UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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Coeptis Therapeutics, Inc.
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2021
TABLE OF CONTENTS
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PRESENTATION OF FINANCIAL AND OTHER INFORMATION
On February 12, 2021, Coeptis Therapeutics, Inc. (“Coeptis”, ‘‘we’’, ‘‘us’’ or the “Company”), formerly Vinings Holdings, Inc., acquired Coeptis Pharmaceuticals, Inc. (“Coeptis Pharma”) in an all-stock transaction. The acquisition of Coeptis Pharma was accomplished through a reverse merger of our wholly owned subsidiary Coeptis Acquisition Sub, Inc. with and into Coeptis Pharma, with Coeptis Pharma determined to be the accounting acquirer of us. As such, the historical financial statements of the registrant for period prior to February 12, 2021 are those of Coeptis Pharma and, in connection with the acquisition, Coeptis Pharma’s equity was exchanged for shares of our common stock. The acquisition of Coeptis Pharma was treated as a “reverse merger.” Unless otherwise stated or the context otherwise requires, the historical business information described in this Annual Report on Form 10-K prior to consummation of the acquisition of Coeptis Pharma is that of Coeptis Pharma and, following consummation of the acquisition of Coeptis Pharma, reflects business information of us and Coeptis Pharma on a consolidated basis.
This report includes our audited financial statements as at and for the twelve-month period ended December 31, 2021. This report also includes our audited financial statements as at and for the twelve-month period ended December 31, 2020.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-KT contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Annual Report on Form 10-K are “forward-looking statements” for purposes of federal and state securities laws, including statements regarding our expectations and projections regarding future developments, operations and financial conditions, and the anticipated impact of our acquisitions, business strategy, and strategic priorities. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. The forward-looking statements in this Annual Report on Form 10-K are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K and are subject to a number of known and unknown risks, uncertainties and assumptions. Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.
These forward-looking statements present our estimates and assumptions only as of the date of this Annual Report on Form 10-K. Accordingly, you are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:
| · | adverse impacts from the pandemic involving the novel coronavirus known as COVID-19; | |
| · | We may not be able to successfully implement our growth strategy on a timely basis or at all; | |
| · | We may have difficulties managing our anticipated growth, or we may not grow at all; | |
| · | We have a history of losses, we expect to incur losses in the future and we may not be able to achieve or maintain profitability; |
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| · | We may not be able to initiate and complete preclinical studies and clinical trials for our product candidates which could adversely affect our business; | |
| · | We may not be able to obtain and maintain the third-party relationships that are necessary to develop, commercialize and manufacture some or all of our product candidates; | |
| · | We may encounter difficulties in managing our growth, which could adversely affect our operations; | |
| · | We need to obtain financing in order to continue our operations; | |
| · | The drug development and approval process is uncertain, time-consuming and expensive; | |
| · | Competition in the biotechnology and pharmaceutical industries may result in competing products, superior marketing of other products and lower revenues or profits for us; | |
| · | Federal laws or regulations on drug importation could make lower cost versions of our future products available, which could adversely affect our revenues, if any; | |
| · | The regulatory approval process is costly and lengthy, and we may not be able to successfully obtain all required regulatory approvals; | |
| · | Healthcare reform measures could adversely affect our business; | |
| · | Protecting and defending against intellectual property claims may have a material adverse effect on our business; |
| · | If we are not able to retain our current senior management team and our scientific advisors or continue to attract and retain qualified scientific, technical and business personnel, our business will suffer; | |
| · | There is a substantial doubt about our ability to continue as a going concern; and | |
| · | the other risks identified in this Annual Report on Form 10-K including, without limitation, those under Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as such factors may updated from time to time in our other filings with the SEC. |
Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this Annual Report on Form 10-KT and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Annual Report on Form 10-KT. We qualify all of our forward-looking statements by these cautionary statements.
NOTE REGARDING TRADEMARKS
We own or have rights to use the trademarks and trade names that we use in conjunction with the operation of our business. Each trademark or trade name of any other company appearing in this Annual Report on Form 10-K is, to our knowledge, owned by such other company. Solely for convenience, our trademarks and trade names referred to in this Annual Report on Form 10-K may appear without the ® or ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and trade names.
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PART I
ITEM 1. BUSINESS
History
We were originally incorporated in the State of Colorado in 1996 under the name Nelx Marketing Inc., and then changed our name to Mind 2 Market, Inc. (1996), then to Health Partnership, Inc. (2005), then to Naerodynamics, Inc. (2008). In January 2020, our company redomiciled to the State of Delaware and changed corporate name to NDYN Merger Corp. In February 2020, NDYN Merger Corp. enacted a Holding Company Reorganization pursuant to Section 251(g) of the Delaware General Corporation Law and, in connection therewith, changed our corporate name to Vinings Holdings, Inc. Effective July 12, 2021, our corporate name changed to “Coeptis Therapeutics, Inc.” and our trading symbol changed to “COEP.”
Reverse Merger Transaction. On February 12, 2021, Coeptis Acquisition Sub, Inc. (“Acquisition Corp.”), a wholly-owned subsidiary of our company, merged (the “Merger”) with and into Coeptis Pharmaceuticals, Inc., a Delaware corporation (“Acquired Coeptis”). Acquired Coeptis was the surviving corporation of that Merger. As a result of the Merger, our company acquired the business of Acquired Coeptis and now continues the existing business operations of Acquired Coeptis as a wholly-owned subsidiary. Simultaneously with the closing of the Merger, all of the issued and outstanding shares of Acquired Coeptis common stock converted, on a 1-for-1 basis, into shares of the company’s common stock. As of the closing of the Merger, there were no Acquired Coeptis options or warrants outstanding to purchase shares of Acquired Coeptis common stock.
Prior to the Merger, our company was a “shell company,” as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Descriptions of our company’s business in this Annual Report of Form 10-K relate to the historical business operations of Acquired Coeptis, unless the context requires otherwise.
Acquired Coeptis. Coeptis Pharmaceuticals, Inc. (Acquired Coeptis) was formed in November 2018, and its sole subsidiary, Coeptis Pharmaceuticals, LLC, was formed in July 2017. Through our subsidiaries, we focus on the development and/or acquisition of pharmaceutical products and technologies which offer improvements to current therapies, thereby improving patient outcomes.
Our current business model is designed around commercializing and furthering the development of our current product portfolio. We are continually exploring partnership opportunities with companies that have novel therapies in various stages of development or companies with technologies that improve the way that drugs are delivered to patients. We will continue to seek the best strategic relationships for our portfolio, which relationships could include in-license agreements, out-license agreements, co-development arrangements and other strategic partnerships in new and exciting therapeutic areas such as auto-immune disease and oncology.
Collaborations for Product Development – Research and Development
Vy-Gen Bio, Inc. In May 2021, we entered into two exclusive option agreements (the “CD38 Agreements”) relating to separate technologies (described below) designed to improve the treatment of CD38-related cancers (e.g., multiple myeloma, chronic lymphocytic leukemia, and acute myeloid leukemia) with VyGen-Bio, Inc. (“Vy-Gen”), a majority-owned subsidiary of Vycellix, Inc., a Tampa, Florida-based private, immuno-centric discovery life science company focused on the development of transformational platform technologies to enhance and optimize next-generation cell and gene-based therapies, including T cell and Natural Killer (NK) cell-based cancer therapies. In August 2021, we exercised those two options and acquired a 50% ownership interest in such technologies, with the ownership interest scalable down to 20% under certain circumstances. In December 2021, we completed our purchase of the 50% ownership interest in the CD38-Diagnostic and adjusted the downward adjustment percentage for the CD38-GEAR-NK product candidate to 25%.
