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) |
| ||
(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 |
|
|
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 |
|
| September 30, |
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| December 31, |
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| 2023 |
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| 2022 |
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| (unaudited) |
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ASSETS |
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Current assets: |
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Cash |
| $ |
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| $ |
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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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| $ |
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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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| $ |
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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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| ( | ) |
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Total deficit attributable to BioCorRx Inc. |
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| ( | ) |
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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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| $ |
|
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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| Three months ended |
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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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| 2022 |
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| 2023 |
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| 2022 |
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Revenues, net |
| $ |
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| $ |
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| $ |
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| $ |
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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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| ( | ) |
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Income taxes |
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Net loss |
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| ( | ) |
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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 |
|
| Series A |
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| Series B |
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| Common |
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| Convertible |
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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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| |||||||||||||||||||||
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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 |
| ||||||||||||
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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| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||||||
Common stock issued for services rendered |
|
| - |
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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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| ( | ) |
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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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Common stock issued in connection with conversion of promissory notes and accounts payable |
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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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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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| ( | ) |
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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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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||||||
Common stock issued for services rendered |
|
| - |
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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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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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| |||||||||
Net loss |
|
| - |
|
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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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|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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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| |||||||||||||||||
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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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| |||||||||||||||||
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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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| ||||||||||||||||||||
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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 |
| |||||||||||
Balance, December 31, 2021 |
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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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| |||||||||
Common stock issued in connection with subscription agreement |
|
| - |
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| - |
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| |||||||||
Share-based compensation |
|
| - |
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| - |
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|
| - |
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| ||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
Balance, March 31, 2022 (unaudited) |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||||||
Common stock issued for services rendered |
|
| - |
|
|
|
|
|
| - |
|
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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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| |||||||||
Warrants issued in connection with loan default |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
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|
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|
|
|
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| ||||||||
Warrants issued in connection with loan default – related party |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
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|
|
|
|
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| ||||||||
Share-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
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|
|
|
|
|
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|
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|
| ||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
Balance, June 30, 2022 (unaudited) |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||||||
Common stock issued for services rendered |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
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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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|
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|
|
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| |||||||||
Share-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
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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|
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|
|
Accounts receivable |
|
|
|
|
| ( | ) | |
Grant receivable |
|
|
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|
| ( | ) | |
Prepaid expenses |
|
|
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|
| ( | ) | |
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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|
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|
|
Cash and restricted cash consist of the following, end of period: |
|
|
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|
Cash |
| $ |
|
| $ |
| ||
Restricted cash |
|
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Total |
| $ |
|
| $ |
| ||
|
|
|
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|
Cash and restricted cash consist of the following, beginning of the period: |
|
|
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|
|
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|
|
Cash |
| $ |
|
| $ |
| ||
Restricted cash |
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| ||
Total |
| $ |
|
| $ |
| ||
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Supplemental disclosures of cash flow information: |
|
|
|
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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 |
|
|
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|
| ||
|
|
|
|
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|
|
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
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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
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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.
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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 |
| $ |
|
| $ |
|
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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 |
|
|
| |
|
| $ |
|
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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 $
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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 $
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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 $
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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 |
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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