UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For
the quarterly period ended
For the transition period from __________ to __________
(Commission File Number)
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
50 Battery Place, #7T, New York, New York 10280
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) |
Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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, 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
with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities 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 15, 2021, there were shares of the registrant’s common stock outstanding.
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
QRONS INC.
CONDENSED BALANCE SHEETS
(Unaudited)
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | - | |||||||
| Total current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accounts payable and accrued liabilities – related party | ||||||||
| Demand loans, related party | ||||||||
| Advances from related party | ||||||||
| Unsecured short-term advances | ||||||||
| Convertible notes – related party, net of debt discount | ||||||||
| Convertible notes, net of debt discount | ||||||||
| Derivative liabilities | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit | ||||||||
| Series A Preferred stock: $ par value; shares authorized; shares issued and outstanding | ||||||||
| Common stock, $ par value: shares authorized; shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
QRONS INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months ended | Nine Months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in derivative liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Weighted average shares outstanding basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
QRONS INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
| Series A Preferred | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock options granted to non-employees as research and development costs | - | - | - | - | - | |||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock options granted to non-employees as research and development costs | - | - | - | - | - | |||||||||||||||||||||||
| Net income for the period | - | - | - | - | - | |||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Series A Preferred | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock options granted to non-employees as research and development costs | - | - | - | - | - | |||||||||||||||||||||||
| Warrants exercised associated with private placement | - | - | - | - | - | |||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock options granted to non-employees as research and development costs | - | - | - | - | - | |||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, June 30, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock options granted to non-employees as research and development costs | - | - | - | - | - | |||||||||||||||||||||||
| Stock issued for private placement | - | - | - | |||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
QRONS INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Stock options issued for research and development expense | ||||||||
| Warrants granted as financing costs | ||||||||
| Non cash interest expense | ||||||||
| Accretion of debt discount | ||||||||
| Change in derivative liabilities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease prepaid expenses | ( | ) | ||||||
| (Decrease) increase accounts payable and accrued liabilities | ( | ) | ||||||
| (Decrease) increase accounts payable and accrued liabilities, related party | ( | ) | ||||||
| Net cash (used by) operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities | ||||||||
| Net cash provided from used by investing activities | ||||||||
| Cash Flows From Financing Activities | ||||||||
| Proceeds from private placement | ||||||||
| Proceeds from convertible notes | ||||||||
| Proceeds from related party advances | ||||||||
| Net cash provided from financing activities | ||||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash at beginning of year | ||||||||
| Cash at end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES | ||||||||
| Derivative liability associated with debt discount | $ | $ | ||||||
| Derivative liability associated with warrants | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 1 – Description of Business and Basis of Presentation
Organization and Nature of Business:
Qrons Inc. (“Qrons” or the “Company”) was incorporated under the laws of the State of Wyoming on August 22, 2016 under the name BioLabMart Inc. and changed its name to Qrons Inc., effective August 8, 2017.
The Company’s common stock was approved by the Financial Industry Regulatory Authority (“FINRA”) for quotation on the OTC pink sheets under the symbol “BLMB” as of July 3, 2017. FINRA announced the Company’s name change to Qrons Inc. on August 9, 2017. The new name and symbol change to “QRON” for the OTC Market was effective August 10, 2017. The Company’s common stock was upgraded from the Pink Market and commenced trading on the OTCQB Venture Market on August 12, 2019.
The Company is an innovative biotechnology company dedicated to developing biotech products, treatments and technologies to combat neuronal diseases, which are an enormous social and economic burden on society. The Company seeks to engage in strategic arrangements with companies and institutions that are developing breakthrough technologies in the fields of artificial intelligence, machine learning, molecular biology, stem cells and tissue engineering, for deployment in the fight against neuronal diseases. The Company’s search is currently focused on researchers based in Israel, a country which is world-renowned for biotech innovations.
The Company’s principal executive office is located at 50 Battery Place, #7T, New York, New York 10280.
Note 2 – Summary of Significant Accounting Policies
Financial Statement Presentation: The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three and nine-month periods have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.
Fiscal Year End: The Company has selected December 31 as its fiscal year end.
Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.
Cash Equivalents: The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.
Research
and Development Costs: The Company charges research and development costs to expense when incurred in accordance with FASB ASC
730, Research and Development. Research and development costs were $
5
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 2 – Summary of Significant Accounting Policies (continued)
Advertising
and Marketing Costs: Advertising and marketing costs are expensed as incurred. The Company incurred $
Related Parties: For the purposes of these financial statements, parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.
The following table provides a summary of the fair value of the Company’s derivative liabilities as of September 30, 2021 and December 31, 2020:
| Fair value measurements on a recurring basis | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| As of September 30, 2021: | ||||||||||||
| Liabilities | ||||||||||||
| Derivative liabilities | $ | $ | $ | |||||||||
| As of December 31, 2020: | ||||||||||||
| Liabilities | ||||||||||||
| Derivative liabilities | $ | $ | $ | |||||||||
6
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 2 – Summary of Significant Accounting Policies (continued)
Warrants: The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in ASC 815 Derivatives and Hedging, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. For warrants classified as equity instruments the Company applies the Black Scholes model and expenses the fair value as financing costs. For warrants classified as derivative financial instruments the Company applies the Monte Carlo model to value the warrants.
Income taxes: The Company has adopted ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement 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 in which those temporary differences are expected to be recovered or settled.
Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method), convertible notes, classes of shares with conversion features, and stock awards and stock options.
| September 30, 2021 | December 31, 2020 | |||||||
| Research warrants at 3% of issued and outstanding shares | ||||||||
| Convertible notes | ||||||||
| Series A preferred shares | ||||||||
| Stock options vested | ||||||||
| Stock options not yet vested | - | |||||||
| Stock purchase warrants | ||||||||
| Total | ||||||||
New Accounting Pronouncements: Certain new accounting pronouncements that have been issued are not expected to have a material effect on the Company’s financial statements.
7
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 3 – Going Concern
The
Company has experienced net losses to date and has not generated revenues from operations. While the Company raised
proceeds of $
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amount and classification of liabilities that might cause results from this uncertainty.
Covid-19 Pandemic
The COVID-19 pandemic has had an adverse impact on the research and development of our product candidates. Research facilities at Dartmouth were subject to closures as well as laboratories at Ariel in Israel during fiscal 2020. This resulted in our discontinuing our research at these Universities and was part of our decision to adjust our research to be collaborative and to seek aligning with third parties to advance our expanded goals. We do not currently know the full extent of potential delays of research in the future as a result of the continuing pandemic restrictions.
COVID-19 has also caused significant disruptions to the global financial markets, which severely impacts our ability to raise additional capital. We terminated our employees in April 2020 in an effort to conserve resources as we evaluate our business development efforts. The ultimate impact on us and our research relationships is currently uncertain. We may be required to further reduce operations or cease operations if we are unable to finance our operations.
Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to fully estimate the effects of the COVID-19 outbreak on its planned operations or financial condition in the next 12 months. However, while significant uncertainty remains, the Company believes it is likely that the COVID-19 outbreak will have a negative impact on its ability to raise additional financing and will result in delays as it continues to impact the Company’s workforce and its collaborative development efforts.
Note 4 – Convertible Note – Related Party and Derivative Liabilities
On
September 1, 2016, the Company entered into a convertible debenture agreement with Decagon LLC, doing business as CubeSquare,
LLC (“CubeSquare”), of which its Chief Executive Officer is the managing partner and its President is a
8
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 4 – Convertible Note – Related Party and Derivative Liabilities (continued)
On September 29, 2017, the Company and CubeSquare amended Note 1 to extend the maturity date from September 1, 2017 to September 1, 2018; on September 9, 2018, the Company further amended Note 1 to extend the maturity date to September 1, 2019; on November 6, 2019, the Company further amended Note 1 to extend the maturity date to September 1, 2020; on October 30, 2020, the Company further amended Note 1 to extend the maturity date to September 1, 2021; and on October 7, 2021, the Company further amended Note 1 to extend the maturity date to September 1, 2022 under the same terms and conditions.
On
September 27, 2017, the Company entered into a second convertible debenture agreement with CubeSquare under which the
Company received proceeds of $
The Company analyzed the amendment to Note 1 and Note 2 under ASC 815-10-15-83 and concluded that the conversion feature within these two convertible Notes meet the definition of a derivative. The Company estimated the fair value of the derivative at each report date using the Black-Scholes valuation model to value the derivative liability related to the variable conversion rate.
The carrying value of these convertible notes is as follows:
| September 30, 2021 | December 31, 2020 | |||||||
| Face value of certain convertible notes | $ | $ | ||||||
| Carrying value | $ | $ | ||||||
| Three Months ended | Nine Months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Interest on the convertible notes | $ | $ | $ | $ | ||||||||||||
As
of September 30, 2021 and December 31, 2020, the unpaid interest balance under Accounts payable and accrued liabilities – related
party was $
As a result of the application of ASC 815, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
| Balance at December 31, 2019 | $ | |||
| Change in fair value | ||||
| Balance at December 31, 2020 | ||||
| Change in fair value | ||||
| Balance at September 30, 2021 | $ | |||
9
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 4 – Convertible Note – Related Party and Derivative Liabilities (continued)
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of September 30, 2021 and December 31, 2020 and the commitment date:
| Commitment Date | December 31, 2020 | September 30, 2021 | ||||||||||
| Expected dividends | ||||||||||||
| Expected volatility | 101% ~103% | 316% ~ 333% | 306% ~ 320% | |||||||||
| Expected term | 0.92 ~ 1 year | 0.74 year | 1 year | |||||||||
| Risk free interest rate | ||||||||||||
Note 5 – Convertible Note and Derivative Liabilities
(1) 8% Convertible notes with warrants issued in December 2019 and February 2020
In
December 2019, we issued and sold in a private offering
On
February 19, 2020 we issued and sold in a private offering
The carrying value of these convertible notes is as follows:
| September 30, 2021 | December 31, 2020 | |||||||
| Face value of certain convertible notes | $ | $ | ||||||
| Less: unamortized discount | ( | ) | ( | ) | ||||
| Carrying value | $ | $ | ||||||
Interest expenses associated with the convertible notes are as follows:
| Three Months ended | Nine Months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Amortization on debt discount | $ | $ | $ | $ | ||||||||||||
| Interest on the convertible notes | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
As
of September 30, 2021 and December 31, 2020, the unpaid interest balance under Accounts payable and accrued liabilities was $
10
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 5 – Convertible Note and Derivative Liabilities (continued)
(1) 8% Convertible notes with warrants issued in December 2019 and February 2020 (continued)
The
convertible notes qualify for derivative accounting and bifurcation under ASC 815. The derivative liability of the $
As a result of the application of ASC 815, as of September 30, 2021 and 2020, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
| Balance at December 31, 2019 | $ | |||
| Derivative addition associated with convertible notes | ||||
| Change in fair value | ||||
| Balance at December 31, 2020 | ||||
| Change in fair value | ||||
| Balance at September 30, 2021 | $ |
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2020 and September30, 2021 and the commitment date:
| Commitment Date | December 31, 2020 | September 30, 2021 | ||||||||||
| Expected dividends | ||||||||||||
| Expected volatility | 154% ~173% | 280% ~296% | 179%~215% | |||||||||
| Expected term | 2.10 years | 1.05 ~ 1.25 years | 0.33 ~ 0.47 years | |||||||||
| Risk free interest rate | 1.42 ~ 1.65% | 0.10% | 0.04% | |||||||||
(2) 8% Convertible note with warrants issued on June 15, 2021
On June 15, 2021, the Company entered into a note purchase agreement with Quick Capital, LLC (“Quick Capital”) pursuant to which the Company issued a twelve-month convertible promissory note in the principal amount of $115,000 for a $100,000 investment (the “Note”), which included an original issuance discount of 10% and a $3,500 credit for legal and transaction costs. In connection with this convertible note issuance, Quick Capital was also issued a five-year warrant (the “Warrant”) to purchase up to an aggregate of 115,000 shares of the Company’s common stock at an exercise price of $1.00 per share (the “Warrant Shares”) subject to adjustments for dilutive issuances at lower prices.