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The CD38 Agreements relate to two separate Vy-Gen drug product candidates, as follows:
| – | CD38-GEAR-NK. This Vy-Gen drug product candidate is designed to protect CD38+ NK cells from destruction by anti-CD38 monoclonal antibodies, or mAbs. CD38-GEAR-NK is an autologous, NK cell-based therapeutic that is derived from a patient’s own cells and gene-edited to enable combination therapy with anti-CD38 mAbs. We believe CD38-GEAR-NK possesses the potential to minimize the risks and side effects from CD38-positive NK cell fratricide. |
| Market Opportunity. We believe CD38-GEAR-NK could potentially revolutionize how CD38-related cancers are treated, by protecting CD38+ NK cells from destruction by anti-CD38 mAbs, thereby promoting the opportunity to improve the treatment of CD38-related cancers, including multiple myeloma, chronic lymphocytic leukemia, and acute myeloid leukemia. |
| Multiple myeloma is expected to be the first cancer indication targeted with CD38-GEAR-NK. The global multiple myeloma market was $19.48B in 2018 and is expected to reach $31B by 2026 [Source: Fortune Business Reports]. |
| – | CD38-Diagnostic. This Vy-Gen drug product candidate is an in vitro diagnostic tool to analyze if cancer patients might be appropriate candidates for anti-CD38 mAb therapy. CD38-Diagnostic is an in vitro screening tool that is intended to provide the ability to pre-determine which cancer patients are most likely to benefit from targeted anti-CD38 mAb therapies, either as monotherapy or in combination with CD38-GEAR-NK. Our management believes that CD38-Diagnostic also has the potential to develop as a platform technology beyond CD38, including to identify patients likely to benefit for broad range of mAb therapies across a myriad of indications. |
| Market Opportunity. We believe CD38-Diagnostic provides opportunity to make more cost-effective medical decisions for the treatment of B cell malignancies with high CD38 expression, including multiple myeloma, which may help to avoid unnecessary administration of anti-CD38 therapies. CD38-Diagnostic is anticipated to reduce the number of patients that are subjected to ineffective therapy and to potentially result in significant savings to healthcare systems. |
| CD38-Diagnostic is viewed as a potential companion diagnostic for determining patient suitability and likelihood of positive treatment outcomes for CD38-GEAR-NK and/or CD38 monoclonal antibody therapies. |
| GEAR-NK Product Overview. GEAR-NK is an autologous, gene-edited, natural killer cell-based therapeutic development platform that allows for modified NK cells to be co-administered with targeted mAbs, which, in the absence of the GEAR-NK, would otherwise be neutralized by mAb therapy. |
In May 2021, we made initial payments totaling $750,000 under the CD38 Agreements, to acquire the exclusive options to acquire co-development rights with respect to CD38-GEAR-NK and CD38-Diagnostic. On August 15, 2021, we entered into amendments to each of the CD038 Agreements. In connection with the two amendments, we delivered to VyGen promissory notes aggregating $3,250,000 with maturity dates of December 31, 2021, and made a cash payment of $1,000,000, upon which cash payment we exercised the two definitive option purchase agreements. In December 2021, we completed our payment obligations to secure the 50% ownership interest in the CD38-Diagnostic, and also entered into an amendment of the CD038-GEAR-NK promissory note to extend the maturity date to March 31, 2022 and to increase the scalable downward adjustment percentage for the CD38-GEAR-NK product candidate to 25%. Pursuant to the CD038-GEAR-NK amendment, if the promissory note is timely paid by March 31, 2022, Coeptis will maintain its 50% ownership interest in the CD38-GEAR-NK product candidate, and if the CD38-GEAR-NK promissory note is not timely paid by March 31, 2022, Coeptis’ ownership interest in such assets will automatically be reduced to 25% and the promissory note will be automatically cancelled and will no longer be due or payable. Details of the two August amendments and the December amendment are summarized in the amendments attached at Exhibits 4.1 and 4.2 to our Current Report on Form 8-K dated August 19, 2021 and Exhibits 4.2 to the our Current Report on Form 8-K dated December 27, 2021.
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In connection with the Vy-Gen relationship and the Company’s ownership in the two product candidates described above, in December 2021 the Company and Vy-Gen entered into a co-development and steering committee agreement. The co-development and steering committee agreement provides for the governance and economic agreements between the Company and Vy-Gen related of the development of the two Vy-Gen drug product candidates and the revenue sharing related thereto, including each company having a 50% representation on the steering committee and each company receiving 50% of the net revenues related to the Vy-Gen product candidates (scalable downward to 25% for the CD38-GEAR-NK as described above). Details of the co-development and steering committee agreement are summarized in our Current Report on Form 8-K dated December 27, 2021, including Exhibits 4.1 and 4.2 thereto.
Statera BioPharma. Coeptis executed a binding Letter of Intent (LOI) with Statera BioPharma, a clinical stage biopharmaceutical company developing immunotherapy via its proprietary AIMS platform. The LOI details a collaboration between the two companies for STAT-201, a product in development for Crohn’s disease. Coeptis is to assist Statera BioPharma in its efforts to develop and commercialize STAT-201 in adult and pediatric populations. Coeptis is to receive development fees and commercial milestones under the to-be-completed definitive agreement.
Vici Health Sciences, LLC. In 2019, Coeptis entered into a co-development agreement with Vici Health Sciences, LLC (“Vici”). Through this partnership, Vici and Coeptis would co-develop, seek FDA approval and share ownership rights to CPT60621, a novel, ready to use, easy to swallow, oral liquid version of an already approved drug used for the treatment of Parkinson’s Disease (PD). As Coeptis continues to direct its operational focus towards the Vy-Gen opportunities previously described, we have recently stopped allocating priority resources to the development of CPT60621. Coeptis and Vici are currently in negotiations in which Vici intends to buy-out most or all of Coeptis’ remaining ownership rights.
Sales and Marketing
We currently do not have in-house commercial capabilities required to market and distribute FDA-approved products. Therefore, we will be required to partner with firms who are capable of conducting all sales, marketing, distribution, contracting and pricing for our future products. There is no assurance that we will be able to secure the services of such a firm or that any such firm will be able to achieve sales expectations.
Our Growth Strategy
To achieve our goals, Coeptis intends to deploy an aggressive, four-pronged, growth strategy listed below that we believe will help us maximize our success and deleverage some of the risk of finding, solely developing and funding our own products.
Strategic Partnerships – We will focus on expanding our existing pipeline through establishing strategic partnerships with companies that have interesting products and technologies. We intend to focus on novel, early-stage and preclinical assets in a variety of therapeutic areas, including oncology and autoimmune diseases. In connection with our strategic partnership growth strategy, as discussed elsewhere herein, we recently entered into two option purchase agreements regarding a co-development opportunity for two early-stage product candidates, as disclosed in and discussed in our Current Report on Form 8-K that was filed on May 11, 2021.
Business Development – We will continue to seek to for acquisition, investment or partnering novel products and technologies that we believe will improve patient outcomes. We will seek to identify companies with products and technologies that are seeking assistance in developing and commercializing these assets. We will assess the commercial market opportunities for all potential products and technologies to determine if there are enough advantages to allow them to be viable, if they are developed.
Commercial Development – A key focus of our company is to participate and assist in the commercial development activities of its assets with our strategic partners. Commercial development activities may include, but are not limited to, clinical development, CMC manufacturing, supply chain management, market research, healthcare economics, market access, sales/marketing, and commercial launch strategies.
Portfolio Optimization – We will continue to evaluate, prioritize, optimize, and make appropriate changes in our pipeline portfolio as market development dynamics and/or product opportunities change. For example, it may be a strategic business decision for us to divest certain products and/or agreements to other companies so it can best focus on its core assets.
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Employees
Currently, we have five employees, of which four are full-time employees, and one is a part-time employee. Our employees are not represented by any labor union or any collective bargaining arrangement with respect to their employment with us. We have never experienced any work stoppages or strikes as a result of labor disputes. We believe that our employee relations are good.
Certain of our employees have been reporting to work remotely due to the COVID-19 outbreak. Our operations or productivity may continue to be impacted throughout the duration of the COVID-19 outbreak and government-mandated closures.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
Available Information
We file annual, quarterly and current reports and other information with the United States Securities and Exchange Commission (“SEC”) that are publicly available through the SEC’s website at www.sec.gov. Our SEC filings will also be available free of charge through the home page of our website https://coeptistx.com as soon as reasonably practicable after they are filed with or furnished to the SEC. Our website and the information contained on or connected to that site are not incorporated into this Annual Report on Form 10-K.
| ITEM 1A. | RISK FACTORS |
As a smaller reporting company, we are not required to provide a statement of risk factors. Nonetheless, we are voluntarily providing risk factors herein. You should consider carefully the following risk factors, together with all the other information in this Annual Report on Form 10-KT, including our consolidated financial statements and notes thereto, and in our other public filings with the SEC. The risk factors discussed below cover not only our current products, product candidates and relationships, but also the risks we expect to encounter when and if we add new product candidates and approved products to our proprietary portfolio, which new products, if added, we expect to be a various stages of pre-clinical and perhaps clinical development. The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described when evaluating our business.
