incurred. The timing and amount of revenue recognized from reimbursement for research and development costs depends upon the specific terms for the contracted work. Such costs are reviewed for multiple performance obligations which can include amounts related to contracted work performed or as milestones have been achieved.
Grant Income
On January 17, 2019, the Company received a Notice of Award from the United States Department of Health and Human Services for a grant from the National Institutes of Health (“NIH”) in support of BICX102 from the National Institute on Drug Abuse. The grant provides for (i) $2,842,430 in funding during the first year and (ii) $2,831,838 during the second year subject to the terms and conditions specified in the grant, including satisfactory progress of project and the availability of funds. On August 27, 2021, the Company received a Notice of Award from the United States Department of Health and Human Services for a grant from National Institute on Drug Abuse. The grant provides for $3,453,367 in funding during the third year subject to the terms and conditions specified in the grant, including satisfactory progress of project and the availability of funds. On March 31, 2022, the Company received a Notice of Award from the United States Department of Health and Human Services for a grant from National Institute on Drug Abuse. The grant provides for $99,431 in additional funding during the third year subject to the terms and conditions specified in the grant, including satisfactory progress of project and the availability of funds. Grant payments received prior to the Company’s performance of work required by the terms of the research grant are recorded as deferred income and recognized as grant income once work is performed and qualifying costs are incurred. Grant receivables were $4,991 and $122,652 as of September 30, 2023 and December 31, 2022, respectively. Deferred revenues related to the grant were $0 as of September 30, 2023 and December 31, 2022. $300,985 and $390,857 were recorded as grant income for the three months ended September 30, 2023 and 2022, respectively. $790,140 and $1,250,231 were recorded as grant income for the nine months ended September 30, 2023 and 2022, respectively. The F&A indirect costs were $0 and $253,208 as of September 30, 2023 and December 31, 2022, respectively. The grant provides for $516,218 in funding for F&A indirect costs. The remaining facilities and administrative indirect cost over allocation is $9,671 as of September 30, 2023. The Company will credit the F&A indirect cost rate.
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| Table of Contents |
Stock Based Compensation
Share-based compensation issued to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The Company measures the fair value of the share-based compensation issued to non-employees at the grant date using the stock price observed in the trading market (for stock transactions) or the fair value of the award (for non-stock transactions), which were considered to be more reliably determinable measures of fair value than the value of the services being rendered.
Royalty Obligations, net
The Company accounted for royalty obligations as debt in accordance with ASC 470-10-25 and derived a debt discount, which is amortized using the straight line method over the expected life of the arrangement, which is 15 years. The Company has no obligation to repay the then outstanding balance if during the expected life of 15 years the treatment is discontinued. In order to record the discount of the liability, the Company fair valued the royalty and the difference between fair value of the royalty obligation and the gross projected future payments was $7,171,200 and was recorded as non-cash interest expense over the life of the liability and offset to additional paid in capital at inception.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required under Regulation S-K for “smaller reporting companies.”
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We have adopted and maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. Based upon the most recent evaluation of internal controls over financial reporting, our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer) identified material weaknesses in our internal control over financial reporting. The material weaknesses identified to date include (i) policies and procedures which are not yet adequately documented, (ii) insufficient GAAP experience regarding complex transactions and reporting, and (iii) insufficient number of staff to maintain optimal segregation of duties and levels of oversight. As of September 30, 2023, based on evaluation of our disclosure controls and procedures, management concluded that our disclosure controls and procedures were not effective.
Notwithstanding the material weaknesses described above, our management, including the Chief Executive Officer and Chief Financial Officer, has concluded that financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations, and cash flows as of and for the periods presented in this quarterly report.
Changes in Internal Controls
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(1) | The Company initiated litigation in 2019 based on a claim that Pellecome and Dr. Orbeck utilized the Company’s confidential information to advance their own weight loss product.
The Company dismissed this litigation without prejudice in July 2021.
On March 30, 2022, the court entered judgment in favor of Pellecome as an individual defendant whereby the Company was ordered to pay Pellecome total costs and attorneys’ fees of $235,886. Pursuant to the judgment, this amount is accruing interest at the rate of ten percent (10%) per annum from October 6, 2021 (the date of the original award of attorneys’ fees by the court which was followed by a number of filings by each party through February 2022).