The Note is convertible into shares of common stock at a conversion price of $0.50 per share. If delivery of the Conversion Shares is not timely made, the Company is obligated to pay Quick Capital $2,000 for each day that the delivery is late as liquidated damages. The conversion price of the Note will be reduced if the Company issues common stock or grants derivative securities for consideration at a price less than the conversion price to the amount of the consideration of such dilutive issuance (“full ratchet reset”). The Note may not be prepaid.
The Company is subject to significant cash penalties if the Company defaults on the notes or in the event shares are not issued timely when a notice of conversion is provided. If an event of default occurs, the Note will become immediately due and payable in an amount equal to 150% of the then outstanding principal amount of the Note plus any interest or amounts owing to Quick Capital. The default provisions are based on the type of default and include a penalty of 50% of the principal plus accrued interest due (the “Default Sum”) and a parity value of the Default Sum based on the effective conversion of the Note on the date of payment of the default and the maximum stock value during the period between the default date and the payment date.
11
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 5 – Convertible Note and Derivative Liabilities (continued)
(2) 8% Convertible note with warrants issued on June 15, 2021
The Company valued the embedded default derivative liability of the Note and the Warrant liability, including the full ratchet reset feature, using Monte Carlo models.
The carrying value of the Note is as follows:
| September 30, 2021 | June 15, 2021 | |||||||
| Face value of certain convertible notes | $ | $ | ||||||
| Less: unamortized discount | ( | ) | ( | ) | ||||
| Carrying value | $ | $ | ||||||
Interest expenses associated with the conversion is as follows:
| Three Months ended | Nine Months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Amortization on debt discount | $ | $ | $ | $ | ||||||||||||
| Day one loss associated with derivative liability | - | - | ||||||||||||||
| Interest on the convertible notes | - | - | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
As a result of the application of ASC 815 as of September 30, 2021 and June 15, 2021, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
| Derivative liability associated with convertible note on commitment date | $ | |||
| Derivative liability associated with warrants on commitment date | ||||
| Derivative liability at June 15, 2021 | ||||
| Change in fair value – convertible note | ( | ) | ||
| Change in fair value – warrants | ||||
| Balance at September 30, 2021 | $ |
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of September 30, 2021 and the commitment date:
| Convertible note: | Commitment Date | September 30, 2021 | ||||||
| Expected dividends | ||||||||
| Expected volatility | % | % | ||||||
| Expected term | 1 years | 0.71 years | ||||||
| Risk free interest rate | % | % | ||||||
| Warrants; | Commitment Date | September 30, 2021 | ||||||
| Expected dividends | ||||||||
| Expected volatility | % | % | ||||||
| Expected term | 5 years | 4.71 years | ||||||
| Risk free interest rate | % | % | ||||||
12
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 6 – Unsecured Short-Term Advance from Third Party
On
June 20, 2019, the Company received $
Note 7 – Related Party Transactions
(1) Demand Loan from related party
On
May 1, 2019, the Company issued a promissory note (the “Note”) to CubeSquare in the principal amount of $
(2) Advances from Related Parties
During
the year ended December 31, 2019, the Company received $
On
August 20, 2019, the Company received $
During
the year ended December 31, 2020, the Company received $
(3) Others
Jonah
Meer, the Company’s Chief Executive Officer, made payments to various vendors during the years ended December 31, 2019 and 2020.
The balance payable to Mr. Meer of $
During
the year ended December 31, 2019, Ido Merfeld, the Company’s President, made payments to various vendors in the aggregate
amount of $
13
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 8 – License and Research Funding Agreement / Royalty Agreement
Ariel Scientific Innovation Ltd.
On November 30, 2019, the Company entered into a royalty and license fee sharing agreement (the “Royalty Agreement”) with Ariel Scientific Innovations Ltd., a wholly owned subsidiary of Ariel University, in Ariel, Israel (“Ariel”), which, among other things, superseded and terminated the original license and research funding agreement, dated December 14, 2016, as amended, between the Company and Ariel (the “License Agreement”). Upon the occurrence of an Exit Event, as such term is described in the Royalty Agreement, including an underwritten public offering of the Company’s shares with proceeds of at least $25 million, a consolidation, merger or reorganization of the Company, and a sale of all or substantially all of the shares and/or the assets of the Company, Ariel has the right to require the Company to issue up to 3% of the then issued and outstanding shares of its common stock. The issuance of any such shares in the future will result in dilution to the interests of other stockholders. In consideration for the parties’ agreement to terminate the License Agreement and for future general scientific collaboration between the parties, the Company agreed to pay Ariel a royalty of 1.25% of net sales (as defined in the Royalty Agreement) of products sold by the Company, or its affiliates and licensees for fifteen years from the first commercial sale in a particular country.
Services agreements which the Company had with Ariel related to laboratory access, molecular biology and neurobiology research, and other services terminated during the year ended December 31, 2020. During 2020, Ariel refunded to the Company certain previously advanced and unused funds.
Note 9 – Intellectual Property License Agreement and Sponsored Research Agreement
Dartmouth College – IP License Agreement
On October 2, 2019, the Company entered into the Intellectual Property License Agreement pursuant to which Dartmouth granted the Company an exclusive world-wide license under the patent application entitled “Mechanically Interlocked Molecules-based Materials for 3D Printing” in the field of human and animal health and certain additional patent rights to use and commercialize licensed products and services. The license grant includes the right of the Company to sublicense to third parties subject to the terms of the Agreement.
The
Agreement provided for: (i) a $
Failure to timely make any payment due under the Agreement will result in interest charges to the Company of the lower of 10% per year or the maximum amount of interest allowable by applicable law.
The Agreement may be terminated by Dartmouth if the Company is in material breach of the Agreement which is not cured after 30 days of notice thereof or if the Company becomes insolvent. Dartmouth may terminate the Agreement if the Company challenges a Dartmouth patent or does not terminate a sublicensee that challenges a Dartmouth patent, except in response to a valid court or governmental order. The Company may terminate the Agreement at any time upon six months written notice to Dartmouth.
If the Company or any sublicensee or affiliate institutes or participates in a licensed patent challenge, the then current earned royalty rate for licensed products covered by Dartmouth patents will automatically be increased to three times the then current earned royalty rate.
14
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 9 – Intellectual Property License Agreement and Sponsored Research Agreement (continued)
Dartmouth College – IP License Agreement (continued)
On March 23, 2021, the United States Patent and Trademark Office issued U.S. Patent No. 10,954,315 to the Trustees of Dartmouth College which is directed to mechanically interlocked, molecules-based materials for 3-D printing. The patent’s inventors are Professor Chenfeng Ke, a member of the Company’s Scientific Advisory Board and Qianming Lin, Professor Ke’s assistant. The patent grant is the culmination of the Intellectual Property License Agreement between the Company and Dartmouth with respect to an exclusive world-wide license of intellectual property related to 3D printable materials in the fields of human and animal health.
The
Company recorded $
Dartmouth College – Sponsored Research Agreement
On July 12, 2018, the Company entered into a one-year sponsored research agreement (the “Sponsored Research Agreement”) with the Trustees of Dartmouth College (“Dartmouth”) pursuant to which the Company will support and fund the cost of research conducted by Dartmouth of mutual interest to the parties in accordance with the Agreement. Intellectual property invented or developed solely by a party will be owned by such party and intellectual property jointly invented or developed shall be jointly owned. On November 4, 2019, the parties entered into an amendment to the Sponsored Research Agreement which extended the term of the Agreement through July 14, 2020. The Sponsored Research Agreement expired by its terms in July 2020.
Note 10 – Commitments
(1) Science Advisory Board Member Consulting Agreements (the “Consulting Agreements”)
As part of its ongoing program of research and development, the Company has retained distinguished scientists and other qualified individuals to advise the Company with respect to its technology and business strategy and to assist it in the research, development and analysis of the Company’s technology and products. In furtherance thereof, the Company has retained certain Advisors as members of its Scientific Advisory Board and Business Advisory Board as described below, and the Company and Advisors have entered into Consulting Agreements with the following terms and conditions:
| - | Scientific Advisory Board and Consulting Services - Advisor shall provide general consulting services to Company (the “Services”) as a member of its Scientific Advisory Board (“SAB”). As a member of the SAB, Advisor agrees to provide the Services as follows: (a) attending meetings of the Company’s SAB; (b) performing the duties of a SAB member at such meetings, as established from time to time by the mutual agreement of the Company and the SAB members, including without limitation meeting with Company employees, consultants and other SAB members, reviewing goals of the Company and assisting in developing strategies for achieving such goals, and providing advice, support, theories, techniques and improvements in the Company’s scientific research and product development activities; and (c) providing consulting services to Company at its request, including a reasonable amount of informal consultation over the telephone or otherwise as requested by Company. Advisor’s consultation with Company will involve services as scientific, technical and business advisor to the Company and its management with respect to neuronal injuries and neuro degenerative diseases. |
| - | SAB Consulting Compensation - the Company shall grant to Advisor the option to purchase certain number of shares of the common stock of the Company as per the stock option award grant. The options are subject to terms and provisions of the Company’s 2016 Stock Option and Stock Award Plan. |
15
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 10 – Commitments (continued)
(2) Business Advisory Board Agreements
On February 10, 2020, the Company entered into a one-year advisory board member consulting agreement with Michael Maizel to serve on the Company’s Advisory Board as a business advisor. The Advisory Board Agreement automatically renews for up to two additional one-year periods, unless earlier terminated by either party upon 30 days’ prior written notice to the other party. In consideration for serving on the Advisory Board, the Company granted an option to purchase shares of common stock under the 2016 Stock Option and Award Plan subject to certain vesting terms. Due to continuing Covid-19 pandemic concerns, on August 17, 2020, the Company notified Mr. Maizel of the termination of this agreement. Mr. Maizel’s vested options were forfeited unexercised in January 2021.
2016 Stock Option and Stock Award
On December 14, 2016, the Board adopted the Company’s 2016 Stock Option and Stock Award Plan (the “Plan”). The Plan provides for the award of stock options (incentive and non-qualified), stock awards and stock appreciation rights to officers, directors, employees and consultants who provide services to the Company. The terms of awards under the Plan are made by the Board. The Company has reserved 10 million shares for issuance under the Plan.
(a) Stock Options granted to Science Advisors and Business Advisors
On November 15, 2017, under the Plan, . During the year ended December 31, 2020, shares subject to such options expired unexercised.
On April 16, 2018, under the Plan, . In April 2021, vested options expired unexercised.
On August 15, 2018, under the Plan, .
On July 1, 2019, under the Plan,
On February 10, 2020 under the Plan, .
16
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 11 – Stock Plan (continued)
(b) Stock Options granted to Employees:
On December 10, 2018, the Board awarded an employee the following three-year stock options under the Plan:
On December 10, 2019, the Board awarded an employee, the following three-year stock options under the Plan: On March 23, 2020, the Company accelerated the vesting provision such that options previously vesting on December 10, 2020 and December 10, 2021 immediately vested and expire on March 23, 2023.
On December 10, 2020, under the Plan, the Board awarded an employee, an immediately exercisable three-year stock option to purchase shares of the common stock of the Company at an exercise price of $ per share.
| Three Months ended | Nine Months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Research and development expenses | $ | $ | $ | $ | ||||||||||||
As
of September 30, 2021 and December 31, 2020, total unrecognized compensation remaining to be recognized in future periods totaled $
(c) Stock Options granted to Officers:
On June 25, 2019, the Company appointed John N. Bonfiglio, PhD as its chief operating officer, effective July 1, 2019. .
On December 10, 2019, the Board granted five-year options to purchase shares of common stock to each of its two officers. The options have an exercise price of $ per share and are immediately exercisable.
On December 10, 2020, the Board granted five-year options to purchase shares of common stock to each of its two officers. The options have an exercise price of $ per share and are immediately exercisable.