Risks Related to Our Company
There is a substantial doubt about our ability to continue as a going concern. The report of our independent auditors that accompanies our consolidated financial statements includes an explanatory paragraph indicating there is a substantial doubt about our ability to continue as a going concern, citing our need for additional capital for the future planned expansion of our activities and to service our ordinary course activities (which may include servicing of indebtedness). The inclusion of a going concern explanatory paragraph in the report of our independent auditors will make it more difficult for us to secure additional financing or enter into strategic relationships on terms acceptable to us, if at all, and likely will materially and adversely affect the terms of any financing that we might obtain. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.
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We have incurred significant losses in prior periods, and losses in the future could cause the quoted price of our common stock to decline or have a material adverse effect on our financial condition, our ability to pay our debts as they become due, and on our cash flows. We have incurred significant losses in prior periods. For the twelve months ended December 31, 2021, we incurred a net loss of $13,449,280 and, as of that date, we had an accumulated deficit of $27,550,126. Any losses in the future could cause the quoted price of our common stock to decline or have a material adverse effect on our financial condition, our ability to pay our debts as they become due, and on our cash flows.
To date, we have generated only minimal product revenue. We expect that planned our product development, preclinical and clinical programs will increase losses significantly over the next five years. In order to achieve profitability, we will be required to generate significant revenue. We cannot be certain that we will generate sufficient revenue to achieve profitability. We anticipate that we will continue to generate operating losses and experience negative cash flow from operations at least through the end of 2023 or longer. We cannot be certain that we will ever achieve profitability or that, if profitability is achieved, that it will be maintained. If our revenue grows at a slower rate than we anticipate or if our product development, marketing and operating expenses exceed our expectations or cannot be adjusted accordingly, our business, results of operation and financial condition will be materially adversely affected and we may be unable to continue operations.
We will not be able to generate meaningful product revenue unless and until one of our product candidates or co-development products successfully completes clinical trials and receives regulatory approval. As some of our current and projected future product candidates or co-development products are, and we expect will be, at an early proof-of-concept stage, we do not expect to receive revenue from any of these products for several years, if at all. We intend to seek to obtain revenue from collaboration or licensing agreements with third parties. We recently shifted our operational focus away from Conjupri and Consensi, in order to focus our efforts on our other product opportunities described elsewhere in this Annual Report on Form 10-K. We expect that we will need to rely on key third-party agreements, in order to be in a position to realize material revenues in the future, and we may never enter into any such agreements or realize material, ongoing future revenue. Even if we eventually generate revenues, we may never be profitable, and, if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
The COVID-19 pandemic could have a material adverse impact on our business, results of operations and financial condition. In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. In January 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern.” This worldwide outbreak has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines and travel bans intended to control the spread of the virus. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses and facilities. These restrictions, and future prevention and mitigation measures, have had an adverse impact on global economic conditions and are likely to have an adverse impact on consumer confidence and spending, which could materially adversely affect the supply of, as well as the demand for, our products. Uncertainties regarding the economic impact of COVID-19 is likely to result in sustained market turmoil, which could also negatively impact our business, financial condition and cash flows.
If our operations or productivity continue to be impacted throughout the duration of the COVID-19 outbreak and government-mandated closures, which may negatively impact our business, financial condition and cash flows. The extent to which the COVID-19 pandemic will further impact our business will depend on future developments and, given the uncertainty around the extent and timing of the potential future spread or mitigation and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our business at this time.
The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on our business. However, if the pandemic continues for a prolonged period it could have a material adverse effect on our business, results of operations, financial condition and cash flows and adversely impact the trading price of our common stock.
If we are unable to manage future expansion effectively, our business may be adversely impacted. In the future, we may experience rapid growth in our business, which could place a significant strain on our operations, in general, and our internal controls and other managerial, operating and financial resources, in particular. If we are unable to manage future expansion effectively, our business would be harmed. There is, of course, no assurance that we will enjoy rapid development in our business.
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We currently depend on the efforts of one of our executive officers; the loss of this officer could disrupt our operations and adversely affect the development of our business. Our success in effectuating our business plan will depend, primarily, on the continued service of our CEO and President, David Mehalick. We have just recently entered into an employment agreement with Mr. Mehalick. (See “Executive Compensation”). The loss of service of Mr. Mehalick, for any reason, could seriously impair our ability to effectuate our business plan, which could have a materially adverse effect on our business and future results of operations. We have not purchased any key-man life insurance.
If we are unable to recruit and retain key personnel, our business may be harmed. If we are unable to attract and retain key personnel, our business may be harmed. Our failure to enable the effective transfer of knowledge and facilitate smooth transitions with regard to our key employees could adversely affect our long-term strategic planning and execution.
Our business plan is not based on independent market studies. We have not commissioned any independent market studies concerning our business plans. Rather, our plans for implementing our business strategy and achieving profitability are based on the experience, judgment and assumptions of our management. If these assumptions prove to be incorrect, we may not be successful in our business operations.
Our Board of Directors may change our policies without shareholder approval. Our policies, including any policies with respect to investments, leverage, financing, growth, debt and capitalization, will be determined by our Board of Directors or officers to whom our Board of Directors delegate such authority. Our Board of Directors will also establish the amount of any dividends or other distributions that we may pay to our shareholders. Our Board of Directors or officers to which such decisions are delegated will have the ability to amend or revise these and our other policies at any time without shareholder vote. Accordingly, our shareholders will not be entitled to approve changes in our policies, which policy changes may have a material adverse effect on our financial condition and results of operations.
We need to obtain financing in order to continue our operations. On a prospective basis, we will require both short-term financing for operations and long-term capital to fund our expected growth. We have no existing bank lines of credit and have not established any definitive sources for additional financing. We believe that cash on hand will be sufficient to meet our short-term financial requirements into the 2nd quarter of 2022 assuming that we elect not to pursue strategic transactions prior to that time. However, we will require additional funds if we want to fully implement our business plan and growth strategy. Additional financing may not be available to us, or if available, then it may not be available upon terms and conditions acceptable to us. If adequate funds are not available, then we may be required to delay, reduce or eliminate product development or clinical programs. Our inability to take advantage of opportunities in the industry because of capital constraints may have a material adverse effect on our business and our prospects. If we fail to obtain the capital necessary to fund our operations, we will be unable to advance our development programs and complete our clinical trials.
In addition, our research and development expenses could exceed our current expectations. This could occur for many reasons, including:
| · | some or all of our product candidates and co-development candidates fail in clinical or preclinical studies and we are forced to seek additional product candidates; | |
| · | our product candidates and co-development candidates require more extensive clinical or preclinical testing than we currently expect; | |
| · | we advance more of our product candidates and co-development candidates than expected into costly later stage clinical trials; | |
| · | we advance more preclinical product candidates and co-development candidates than expected into early-stage clinical trials; | |
| · | we are required, or consider it advisable, to acquire or license rights from one or more third parties; or | |
| · | we determine to acquire or license rights to additional product candidates and co-development candidates or new technologies. |
While we expect to seek additional funding through public or private financings, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our Common Stock and other capital securities. We may also seek additional funds through arrangements with collaborators or other third parties. These arrangements would generally require us to relinquish rights to some of our technologies, product candidates or products, and we may not be able to enter into such agreements, on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our development programs, including some or all of our product candidates.
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We currently do not have sufficient cash to fully implement our business plan. We have experienced a lack of adequate capital resources causing us to be unable to fully implement our full business plan. We believe that we need to raise or otherwise obtain additional financing beyond our current cash position in order to satisfy our existing obligations and fully implement our business plan. We do not expect to have positive cash flow until the end of 2023 or longer. If we are not successful in obtaining additional financing, we will not be able to fully implement our business plan and we may not be able to continue our operations.
We have a limited operating history and a history of operating losses, and expect to incur significant additional operating losses. We began our business in 2017 and have a limited operating history. Although we have enlisted the assistance of pharmaceutical experts, our lack of experience may cause us to encounter unforeseen problems that could have a material adverse effect on our business and financial condition. Further, there is limited historical financial information upon which to base an evaluation of our performance.
