GRML 10-Q
Greenland Mines Ltd (GRML)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
or
For the transition period from to
Commission
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
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As of November 19, 2024, there were
KLOTHO NEUROSCIENCES, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KLOTHO NEUROSCIENCES, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
| September 30, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Intangible assets: | ||||||||
| Licenses | ||||||||
| Patents | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Notes payable to related parties | ||||||||
| Notes payable | ||||||||
| Total current liabilities | ||||||||
| Warrant liability | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, par value $ | ||||||||
| Common stock, par value $ | ||||||||
| Additional paid-in capital | ||||||||
| Common stock to be issued | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements.
1
KLOTHO NEUROSCIENCES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For
the Three Months Ended | For
the Nine Months Ended | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Professional fees | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of warrant liability | ||||||||||||||||
| Other income (expense) | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share: Basic and Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding – basic and diluted | ||||||||||||||||
See accompanying notes to the unaudited consolidated financial statements.
2
KLOTHO NEUROSCIENCES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Total | ||||||||||||||||||||||||||||||||
| Preferred Stock | Additional | Common | Stockholder’s | |||||||||||||||||||||||||||||
| Common Stock | (Series B, C and D) | Paid-in | Stock | Accumulated | Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | to be Issued | Deficit | (Deficit) | |||||||||||||||||||||||||
| Balance, January 1, 2024, Revised | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Retroactive application of merger | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Adjusted balance, beginning of period* | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Public warrants assumed from SPAC | - | - | ( | ) | ||||||||||||||||||||||||||||
| Private warrants assumed from SPAC | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Share-based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Conversion of Notes Payable | ||||||||||||||||||||||||||||||||
| Warrant conversion | - | |||||||||||||||||||||||||||||||
| Share-based compensation | - | |||||||||||||||||||||||||||||||
| Other | - | - | - | |||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2024 (unaudited) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||
| Preferred Stock | Additional | Additional | Stockholder’s | |||||||||||||||||||||||||||||
| Common Stock | (Series B, C and D) | Paid-in | Paid-in | Accumulated | Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Capital | Deficit | (Deficit) | |||||||||||||||||||||||||
| Balance, January 1, 2023 as recast | $ | $ | $ | $ | - | $ | ( | ) | $ | |||||||||||||||||||||||
| Retroactive application of merger | ( | ) | ( | ) | - | |||||||||||||||||||||||||||
| Adjusted balance, beginning of period at 6/21/2024 | - | ( | ) | |||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at September 30, 2023, Revised | $ | $ | $ | $ | - | $ | ( | ) | $ | |||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at December 31, 2023 (unaudited) | $ | $ | $ | $ | - | $ | ( | ) | $ | |||||||||||||||||||||||
| * |
See accompanying notes to the unaudited consolidated financial statements.
3
KLOTHO NEUROSCIENCES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended | ||||||||
| September 30, 2024 | September 30, 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Changes in fair value of warrant liability | ( | ) | ||||||
| Commitment fee | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Tax payable | ( | ) | ||||||
| Related party payable | ( | ) | ||||||
| Other liabilities | ||||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Acquisition of patents | ( | ) | ||||||
| Acquisition of licenses | ( | ) | ( | ) | ||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible promissory note | ||||||||
| Proceeds from sales of stocks and warrants, net | ||||||||
| Proceeds from related party loans | ||||||||
| Proceeds from shareholders | ||||||||
| Merger proceeds net of transaction cost | ||||||||
| Repayment of advance to shareholder | ||||||||
| Net cash provided by financing activities | $ | $ | ||||||
| NET CHANGE IN CASH | ( | ) | ||||||
| Cash - Beginning of period | ||||||||
| Cash - End of period | $ | $ | ||||||
| SUPPLEMENTAL NON-CASH FINANCING AND INVESTING ACTIVITIES: | ||||||||
| Note payable settled with issuance of common stock | $ | $ | ||||||
| Interest payable settled with issuance of common stock | $ | $ | ||||||
| Non-cash directors and officers insurance | $ | $ | ||||||
| Non-cash PIPE Funds used for merger transaction close | $ | $ | ||||||
| Commitment fee paid in stock | $ | $ | ||||||
| Assumed warrant liability from merger | $ | $ | ||||||
| Assumed income tax payable | $ | $ | ||||||
| Warrant conversion | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Interest Paid | $ | $ | ||||||
| Taxes Paid | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements.