17
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 11 – Stock Plan (continued)
(c) Stock Options granted to Officers: (continued)
There was no compensation recognized in the three and nine months ended September 30, 2021 and 2020 related to stock option grants. As of September 30, 2021 and December 31, 2020, there was no unrecognized compensation remaining to be recognized in future periods.
| Measurement date | ||||
| Dividend yield | ||||
| Expected volatility | 114.69 ~ 186.80% | |||
| Risk-free interest rate | 0.39% ~ 2.68% | |||
| Expected life (years) | 3 ~ 5 | |||
| Stock Price | $0.38 ~ 2.80 | |||
| Exercise Price | $0.40 ~ 2.00 | |||
| September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
| Weighted Average Exercise | Weighted Average Remaining Contractual Life | Weighted Average Exercise | Weighted Average Remaining Contractual Life | |||||||||||||||||||||
| Shares | Price | (in years) | Shares | Price | (in years) | |||||||||||||||||||
| Outstanding, beginning of period | $ | $ | ||||||||||||||||||||||
| Granted | - | $ | - | |||||||||||||||||||||
| Exercised | - | $ | - | |||||||||||||||||||||
| Canceled/forfeited | ( | ) | $ | - | ( | ) | $ | - | ||||||||||||||||
| Outstanding, end of period | $ | 3.08 | $ | 3.28 | ||||||||||||||||||||
| Options exercisable, end of period | $ | $ | ||||||||||||||||||||||
| Options expected to vest, end of period | $ | - | $ | |||||||||||||||||||||
| Weighted average fair value of options granted | $ | $ | ||||||||||||||||||||||
18
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 12 – Capital Stock
Authorized:
The Company has authorized shares of common stock, par value $, and shares of preferred stock which is designated as Series A Preferred Stock, par value $.
Series A Preferred Stock:
The Series A Preferred Stock is redeemable at the option of the Company at any time, in whole or in part, upon 10 trading days prior notice, at a price of $1.00 per share plus 4% per annum from the date of issuance (the “Stated Value”). The holders of the Series A Preferred Stock are entitled to a liquidation preference equal to the Stated Value, prior to the holders of other preferred stock or common stock. The holders of the Series A Preferred Stock have the right to convert such stock into common stock at a conversion rate equal to the Stated Value as of the conversion date divided by the average closing price of the common stock for the five previous trading days. The Company is required to reserve sufficient number of shares for the conversion of the Series A Preferred Stock. The holders of Class A Preferred Stock shall vote together as a single class with the holders of the Company’s common stock and the holders of any other class or series of shares entitled to vote with the common stock, with the holders of Class A Preferred Stock being entitled to 66 2/3% of the total votes on all such matters, regardless of the actual number of shares of Class A Preferred Stock then outstanding.
There was a total of shares of Series A Preferred Stock issued and outstanding as of September 30, 2021 and December 31, 2020.
Common Stock
In
August 2020, the Company sold an aggregate of shares of its common stock with a five-year warrant to purchase
an aggregate of 100,000 shares of common stock at an exercise price of $1.00 per share (the “Warrant Shares”) to investors
in a private offering for aggregate gross proceeds of $
There was a total of shares of common stock issued and outstanding as of September 30, 2021 and December 31, 2020.
Common Stock Purchase Warrants
As of September 30, 2021 and December 31, 2020, the following common stock purchase warrants were outstanding:
| Warrants | Weighted Average Exercise Price | |||||||
| Outstanding – December 31, 2019 | (1) | $ | ||||||
| Granted | (2)(3) | |||||||
| Canceled/forfeited | ||||||||
| Exercised | ||||||||
| Outstanding – December 31, 2020 | ||||||||
| Outstanding – December 31, 2020 | ||||||||
| Granted | (4) | $ | ||||||
| Canceled/forfeited | ||||||||
| Exercised | ||||||||
| Outstanding –September 30, 2021 | $ | |||||||
19
QRONS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2021 and 2020
Note 12 – Capital Stock (continued)
Common Stock Purchase Warrants (continued)
(1)
During the year ended December 31, 2019, the Company granted certain convertible notes holders warrants to purchase an aggregate of shares
of common stock at an exercise price of $. The fair value of the warrants was $
(2)
During the year ended December 31, 2020, the Company granted a convertible note holder a warrant to purchase shares
of common stock at an exercise price of $. The fair value of the warrant was $
(3) Each two shares of common stock purchased in a private offering included one warrant to purchase an additional share of common stock at an exercise price of $1.00.
(4) On June 15, 2021, the Company granted a convertible note holder a warrant to purchase shares of common stock at an exercise price of $ subject to adjustments for full ratchet resets for dilutive issuances at lower prices.
| Measurement date | ||||
| Dividend yield | ||||
| Expected volatility | 97.90~20.70% | |||
| Risk-free interest rate | 0.16 ~ 1.72% | |||
| Expected life (years) | 2.71 ~ 5.00 | |||
| Stock Price | $0.25 ~ $0.99 | |||
| Exercise Price | $0.40 ~ $1.00 | |||
Note 13 – Subsequent Events
The Company has evaluated events for the period from September 30, 2021 through the date of the issuance of these financial statements and determined that there are no additional events requiring disclosure.
20
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains predictions, estimates and other forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “intends,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors including the risks set forth in the section entitled “Risk Factors” in our Post-Effective Amendment No. 1 to our Registration Statement on Form S-1, as filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2018, that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements
Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Report. You should read this Report with the understanding that our actual future results may be materially different from what we expect.
All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.
The management’s discussion and analysis of our financial condition and results of operations are based upon our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements for the three and nine months ended September 30, 2021 and the notes thereto appearing elsewhere in this Report and the Company’s audited financial statements for the fiscal year ended December 31, 2020, as filed with the SEC in its Annual Report on Form 10-K on March 31, 2021, along with the accompanying notes. As used in this Quarterly Report, the terms “we,” “us,” “our” and the “Company” means Qrons Inc.
The Company has relied primarily on its two co-founders, Jonah Meer, Chief Executive Officer, and Ido Merfeld, President, who are its sole directors to manage its day-to-day business and has outsourced professional services to third parties in an effort to maintain lower operational costs.
Messrs. Meer and Merfeld, as the holders of the Company’s issued and outstanding shares of the Company’s Class A Preferred Stock, collectively have 66 2/3% of the voting rights of the Company. Acting together, they will be able to influence the outcome of all corporate actions requiring approval of our stockholders.
Plan of Operations
We are an innovative biotechnology company dedicated to developing biotech products, treatments and technologies that create a platform to combat neuronal diseases. We seek to engage in strategic arrangements with companies and institutions that are developing breakthrough technologies in the fields of artificial intelligence and machine learning, molecular biology, stem cells and tissue engineering, for deployment in the fight against neuronal diseases. Our search is focused on researchers based in Israel, a country which is world-renowned for biotech innovations.
To date, the Company has collaborated with universities and scientists in the fields of regenerative medicine, tissue engineering and 3D printable hydrogels to develop a treatment that integrates proprietary, engineer mesenchymal stem cells (“MSCs”), 3D printable implant, smart materials and a novel delivery system and has two product candidates for treating penetrating and non-penetrating (concussion-like) traumatic brain injuries, both integrating proprietary, anti-brain inflammation synthetic hydrogel and modified MSCs.
We have not generated any revenue from the sale of products.
21
Results of Operations
Three Months Ended September 30, 2021 and September 30, 2020
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future.
Net Loss
We had a net loss of $79,880 in the three months ended September 30, 2021 compared to a net loss of $153,933 in the three months ended September 30, 2020, as follows:
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Net sales | $ | - | $ | - | ||||
| Operating expenses: | ||||||||
| Research and development expenses | 9,076 | 33,441 | ||||||
| Professional fees | 11,868 | 9,010 | ||||||
| General and administrative expenses | 9,363 | 20,977 | ||||||
| Total operating expenses | 30,307 | 63,428 | ||||||
| Loss from operations | (30,307 | ) | (63,428 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | (43,526 | ) | (12,460 | ) | ||||
| Change in derivative liabilities | (6,047 | ) | (78,045 | ) | ||||
| Total other income (expense) | (49,573 | ) | (90,505 | ) | ||||
| Net loss | $ | (79,880 | ) | $ | (153,933 | ) | ||
Operating Expenses
Total operating expenses for the three months ended September 30, 2021 were $30,307 compared to total operating expenses of $63,428 for the three months ended September 30, 2020. The decrease in operating expenses during the three months ended September 30, 2021 is due to a decrease in research and development expenses from $33,441 for the three months ended September 30, 2020 to $9,076 for the three months ended September 30, 2021, and a decrease in general and administrative expenses from $20,977 during the three months ended September 30, 2020 to $9,363 for the three months ended September 30, 2021, offset by a small increase in professional fees from $9,010 for the three months ended September 30, 2020 to $11,868 for the three months ended September 30, 2021. During the three months ended September 30, 2020, the Company incurred $33,441 of research and development expenses which included service fees related to certain research and development agreements of $19,840, legal and filing fees related to patents of $5,610 and technology licensing fees of $7,991 as compared to $9,076 in research and development fees for the three months ended September 30, 2021 which includes licensing fees of $6,250 and software license and equipment costs of $2,826. The decrease in general and administrative expense during the three months ended September 30, 2021 was primarily due to a decrease in overall operating activities during the three months ended September 30, 2021.
Other Income (Expense)
Other expense in the three months ended September 30, 2021 was $49,573, which included a loss of $6,047 as a result of the change in value of derivative liabilities, and interest expense of $43,526 which is comprised of accretion of convertible notes of $37,779 and accrued interest on convertible notes payable of $5,747. Other expense in the three months ended September 30, 2020 was $90,505, which included a loss of $78,045 as a result of the change in value of derivative liabilities, and interest expense of $12,460 which is comprised of accretion of convertible notes of $8,931 and accrued interest on convertible notes payable of $3,529.
22
Nine Months Ended September 30, 2021 and September 30, 2020
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future.
Net Loss
We had a net loss of $280,615 in the nine months ended September 30, 2021 compared to a net loss of $410,796 in the nine months ended September 30, 2020, as follows:
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Net sales | $ | - | $ | - | ||||
| Operating expenses: | ||||||||
| Research and development expenses | 32,262 | 207,900 | ||||||
| Professional fees | 35,808 | 39,526 | ||||||
| General and administrative expenses | 43,398 | 48,528 | ||||||
| Total operating expenses | 111,468 | 295,954 | ||||||
| Loss from operations | (111,468 | ) | (295,954 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | (166,270 | ) | (39,559 | ) | ||||
| Change in derivative liabilities | (2,877 | ) | (75,283 | ) | ||||
| Total other income (expense) | (169,147 | ) | (114,842 | ) | ||||
| Net loss | $ | (280,615 | ) | $ | (410,796 | ) | ||
Operating Expenses
Total operating expenses for the nine months ended September 30, 2021 were $111,468 compared to total operating expenses of $295,954 for the nine months ended September 30, 2020. The decrease in operating expenses during the nine months ended September 30, 2021 is due to substantially decreased research and development activities as a result of the impact of COVID 19. During the nine months ended September 30, 2021, the Company incurred $32,262 of research and development expenses which included service fees related to certain research and development agreements of $6,200, technology licensing fees of $18,750, software licensing fees of $6,826 and purchases of expendable lab supplies and equipment of $486, compared to $207,900 of research and development expenses which included payroll of $79,274, service fees related to certain research and development agreements of $124,820, a credit offsetting prior accrued fees associated with a sponsored research agreement of $26,809, legal and filing fees related to patents of $6,197, purchases of expendable lab supplies and equipment of $445 and technology licensing fees of $23,973, during the nine months ended September 30, 2020. The Company incurred general and administrative expenses of $43,398 for the nine months ended September 30, 2021 compared to general and administrative expenses of $48,528 for the nine months ended September 30, 2020. Professional fees were $35,808 for the nine months ended September 30, 2021, which reflect a slight decrease in legal and audit fees compared to professional fees of $39,526 during the nine months ended September 30, 2020.