The drug development and approval process is uncertain, time-consuming and expensive. The process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive and uncertain. It also can vary substantially based on the type, complexity, and novelty of the product. We, or our co-development partners, must provide the FDA and foreign regulatory authorities with preclinical and clinical data demonstrating that our products are safe and effective before they can be approved for commercial sale. Clinical development, including preclinical testing, is a long, expensive and uncertain process. It may take us several years to complete our testing, and failure can occur at any stage of testing. Any preclinical or clinical test may fail to produce results satisfactory to the FDA. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive results from a preclinical study or clinical trial, adverse medical events during a clinical trial or safety issues resulting from products of the same class of drug could cause a preclinical study or clinical trial to be repeated or a program to be terminated, even if other studies or trials relating to the program are successful.
We will be required to sustain and further build our intellectual property rights. We do not currently have any intellectual property rights in our name in respect of our current assets, and instead have rights in respect of our current assets through agreements with third parties. We intend to fully protect any product, formulation and process that we develop with appropriate intellectual property registrations. If we fail to sustain and further build our direct and indirect intellectual property rights, competitors will be able to take advantage of our research and development efforts to develop competing products. If we are not able to protect our proprietary technology, trade secrets, and know-how, our competitors may use our inventions to develop competing products. Our future patents and patent applications, even if granted, may not protect us against our competitors. Patent positions generally, including those of other pharmaceutical and biotechnology companies, are or will be generally uncertain and involve complex legal, scientific and factual questions. The standards which the United States Patent and Trademark Office uses to grant patents, and the standards which courts use to interpret patents, are not always applied predictably or uniformly and can change, particularly as new technologies develop. Consequently, the level of protection, if any, that will be provided by our direct or indirect patent rights from time to time if we attempt to enforce them, and they are challenged, is uncertain. In addition, the type and extent of patent claims that will be issued to us in the future is uncertain. Any patents that are issued may not contain claims that permit us to stop competitors from using similar technology.
In addition, we may also rely on unpatented technology, trade secrets, and confidential information. We may not be able to effectively protect our rights to this technology or information. Other parties may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We will generally require each of our employees, consultants, collaborators, and certain contractors to execute a confidentiality agreement at the commencement of an employment, consulting, collaborative, or contractual relationship with us. However, these agreements may not provide effective protection of our technology or information or, in the event of unauthorized use or disclosure, they may not provide adequate remedies.
Patent positions are often uncertain and involve complex legal and factual questions. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States. Whether filed in the United States or abroad, our patent applications may be challenged or may fail to result in issued patents. In addition, any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing or commercializing competing products. Furthermore, others may independently develop or commercialize similar or alternative technologies or drugs, or design around our patents. Our patents may be challenged, invalidated or fail to provide us with any competitive advantages. We may not have the funds available to protect our patents or other technology; such protection is costly and can result in further litigation expenses.
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If we do not obtain or we are unable to maintain adequate patent or trade secret protection for our products in the United States, competitors could duplicate them without repeating the extensive testing that we will be required to undertake to obtain approval of the products by the FDA. Regardless of any patent protection, under the current statutory framework the FDA is prohibited by law from approving any generic version of any of our products for a period of years that would be determined based on the nature of the product (i.e. an orphan drugs would get 7 years, a new chemical entity would get 5 years and a new clinical investigation would get 3 years). Upon the expiration of that period, or if that time period is altered, the FDA could approve a generic version of our product unless we have patent protection sufficient for us to block that generic version. Without sufficient patent protection, the applicant for a generic version of our product would be required only to conduct a relatively inexpensive study to show that its product is bioequivalent to our product and may not have to repeat the studies that we will need to conduct to demonstrate that the product is safe and effective. In the absence of adequate patent protection in other countries, competitors may similarly be able to obtain regulatory approval in those countries of products that duplicate our products.
We will be required to comply with our obligations in our intellectual property licenses and other agreements with third parties. If we fail to comply with our obligations in our intellectual property licenses and other agreements with third parties, we could lose license rights that are important to our business. We are not currently party to any intellectual property license agreement with any third parties, but we anticipate that in-licensing and co-development will be strategies that we utilize as we continue to pursue our growth strategy. We expect to enter into licenses and co-development and other agreements in the future, and we expect these agreements to impose, various diligences, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license, in which event we might not be able to market any product that is covered by the licensed patents.
We may need to resort to litigation to enforce or defend our intellectual property rights, including any patents issued to us. If a competitor or collaborator files a patent application claiming technology also invented by us, in order to protect our rights, we may have to participate in an expensive and time-consuming interference proceeding before the United States Patent and Trademark Office. We cannot guarantee that our product candidates will be free of claims by third parties alleging that we have infringed their intellectual property rights. Third parties may assert that we are employing their proprietary technologies without authorization and they may resort to litigation to attempt to enforce their rights. Third parties may have or obtain patents in the future and claim that the use of our technology or any of our product candidates infringes their patents. We may not be able to develop or commercialize combination product candidates because of patent protection others have. Our business will be harmed if we cannot obtain a necessary or desirable license, can obtain such a license only on terms we consider to be unattractive or unacceptable, or if we are unable to redesign our product candidates or processes to avoid actual or potential patent or other intellectual property infringement. Obtaining, protecting and defending patent and other intellectual property rights can be expensive and may require us to incur substantial costs, including the diversion of management and technical personnel. An unfavorable ruling in patent or intellectual property litigation could subject us to significant liabilities to third parties, require us to cease developing, manufacturing or selling the affected products or using the affected processes, require us to license the disputed rights from third parties, or result in awards of substantial damages against us.
There can be no assurance that we would prevail in any intellectual property infringement action, will be able to obtain a license to any third-party intellectual property on commercially reasonable terms, successfully develop non-infringing alternatives on a timely basis, or license non-infringing alternatives, if any exist, on commercially reasonable terms. Any significant intellectual property impediment to our ability to develop and commercialize our products could seriously harm our business and prospects.
Patent litigation or other litigation in connection with our intellectual property rights may lead to publicity that may harm our reputation and the value of our common stock may decline. During the course of any patent litigation, there may be public announcements of the results of hearings, motions, and other interim proceedings or developments in the litigation. If securities analysts or investors regard these announcements as negative, the value of our common stock may decline. General proclamations or statements by key public figures may also have a negative impact on the perceived value of our intellectual property.
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Protecting and defending against intellectual property claims may have a material adverse effect on our business. From time to time, we may receive notice that others have infringed on our proprietary rights or that we have infringed on the intellectual property rights of others. There can be no assurance that infringement or invalidity claims will not materially adversely affect our business, financial condition or results of operations. Regardless of the validity or the success of the assertion of claims, we could incur significant costs and diversion of resources in protecting or defending against claims, which could have a material adverse effect on our business, financial condition or results of operations. We may not have the funds or resources available to protect our intellectual property.
Our competitors and potential competitors may develop products and technologies that make ours less attractive or obsolete. Many companies, universities, and research organizations developing competing product candidates have greater resources and significantly greater experience in financial, research and development, manufacturing, marketing, sales, distribution, and technical regulatory matters than we have. In addition, many competitors have greater name recognition and more extensive collaborative relationships. Our competitors could commence and complete clinical testing of their product candidates, obtain regulatory approvals, and begin commercial-scale manufacturing of their products faster than we or our co-development partners are able to for our products. They could develop products that would render our product candidates and co-development candidates, and those of our collaborators, obsolete and noncompetitive. If we are unable to compete effectively against these companies, then we may not be able to commercialize our product candidates or achieve a competitive position in the market. This would adversely affect our ability to generate revenues.
Competition in the biotechnology and pharmaceutical industries may result in competing products, superior marketing of other products and lower revenues or profits for us. There are many companies that are seeking to develop products and therapies for the treatment of the same diseases that we are currently targeting. Many of our competitors have substantially greater financial, technical, human and other resources than we do and may be better equipped to develop, manufacture and market technologically superior products. In addition, many of these competitors have significantly greater experience than we do in undertaking preclinical testing and human clinical studies of new pharmaceutical products and in obtaining regulatory approvals of human therapeutic products. Accordingly, our competitors may succeed in obtaining FDA approval for superior products.