4
KLOTHO NEUROSCIENCES, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
Klotho Neurosciences, Inc. (“The Company” or “Klotho”), formerly known as ANEW Medical, Inc., develops essential medicines for the treatment of chronic diseases – cancer, cardiovascular, and neurodegenerative disorders. The Company currently has acquired two licensed platforms: a generic drug portfolio and a biosimilar biologics platform that uses biologic therapies to treat cancer, and two proprietary, patented technologies involving the melanocortin receptor-binding molecules and a gene therapy platform which uses a gene therapy approach to introduce a therapeutic protein called “Klotho” inside the body to treat neurodegenerative diseases.
On September 12, 2022, the Company acquired five market-approved anti-cancer drugs approved for sale in Germany. The Market Authorizations (MA’s) are for four of the drugs that comprise the “FOLFOX” and “FOLFIRI” multi-drug regimens used in treatment of metastatic colorectal and gastric cancer and in two of the drugs that are used to treat metastatic lung cancer. The drugs are important in the treatment of many solid tumors in both childhood and adult cancers. Previously, the Company acquired two off-patent bio generic antibodies from Reliance Life Sciences (RLS), the life science arm of Reliance Industries Pvt Ltd. of Navi Mumbai, India.
During January 2023, the Company acquired a treatment for small drug molecules that bind to the melanocortin receptors on human cells and affect skin pigmentation.
Effective July 24, 2024, the Company changed its legal name from ANEW Medical, Inc. to Klotho Neurosciences, Inc. This name change was approved by the Company’s Board of Directors to better reflect the strategic focus of its proprietary products. Throughout these financial statements, references to the “Company” refer to Klotho Neurosciences, Inc., formerly known as ANEW. Under certain circumstances, references to ANEW have remained when useful in describing the sequence of events that occurred during the merger between Redwoods and ANEW.
Business Combinations
As of May 30, 2023, Redwoods Acquisition Corp., a Delaware corporation and a special purpose acquisition company (“Redwoods”), Anew Medical Sub, Inc., a Wyoming corporation (“Merger Sub”) and ANEW Medical, Inc., a Wyoming corporation (“ANEW”) entered into a Business Combination Agreement, which was amended as of November 4, 2023 (the “Business Combination Agreement”). On June 21, 2024 (the “Closing Date”), Merger Sub merged with and into ANEW, with ANEW continuing as the surviving corporation and as a wholly owned subsidiary of Redwoods (the “Business Combination”). In connection with the Business Combination, on June 21, 2024, Redwoods filed its Second Amended Certificate of Incorporation with the Delaware Secretary of State, and adopted the amended and restated bylaws (the “Amended and Restated Bylaws”), which replaced Redwoods’ Charter and Bylaws in effect as of such time. In connection with the closing of the Business Combination (the “Closing”), Redwoods changed its name to “ANEW Medical, Inc.”
For accounting purposes, the transactions contemplated by the Business Combination are treated as a reverse acquisition and, as such, the historical financial statements of the accounting acquirer ANEW (Wyoming) will become the historical financial statements of the Company. Under this method of accounting, Redwoods was treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the Merger was treated as the equivalent of the Company issuing shares for the net assets of Redwoods, accompanied by a recapitalization. The net assets of Redwoods were stated at historical cost with no goodwill or other intangible assets recorded.