23
Other Income (Expense)
Other expense in the nine months ended September 30, 2021 was $169,147, which included a loss of $2,877 as a result of the change in value of derivative liabilities, and interest expense of $166,270, which is comprised of accretion of convertible notes of $60,269, financing costs of $94,332 and accrued interest on convertible notes payable of $11,669. Other expense in the nine months ended September 30, 2020 was $114,842 and included a loss of $75,283 as a result of the change in value of derivative liabilities, and interest expense of $39,559 which is comprised of accretion of convertible notes of $26,350, financing costs of $3,400 and accrued interest on convertible notes of $9,809.
Operating Activities
Net cash used in operating activities was $100,458 for the nine months ended September 30, 2021 compared to $185,567 for the nine months ended September 30, 2020. Net cash used in operating activities for the nine months ended September 30, 2021 was primarily the result of net loss, offset by non-cash items, including compensation in the form of stock options for research and development expense of $6,200, accretion of debt discount of $60,269, an increase from the change in derivative liabilities of $2,877, non-cash interest expense of $94,332 and changes to operating assets and liabilities, including an increase to prepaid expenses of $2,000, an increase to accounts payable of $22,399 and a decrease to accounts payable-related parties of $3,920. Net Cash used in operating activities for the nine months ended September 30, 2020 was primarily the result of net loss, offset by non-cash items including compensation in the form of stock options for research and development expense totalling $117,111, warrants granted as financing costs valued at $3,400, accretion of debt discount of $26,350, a loss from the change in derivative liabilities of $75,284 and changes to operating assets and liabilities, including a decrease to prepaid expenses of $54,522, a decrease to accounts payable of $62,483 and an increase to accounts payable-related parties of $11,045.
Investing Activities
There were no investing activities during the nine months ended September 30, 2021 and 2020.
Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2021 totaled $100,000 in proceeds from convertible notes. Net cash provided by financing activities during the nine months ended September 30, 2020 totaled $211,00, which was comprised of $101,000 in proceeds from related parties in the form of short-term advances from its officers $100,000 in proceeds from a private placement and $10,000 in proceeds from a convertible note.
Liquidity and Capital Resources
As of September 30, 2021, we had cash of $57,174 and prepaid expenses totalling $2,000. We are in the early stage of development and have experienced net losses to date and have not generated revenue from operations which raises substantial doubt about our ability to continue as a going concern. There are a number of conditions that we must satisfy before we will be able to commercialize potential products and generate revenue, including successful development of product candidates, which includes clinical trials, FDA approval, demonstration of effectiveness sufficient to generate commercial orders by customers, establishing production capabilities as well as effective marketing and sales capabilities for our product. We do not currently have sufficient resources to accomplish any of these conditions necessary for us to generate revenue and expect to incur increasing operating expenses. We will require substantial additional funds for operations, the service of debt and to fund our business objectives. There can be no assurance that financing, whether debt or equity, will be available to us in the amount required at any particular time or for any particular period or, if available, that it can be obtained on terms favorable to us. If additional funds are raised by the issuance of equity securities, such as through the issuance and exercise of warrants, then existing stockholders will experience dilution of their ownership interest. If additional funds are raised by the issuance of debt or other equity instruments, we may be subject to certain limitations in our operations, and issuance of such securities may have rights senior to those of the then existing stockholders. We currently have no agreements, arrangements or understandings with any person or entity to obtain funds through bank loans, lines of credit or any other sources.
As we monitor the full impact of the COVID-19 outbreak, we continue exploring sources of debt and equity financings as well as available grants. We are currently exploring and are in discussions for potential strategic alternatives in the biotechnology field which could advance our MSCs and neurodegenerative research. There can be no assurance the necessary financing will be available or that a suitable strategic partner will be identified. In such event, we may explore relationships with third parties to develop or commercialize products or technologies that we have not previously sought to develop or commercialize, decide to exit our existing business, cease operations altogether or pursue an acquisition of our company. However, without additional financing, we do not believe our resources will be sufficient to meet our operating and capital needs beyond the second quarter of 2022.
24
Quick Capital Financing
On June 15, 2021, the Company entered into a note purchase agreement with Quick Capital, LLC, a Wyoming limited liability company (“Quick Capital”), pursuant to which the Company issued Quick Capital a twelve-month convertible promissory note in the principal amount of $115,000 (the “Note”) for a $100,000 investment, which included an original issuance discount of 10% and a $3,500 credit for Quick Capital’s legal and transaction costs. In connection with the Note issuance, Quick Capital was also issued a five-year warrant (the “Warrant”) to purchase up to an aggregate of 115,000 shares of the Company’s common stock at an exercise price of $1.00 per share (the “Warrant Shares”). If there is no effective registration statement covering the Warrant Shares, Quick Capital may exercise the Warrant on a cashless basis. The Note is convertible into shares of common stock at a conversion price of $0.50 per share. The Note may not be converted, and the Warrant may not be exercised if after giving effect to such conversion or exercise, as the case may be, Quick Capital and its affiliates would beneficially own more than 4.99% of the outstanding common stock of the Company. For twelve months following the issuance of the Quick Note, Quick Capital will have the right of first refusal to participate in future financings proposed to the Company on the same terms and participation rights to purchase up to $115,000 of securities in other offerings. The conversion price of the Note will be reduced if the Company issues common stock or grants derivative securities for consideration at a price less than the conversion price to the amount of the consideration of such dilutive issuance. The Note contains certain restrictive covenants limiting the Company’s ability to make distributions or dividends, repurchase its securities, incur debt, sell assets, make loans, or engage in exchange offers. If an event of default (as described in the Note) occurs, the Note will become immediately due and payable in an amount equal to 150% of the then outstanding principal amount of the Note plus any interest or amounts owing to Quick Capital. Quick Capital is entitled to the same terms of future financings of the Company that are more favourable than the terms of the Quick Note.
Going Concern
Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. Our report from our independent registered public accounting firm for the fiscal year ended December 31, 2020 includes an explanatory paragraph stating the Company has recurring losses and limited operations which raise substantial doubt about its ability to continue as a going concern. If the Company is unable to obtain adequate capital, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in Note 2 to our unaudited financial statements contained herein.
Research and Development Costs: The Company charges research and development costs to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development costs were $32,262 and $207,900 for the nine-month periods ended September 30, 2021 and 2020, respectively.
Stock-Based Compensation and Other Share-Based Payments: The Company records stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation, using the fair value method on grant date. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the equity instruments issued. The expense attributable to the Company’s directors is recognized over the period the amounts are earned and vested, and the expense attributable to the Company’s non-employees is recognized when vested, as described in Note 11, Stock Plan.
25
Advertising and Marketing Costs: Advertising and marketing costs are expensed as incurred. The Company incurred $18,107 and $24,307 in advertising and marketing costs during the nine months ended September 30, 2021 and September 30, 2020, respectively.
Warrants: The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in ASC 815 Derivatives and Hedging, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. For warrants classified as equity instruments the Company applies the Black Scholes model and expenses the fair value as financing costs.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued recently, none of which are expected to have a material effect on the Company’s operations, financial position or cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company and are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of September 30, 2021, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, based on the material weaknesses discussed below, our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our internal controls and procedures are not effective for the following reasons: (i) there is an inadequate segregation of duties consistent with control objectives as management is comprised of only two persons, one of which is the Company’s principal executive officer and principal financial officer and, (ii) the Company does not have a formal audit committee with a financial expert, and thus the Company lacks the board oversight role within the financial reporting process.
In order to mitigate the foregoing material weakness, we have engaged an outside accounting consultant with significant experience in the preparation of financial statements in conformity with GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity with GAAP. We will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.
We would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will continue to reassess this matter to determine whether improvement in segregation of duty is feasible. In addition, we would need to expand our board to include independent members.
Going forward, we intend to evaluate our processes and procedures and, where practicable and resources permit, implement changes in order to have more effective controls over financial reporting.
Changes in Internal Control over Financial Reporting
During the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company and is not required to provide this information.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of equity securities during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
| Exhibit Number | Exhibit | |
| 31 | Certification of the Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32 | Certification of the Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) | |
| 101.INS | XBRL INSTANCE DOCUMENT | |
| 101.SCH | XBRL TAXONOMY EXTENSION SCHEMA | |
| 101.CAL | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE | |
| 101.DEF | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE | |
| 101.LAB | XBRL TAXONOMY EXTENSION LABEL LINKBASE | |
| 101.PRE | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
27
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.
| QRONS INC. | ||
| Date: November 15, 2021 | By: | /s/ Jonah Meer |
| Jonah Meer | ||
| Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
28
Exhibit 31
Certification Pursuant to pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
I, Jonah Meer, (Principal Executive Officer and Principal Financial and Accounting Officer), certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Qrons Inc. (the “Company); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | As the registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15 (f) for the registrant and I have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | As the registrant’s certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 15, 2021 | By: | /s/ Jonah Meer |
| Jonah Meer | ||
| Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Jonah Meer, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) of Qrons Inc. (the “Company”), certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350) that, to his knowledge, the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 (the “Report”):
| (1) | fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| /s/ Jonah Meer | |
| Jonah Meer | |
| Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) |
|
| Date: November 15, 2021 |
Condensed Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Series A Preferred Shares, par value | $ 0.001 | $ 0.001 |
| Series A Preferred Shares, authorized | 10,000 | 10,000 |
| Series A Preferred Shares, shares issued | 2,000 | 2,000 |
| Series A Preferred Shares, shares outstanding | 2,000 | 2,000 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 13,289,789 | 13,289,789 |
| Common stock, shares outstanding | 13,289,789 | 13,289,789 |
Condensed Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| Net sales | ||||
| Operating expenses: | ||||
| Research and development expenses | 9,076 | 33,441 | 32,262 | 207,900 |
| Professional fees | 11,868 | 9,010 | 35,808 | 39,526 |
| General and administrative expenses | 9,363 | 20,977 | 43,398 | 48,528 |
| Total operating expenses | 30,307 | 63,428 | 111,468 | 295,954 |
| Loss from operations | (30,307) | (63,428) | (111,468) | (295,954) |
| Other income (expense) | ||||
| Interest expense | (43,526) | (12,460) | (166,270) | (39,559) |
| Change in derivative liabilities | (6,047) | (78,045) | (2,877) | (75,283) |
| Total other income (expense) | (49,573) | (90,505) | (169,147) | (114,842) |
| Net loss | $ (79,880) | $ (153,933) | $ (280,615) | $ (410,796) |
| Net loss per common share – basic and diluted | $ (0.01) | $ (0.01) | $ (0.02) | $ (0.03) |
| Weighted average shares outstanding basic and diluted | 13,289,789 | 13,182,180 | 13,289,789 | 13,120,811 |
Description of Business and Basis of Presentation |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Description of Business and Basis of Presentation | Note 1 – Description of Business and Basis of Presentation
Organization and Nature of Business:
Qrons Inc. (“Qrons” or the “Company”) was incorporated under the laws of the State of Wyoming on August 22, 2016 under the name BioLabMart Inc. and changed its name to Qrons Inc., effective August 8, 2017.
The Company’s common stock was approved by the Financial Industry Regulatory Authority (“FINRA”) for quotation on the OTC pink sheets under the symbol “BLMB” as of July 3, 2017. FINRA announced the Company’s name change to Qrons Inc. on August 9, 2017. The new name and symbol change to “QRON” for the OTC Market was effective August 10, 2017. The Company’s common stock was upgraded from the Pink Market and commenced trading on the OTCQB Venture Market on August 12, 2019.
The Company is an innovative biotechnology company dedicated to developing biotech products, treatments and technologies to combat neuronal diseases, which are an enormous social and economic burden on society. The Company seeks to engage in strategic arrangements with companies and institutions that are developing breakthrough technologies in the fields of artificial intelligence, machine learning, molecular biology, stem cells and tissue engineering, for deployment in the fight against neuronal diseases. The Company’s search is currently focused on researchers based in Israel, a country which is world-renowned for biotech innovations.