Other risks and uncertainties include:
| · | our ability to successfully complete preclinical and clinical development of our products and services. | |
| · | our ability to manufacture sufficient amounts of products for development and commercialization activities. | |
| · | our ability to obtain, maintain and successfully enforce adequate patent and other proprietary rights protection of our products and services. | |
| · | the scope, validity and enforceability of patents and other proprietary rights held by third parties and their impact on our ability to commercialize our products and services. | |
| · | the accuracy of our estimates of the size and characteristics of the markets to be addressed by our products and services, including growth projections. | |
| · | market acceptance of our products and services. | |
| · | our ability to identify new patients for our products and services. | |
| · | the accuracy of our information regarding the products and resources of our competitors and potential competitors. | |
| · | the content and timing of submissions to and decisions made by the US Food and Drug Administration (FDA) and other regulatory agencies. | |
| · | our ability to obtain reimbursement for our products and services from third-party payors, and the extent of such coverage. | |
| · | our ability to establish and maintain strategic license, collaboration and distribution arrangements. | |
| · | the continued funding of our collaborations and joint ventures, if any are ultimately established. | |
| · | the possible disruption of our operations due to terrorist activities and armed conflict, including as a result of the disruption of operation of our subsidiaries and our customers, suppliers, distributors, couriers, collaborative partners, licensees and clinical trial sites. |
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Positive or timely results from preclinical studies and early clinical trials do not ensure positive or timely results in late-stage clinical trials or product approval by the FDA or any other regulatory authority. Product candidates that show positive preclinical or early clinical results often fail in later stage clinical trials. Data obtained from preclinical and clinical activities is susceptible to varying interpretations, which could delay, limit, or prevent regulatory approvals.
We have limited experience in conducting the clinical trials required to obtain regulatory approval. We may not be able to conduct clinical trials at preferred sites, enlist clinical investigators, enroll sufficient numbers of participants, or begin or successfully complete clinical trials in a timely fashion, if at all. Any failure to perform may delay or terminate the trials. Our current clinical trials may be insufficient to demonstrate that our potential products will be active, safe, or effective. Additional clinical trials may be required if clinical trial results are negative or inconclusive, which will require us to incur additional costs and significant delays. If we do not receive the necessary regulatory approvals, we will not be able to generate product revenues and may not become profitable.
Risks Related to Regulation
The regulatory approval process is costly and lengthy, and we may not be able to successfully obtain all required regulatory approvals. The preclinical development, clinical trials, manufacturing, marketing and labeling of pharmaceuticals are all subject to extensive regulation by numerous governmental authorities and agencies in the United States and other countries. We must obtain regulatory approval for each of our product candidates before marketing or selling any of them. It is not possible to predict how long the approval processes of the FDA or any other applicable federal or foreign regulatory authority or agency for any of our products will take or whether any such approvals ultimately will be granted. The FDA and foreign regulatory agencies have substantial discretion in the drug approval process, and positive results in preclinical testing or early phases of clinical studies offer no assurance of success in later phases of the approval process. Generally, preclinical and clinical testing of products can take many years and require the expenditure of substantial resources, and the data obtained from these tests and trials can be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. If we encounter significant delays in the regulatory process that result in excessive costs, this may prevent us from continuing to develop our product candidates. Any delay in obtaining, or failure to obtain, approvals could adversely affect the marketing of our products and our ability to generate product revenue. The risks associated with the approval process include:
| · | failure of our product candidates to meet a regulatory agency’s requirements for safety, efficacy and quality; | |
| · | limitation on the indicated uses for which a product may be marketed; | |
| · | unforeseen safety issues or side effects; and | |
| · | governmental or regulatory delays and changes in regulatory requirements and guidelines. |
Even if we receive regulatory approvals for marketing our product candidates, if we fail to comply with continuing regulatory requirements, we could lose our regulatory approvals, and our business would be adversely affected. The FDA continues to review products even after they receive initial approval. If we receive approval to commercialize any product candidates, the manufacturing, marketing and sale of these drugs will be subject to continuing regulation, including compliance with quality systems regulations, good manufacturing practices, adverse event requirements, and prohibitions on promoting a product for unapproved uses. Enforcement actions resulting from our failure to comply with government and regulatory requirements could result in fines, suspension of approvals, withdrawal of approvals, product recalls, product seizures, mandatory operating restrictions, criminal prosecution, civil penalties and other actions that could impair the manufacturing, marketing and sale of our potential products and our ability to conduct our business.
Even if we are able to obtain regulatory approvals for any of our product candidates, if they exhibit harmful side effects after approval, our regulatory approvals could be revoked or otherwise negatively impacted, and we could be subject to costly and damaging product liability claims. Even if we receive regulatory approval for our product candidates, we will have tested them in only a small number of patients during our clinical trials. If our applications for marketing are approved and more patients begin to use our product, new risks and side effects associated with our products may be discovered. As a result, regulatory authorities may revoke their approvals; we may be required to conduct additional clinical trials, make changes in labeling of our product, reformulate our product or make changes and obtain new approvals for our and our suppliers’ manufacturing facilities. We might have to withdraw or recall our products from the marketplace. We may also experience a significant drop in the potential sales of our product if and when regulatory approvals for such product are obtained, experience harm to our reputation in the marketplace or become subject to lawsuits, including class actions. Any of these results could decrease or prevent any sales of our approved product or substantially increase the costs and expenses of commercializing and marketing our product.
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Healthcare reform measures could adversely affect our business. The efforts of governmental and third-party payers to contain or reduce the costs of healthcare may adversely affect the business and financial condition of pharmaceutical companies. In the United States and in foreign jurisdictions there have been, and we expect that there will continue to be, a number of legislative and regulatory proposals aimed at changing the healthcare system. For example, in some countries other than the United States, pricing of prescription drugs is subject to government control, and we expect proposals to implement similar controls in the United States to continue. The pendency or approval of such proposals could result in a decrease in our common stock value or limit our ability to raise capital or to enter into collaborations or license rights to our products.
Federal legislation may increase the pressure to reduce prices of pharmaceutical products paid for by Medicare, which could adversely affect our revenues, if any. The Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA, expanded Medicare coverage for drug purchases by the elderly and disabled beginning in 2006. The legislation uses formularies, preferred drug lists and similar mechanisms that may limit the number of drugs that will be covered in any therapeutic class or reduce the reimbursement for some of the drugs in a class. More recently, the Patient Protection and Affordable Care Act of 2010 also contained certain provisions with the potential to affect pricing of pharmaceutical products.
As a result of the expansion of legislation, including recent healthcare insurance legislation, and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives could decrease the coverage and price that we receive for our products in the future and could seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payers often follow Medicare coverage policy and payment limitations in setting their own reimbursement systems, and any limits on or reductions in reimbursement that occur in the Medicare program may result in similar limits on or reductions in payments from private payers.
Federal laws or regulations on drug importation could make lower cost versions of our future products available, which could adversely affect our revenues, if any. The prices of some drugs are lower in other countries than in the United States because of government regulation and market conditions. Various proposals have been advanced to permit the importation of drugs from other countries to provide lower cost alternatives to the products available in the United States. In addition, the MMA requires the Secretary of Health and Human Services to promulgate regulations for drug reimportation from Canada into the United States under some circumstances, including when the drugs are sold at a lower price than in the United States. A prime example of the effort to provide safe, lower cost drugs to consumers is Safe Importation Action Plan that was released by the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA), which plan is describes steps the HHS and FDA will take to allow the safe importation of certain drugs originally intended for non-US markets. If the laws or regulations are changed to permit or more easily permit the importation of drugs into the United States in circumstances that are currently not permitted, such a change could have an adverse effect on our business by making available lower priced alternatives to our future products.
Failure to obtain regulatory and pricing approvals in foreign jurisdictions could delay or prevent commercialization of our products abroad. If we succeed in developing any products, we intend to market them in the European Union and other foreign jurisdictions. In order to do so, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval abroad may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval and additional risks associated with requirements particular to those foreign jurisdictions where we will seek regulatory approval of our products. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. We and our collaborators may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market outside the United States. The failure to obtain these approvals could materially adversely affect our business, financial condition and results of operations.