Recapitalization
In connection with the merger, the Company issued
5
Immediately after giving effect to the Business Combination,
At Closing, pursuant to the terms of the Business Combination Agreement and after giving effect to the redemptions of shares of Redwoods Common Stock:
| ● | The total consideration paid at Closing (the “Merger
Consideration”) by Redwoods to ANEW Medical, Inc. security holders was |
| ● | Each share of ANEW Medical Common Stock, if any, that was owned by Redwoods, Merger Sub, ANEW Medical, Inc. or any other affiliate of Redwoods immediately prior to the effective time of the Merger (the “Effective Time”) was automatically cancelled and retired without any conversion or consideration; |
| ● | Each share of Merger Sub common stock, par value $ |
In connection with the Merger,
the Company entered into a convertible promissory note and Securities Purchase Agreement (“SPA”) with certain accredited investors
(the “Redwoods PIPE Investors”) for an aggregate of
In connection with the Merger,
the Company entered convertible promissory note and Securities Purchase Agreement (“SPA”) with certain accredited investors
(the “ANEW PIPE Investors”) for an aggregate of
Concurrent with Closing,
certain ANEW stockholders may be entitled to up to an additional
| (ii) | 2,000,000 Contingent Consideration Shares upon the Company’s common stock achieving a closing price equal to or exceeding $15.00 for 10 trading days within a 20-day trading period in the first three years following the Closing; and |
| (iii) | 1,000,000 Contingent Consideration Shares upon the Company’s common stock achieving a closing price equal to or exceeding $20.00 for 10 trading days within a 20-day trading period in the first five years following the Closing. |
In
accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparable periods up to June
21, 2024 and reflected as such as of September 30, 2024, to reflect the number of shares of the Company’s common stock, $
For accounting purposes, the Merger was treated as the equivalent of the
Company issuing shares for the net assets of Redwoods, accompanied by a recapitalization. The net assets of Redwoods
were stated at historical cost with no goodwill or other intangible assets recorded. In connection with the Merger, in addition to
the warrants, ANEW Medical assumed $
6
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The accompanying unaudited consolidated financial
statements have been prepared as if the Company will continue as a going concern. The Company has incurred significant operating losses
and negative cash flows from operations since inception. As of September 30, 2024, the Company had cash of approximately $
Basis of Presentation and Principles of Consolidation
The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. The Company prepared the Financial Statements, without audit, pursuant to the rules and regulations of the SEC applicable to quarterly reporting on Form 10-Q and reflect, in management’s opinion, all adjustments necessary to present fairly the financial information. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements, prepared in accordance with generally accepted accounting principles, have been consolidated or omitted as permitted by such rules and regulations. These Financial Statements should be read in conjunction with the consolidated financial statements and related notes included in the 2023 Annual Report. Results of operations for interim periods are not necessarily indicative of annual results.
Reclassification
Certain prior year amounts have been reclassified for comparative purposes to conform to the current-year financial statement presentation. These reclassifications had no effect on previously reported results of operations and were not material.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited consolidated financial statements in conformity with U.S. GAAP requires the Company’s 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 revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents represent cash on hand, demand deposits, and other short-term highly liquid investments placed with banks, which have original maturities of three months or less and are readily convertible to known amounts of cash.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $
7
Fair Value of Financial Instruments
The assets and liabilities are valued using a fair market basis as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) ASC 820, Fair Value Measurement. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company uses a three-level hierarchy established by the FASB that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach). The levels of the fair value hierarchy are described below:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. | |
| Level 2: | Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs with little or no market data available, which require the reporting entity to develop its own assumptions. |
The
Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment
and considers factors specific to the asset or liability.
| Fair value measurements at reporting date using: | ||||||||||||||||
| Fair value | Quoted prices in active markets for identical liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||
| Liabilities: | ||||||||||||||||
| Representative warrant liabilities, September 30, 2024 | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Representative warrant liabilities, December 31, 2023 | $ | $ | $ | $ | ||||||||||||
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Representative warrant liabilities, January 1 | $ | $ | ||||||
| Issuances/Assumptions | ||||||||
| Change in fair value | ( | ) | ||||||
| Representative warrant liabilities, September 30 | $ | $ | ||||||
| Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Representative warrant liabilities, July 1 | $ | $ | ||||||
| Change in fair value | ( | ) | ||||||
| Representative warrant liabilities, September 30 | $ | $ | ||||||
8
Intangible Assets
The Company’s intangible assets consist of acquired medical licenses and patents.
The Company acquires medical licenses for the treatment of medical conditions to market and sell in the future. The initial asset cost is the cost to acquire the license. Once in use, the Company amortizes the license cost over the useful life using the straight-line method. As part of the licensing agreements, the Company acquires patents and records the cost to acquire patents as the initial asset cost. Once the patents are approved and in use, assuming no litigations expenses, the Company amortizes the patent cost over the useful life using the straight-line method. The amortization period will not exceed the lifespan of the protection afforded by the patent. If the expected useful life of the patent is even shorter, the Company will use the useful life for amortization purposes. Thus, the shorter of a patent’s useful life or legal life will be used for the amortization period.