The Company’s principal executive office is located at 50 Battery Place, #7T, New York, New York 10280.
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Summary of Significant Accounting Policies |
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies
Financial Statement Presentation: The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three and nine-month periods have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.
Fiscal Year End: The Company has selected December 31 as its fiscal year end.
Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.
Cash Equivalents: The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.
Research and Development Costs: The Company charges research and development costs to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development costs were $32,262 and $207,900 for the nine-month periods ended September 30, 2021 and 2020, respectively.
Advertising and Marketing Costs: Advertising and marketing costs are expensed as incurred. The Company incurred $18,107 and $24,307 in advertising and marketing costs during the nine-month periods ended September 30, 2021 and 2020, respectively.
Related Parties: For the purposes of these financial statements, parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.
The following table provides a summary of the fair value of the Company’s derivative liabilities as of September 30, 2021 and December 31, 2020:
Warrants: The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in ASC 815 Derivatives and Hedging, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. For warrants classified as equity instruments the Company applies the Black Scholes model and expenses the fair value as financing costs. For warrants classified as derivative financial instruments the Company applies the Monte Carlo model to value the warrants.
Income taxes: The Company has adopted ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement 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 in which those temporary differences are expected to be recovered or settled.
Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method), convertible notes, classes of shares with conversion features, and stock awards and stock options.
New Accounting Pronouncements: Certain new accounting pronouncements that have been issued are not expected to have a material effect on the Company’s financial statements.
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Going Concern |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Going Concern | Note 3 – Going Concern
The Company has experienced net losses to date and has not generated revenues from operations. While the Company raised proceeds of $100,000 during the nine months ended September 30, 2021 through issuance of a convertible promissory note, and $211,000 during the year ended December 31, 2020 by way of private placement offerings to accredited investors, loans and advances from its officers and directors and third-party short term loans, it does not believe its resources will be sufficient to meet its operating and capital needs beyond the second quarter of 2022. The Company expects it will require additional capital to fully implement the scope of its proposed business operations, which raises substantial doubt about its ability to continue as a going concern. The Company will have to continue to rely on equity and debt financing, and continued support from its officers and directors. There can be no assurance that financing, whether debt or equity, will be available to the Company in the amount required at any particular time or for any particular period or, if available, that it can be obtained on favorable terms. In addition, if the Company is unable to obtain adequate financing due to the continued effect of COVID-19 on the capital markets, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amount and classification of liabilities that might cause results from this uncertainty.
Covid-19 Pandemic
The COVID-19 pandemic has had an adverse impact on the research and development of our product candidates. Research facilities at Dartmouth were subject to closures as well as laboratories at Ariel in Israel during fiscal 2020. This resulted in our discontinuing our research at these Universities and was part of our decision to adjust our research to be collaborative and to seek aligning with third parties to advance our expanded goals. We do not currently know the full extent of potential delays of research in the future as a result of the continuing pandemic restrictions.
COVID-19 has also caused significant disruptions to the global financial markets, which severely impacts our ability to raise additional capital. We terminated our employees in April 2020 in an effort to conserve resources as we evaluate our business development efforts. The ultimate impact on us and our research relationships is currently uncertain. We may be required to further reduce operations or cease operations if we are unable to finance our operations.
Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to fully estimate the effects of the COVID-19 outbreak on its planned operations or financial condition in the next 12 months. However, while significant uncertainty remains, the Company believes it is likely that the COVID-19 outbreak will have a negative impact on its ability to raise additional financing and will result in delays as it continues to impact the Company’s workforce and its collaborative development efforts.
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Convertible Note – Related Party and Derivative Liabilities |
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| Convertible Note Related Party And Derivative Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Note – Related Party and Derivative Liabilities | Note 4 – Convertible Note – Related Party and Derivative Liabilities
On September 1, 2016, the Company entered into a convertible debenture agreement with Decagon LLC, doing business as CubeSquare, LLC (“CubeSquare”), of which its Chief Executive Officer is the managing partner and its President is a 25% owner of CubeSquare. The Company received proceeds of $10,000 during fiscal 2016 (“Note 1”). The note bears interest at 8% per annum and was due on September 1, 2017. Interest accrues from September 1, 2016 and is payable on maturity. Interest is payable, at the lender’s option, in cash or common stock. Any portion of the loan and unpaid interest is convertible at any time at the option of CubeSquare into shares of common stock of the Company at a conversion price of the greater of (i) $0.0625 per share if the Company’s shares are not trading on a public market and; (ii) in the event the Company’s shares are listed for trading on a public market, the conversion price shall be equal to a 50% discount to the average of the five lowest trading prices during the previous twenty trading days prior to the date of the notice of conversion from the lender.
On September 29, 2017, the Company and CubeSquare amended Note 1 to extend the maturity date from September 1, 2017 to September 1, 2018; on September 9, 2018, the Company further amended Note 1 to extend the maturity date to September 1, 2019; on November 6, 2019, the Company further amended Note 1 to extend the maturity date to September 1, 2020; on October 30, 2020, the Company further amended Note 1 to extend the maturity date to September 1, 2021; and on October 7, 2021, the Company further amended Note 1 to extend the maturity date to September 1, 2022 under the same terms and conditions.
On September 27, 2017, the Company entered into a second convertible debenture agreement with CubeSquare under which the Company received proceeds of $15,000 (Note 2). Note 2 bears interest at 8% per annum and was due on September 27, 2018. Interest accrues from September 27, 2017 and is payable on maturity. Any portion of the principal and unpaid interest under the note is convertible at any time at the option of CubeSquare into shares of common stock of the Company at a conversion price equal to a 50% discount to the average of the five lowest trading prices during the previous twenty trading days prior to the date of the notice of conversion from CubeSquare. On September 9, 2018, Note 2 was amended to extend the maturity date to September 27, 2019. On November 6, 2019, Note 2 was amended to extend the maturity date to September 27, 2020 ; on October 30, 2020 Note 2 was amended to extend the maturity date to September 27, 2021; and further on October 7, 2021 Note 2 was amended to extend the maturity date to September 27, 2022.
The Company analyzed the amendment to Note 1 and Note 2 under ASC 815-10-15-83 and concluded that the conversion feature within these two convertible Notes meet the definition of a derivative. The Company estimated the fair value of the derivative at each report date using the Black-Scholes valuation model to value the derivative liability related to the variable conversion rate.
The carrying value of these convertible notes is as follows:
As of September 30, 2021 and December 31, 2020, the unpaid interest balance under Accounts payable and accrued liabilities – related party was $8,945 and $7,449, respectively.
As a result of the application of ASC 815, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of September 30, 2021 and December 31, 2020 and the commitment date:
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Convertible Note and Derivative Liabilities |
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| Convertible Note and Derivative Liabilities | Note 5 – Convertible Note and Derivative Liabilities
(1) 8% Convertible notes with warrants issued in December 2019 and February 2020
In December 2019, we issued and sold in a private offering 8% convertible notes in the aggregate principal amount of $70,000. Such notes are due on December 31, 2021 and are convertible into shares of our common stock at a conversion price (the “Conversion Price”) for each share of common stock equal to the lesser of: (a) $0.50, (b) the lowest price at which the Company has converted any convertible security of the Company (to the holder or to any third party) within 30 trading days prior to the date of delivery of the applicable Notice of Conversion; and (c) so long as lower than (a) or (b), such price per share of common stock as the Company and the holder may agree from time to time. In connection with the 8% convertible note issuance, we issued warrants to purchase an aggregate of 70,000 shares of common stock at an exercise price of $1.00.
On February 19, 2020 we issued and sold in a private offering 8% convertible notes in the principal amount of $10,000, due on February 19, 2022. Such notes are convertible into shares of common stock at a conversion price per share equal to the lesser of: (a) $0.50; (b) the lowest price at which the Company has converted any convertible security of the Company within 30 trading days prior to the date of delivery of the applicable notice of conversion; and (c) such other as the Company and the holder may agree. In connection with the 8% convertible note issuance, we issued warrants to purchase an aggregate of 10,000 shares of common stock at an exercise price of $1.00.
The carrying value of these convertible notes is as follows:
Interest expenses associated with the convertible notes are as follows:
As of September 30, 2021 and December 31, 2020, the unpaid interest balance under Accounts payable and accrued liabilities was $11,858 and $7,373, respectively.
The convertible notes qualify for derivative accounting and bifurcation under ASC 815. The derivative liability of the $80,000 convertible notes was calculated using the Black-Scholes pricing model to be $72,689.
As a result of the application of ASC 815, as of September 30, 2021 and 2020, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2020 and September30, 2021 and the commitment date:
(2) 8% Convertible note with warrants issued on June 15, 2021
On June 15, 2021, the Company entered into a note purchase agreement with Quick Capital, LLC (“Quick Capital”) pursuant to which the Company issued a twelve-month convertible promissory note in the principal amount of $115,000 for a $100,000 investment (the “Note”), which included an original issuance discount of 10% and a $3,500 credit for legal and transaction costs. In connection with this convertible note issuance, Quick Capital was also issued a five-year warrant (the “Warrant”) to purchase up to an aggregate of 115,000 shares of the Company’s common stock at an exercise price of $1.00 per share (the “Warrant Shares”) subject to adjustments for dilutive issuances at lower prices.
The Note is convertible into shares of common stock at a conversion price of $0.50 per share. If delivery of the Conversion Shares is not timely made, the Company is obligated to pay Quick Capital $2,000 for each day that the delivery is late as liquidated damages. The conversion price of the Note will be reduced if the Company issues common stock or grants derivative securities for consideration at a price less than the conversion price to the amount of the consideration of such dilutive issuance (“full ratchet reset”). The Note may not be prepaid.
The Company is subject to significant cash penalties if the Company defaults on the notes or in the event shares are not issued timely when a notice of conversion is provided. If an event of default occurs, the Note will become immediately due and payable in an amount equal to 150% of the then outstanding principal amount of the Note plus any interest or amounts owing to Quick Capital. The default provisions are based on the type of default and include a penalty of 50% of the principal plus accrued interest due (the “Default Sum”) and a parity value of the Default Sum based on the effective conversion of the Note on the date of payment of the default and the maximum stock value during the period between the default date and the payment date.
(2) 8% Convertible note with warrants issued on June 15, 2021
The Company valued the embedded default derivative liability of the Note and the Warrant liability, including the full ratchet reset feature, using Monte Carlo models.
The carrying value of the Note is as follows:
Interest expenses associated with the conversion is as follows:
As a result of the application of ASC 815 as of September 30, 2021 and June 15, 2021, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of September 30, 2021 and the commitment date:
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Unsecured Short-Term Advance from Third Party |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Debt Disclosure [Abstract] | |
| Unsecured Short-Term Advance from Third Party | Note 6 – Unsecured Short-Term Advance from Third Party
On June 20, 2019, the Company received $100,000 from a third party in the form of an unsecured, demand, non-interest-bearing, short-term advance to meet its operating needs. The advance remains outstanding at September 30, 2021 and December 31, 2020. |
Related Party Transactions |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
(1) Demand Loan from related party
On May 1, 2019, the Company issued a promissory note (the “Note”) to CubeSquare in the principal amount of $50,000. The Note bears interest at the rate of 8% per annum and is due and payable by the Company upon demand from CubeSquare. We recorded interest expenses of $1,008 and $2,991 for the three and nine months ended September 30, 2021, respectively. We recorded interest expenses of $1,008 and $3,003 for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021 and December 31, 2020, the unpaid interest balance under Accounts payable and accrued liabilities – related party was $9,665 and $6,674, respectively.
(2) Advances from Related Parties
During the year ended December 31, 2019, the Company received $135,000 from Jonah Meer, its Chief Executive Officer, in the form of an unsecured, demand, non-interest-bearing, short-term advance to help meet its operating needs. During the year ended December 31, 2020, the Company received an additional $70,000 from Jonah Meer.