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Risks Related to Our Organization and Structure
Our holding company structure makes us dependent on our subsidiaries for our cash flow and could serve to subordinate the rights of our shareholders to the rights of creditors of our subsidiaries, in the event of an insolvency or liquidation of any such subsidiary. Our company acts as a holding company and, accordingly, substantially all of our operations are conducted through our subsidiaries. Such subsidiaries will be separate and distinct legal entities. As a result, substantially all of our cash flow will depend upon the earnings of our subsidiaries. In addition, we will depend on the distribution of earnings, loans or other payments by our subsidiaries. No subsidiary will have any obligation to provide our company with funds for our payment obligations. If there is an insolvency, liquidation or other reorganization of any of our subsidiaries, our shareholders will have no right to proceed against their assets. Creditors of those subsidiaries will be entitled to payment in full from the sale or other disposal of the assets of those subsidiaries before our company, as a shareholder, would be entitled to receive any distribution from that sale or disposal.
Risks Related to Our Securities
We may seek capital that may result in shareholder dilution or that may have rights senior to those of our common stock. From time to time, we may seek to obtain additional capital, either through equity, equity-linked or debt securities. The decision to obtain additional capital will depend on, among other factors, our business plans, operating performance and condition of the capital markets. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, which could negatively affect the market price of our common stock or cause our shareholders to experience dilution.
We do not intend to pay dividends on our common stock. We intend to retain earnings, if any, to provide funds for the implementation of our business strategy. We do not intend to declare or pay any dividends in the foreseeable future. Therefore, there can be no assurance that holders of our common stock will receive cash, stock or other dividends on their shares of our common stock, until we have funds which our Board of Directors determines can be allocated to dividends.
Because we became public pursuant to a “reverse merger” transaction, we may not be able to attract the attention of brokerage firms. Additional risks may exist, since we became public pursuant to a “reverse merger” transaction. Securities analysts of brokerage firms may not provide coverage of us, since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on our behalf, in the future.
Our common stock has been, and may in the future be, a “Penny Stock” and subject to specific rules governing its sale to investors. The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to our Common Stock, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for transactions in penny stocks; and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person; and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination; and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors sell shares of our common stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
There is minimal trading activity in our common stock and there is no assurance that an active market will develop in the future. Although our common stock is currently quoted on the OTC Pink marketplace of OTC Link (an interdealer electronic quotation system operated by OTC Markets Group, Inc.) under the symbol “COEP”, trading of our common stock may be extremely sporadic. For example, several days may pass before any shares may be traded. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of our common stock. There can be no assurance that a more active market for our common stock will develop, or if one should develop, there is no assurance that it will be sustained. This severely limits the liquidity of our common stock, and would likely have a material adverse effect on the market price of our common stock and on our ability to raise additional capital.
The market for our common stock may be volatile. The market price of our common stock may fluctuate substantially and will depend on a number of factors many of which are beyond our control and may not be related to our operating performance. Factors that could cause fluctuations in the market price of our common stock include, but are not limited to, the following:
| · | price and volume fluctuations in the overall stock market from time to time; | |
| · | volatility in the market prices and trading volumes of pharmaceutical and biotechnology stocks; | |
| · | changes in operating performance and stock market valuations of other pharmaceutical and biotechnology companies generally, or those in our industry in particular; | |
| · | sales of shares of our Common Stock by us or our shareholders; | |
| · | failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; | |
| · | the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; | |
| · | announcements by us or our competitors of new products or services; | |
| · | the public’s reaction to our press releases, other public announcements and filings with the SEC; | |
| · | rumors and market speculation involving us or other companies in our industry; | |
| · | actual or anticipated changes in our operating results or fluctuations in our operating results; | |
| · | actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; | |
| · | litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; | |
| · | developments or disputes concerning our intellectual property or other proprietary rights; | |
| · | announced or completed acquisitions of businesses or technologies by us or our competitors; | |
| · | new laws or regulations or new interpretations of existing laws or regulations applicable to our business; | |
| · | changes in accounting standards, policies, guidelines, interpretations or principles; | |
| · | any significant change in our management; and | |
| · | general economic conditions and slow or negative growth of our markets. |
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
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If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud, and, consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our common stock. We must maintain effective internal controls to provide reliable financial reports and detect fraud. We have been assessing our internal controls to identify areas that need improvement. We are in the process of implementing changes to internal controls, but have not yet completed implementing these changes. Failure to implement these changes to our internal controls or any others that it identifies as necessary to maintain an effective system of internal controls could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading price of our stock.
Our Certificate of Incorporation allows for our board to create new series of preferred stock without further approval by our shareholders, which could adversely affect the rights of the holders of our common stock. Our board of directors has the authority to issue shares of our preferred stock, with such relative rights and preferences as the board of directors may determine, without further shareholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation and the right to receive dividend payments before dividends are distributed to the holders of our common stock. In addition, our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing shareholders.
In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (DGCL), which may, unless certain criteria are met, prohibit large shareholders, in particular those owning 15% or more of the voting rights on our common stock, from merging or combining with us for a prescribed period of time.
The outstanding shares of our Series B Convertible Preferred Stock could limit current and future owners of our common stock from influencing any corporate decision. Our Chairman, CEO and President, David Mehalick, as the owner of 100% of all outstanding shares of our Series B Convertible Preferred Stock, will have significant influence on the management and affairs of our company, as well as matters requiring the approval by our shareholders, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets, and any other significant corporate transaction. Each holder of outstanding shares of Series B Convertible Preferred Stock shall be entitled to the number of votes equal to 1,000 shares of our common stock for each share of Series B Convertible Preferred Stock. Except as provided by law, or by the provisions establishing any other series of our Preferred Stock, holders of Series B Convertible Preferred Stock and of any other outstanding series of Preferred Stock shall vote on an as-converted basis together with the holders of our common stock as a single class.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
| ITEM 2. | PROPERTIES |
Our principal place of business is located at 105 Bradford Street, Suite 420, Wexford, Pennsylvania 15090, which we lease. The lease is scheduled to expire on May 31, 2024.
We do not own any properties or land.
We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available.
| ITEM 3. | LEGAL PROCEEDINGS |
We are from time to time subject to litigation and other proceedings that arise in the ordinary course of our business. Subject to the inherent uncertainties of litigation and although no assurances are possible, we believe that there are no pending lawsuits or claims that, individually or in the aggregate, will have a material adverse effect on our business, financial condition or our yearly results of operations.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
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PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Our common stock is listed on the OTC PINK under the symbol “COEP.” Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-downs or commissions, and may not necessarily represent actual transactions. The closing price of our common stock on the OTC PINK on December 31, 2021 was $4.05 per share.
Holders of Common Stock
As of March 11, 2022, we had 37,966,063 shares of our common stock issued and outstanding, and there were 459 record holders of our common stock. Certain shares are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Dividend Policy
We do not currently anticipate declaring or paying cash dividends on our common stock in the foreseeable future. We currently intend to retain our future earnings, if any, to finance the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon then-existing conditions, including our results of operations and financial condition, capital requirements, business prospects, statutory and contractual restrictions on our ability to pay cash dividends, including restrictions contained in any credit agreements (if any), and other factors our board of directors may deem relevant. Accordingly, you may need to sell your shares of our common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them. See “Risk Factors—Risks Related to our Securities—We do not intend to pay dividends on our Common Stock.”
Our Series B Preferred Stock do not rank senior to the shares of our common stock with respect to dividend rights.
Securities Authorized for Issuance under Equity Compensation Plans
The Company does not currently have an equity incentive plan in place but intends to put one in place in 2022.
Recent Sales of Unregistered Securities
Merger Issuances. On February 12, 2021, as part of the acquisition by way of reverse merger described elsewhere in this Annual Report on Form 10-K, we issued shares of our common stock to the former Coeptis stockholders. These shares were issued in reliance upon an exemption from registration provided by Section 506(b) of Regulation D.
2021 Private Placement. On November 17, 2021, we completed a private placement (the “2021 Private Placement”), in which we sold 5,827,324 shares of our common stock in reliance on an exemption from registration under the Securities Act. The gross proceeds from the 2021 Private Placement were approximately $8.7 million, which we used for general corporate purposes.
Current Reg A Offering. On December 6, 2021, we launched an offering of our common stock pursuant to Tier 2 of Regulation A of the United States Securities and Exchange Commission, pursuant to which we sold 0 and 91,999 shares of our common stock a price per share of $3.00 at December 31, 2021 and March 11, 2022, respectively.