Impairment of Long-Lived and Intangible Assets
The Company assesses the impairment of long-lived and intangible assets
periodically, or at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Factors considered important, which could trigger an impairment review, include the following: significant underperformance relative to
historical or projected future cash flows; significant changes in the manner of use of the assets or the strategy of the overall business;
and significant negative industry trends. When management determines that the carrying value of long-lived and intangible assets may not
be recoverable, impairment is measured as the excess of the assets’ carrying value over the estimated fair value. Management is
not aware of any other impairment charges that may currently be required; however, the Company cannot predict the occurrence of events
that might adversely affect the reported values in the future. On an annual basis, the Company tests the long-lived and intangible assets
for impairment based on the projected net present value of cash flows for each asset. Prior to the annual impairment test, if circumstances
change and a long-lived or intangible asset is deemed impaired, an impairment loss will be immediately recognized in the statements of
operations. At December 31, 2023, the date of the last impairment test, it was determined that the estimated fair value of the intangible
assets exceeded the carrying value of the assets by
Revenue Recognition
The Company is in a pre-revenue state and does not generate revenue. When the Company commences to derive revenue, those contracts will be accounted in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic ASC 606).
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASU 740, “Income Taxes”. Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company is subject to Income tax filings requirements in U.S. federal and various state jurisdictions. The Company’s tax returns for years from 2021, 2022, and 2023 are subject to U.S. federal, state, and local income tax examinations by tax authorities.
The Company reports income tax related interest and penalties within the income tax line item on the consolidated statements of operations. The Company likewise reports the reversal of income tax-related interest and penalties within such line item to the extent the Company resolves the liabilities for uncertain tax positions in a manner favorable to the accruals.
Net Loss Per Share (Basic and Diluted)
Basic net loss per share is computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares outstanding, plus the number of additional shares that would have been outstanding if the common share equivalents had been issued, if dilutive.
9
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding (denominator for basic earnings per share) | ||||||||
| Weighted average shares and assumed potential common shares (denominator for diluted earnings per share, treasury method) | ||||||||
| Basic loss per share | $ | ( | ) | $ | ( | ) | ||
| Diluted loss per share | $ | ( | ) | $ | ( | ) | ||
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Total potentially dilutive shares | ||||||||
Research and Development Cost
Research
and development (R&D) costs are expensed as incurred. R&D costs are related to the Company’s internally funded development
of the Company medical licenses and patents. The Company R&D costs were $
Share-based Compensation
The Company accounts for share-based compensation in accordance with the fair value recognition provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 718 and No. 505. The Company issues restricted stock to employees and consultants for their services. Cost for these transactions are measured at the fair value of the equity instruments issued at the date of grant. These shares are considered fully vested and the fair market value is recognized as an expense in the period granted. The Company recognized consulting expenses and a corresponding increase to additional paid-in-capital related to stock issued for services. For agreements requiring future services, the consulting expense is to be recognized ratably over the requisite service period.
The
Company recorded share-based compensation of $
10
Warrants
As
of September 30, 2024, the fair value of the Representative Warrant liabilities was $
During the three months
ended September 30, 2024, a warrant holder exercised
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the related parties include (a) affiliates of the Company; (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
NOTE 3 — PREPAID EXPENSES
Prepaid expenses consist of prepayment of the premium on Directors
and Officers insurance. As of September 30, 2024 and December 31, 2023, prepaid expenses totaled $
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NOTE 4 — INTANGIBLE ASSETS
| Intangible Assets | September 30, 2024 | December 31, 2023 | ||||||
| Licenses | ||||||||
| Non-Exclusive License Agreement | $ | $ | ||||||
| Proprietary pharmaceutical drugs | ||||||||
| Various generic drugs | ||||||||
| Four generic drugs (Encore) | ||||||||
| Needleless Syringe License | ||||||||
| Patents | ||||||||
| Total intangible assets | $ | $ | ||||||
Intangible assets are as follows:
| ● | Non-Exclusive
License Agreement ($ |
| ● | Proprietary Pharmaceutical Drugs ($ |
| ● | Various
Generic Drugs ($ |
| ● | Four
Generic Drugs (Encore) ($1,308,270) – On September 12, 2022, the Company acquired four market-approved anti-cancer
drugs approved for sale in Germany for $ |
| ● | Needleless
Syringe License ($ |
| ● | Patents
($ |
| ● | Exclusive
World-wide License Agreement - On January 24, 2022, the Company signed an exclusive, world-wide License Agreement with the University
of Barcelona for a cell and/or gene therapy that has shown compelling activity in animal models of human Alzheimer’s disease and
amyotrophic lateral sclerosis (“ALS” or “Lou Gehrig’s disease”). The gene therapy will also be applied
to age-related diseases and rare (“Orphan”) diseases. Beginning on December 15, 2022, the Quarterly license fee is |
These licenses and patents are not currently in use as the Company is pre-revenue stage. Once these licenses are in use, the licenses will be amortized over its useful life. The Company expects to utilize these licenses and patents in year 2025.