On August 20, 2019, the Company received $50,000 from Ido Merfeld, its President, in the form of an unsecured, demand, non-interest-bearing, short-term advance to help meet its operating needs. During the year ended December 31, 2020, the Company received an additional $21,000 from Ido Merfeld.
During the year ended December 31, 2020, the Company received $10,000 from CubeSquare in the form of an unsecured, demand, non-interest-bearing, short-term advance to help meet its operating needs. The Company’s Chief Executive Officer is the managing partner and the Company’s President is a 25% owner of CubeSquare.
(3) Others
Jonah Meer, the Company’s Chief Executive Officer, made payments to various vendors during the years ended December 31, 2019 and 2020. The balance payable to Mr. Meer of $21,068 and $28,475 is reflected in accounts payable, related party as of September 30, 2021 and December 31, 2020, respectively.
During the year ended December 31, 2019, Ido Merfeld, the Company’s President, made payments to various vendors in the aggregate amount of $1,169. The balance payable to Mr. Merfeld of $1,169 is reflected in accounts payable, related party as of September 30, 2021 and December 31, 2020.
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License and Research Funding Agreement |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| License And Research Funding Agreement | |
| License and Research Funding Agreement | Note 8 – License and Research Funding Agreement / Royalty Agreement
Ariel Scientific Innovation Ltd.
On November 30, 2019, the Company entered into a royalty and license fee sharing agreement (the “Royalty Agreement”) with Ariel Scientific Innovations Ltd., a wholly owned subsidiary of Ariel University, in Ariel, Israel (“Ariel”), which, among other things, superseded and terminated the original license and research funding agreement, dated December 14, 2016, as amended, between the Company and Ariel (the “License Agreement”). Upon the occurrence of an Exit Event, as such term is described in the Royalty Agreement, including an underwritten public offering of the Company’s shares with proceeds of at least $25 million, a consolidation, merger or reorganization of the Company, and a sale of all or substantially all of the shares and/or the assets of the Company, Ariel has the right to require the Company to issue up to 3% of the then issued and outstanding shares of its common stock. The issuance of any such shares in the future will result in dilution to the interests of other stockholders. In consideration for the parties’ agreement to terminate the License Agreement and for future general scientific collaboration between the parties, the Company agreed to pay Ariel a royalty of 1.25% of net sales (as defined in the Royalty Agreement) of products sold by the Company, or its affiliates and licensees for fifteen years from the first commercial sale in a particular country.
Services agreements which the Company had with Ariel related to laboratory access, molecular biology and neurobiology research, and other services terminated during the year ended December 31, 2020. During 2020, Ariel refunded to the Company certain previously advanced and unused funds.
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Intellectual Property License Agreement and Sponsored Research Agreement |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| Intellectual Property License Agreement and Sponsored Research Agreement | Note 9 – Intellectual Property License Agreement and Sponsored Research Agreement
Dartmouth College – IP License Agreement
On October 2, 2019, the Company entered into the Intellectual Property License Agreement pursuant to which Dartmouth granted the Company an exclusive world-wide license under the patent application entitled “Mechanically Interlocked Molecules-based Materials for 3D Printing” in the field of human and animal health and certain additional patent rights to use and commercialize licensed products and services. The license grant includes the right of the Company to sublicense to third parties subject to the terms of the Agreement.
The Agreement provided for: (i) a $25,000 license issue fee; (ii) an annual license maintenance fee of $25,000, until the first commercial sale of a licensed product or service; (iii) an earned royalty of 2% of net sales of licensed products and services by the Company or a sublicensee; (iv) 15% of consideration received by the Company under a sublicense; and (v) beginning in the first calendar year after the first commercial sale, an annual minimum royalty payment of $500,000, $1,000,000 in the second calendar year, and $2,000,000 in the third calendar year and each year thereafter. The Company will also reimburse Dartmouth for all patent preparation, filing, maintenance and defense costs.
Failure to timely make any payment due under the Agreement will result in interest charges to the Company of the lower of 10% per year or the maximum amount of interest allowable by applicable law.
The Agreement may be terminated by Dartmouth if the Company is in material breach of the Agreement which is not cured after 30 days of notice thereof or if the Company becomes insolvent. Dartmouth may terminate the Agreement if the Company challenges a Dartmouth patent or does not terminate a sublicensee that challenges a Dartmouth patent, except in response to a valid court or governmental order. The Company may terminate the Agreement at any time upon six months written notice to Dartmouth.
If the Company or any sublicensee or affiliate institutes or participates in a licensed patent challenge, the then current earned royalty rate for licensed products covered by Dartmouth patents will automatically be increased to three times the then current earned royalty rate.
On March 23, 2021, the United States Patent and Trademark Office issued U.S. Patent No. 10,954,315 to the Trustees of Dartmouth College which is directed to mechanically interlocked, molecules-based materials for 3-D printing. The patent’s inventors are Professor Chenfeng Ke, a member of the Company’s Scientific Advisory Board and Qianming Lin, Professor Ke’s assistant. The patent grant is the culmination of the Intellectual Property License Agreement between the Company and Dartmouth with respect to an exclusive world-wide license of intellectual property related to 3D printable materials in the fields of human and animal health.
The Company recorded $18,750 as license fees during the nine months ended September 30, 2021, and 2020 with respect to such annual fee.
Dartmouth College – Sponsored Research Agreement
On July 12, 2018, the Company entered into a one-year sponsored research agreement (the “Sponsored Research Agreement”) with the Trustees of Dartmouth College (“Dartmouth”) pursuant to which the Company will support and fund the cost of research conducted by Dartmouth of mutual interest to the parties in accordance with the Agreement. Intellectual property invented or developed solely by a party will be owned by such party and intellectual property jointly invented or developed shall be jointly owned. On November 4, 2019, the parties entered into an amendment to the Sponsored Research Agreement which extended the term of the Agreement through July 14, 2020. The Sponsored Research Agreement expired by its terms in July 2020.
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Commitments |
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Sep. 30, 2021 | |||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||
| Commitments | Note 10 – Commitments
(1) Science Advisory Board Member Consulting Agreements (the “Consulting Agreements”)
As part of its ongoing program of research and development, the Company has retained distinguished scientists and other qualified individuals to advise the Company with respect to its technology and business strategy and to assist it in the research, development and analysis of the Company’s technology and products. In furtherance thereof, the Company has retained certain Advisors as members of its Scientific Advisory Board and Business Advisory Board as described below, and the Company and Advisors have entered into Consulting Agreements with the following terms and conditions:
(2) Business Advisory Board Agreements
On February 10, 2020, the Company entered into a one-year advisory board member consulting agreement with Michael Maizel to serve on the Company’s Advisory Board as a business advisor. The Advisory Board Agreement automatically renews for up to two additional one-year periods, unless earlier terminated by either party upon 30 days’ prior written notice to the other party. In consideration for serving on the Advisory Board, the Company granted an option to purchase shares of common stock under the 2016 Stock Option and Award Plan subject to certain vesting terms. Due to continuing Covid-19 pandemic concerns, on August 17, 2020, the Company notified Mr. Maizel of the termination of this agreement. Mr. Maizel’s vested options were forfeited unexercised in January 2021.
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Stock Plan |
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| Stock Plan |
2016 Stock Option and Stock Award
On December 14, 2016, the Board adopted the Company’s 2016 Stock Option and Stock Award Plan (the “Plan”). The Plan provides for the award of stock options (incentive and non-qualified), stock awards and stock appreciation rights to officers, directors, employees and consultants who provide services to the Company. The terms of awards under the Plan are made by the Board. The Company has reserved 10 million shares for issuance under the Plan.
(a) Stock Options granted to Science Advisors and Business Advisors
On November 15, 2017, under the Plan, . During the year ended December 31, 2020, shares subject to such options expired unexercised.
On April 16, 2018, under the Plan, . In April 2021, vested options expired unexercised.
On August 15, 2018, under the Plan, .
On July 1, 2019, under the Plan,
On February 10, 2020 under the Plan, .
(b) Stock Options granted to Employees:
On December 10, 2018, the Board awarded an employee the following three-year stock options under the Plan:
On December 10, 2019, the Board awarded an employee, the following three-year stock options under the Plan: On March 23, 2020, the Company accelerated the vesting provision such that options previously vesting on December 10, 2020 and December 10, 2021 immediately vested and expire on March 23, 2023.
On December 10, 2020, under the Plan, the Board awarded an employee, an immediately exercisable three-year stock option to purchase shares of the common stock of the Company at an exercise price of $ per share.
As of September 30, 2021 and December 31, 2020, total unrecognized compensation remaining to be recognized in future periods totaled $0 and $6,100, respectively.
(c) Stock Options granted to Officers:
On June 25, 2019, the Company appointed John N. Bonfiglio, PhD as its chief operating officer, effective July 1, 2019. .
On December 10, 2019, the Board granted five-year options to purchase shares of common stock to each of its two officers. The options have an exercise price of $ per share and are immediately exercisable.
On December 10, 2020, the Board granted five-year options to purchase shares of common stock to each of its two officers. The options have an exercise price of $ per share and are immediately exercisable.
There was no compensation recognized in the three and nine months ended September 30, 2021 and 2020 related to stock option grants. As of September 30, 2021 and December 31, 2020, there was no unrecognized compensation remaining to be recognized in future periods.
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| Capital Stock | Note 12 – Capital Stock
Authorized:
The Company has authorized shares of common stock, par value $, and shares of preferred stock which is designated as Series A Preferred Stock, par value $.
Series A Preferred Stock:
The Series A Preferred Stock is redeemable at the option of the Company at any time, in whole or in part, upon 10 trading days prior notice, at a price of $1.00 per share plus 4% per annum from the date of issuance (the “Stated Value”). The holders of the Series A Preferred Stock are entitled to a liquidation preference equal to the Stated Value, prior to the holders of other preferred stock or common stock. The holders of the Series A Preferred Stock have the right to convert such stock into common stock at a conversion rate equal to the Stated Value as of the conversion date divided by the average closing price of the common stock for the five previous trading days. The Company is required to reserve sufficient number of shares for the conversion of the Series A Preferred Stock. The holders of Class A Preferred Stock shall vote together as a single class with the holders of the Company’s common stock and the holders of any other class or series of shares entitled to vote with the common stock, with the holders of Class A Preferred Stock being entitled to 66 2/3% of the total votes on all such matters, regardless of the actual number of shares of Class A Preferred Stock then outstanding.
There was a total of shares of Series A Preferred Stock issued and outstanding as of September 30, 2021 and December 31, 2020.
Common Stock
In August 2020, the Company sold an aggregate of shares of its common stock with a five-year warrant to purchase an aggregate of 100,000 shares of common stock at an exercise price of $1.00 per share (the “Warrant Shares”) to investors in a private offering for aggregate gross proceeds of $100,000. The proceeds will be used for general corporate purposes. The Warrant Shares have “piggyback” registration rights and the warrant has a provision for cashless exercise. In addition, the warrant may not be exercised if it would result in beneficial ownership by the holder and his affiliates of more than 9.99% of the Company’s outstanding shares of common stock.
There was a total of shares of common stock issued and outstanding as of September 30, 2021 and December 31, 2020.
Common Stock Purchase Warrants
As of September 30, 2021 and December 31, 2020, the following common stock purchase warrants were outstanding:
(1) During the year ended December 31, 2019, the Company granted certain convertible notes holders warrants to purchase an aggregate of shares of common stock at an exercise price of $. The fair value of the warrants was $36,410 and recorded as financing cost.
(2) During the year ended December 31, 2020, the Company granted a convertible note holder a warrant to purchase shares of common stock at an exercise price of $. The fair value of the warrant was $3,400 and recorded as financing cost.
(3) Each two shares of common stock purchased in a private offering included one warrant to purchase an additional share of common stock at an exercise price of $1.00.
(4) On June 15, 2021, the Company granted a convertible note holder a warrant to purchase shares of common stock at an exercise price of $ subject to adjustments for full ratchet resets for dilutive issuances at lower prices.