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Warrant Issuances:
On November 23, 2020, pre-Merger, the Company issued a class A and a class B warrant to Coral Investment Partners, LP, with each warrant granting the right to purchase 500,000 shares of common stock at a price of $2 per share under the Class A warrant and the right to purchase 500,000 shares of common stock at a price of $5 per share under the Class B warrant.
On May 28, 2021, the Company issued a warrant to a third party in exchange for professional services, granting the warrant holder the right to purchase 500,000 shares of common stock at a price of $1 per share, 500,000 shares at $2 per share, and 500,000 at $5 per share.
On July 30th, 2021, the Company issued a warrant to a third party in exchange for professional services, granting the warrant holder the right to purchase 200,000 shares of common stock at a price of $1 per share, 100,000 shares at $2 per share, and 100,000 at $5 per share.
On September 22, 2021, the Company issued a warrant in conjunction with the termination of a license right with Purple Biotech, Ltd., granting Purple Biotech the right to purchase 300,000 shares of common stock at $5 per share, subject to certain adjustments.
Between November 2021 and January 2022, the Company issued warrants in exchange for professional services, granting the warrant holders the right to purchase (subject to vesting in certain cases) in the aggregate up to 4,195,100 shares at an average exercise price of approximately $1.50 per share.
Description of our Capital Stock
Description of Common Stock
The holders of our common stock are entitled to one vote per share on all matters submitted to a vote of the shareholders, including the election of directors. Generally, all matters to be voted on by shareholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our common stock (including our common stock underlying the Series B Convertible Preferred Stock) that are present in person or represented by proxy. Except as otherwise provided by law, amendments to our Certificate of Incorporation generally must be approved by a majority of the votes entitled to be cast by all outstanding shares of our common stock (including our common stock underlying the Series B Convertible Preferred Stock). Our Certificate of Incorporation does not provide for cumulative voting in the election of directors. Holders of our common stock will be entitled to such cash dividends as may be declared from time to time by the Board from funds available. Holders of our common stock have no preemptive rights to purchase shares of our common stock. The issued and outstanding shares of our common stock are not subject to any redemption provisions and are not convertible into any other shares of our capital stock. Upon our liquidation, dissolution or winding up, the holders of our common stock (including our common stock underlying the Series B Convertible Preferred Stock) will be entitled to receive pro rata all assets available for distribution to such holders.
Description of Preferred Stock
Pursuant to our Amended and Restated Certificate of Incorporation, we are authorized to issue up to 10,000,000 shares of “blank check” preferred stock, which may be issued from time to time in one or more series upon authorization by the company’s board of directors. The board of directors, without further approval of the stockholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights and terms, liquidation preferences, and any other rights, preferences, privileges and restrictions applicable to each series of preferred stock.
Series A Preferred Stock
As of December 31, 2020, there were no shares of Series A Preferred outstanding, and we have no intention of issuing any Series A Preferred Stock in the near future. The following summary is based on the Certificate of Designation, Preferences and Rights of the Series A Preferred Stock. The summary is qualified in its entirety by reference to the Certificate of Designation, Preferences and Rights of the Series A Preferred Stock that is included as Exhibit 4.1 to the Company’s Form 10 that was filed with the SEC on August 11, 2020.
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The Series A Preferred Stock has no liquidation preference over any other class of stock. Except as otherwise required by law, holders of Series A Preferred Stock have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock or any other class or series of preferred stock) for the taking of any corporate action. The series A Preferred is convertible at the option of the holder for a period of time from the date of issuance, each holder of shares of Series A Preferred Stock may, at any time and from time to time, provided that the holders of the Series A Preferred Stock are limited to conversion ownership of 9.99% of the Company Common Stock. For a period of 18 months after the Preferred is convertible, the conversion price of the Series A Preferred is subject to adjustment to prevent dilution in the event that the Company issues additional shares at a purchase price less than the applicable conversion price. The conversion price is subject to adjustment on a weighted basis that takes into account issuances of additional shares.
Series B Convertible Preferred Stock
The Company has designated 2,000,000 shares of Series B Convertible Preferred Stock with a par value of $0.0001 per share. As of December 31, 2021, there were 8,000 shares of Series B Preferred outstanding. The summary is qualified in its entirety by reference to the Certificate of Designation, Preferences and Rights of the Series B Preferred Stock that is included as Exhibit 4.2 to the Company’s Form 10 that was filed with the SEC on August 11, 2020.
Initially, there will be no dividends due or payable on the Series B Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Company’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed. All shares of the Series B Preferred Stock shall rank (i) senior to the Company Common Stock and any other class or series of capital stock of the Company hereafter created, (ii) pari passu with any class or series of capital stock of the Company hereafter created and specifically ranking, by its terms, on par with the Series B Preferred Stock and (iii) junior to any class or series of capital stock of the Company hereafter created specifically ranking, by its terms, senior to the Series B Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. The Series B Preferred shall have no liquidation preference over any other class of stock. Each holder of outstanding shares of Series B Preferred Stock shall be entitled to the number of votes equal to equal to one thousand (1,000) shares of Company Common Shares for each share of Series B Preferred Stock. Except as provided by law, or by the provisions establishing any other series of Preferred Stock, holders of Series B Preferred Stock and of any other outstanding series of Preferred Stock shall vote on an as-converted basis together with the holders of Common Stock as a single class. Each holder of shares of Series B Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series B Preferred Stock into a 1,000 of fully paid and nonassessable shares of Company Common Stock; provided, however, that any Optional Conversion must involve the issuance of at least 100 shares of Company Common Stock. In the event of a reverse split, the conversion ratio shall not be changed. However, in the event a forward split shall occur then the conversion ratio shall be modified to be increased by the same ratio as the forward split.
| ITEM 6. | SELECTED FINANCIAL DATA |
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item.
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
This Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 12E of the Securities Exchange Act of 1934, including or related to our future results, certain projections and business trends. Assumptions relating to forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. When used in this Report, the words “estimate,” “project,” “intend,” “believe,” “expect” and similar expressions are intended to identify forward-looking statements. Although we believe that assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate, and we may not realize the results contemplated by the forward-looking statement. Management decisions are subjective in many respects and susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause us to alter our business strategy or capital expenditure plans that may, in turn, affect our results of operations. In light of the significant uncertainties inherent in the forward-looking information included in this Report, you should not regard the inclusion of such information as our representation that we will achieve any strategy, objective or other plans. The forward-looking statements contained in this Report speak only as of the date of this Report as stated on the front cover, and we have no obligation to update publicly or revise any of these forward-looking statements. These and other statements which are not historical facts are based largely on management’s current expectations and assumptions and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by such forward-looking statements. These risks and uncertainties include, among others, the failure to successfully develop a profitable business, delays in identifying customers, and the inability to retain a significant number of customers, as well as the risks and uncertainties described elsewhere in this Annual Report.
When we use works like “Coeptis,” “we,” “us”, “our,” the “company” and words of the like in this Section, unless otherwise indicated, we are referring to the operations of us and our wholly-owned subsidiary Coeptis Pharma.
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Cautionary Statement
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
| · | Only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced Managements Discussion and Analysis of Financial Condition and Results of Operations disclosure. | |
| · | Reduced disclosure about our executive compensation arrangements. | |
| · | Not having to obtain non-binding advisory votes on executive compensation or golden parachute arrangements. | |
| · | Exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. |
We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenue, we have more than $700 million in market value of our stock held by non-affiliates, or we issue more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of these reduced reporting burdens herein, and the information that we provide may be different than what you might get from other public companies in which you hold stock.