12
NOTE 5 — ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of professional fees.
The accounts payable and accrued expenses as of September 30, 2024 and December 31, 2023 were $
NOTE 6 – NOTES PAYABLE TO RELATED PARTIES
| September 30, 2024 | December 31, 2023 | |||||||
| December 2023 - $ | $ | - | $ | |||||
| May 2024 and December 2023 - $ | ||||||||
| August 2024 - $ | ||||||||
| August 2024 - $ | ||||||||
| September 2024
- $ | ||||||||
| Total notes payable to related parties | $ | $ | ||||||
December
2023 ($135,000) – On December 1, 2023, the Company issued a promissory note to two members of management in the amount
of $
May 2024 and December
2023 ($
August 2024 ($
August 2024 ($
September 2024
($
NOTE 7 — NOTES PAYABLE
On September 12, 2022, the Company issued a $
On
March 4, 2024, in connection with the Merger, Public ANEW entered into a convertible promissory note and Securities Purchase Agreement
(“SPA”) with certain accredited investors (the “Redwoods PIPE Investors”) for an aggregate purchase price
of up to $
On April 22, 2024, prior to the closing of the
Business Combination Agreement, ANEW Medical (Wyoming) entered into a convertible promissory note and Securities Purchase Agreement (“SPA”)
with certain accredited investors (the “ANEW PIPE Investors”) for an aggregate purchase price of up to $
Both convertible promissory notes, Redwoods PIPE
Financing and ANEW PIPE Financing, bore an interest rate of
During the third quarter of 2024, investors converted convertible promissory
notes totaling $
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NOTE 8 — RELATED PARTIES
On October 10, 2021,
the Company signed an Employment Agreement with Dr, Joseph Sinkule to serve as the Company’s CEO for three years ending on October
9th, 2024. In addition, Mr. Sinkule will serve as a member of the board of directors for a five-year term. Mr. Sinkule’s
annual salary will be $
During November 2022,
the Company advanced a shareholder $
On December 12, 2023, the Company issued a promissory note to a member
of management. The promissory note accrued interest at a one-time interest fee of $
On
August 27, 2024, the Company issued a promissory note to a member of management. The promissory note accrues no interest. The unpaid
principal balance was $
On
August 27, 2024, the Company issued a promissory note to a member of management. the promissory note accrues no interest. The unpaid
principal balance was $
At
September 30, 2024 and December 31, 2023, the aggregate related party payable was $
NOTE 9 — STOCKHOLDER’S EQUITY
On June 21, 2024, the Business Combination, among other transactions contemplated by the Business Combination Agreement, was completed. The transaction was accounted as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Redwoods was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of the Combined Company represent a continuation of the financial statements of Klotho with the Transactions treated as the equivalent of Klotho issuing shares for the net assets of Redwoods, accompanied by a recapitalization. Under this method of accounting, Redwoods was treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the Merger was treated as the equivalent of the Company issuing shares for the net assets of Redwoods, accompanied by a recapitalization. The net assets of Redwoods were stated at historical cost with no goodwill or other intangible assets recorded. See “NOTE 1 — Organization and Business Description” for detail.
Equity Incentive Plan
In connection with the Business Combination, the Company’s Board adopted, and the Company’s stockholders approved, the Equity Incentive Plan (“Equity Incentive Plan”). Although the Company does not have a formal policy with respect to the grant of equity incentive awards to the Company’s executive officers, the Company believes that equity awards provide Company’s executive officers with a strong link to the Company’s long-term performance, create an ownership culture and help to align the interests of the Company’s executives and the Company’s stockholders. In addition, Company believes that equity awards with a time-based vesting feature promote executive retention because this feature provides incentives to Company’s executive officers to remain in Klotho’s employment during the applicable vesting period. Accordingly, Company’s board of directors periodically reviews the equity incentive compensation of the Company’s executive officers and from time to time may grant equity incentive awards to them.
During the three months ended September 30, 2024, the Company granted
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NOTE 10 — COMMITMENTS AND CONTINGENCIES
From time to time, the Company is subject to various legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. Although the outcome of the various legal proceedings and claims cannot be predicted with certainty, management does not believe that any of these proceedings or other claims will have a material effect on the Company’s business, financial condition, results of operations or cash flows.