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2021 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 13 – Subsequent Events
The Company has evaluated events for the period from September 30, 2021 through the date of the issuance of these financial statements and determined that there are no additional events requiring disclosure. |
Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Statement Presentation: | Financial Statement Presentation: The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three and nine-month periods have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.
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| Fiscal Year End: | Fiscal Year End: The Company has selected December 31 as its fiscal year end.
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| Use of Estimates: | Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.
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| Cash Equivalents: | Cash Equivalents: The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.
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| Research and Development Costs: | Research and Development Costs: The Company charges research and development costs to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development costs were $32,262 and $207,900 for the nine-month periods ended September 30, 2021 and 2020, respectively.
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| Advertising and Marketing Costs: | Advertising and Marketing Costs: Advertising and marketing costs are expensed as incurred. The Company incurred $18,107 and $24,307 in advertising and marketing costs during the nine-month periods ended September 30, 2021 and 2020, respectively.
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| Related Parties: | Related Parties: For the purposes of these financial statements, parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.
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| Stock Based Compensation and Other Share-Based Payments: |
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| summary of the fair value of the Company’s derivative liabilities | Fair Value of Financial Instruments
ASC 820, Fair Value Measurements, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.
The following table provides a summary of the fair value of the Company’s derivative liabilities as of September 30, 2021 and December 31, 2020:
Warrants: The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in ASC 815 Derivatives and Hedging, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. For warrants classified as equity instruments the Company applies the Black Scholes model and expenses the fair value as financing costs. For warrants classified as derivative financial instruments the Company applies the Monte Carlo model to value the warrants.
Income taxes: The Company has adopted ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement 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 in which those temporary differences are expected to be recovered or settled.
Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method), convertible notes, classes of shares with conversion features, and stock awards and stock options.
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| Warrants: | Warrants: The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in ASC 815 Derivatives and Hedging, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. For warrants classified as equity instruments the Company applies the Black Scholes model and expenses the fair value as financing costs. For warrants classified as derivative financial instruments the Company applies the Monte Carlo model to value the warrants.
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| Income taxes: | Income taxes: The Company has adopted ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement 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 in which those temporary differences are expected to be recovered or settled.
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| Basic and Diluted Loss Per Share |
Potential common stock consists of the incremental common stock issuable upon the exercise of common stock warrants (using the if-converted method), convertible notes, classes of shares with conversion features, and stock awards and stock options.
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| New Accounting Pronouncements | New Accounting Pronouncements: Certain new accounting pronouncements that have been issued are not expected to have a material effect on the Company’s financial statements. |
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Summary of Significant Accounting Policies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| table below reflects the potentially dilutive securities at each reporting period | The following table provides a summary of the fair value of the Company’s derivative liabilities as of September 30, 2021 and December 31, 2020:
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| table below reflects the potentially dilutive securities at each reporting period |
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Convertible Note – Related Party and Derivative Liabilities (Tables) |
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| Convertible Note Related Party And Derivative Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The carrying value of these convertible notes is as follows | The carrying value of these convertible notes is as follows:
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| Schedule of interest on the convertible note |
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| the derivative liability associated with the conversion | As a result of the application of ASC 815, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
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| derivative liabilities were based upon the following management assumptions | The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of September 30, 2021 and December 31, 2020 and the commitment date:
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Convertible Note and Derivative Liabilities (Tables) |
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| Convertible Note And Derivative Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| carrying value of these convertible notes | The carrying value of these convertible notes is as follows:
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| Interest expenses associated with the convertible notes | Interest expenses associated with the convertible notes are as follows:
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| the fair value of the derivative liability associated with the conversion feature | As a result of the application of ASC 815, as of September 30, 2021 and 2020, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
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| the commitment and re-measurement dates | The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2020 and September30, 2021 and the commitment date:
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| The carrying value of the Note is as follows | The carrying value of the Note is as follows:
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| Interest expenses associated with the conversion | Interest expenses associated with the conversion is as follows:
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| the fair value of the derivative liability associated with the conversion feature is summarized as follows | As a result of the application of ASC 815 as of September 30, 2021 and June 15, 2021, the fair value of the derivative liability associated with the conversion feature is summarized as follows:
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| fair value at the commitment and re-measurement dates for the Company’s derivative liabilities | The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of September 30, 2021 and the commitment date:
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Stock Plan (Tables) |
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| Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| the recognized compensation in respect of the above stock option compensation |
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| The fair value of each option award referenced above is estimated on the date of gran |
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| summary of the activity for the Company’s stock options |
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Capital Stock (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| the following common stock purchase warrants were outstanding | As of September 30, 2021 and December 31, 2020, the following common stock purchase warrants were outstanding:
|
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| The fair value of the outstanding common stock purchase warrants |
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table below reflects the potentially dilutive securities at each reporting period (Details) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Liabilities | ||
| Total | 4,447,578 | 4,301,460 |
| Research Warrants [Member] | ||
| Liabilities | ||
| Total | 398 | 398 |
| Convertible Debt Securities [Member] | ||
| Liabilities | ||
| Total | 568,184 | 445,400 |
| Share-based Payment Arrangement [Member] | ||
| Liabilities | ||
| Total | 700 | 700 |
| Share-based Payment Arrangement, Option [Member] | ||
| Liabilities | ||
| Total | 3,185,000 | 3,243,333 |
| Stock Options Not Yet Vested [Member] | ||
| Liabilities | ||
| Total | 33,333 | |
| Stock Purchase Warrants [Member] | ||
| Liabilities | ||
| Total | 295,000 | 180,000 |
| Fair Value, Inputs, Level 1 [Member] | ||
| Liabilities | ||
| Derivative liabilities | ||
| Fair Value, Inputs, Level 2 [Member] | ||
| Liabilities | ||
| Derivative liabilities | ||
| Fair Value, Inputs, Level 3 [Member] | ||
| Liabilities | ||
| Derivative liabilities | $ 351,694 | $ 154,485 |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Accounting Policies [Abstract] | ||||
| Research and development costs | $ 9,076 | $ 33,441 | $ 32,262 | $ 207,900 |
| Advertising or marketing costs | $ 18,107 | $ 24,307 | ||
Going Concern (Details Narrative) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Proceeds from loan | $ 100,000 | $ 211,000 |
The carrying value of these convertible notes is as follows (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Summary of Investment Holdings [Line Items] | ||
| Carrying value | $ 25,000 | $ 25,000 |
| Related Party Debt [Member] | ||
| Summary of Investment Holdings [Line Items] | ||
| Face value of certain convertible notes | 25,000 | 25,000 |
| Carrying value | $ 25,000 | $ 25,000 |
Schedule of interest on the convertible note (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Related Party Debt [Member] | ||||
| Summary of Investment Holdings [Line Items] | ||||
| Interest on the convertible notes | $ 504 | $ 507 | $ 1,496 | $ 1,510 |
the derivative liability associated with the conversion (Details) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Summary of Investment Holdings [Line Items] | ||
| Balance at December 31, 2020 | $ 154,485 | |
| Balance at September 30, 2021 | 351,694 | $ 154,485 |
| Related Party Debt [Member] | ||
| Summary of Investment Holdings [Line Items] | ||
| Balance at December 31, 2020 | 61,682 | 37,182 |
| Change in fair value | 16,927 | 24,500 |
| Balance at September 30, 2021 | $ 78,609 | $ 61,682 |
derivative liabilities were based upon the following management assumptions (Details) - Related Party Debt [Member] |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Summary of Investment Holdings [Line Items] | ||
| Expected dividends | 0.00% | 0.00% |
| Risk free interest rate | 0.09% | 0.09% |
| Commitment Date [Member] | ||
| Summary of Investment Holdings [Line Items] | ||
| Expected dividends | 0.00% | |
| Risk free interest rate | 1.33% |
Convertible Note – Related Party and Derivative Liabilities (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 27, 2017 |
Sep. 01, 2016 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves [Line Items] | |||||
| Received proceeds totaling | $ 100,000 | $ 10,000 | |||
| Cubesquare Llc [Member] | |||||
| Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves [Line Items] | |||||
| Ownership percentage | 25.00% | ||||
| Received proceeds totaling | $ 15,000 | $ 10,000 | |||
| Interest rate per annum | 8.00% | 8.00% | 8.00% | ||
| Conversion, description | Any portion of the principal and unpaid interest under the note is convertible at any time at the option of CubeSquare into shares of common stock of the Company at a conversion price equal to a 50% discount to the average of the five lowest trading prices during the previous twenty trading days prior to the date of the notice of conversion from CubeSquare. | (i) $0.0625 per share if the Company’s shares are not trading on a public market and; (ii) in the event the Company’s shares are listed for trading on a public market, the conversion price shall be equal to a 50% discount to the average of the five lowest trading prices during the previous twenty trading days prior to the date of the notice of conversion from the lender. | |||
| Accounts payable and accrued liabilities related party | $ 8,945 | $ 7,449 | |||
carrying value of these convertible notes (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Summary of Investment Holdings [Line Items] | ||
| Carrying value | $ 25,000 | $ 25,000 |
| Derivative Liabilitie [Member] | ||
| Summary of Investment Holdings [Line Items] | ||
| Face value of certain convertible notes | 80,000 | 80,000 |
| Less: unamortized discount | (9,571) | (36,364) |
| Carrying value | $ 70,429 | $ 43,636 |
Interest expenses associated with the convertible notes (Details) - Derivative Liabilitie [Member] - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Summary of Investment Holdings [Line Items] | ||||
| Amortization on debt discount | $ 9,029 | $ 9,030 | $ 26,793 | $ 26,350 |
| Interest on the convertible notes | 1,916 | 1,915 | 4,485 | 5,296 |
| Total | $ 10,945 | $ 10,925 | $ 31,278 | $ 31,646 |
the fair value of the derivative liability associated with the conversion feature (Details) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Summary of Investment Holdings [Line Items] | ||
| Balance at December 31, 2020 | $ 154,485 | |
| Balance at September 30, 2021 | 351,694 | $ 154,485 |
| Derivative Liabilitie [Member] | ||
| Summary of Investment Holdings [Line Items] | ||
| Balance at December 31, 2020 | 92,803 | 52,185 |