The Company has not yet paid any amount to Pellecome. On May 27, 2022, the Company filed a notice of appeal with California Superior Court for Orange County regarding the March 30, 2022 judgment entered in favor of Pellecome. On February 2, 2023, the Company filed a motion requesting the California Superior Court for Orange County reverse and remand its prior ruling, including reversing the granting of Pellecome $222,933 in attorney’s fees. While the Company cannot predict the outcome of this matter, the Company has accrued $322,000 as a loss contingency for this matter. On October 4, 2023 the Court of Appeal of the State of California upheld the March 30, 2022 judgement in favor of Pellecome whereby $222,933 was awarded in attorney’s fees. |
ITEM 1A. RISK FACTORS
Not required under Regulation S-K for “smaller reporting companies.”
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The shares of common stock listed below were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded by Section 4(a)(2) thereof for the sale of securities not involving a public offering:
During the nine months ended September 30, 2023, the Company issued an aggregate of 108,269 shares of its common stock for services rendered valued at $190,560 based on the underlying market value of the common stock at the date of issuance, among which 50,845 shares valued at $88,949 were issued to the board of directors for board compensation.
During the nine months ended September 30, 2023, the Company issued 40,285 shares as additional consideration for the issuance of a promissory note (see Note 9). The 40,285 shares of common stock were valued at an aggregate value of $65,580.
During the nine months ended September 30, 2023, the Company issued 183,606 shares of its common stock in connection with conversion of promissory notes (see Note 10). The 183,606 shares of common stock were valued at an aggregate value of $313,892, resulting in $34,338 of loss on settlement of debt recognized for the difference between the fair value of common stock issued and the carrying value of the debt. During the nine months ended September 30, 2023, the Company also issued 24,000 shares of its common stock in connection with conversion of accounts payable of $48,000. The 24,000 shares of common stock were valued at an aggregate value of $48,000.
During the nine months ended September 30, 2023, the Company issued an aggregate of 517,001 shares of its common stock pursuant to the Lucido 2023 Subscription Agreement (as defined in Note 15), the Galligan 2023 Subscription Agreement (as defined in Note 15), and the 2023 Q2 Subscription Agreement (as defined in Note 14). 342,592 common shares were recorded at a price of $1.75 per shares for gross proceeds to the Company of $600,000. 174,409 common shares were recorded at a price of $1.72 per shares for gross proceeds to the Company of $300,000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not Applicable.
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ITEM 6. EXHIBITS.
| ||
| ||
| ||
| ||
101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 Labels Linkbase Document. |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
_______________
** | Filed herewith. |
|
|
+ | In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed. |
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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.
| BIOCORRX INC. |
| |
|
|
| |
Date: November 14, 2023 | By: | /s/ Lourdes Felix |
|
|
| Lourdes Felix |
|
|
| Chief Executive Officer and Chief Financial Officer |
|
| 48 |
EXHIBIT 31.1
CERTIFICATION
I, Lourdes Felix, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of BioCorRx Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Date: November 14, 2023 | By: | /s/ Lourdes Felix |
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| Lourdes Felix |
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| Chief Executive Officer |
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| Chief Financial Officer |
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EXHIBIT 31.2
CERTIFICATION
I, Lourdes Felix, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of BioCorRx Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Date: November 14, 2023 | By: | /s/ Lourdes Felix |
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| Lourdes Felix |
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| Chief Executive Officer |
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| Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Lourdes Felix, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of BioCorRx Inc. on Form 10-Q for the quarter ended September 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of BioCorRx Inc.
| Date: November 14, 2023 | By: | /s/ Lourdes Felix |
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| Lourdes Felix |
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| Chief Executive Officer |
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| Chief Financial Officer |
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EXHIBIT 32.2
CERTIFICATIONS OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Lourdes Felix, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of BioCorRx Inc. on Form 10-Q for the quarter ended September 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of BioCorRx Inc.
| Date: November 14, 2023 | By: | /s/ Lourdes Felix |
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| Lourdes Felix |
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| Chief Executive Officer |
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| Chief Financial Officer |
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