Material Contracts
On November 27, 2014,
the Company signed a License Agreement and a Manufacturing and Supply Agreement for the monoclonal antibody development license and supply
agreement and related manufacturing with Reliance Life Sciences (RLS), the life science arm of Reliance Industries Pvt Ltd, the largest
private company in India. The contract expires on November 27, 2024 with a
On October 19, 2022,
the Company signed an M&A/Capital Markets Advisory Agreement with Chardan Capital Markets to advise and assist the Company in negotiating
the terms and conditions with respect to a potential sale, purchase, merger, joint venture, business combination, material change of control,
or similar transaction involving the Company and a strategic acquirer and/or private or publicly listed entity or business, including
a Special Purpose Acquisition Company (SPAC), and with respect to any offerings of any equity, equity-linked or debt securities of the
Company or any other party to a financing transaction and perform such other financial advisory services to the Company. At the close
of the merger on June 21, 2024, the Company paid $
On June 13, 2024, RWOD and Klotho entered into
a forward purchase agreement with (i) Meteora Capital Partners, LP (“MCP”), (ii) Meteora Select Trading
Opportunities Master, LP (“MSTO”), and (iii) Meteora Strategic Capital, LLC (“MSC” and, collectively
with MCP and MSTO, the “Seller”) (the “Forward Purchase Agreement”). Redwoods is the holder of the asset and Sponsor
and is also a counterparty to Klotho. Upon Closing of the merger on June 21, 2024 and on September 30, 2024, the value of the contract
for the Company was $
The Company entered into several employment, advisory,
and consulting agreements during the quarter. On August 15th, 2024, the Company entered into a
NASDAQ Deficiencies
On August 16, 2024, the Company received two delinquency notification letters (the “Notices”) from the Nasdaq Stock Market LLC (“Nasdaq”) due to the Company’s non-compliance with Nasdaq Listing Rules 5450(b)(2)(C) and 5450(b)(2)(A). The Notices cite the Company’s (a) not being in compliance with the minimum Market Value of Publicly Held Shares (“MVPHS”) requirement as set forth in Nasdaq Listing Rule 5450(b)(2)(C) and (b) not being in compliance with the minimum Market Value of Listed Securities (MVLS) requirement as set forth in Nasdaq Listing Rule 5450(b)(2)(A).
In accordance with Nasdaq Listing Rule 5810(c)(3)(D),
the Company has been provided 180 calendar days, or until February 12, 2025, to regain compliance. To regain compliance, prior to February
12, 2025, (a) the Company’s minimum market value of publicly held shares must close at $
If the Company fails to timely regain compliance with Nasdaq Listing Rules, the Company’s common stock will be subject to delisting from Nasdaq. As part of its compliance plan, the Company is evaluating a change in Nasdaq listing tiers and alternate means of qualification, including but not limited to the shareholder equity standard of qualification.
On October 15, 2024, the Company received a delinquency
notification letter (the “Notice”) from the Nasdaq Stock Market LLC (“Nasdaq”) due to the failure of the Company’s
common stock to maintain a minimum bid price of $
In accordance with Nasdaq Listing Rule 5810(c)(3)(A),
the Company has been provided 180 calendar days, or until April 14, 2025, to regain compliance. To regain compliance, prior to April 14,
2025, the closing bid price of the Company’s common stock must be at least $
If the Company fails to timely regain compliance with Nasdaq Listing Rules, the Company’s common stock will be subject to delisting from Nasdaq.