| Derivative addition associated with convertible notes | 7,915 | |
| Change in fair value | 6,972 | 32,703 |
| Balance at September 30, 2021 | $ 99,755 | $ 92,803 |
the commitment and re-measurement dates (Details) - Derivative Liabilitie [Member] |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Summary of Investment Holdings [Line Items] | ||
| Expected dividends | 0.00% | 0.00% |
| Commitment Date [Member] | ||
| Summary of Investment Holdings [Line Items] | ||
| Expected dividends | 0.00% |
The carrying value of the Note is as follows (Details) - USD ($) |
Sep. 30, 2021 |
Jun. 15, 2021 |
Dec. 31, 2020 |
|---|---|---|---|
| Summary of Investment Holdings [Line Items] | |||
| Carrying value | $ 25,000 | $ 25,000 | |
| Warrants [Member] | |||
| Summary of Investment Holdings [Line Items] | |||
| Face value of certain convertible notes | 115,000 | $ 115,000 | |
| Less: unamortized discount | (81,524) | (115,000) | |
| Carrying value | $ 33,476 |
Interest expenses associated with the conversion (Details) - Warrants [Member] - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Summary of Investment Holdings [Line Items] | ||||
| Amortization on debt discount | $ 28,750 | $ 33,476 | ||
| Day one loss associated with derivative liability | 79,332 | 79,332 | ||
| Interest on the convertible notes | 2,319 | 2,697 | ||
| Total | $ 110,401 | $ 115,505 | ||
the fair value of the derivative liability associated with the conversion feature is summarized as follows (Details) - Warrants [Member] - USD ($) |
1 Months Ended | 4 Months Ended |
|---|---|---|
Jun. 15, 2021 |
Sep. 30, 2021 |
|
| Summary of Investment Holdings [Line Items] | ||
| Derivative liability at June 15, 2021 | $ 51,009 | $ 194,332 |
| Derivative liability associated with warrants on commitment date | 143,323 | |
| Change in fair value – convertible note | (21,165) | |
| Change in fair value – warrants | 163 | |
| Balance at September 30, 2021 | $ 194,332 | $ 173,330 |
fair value at the commitment and re-measurement dates for the Company’s derivative liabilities (Details) - Warrants [Member] |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Summary of Investment Holdings [Line Items] | |
| Expected dividends | 0.00% |
| Expected volatility | 200.60% |
| Risk free interest rate | 0.67% |
| Commitment Date [Member] | |
| Summary of Investment Holdings [Line Items] | |
| Expected dividends | 0.00% |
| Expected volatility | 201.70% |
| Risk free interest rate | 0.65% |
| Convertible Notes Payable [Member] | |
| Summary of Investment Holdings [Line Items] | |
| Expected dividends | 0.00% |
| Expected volatility | 211.70% |
| Risk free interest rate | 0.23% |
| Convertible Notes Payable [Member] | Commitment Date [Member] | |
| Summary of Investment Holdings [Line Items] | |
| Expected dividends | 0.00% |
| Expected volatility | 307.10% |
| Risk free interest rate | 0.18% |
Convertible Note and Derivative Liabilities (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Feb. 19, 2020 |
Dec. 31, 2019 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| Summary of Investment Holdings [Line Items] | |||||
| Received convertible note | $ 100,000 | $ 10,000 | |||
| Derivative Liabilitie [Member] | |||||
| Summary of Investment Holdings [Line Items] | |||||
| Interest rate per annum | 8.00% | 8.00% | |||
| Received convertible note | $ 10,000 | $ 70,000 | |||
| Conversionn description | Such notes are convertible into shares of common stock at a conversion price per share equal to the lesser of: (a) $0.50; (b) the lowest price at which the Company has converted any convertible security of the Company within 30 trading days prior to the date of delivery of the applicable notice of conversion; and (c) such other as the Company and the holder may agree. In connection with the 8% convertible note issuance, we issued warrants to purchase an aggregate of 10,000 shares of common stock at an exercise price of $1.00 | convertible into shares of our common stock at a conversion price (the “Conversion Price”) for each share of common stock equal to the lesser of: (a) $0.50, (b) the lowest price at which the Company has converted any convertible security of the Company (to the holder or to any third party) within 30 trading days prior to the date of delivery of the applicable Notice of Conversion; and (c) so long as lower than (a) or (b), such price per share of common stock as the Company and the holder may agree from time to time. In connection with the 8% convertible note issuance, we issued warrants to purchase an aggregate of 70,000 shares of common stock at an exercise price of $1.00. | |||
| Accounts payable and accrued liabilities related party | 11,858 | $ 7,373 | |||
| Derivative liability convertible notes | 80,000 | ||||
| Derivative liabilities | $ 72,689 | ||||
Unsecured Short-Term Advance from Third Party (Details Narrative) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Debt Disclosure [Abstract] | ||
| Commercial Paper | $ 100,000 | $ 100,000 |
Related Party Transactions (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Sep. 27, 2017 |
Sep. 01, 2016 |
|
| Related Party Transaction [Line Items] | ||||||||
| Due to related party | $ 50,000 | $ 50,000 | $ 50,000 | |||||
| Cubesquare Llc [Member] | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Due to related party | $ 50,000 | $ 50,000 | 10,000 | |||||
| Interest percentage | 8.00% | 8.00% | 8.00% | 8.00% | ||||
| Interest expense | $ 1,008 | $ 1,008 | $ 2,991 | $ 3,003 | ||||
| Accounts payable and accrued liabilities | 9,665 | 9,665 | 6,674 | |||||
| Jonah Meer [Member] | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Due to related party | 135,000 | 135,000 | 70,000 | |||||
| Accounts payable and accrued liabilities | 21,068 | 21,068 | 28,475 | |||||
| Ido Merfeld [Member] | ||||||||
| Related Party Transaction [Line Items] | ||||||||
| Due to related party | 50,000 | 50,000 | $ 21,000 | $ 1,169 | ||||
| Accounts payable and accrued liabilities | $ 1,169 | $ 1,169 | ||||||
Intellectual Property License Agreement and Sponsored Research Agreement (Details Narrative) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| License fee | $ 25,000 | |
| Royalty expense | 500,000 | |
| Licence expense | $ 18,750 | $ 18,750 |
Commitments (Details Narrative) - shares |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
Feb. 10, 2020 |
|
| Acquired Finite-Lived Intangible Assets [Line Items] | |||
| Number of options forfeited | 91,666 | 38,334 | |
| Business Advisory Board Agreements [Member] | |||
| Acquired Finite-Lived Intangible Assets [Line Items] | |||
| Stock option and advisor granted | 50,000 | ||
| Number of options forfeited | 25,000 |
the recognized compensation in respect of the above stock option compensation (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Research and Development Expense [Member] | ||||
| Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
| Research and development expenses | $ 19,840 | $ 6,200 | $ 117,111 | |
The fair value of each option award referenced above is estimated on the date of gran (Details) |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Equity Option [Member] | Measurement Date [Member] | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Dividend yield | 0.00% |
Stock Plan (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 10, 2020 |
Feb. 10, 2020 |
Dec. 10, 2019 |
Dec. 10, 2018 |
Aug. 15, 2018 |
Jul. 31, 2019 |
Jun. 25, 2019 |
Apr. 16, 2018 |
Nov. 15, 2017 |
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Stock Options Granted To Employees [Member] | |||||||||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
| Description of services agreement | (i) an option to purchase 33,334 shares of common stock, exercisable on December 10, 2019 at an exercise price of $2.00 per share (ii) an option to purchase 33,333 shares of common stock exercisable on December 10, 2020 at an exercise price of $2.00 per share, and (iii) an option to purchase 33,333 shares of common stock exercisable on December 10, 2021 at an exercise price of $2.00 per share, provided the employee is providing services to the Company at the time of exercise. | (i) an option to purchase 33,334 shares of common stock, exercisable on December 10, 2018 at an exercise price of $2.00 per share (ii) an option to purchase 33,333 shares of common stock exercisable on December 10, 2019 at an exercise price of $2.00 per share, and (iii) an option to purchase 33,333 shares of common stock exercisable on December 10, 2020 at an exercise price of $2.00 per share, provided the employee is providing services to the Company at the time of exercise. On March 23, 2020, the options previously vesting on December 10, 2020 shall vest immediately with an expiration date of March 23, 2023. | |||||||||
| Granted an option to purchase of common stock | 100,000 | ||||||||||
| Weighted average excercise price | $ 2.00 | ||||||||||
| Unrecognized compensation | $ 0 | $ 6,100 | |||||||||
| Stock Options Granted To Officers [Member] | |||||||||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
| Description of services agreement | As compensation, Dr. Bonfiglio was granted a three-year stock option to purchase 100,000 shares of common stock at an exercise price of $2.00 per share, 50,000 of which shares vested upon grant and 25,000 shares vest on each of July 1, 2020 and July 1, 2021, provided Dr. Bonfiglio is in the employ of the Company on such dates. Mr. Bonfiglio was terminated as chief operating officer as of November 30, 2019. Accordingly, all unvested stock options terminated on such date. In January, 2021, 50,000 vested options were forfeited | ||||||||||
| Granted an option to purchase of common stock | 325,000 | 325,000 | |||||||||
| Weighted average excercise price | $ 2.00 | $ 2.00 | |||||||||
| Equity Option [Member] | |||||||||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
| Description of services agreement | the Company granted three-year options to purchase an aggregate of 50,000 shares of its common stock at an exercise price of $2.00 per share, to a Business Advisor (Note 10(2) above). 25,000 of such shares subject to the option were immediately exercisable and expire on February 10, 2023, and 25,000 shares vest on February 10, 2021 and expire on February 10, 2024. On July 15, 2020, 25,000 unvested options were forfeited. In January 2021, 25,000 vested options were forfeited | the Board awarded a Science Advisor, the following three-year stock options: (i) an option to purchase 6,667 shares of common stock, exercisable on August 15, 2018 at an exercise price of $2.00 per share (ii) an option to purchase 6,667 shares of common stock exercisable on August 15, 2019 at an exercise price of $2.00 per share, and (iii) an option to purchase 6,666 shares of common stock exercisable on August 15, 2020 at an exercise price of $2.00 per share, provided the Advisor is providing services to the Company at the time of exercise | the Board awarded a Science Advisor, the following three-year stock options: (i) an option to purchase 33,334 shares of common stock, exercisable on July 1, 2019 at an exercise price of $2.00 per share (ii) an option to purchase 33,333 shares of common stock exercisable on July 1, 2020 at an exercise price of $2.00 per share, and (iii) an option to purchase 33,333 shares of common stock exercisable on July 1, 2021 at an exercise price of $2.00 per share, provided the advisor is providing services to the Company at the time of exercise. | the Board awarded a Science Advisor, the following three-year stock options: (i) an option to purchase 10,000 shares of common stock, exercisable on April 16, 2018 at an exercise price of $2.00 per share (ii) an option to purchase 10,000 shares of common stock exercisable on April 16, 2019 at an exercise price of $2.00 per share, and (iii) an option to purchase 10,000 shares of common stock exercisable on April 16, 2020 at an exercise price of $2.00 per share, provided the Advisor is providing services to the Company at the time of exercise | the Board awarded two of its Science Advisors the following three-year stock options: (i) an immediately exercisable option to purchase 6,667 shares of common stock at an exercise price of $2.00 per share, (ii) an option to purchase 6,667 shares of common stock exercisable on November 15, 2018 at an exercise price of $2.00 per share and (iii) an option to purchase 6,666 shares of common stock exercisable on November 15, 2019 at an exercise price of $2.00 per share, provided that such Advisors are providing services to the Company at the time of exercise | ||||||
| Number of option expired | 13,334 | ||||||||||
| Option vested | 10,000 | ||||||||||
the following common stock purchase warrants were outstanding (Details) - $ / shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Equity [Abstract] | ||
| Warrants Outstanding Beginning | 180,000 | 70,000 |
| Weighted Average Exercise Price Outstanding Beginning | $ 1.00 | $ 1.00 |
| Warrants Granted | 115,000 | 110,000 |
| Weighted Average Exercise Price Granted | $ 1.00 | $ 1.00 |
| Warrants Canceled/Forfeited | ||
| Weighted Average Exercise Price Canceled/Forfeited | ||
| Warrants Exercised | ||
| Weighted Average Exercise Price Exercised | ||
| Warrants Outstanding Ending | 295,000 | 180,000 |
| Weighted Average Exercise Price Outstanding Ending | $ 1.00 | $ 1.00 |
The fair value of the outstanding common stock purchase warrants (Details) |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Warrant [Member] | Measurement Date [Member] | |
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
| Dividend yield | 0.00% |
Capital Stock (Details Narrative) - USD ($) |
1 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Jun. 15, 2021 |
Aug. 31, 2020 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Sep. 30, 2021 |
|
| Equity [Abstract] | |||||
| Common Stock, Shares Authorized | 100,000,000 | 100,000,000 | |||
| Common Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 | |||
| Preferred Stock, Shares Authorized | 10,000 | 10,000 | |||
| Preferred Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 | |||
| Preferred Stock, Shares Issued | 2,000 | 2,000 | |||
| Preferred Stock, Shares Outstanding | 2,000 | 2,000 | |||
| Number of shares sold to investers in private offering | 200,000 | ||||
| Gross proceeds from investors | $ 100,000 | ||||
| Common Stock, Shares, Issued | 13,289,789 | 13,289,789 | |||
| Common Stock, Shares, Outstanding | 13,289,789 | 13,289,789 | |||
| Number of common shares issued for warrants | 115,000 | 10,000 | 70,000 | ||
| Share price per share | $ 1.00 | $ 1.00 | $ 1.00 | ||
| Number of common shares issued for warrants amount | $ 3,400 | $ 36,410 | |||