15
NOTE 11 — SUBSEQUENT EVENTS
The Company has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were issued, and has determined that the following subsequent event exists:
| ● | Key Executive Employment Agreement
– Joseph Sinkule, Chief Executive Officer - On October 24, 2024, Dr. Joseph Sinkule, the Company’s Chief Executive Officer,
entered into a new three-year employment agreement with the Company. Pursuant to the Employment Agreement, Dr. Sinkule will receive an
annual base salary of $ |
| ● | Teleost Biopharmaceuticals – On November 8, 2024, the Company and Teleost Biopharmaceuticals, LLC mutually agreed to terminate a Licensing Agreement dated January 28, 2023 granting the Company certain rights to develop and commercialize certain patent rights previously licensed to Teleost and know-how rights owned by Teleost in the field of gamma-melanocortins comprised of drug and peptide chemicals, API and pharmaceuticals that bind, affect, and potentially treat diseases directly or indirectly related to human MC1R receptors. The Company sought the termination of the Licensing Agreement since the licensed rights are no longer core to the Company’s business and research plans. This termination did not result in a financial impact for the Company. |
| ● | Scientific Advisory Board – On November 11, 2024, the Company appointed an additional advisor to our Scientific Advisory Board with annual compensation of $ |
| ● | Convertible Promissory Note – On November 14, 2024, the Company signed a Securities Purchase Agreement (SPA) tied to a Convertible Promissory Note with Austria Capital LLC in the amount of $ |
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (this “Quarterly Report”) to “we,” “us” or the “Company” refer to Klotho Neurosciences, Inc. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report, including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the search for an initial business combination, the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s filings with the SEC can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
Klotho Neurosciences, Inc. (“The Company” or “Klotho”) develops essential medicines for the treatment of chronic diseases – cancer, cardiovascular, and neurodegenerative disorders. The Company currently has acquired two licensed platforms: a generic drug portfolio and a biosimilar biologics platform that uses biologic therapies to treat cancer, and two proprietary, patented technologies involving the melanocortin receptor-binding molecules and a gene therapy platform which uses a gene therapy approach to introduce a therapeutic protein called “Klotho” inside the body to treat neurodegenerative diseases.
Effective September 17, 2024, the Company changed its legal name from ANEW Medical, Inc. to Klotho Neurosciences, Inc. This name change was approved by the Company’s Board of Directors to better reflect the strategic focus of its proprietary products. Throughout these financial statements, references to the ‘Company’ refer to Klotho Neurosciences, Inc., formerly known as ANEW or ANEW Public. Under certain circumstances, references to ANEW and ANEW Public have remained when useful in describing the sequence of events that occurred during the merger between Redwoods and ANEW.
As of May 30, 2023, Redwoods Acquisition Corp., a Delaware corporation and a special purpose acquisition company (“Redwoods”), Anew Medical Sub, Inc., a Wyoming corporation (“Merger Sub”) and ANEW Medical, Inc., a Wyoming corporation (“ANEW”) entered into a Business Combination Agreement, which was amended as of November 4, 2023 (the “Business Combination Agreement”). On June 21, 2024 (the “Closing Date”), Merger Sub merged with and into ANEW, with ANEW continuing as the surviving corporation and as a wholly owned subsidiary of Redwoods (the “Business Combination”). In connection with the Business Combination, on June 21, 2024, Redwoods filed a Second Amended Certificate of Incorporation with the Delaware Secretary of State, and adopted the amended and restated bylaws (the “Amended and Restated Bylaws”), which replaced Redwoods’ Charter and Bylaws in effect as of such time. In connection with the closing of the Business Combination (the “Closing”), Redwoods changed its name to “ANEW Medical, Inc.”
17
Critical Accounting Policies and Estimates
See Item 1, Note 2 – “Summary of Significant Accounting Policies.”
Results of Operations
For accounting purposes, the transactions contemplated by the Business Combination are treated as a reverse acquisition and, as such, the historical financial statements of the accounting acquirer Klotho will become the historical financial statements of Public ANEW. Under this method of accounting, Redwoods was treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the Merger was treated as the equivalent of the Company issuing shares for the net assets of Redwoods, accompanied by a recapitalization. The net assets of Redwoods were stated at historical cost with no goodwill or other intangible assets recorded.
We have not generated any operating revenues to date. To date, the Company’s operations have consisted of acquiring our licensed platforms and patents, and planning for the Business Combination. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as our expenses associated with planning our research and clinical testing operations.
Results of Operations for the Three and Nine Months Ended September 30, 2024 Compared to the Three and Nine Months Ended September 30, 2023
Revenues
The Company had no revenue for the nine months ended September 30, 2024 and September 30, 2023.
Operating Expenses
Operating expenses are composed of consultant fees and professional fees.
Our operating expenses for the three months ended September 30, 2024 were $2,870,932 compared to $123,737 for the three months ended September 30, 2023, an increase of $2,747,195. The increase was primarily due to increased share-based compensation expense.
Our operating expenses for the nine months ended September 30, 2024 were $3,688,584 compared to $520,589 for the nine months ended September 30, 2023, an increase of $3,167,995. The increase was primarily due to increased share-based compensation expense as well as expenses associated with our business combination including increases in third party consulting fees and professional fees.
Net Loss
For the three months ended September 30, 2024, we incurred a net loss of $2,959,426 compared to a net loss of $144,111 for the three month period ended September 30, 2023. The increase in net loss was primarily due to increased share-based compensation expense.
For the nine months ended September 30, 2024, we incurred a net loss of $4,083,109 compared to a net loss of $580,983 for the nine month period ended September 30, 2023, an increase of $3,502,126. The increase in net loss was primarily due to increased stock-based compensation expense as well as expenses associated with preparing for our business combination including increases in third party consulting fees and professional fees.
18
Liquidity and Capital Resources
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (2,002,358 | ) | $ | (247,406 | ) | ||
| Net cash used in investing activities | (123,497 | ) | (76,325 | ) | ||||
| Net cash provided by financing activities | 2,173,942 | 250,000 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | 48,087 | $ | (73,731 | ) | |||
| Cash, beginning of year | 2,808 | 75,872 | ||||||
| Cash, end of year | $ | 50,895 | $ | 2,141 | ||||
Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2024 was $2,002,358, compared to $247,406, for the nine months ended September 30, 2023, an increase of approximately $1,755,000. The significant increase in cash used in operating activities is primarily attributable to increases in expenses related to the business combination and continued operating costs. We expect net cash used in operating activities to increase in the coming periods, until our products are able to produce meaningful revenue.
Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2024 was $123,497, compared to $76,325 for the nine months ended September 30, 2023, an increase of approximately $47,000. The increase in cash used in investing activities is primarily attributable to licensing payments made in the period.
Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2024 was $2,173,942, which consisted of investments, proceeds from the business combination, as well as proceeds from related parties. For the nine months ended September 30, 2023, net cash provided by financing activities was $250,000, from repayment of an advance to a shareholder.
Liquidity, Capital Resources and Going Concern
As of September 30, 2024, the Company had cash of $50,895 and net working capital of ($827,783).
The Company has incurred and expects to continue to incur significant professional costs to remain as a publicly traded company and incurred significant transaction costs related to the consummation of the Business Combination.
The accompanying consolidated financial statements have been prepared as if the Company will continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. As of September 30, 2024, the Company had cash of approximately $51,000 and an accumulated deficit of approximately $8.5 million. The Company has incurred recurring losses, has experienced recurring negative operating cash flows, and requires significant cash resources to execute its business plans. The Company is dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute its development plans and continue operations. Without additional funding, there is substantial doubt about the Company’s ability to continue as a going concern for twelve months from the date of these financial statements.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
19
Emerging Growth Company Status
We are an “emerging growth company”, as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company, we can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to avail ourselves of these options. Once adopted, we must continue to report on that basis until we no longer qualify as an emerging growth company.
We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of our initial public offering; (ii) the first fiscal year after our annual gross revenue are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If, as a result of our decision to reduce future disclosure, investors find our common stock less attractive, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to make disclosures under this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of September 30, 2024. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2024, our disclosure controls and procedures were ineffective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified by Securities and Exchange Commission (“SEC”) rules and forms and (b) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding any required disclosure.
Management has identified control deficiencies regarding inadequate accounting resources, the lack of segregation of duties and the need for a stronger internal control environment. Our management believes that these material weaknesses are due to the small size of our accounting staff. The small size of our accounting outsourced staff may prevent adequate controls in the future due to the cost/benefit of such remediation.
To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.
These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our financial statements may not be prevented or detected on a timely basis. In light of this material weakness, we performed additional analyses and procedures in order to conclude that our financial statements for the quarter ended September 30, 2024, included in this Quarterly Report on Form 10-Q were fairly stated in accordance with GAAP. Accordingly, management believes that despite our material weaknesses, our financial statements for the quarter ended September 30, 2024, are fairly stated, in all material respects, in accordance with GAAP.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As a smaller reporting company, we are not required to make disclosures under this Item.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item
5.
During the three months ended September 30, 2024,
the Company’s Board of Directors
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
| * | Filed herewith. |
| ** | Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
21
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.
| KLOTHO NEUROSCIENCES, INC. | ||
| Date: November 19, 2024 | By: | /s/ Joseph A. Sinkule |
| Name: | Joseph A. Sinkule | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 19, 2024 | By: | /s/ Jeffrey LeBlanc |
| Name: | Jeffrey LeBlanc | |
| Title: | Chief Financial Officer (Principal Accounting Officer) | |
22