Overview and Outlook
Our company, Coeptis Therapeutics, Inc. (“Coeptis Therapeutics”), is a holding company that conducts its current operations through its wholly-owned subsidiary Coeptis Pharmaceuticals, Inc. (“Coeptis”). We are a pharmaceutical company which owns, acquires, and develops drug products and pharmaceutical technologies which offer improvements to current therapies. Our products and technologies are intended to be commercialized in the US and worldwide markets. Since Coeptis’ inception in 2017, it has acquired and commercialized two drug products for the U S market, which were approved as 505b2 applications. These anti-hypertension products were launched into the US market during 2020 through a marketing partner. At launch, the sales and promotional efforts were significantly impeded by the limitation of the global pandemic and as such, we have since abandoned all activities and ownership pertaining to both products. We also began the development of several ANDA products which we divested in 2019 to a larger generic pharmaceutical drug manufacturer, and have moved away from focusing on the commercialization of generic products. In early 2021, we entered into strategic partnerships to co-develop improved therapies for the auto-immune and oncology markets. Following the reverse merger transaction involving us and Coeptis, we continue to focus on identifying and investing resources into innovative products and technologies which we believe will significantly transform Coeptis’ current products and therapies.
During 2020 and continuing through 2021, Coeptis faced several operational challenges related to the COVID-19 global pandemic, which we continue to work to overcome. The launch of both 5050b2 products was impacted because of various COVID-19 limitations, most notably field sales personnel were not able to make healthcare provider visits in person; thereby limiting the awareness of the availability of these products. We explored and implemented several non-personal promotion efforts, but given the global limitations and dynamics, it was challenging to achieve expected sales. We have since abandoned all activities and ownership pertaining to both products.
In May 2021, we entered into two exclusive option agreements (the “CD38 Agreements”) relating to separate technologies designed to improve the treatment of CD38-related cancers (e.g., multiple myeloma, chronic lymphocytic leukemia, and acute myeloid leukemia) with VyGen-Bio, Inc. (“Vy-Gen”), a majority-owned subsidiary of Vycellix, Inc., a Tampa, Florida-based private, immuno-centric discovery life science company focused on the development of transformational platform technologies to enhance and optimize next-generation cell and gene-based therapies, including T cell and Natural Killer (NK) cell-based cancer therapies.
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The CD38 Agreements relate to two separate Vy-Gen drug product candidates, as follows:
CD38-GEAR-NK. This Vy-Gen drug product candidate is designed to protect CD38+ NK cells from destruction by anti-CD38 monoclonal antibodies, or mAbs. CD38-GEAR-NK is an autologous, NK cell-based therapeutic that is derived from a patient’s own cells and gene-edited to enable combination therapy with anti-CD38 mAbs. We believe CD38-GEAR-NK possesses the potential to minimize the risks and side effects from CD38-positive NK cell fratricide.
Market Opportunity. We believe CD38-GEAR-NK could potentially revolutionize how CD38-related cancers are treated, by protecting CD38+ NK cells from destruction by anti-CD38 mAbs, thereby promoting the opportunity to improve the treatment of CD38-related cancers, including multiple myeloma, chronic lymphocytic leukemia, and acute myeloid leukemia.
Multiple myeloma is expected to be the first cancer indication targeted with CD38-GEAR-NK. The global multiple myeloma market was $19.48B in 2018 and is expected to reach $31B by 2026 [Source: Fortune Business Reports].
CD38-Diagnostic. This Vy-Gen product candidate is an in vitro diagnostic tool to analyze if cancer patients might be appropriate candidates for anti-CD38 mAb therapy. CD38-Diagnostic is an in vitro screening tool that provides the ability to pre-determine which cancer patients are most likely to benefit from targeted anti-CD38 mAb therapies, either as monotherapy or in combination with CD38-GEAR-NK. CD38-Diagnostic also has the potential to develop as a platform technology beyond CD38, to identify patients likely to benefit for broad range of mAb therapies across myriad indications.
Market Opportunity. We believe CD38-Diagnostic provides opportunity to make more cost-effective medical decisions for the treatment of B cell malignancies with high CD38 expression, including multiple myeloma, which may help to avoid unnecessary administration of anti-CD38 therapies. CD38-Diagnostic could prevent patients from being subjected to ineffective therapy and enable significant savings to healthcare systems.
CD38-Diagnostic could be offered as a companion diagnostic for determining patient suitability and likelihood of positive treatment outcomes for CD38-GEAR-NK and/or CD38 monoclonal antibody therapies.
GEAR-NK Product Overview. GEAR-NK is an autologous, gene-edited, natural killer cell-based therapeutic development platform that allows for modified NK cells to be co-administered with targeted mAbs, which, in the absence of the GEAR-NK, would otherwise be neutralized by mAb therapy.
In May 2021, we made initial payments totaling $750,000 under the CD38 Agreements, to acquire the exclusive options to acquire co-development rights with respect to CD38-GEAR-NK and CD38-Diagnostic. On August 15, 2021, we entered into amendments to each of the CD038 Agreements. In connection with the two amendments, we delivered to VyGen promissory notes aggregating $3,250,000 with maturity dates of December 31, 2021, and made a cash payment of $1,000,000, upon which cash payment we exercised the two definitive option purchase agreements. In December 2021, we completed our payment obligations to secure the 50% ownership interest in the CD38-Diagnostic, and also entered into an amendment of the CD038-GEAR-NK promissory note to extend the maturity date to March 31, 2022 and to increase the scalable downward adjustment percentage for the CD38-GEAR-NK product candidate to 25%. Pursuant to the CD038-GEAR-NK amendment, if the promissory note is timely paid by March 31, 2022, Coeptis will maintain its 50% ownership interest in the CD38-GEAR-NK product candidate, and if the CD38-GEAR-NK promissory note is not timely paid by March 31, 2022, Coeptis’ ownership interest in such assets will automatically be reduced to 25% and the promissory note will be automatically cancelled and will no longer be due or payable. Details of the two August amendments and the December amendment are summarized in the amendments attached at Exhibits 4.1 and 4.2 to our Current Report on Form 8-K dated August 19, 2021 and Exhibits 4.2 to the our Current Report on Form 8-K dated December 27, 2021.
In connection with the Vy-Gen relationship and the Company’s ownership in the two product candidates described above, in December 2021 the Company and Vy-Gen entered into a co-development and steering committee agreement. The co-development and steering committee agreement provides for the governance and economic agreements between the Company and Vy-Gen related of the development of the two Vy-Gen drug product candidates and the revenue sharing related thereto, including each company having a 50% representation on the steering committee and each company receiving 50% of the net revenues related to the Vy-Gen product candidates (scalable downward to 25% for the CD38-GEAR-NK as described above). Details of the co-development and steering committee agreement are summarized in our Current Report on Form 8-K dated December 27, 2021, including Exhibits 4.1 and 4.2 thereto.
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Statera BioPharma. Coeptis executed a binding Letter of Intent (LOI) with Statera BioPharma, a clinical stage biopharmaceutical company developing immunotherapy via its proprietary AIMS platform. The LOI details a collaboration between the two companies for STAT-201, a product in development for Crohn’s disease. Coeptis is to assist Statera BioPharma in its efforts to develop and commercialize STAT-201 in adult and pediatric populations. Coeptis is to receive development fees and commercial milestones under the to-be-completed definitive agreement.
STAT-201. STAT-201 is a lower dose version of an existing FDA approved product. STAT-201 has been granted Orphan Drug designation by the FDA which provides up to 7 years of market exclusivity upon approval. The safety profile of STAT-201 has been established and clinical studies have been previously conducted showing preliminary efficacy in Crohn’s disease and other inflammatory diseases. A method of use patent was filed in 2011 and additional patents have been recently filed.
We are working closely with Statera on near- and longer-term development strategy and timelines for clinical trials and subsequent FDA filings.
Market Opportunity. There are many FDA approved products to treat Crohn’s disease, including aminosalicylates, such as Azulfidine® and Asacol®, corticosteroids and biologics, such as Humira®. Some of the disadvantages of current therapies include: high cost, frequent dosing (up to 3 doses per day) and side effects ranging from upper respiratory infection, risk of other infections, decreased immune system function, and diarrhea. In initial studies, STAT-201 exhibited mild side effects including vivid dreams, dizziness and headaches. STAT-201 will be available as an oral tablet or capsule taken once per day.
The United States market for Crohn’s disease was forecasted to be $6 Billion by 2021 [Source: Datamonitor Healthcare 2016]. A large portion of this market, approximately 60%, are the biologic drugs. It is estimated that up to 40% of Crohn’s patients may be non-responsive to biologic treatments. The target market for STAT-201 includes patients who do not tolerate and/or are considered non-responsive to biologic treatment. The market potential for STAT-201 in Crohn’s disease alone is approximately $1.4-2.4 Billion annually in the United States.
Vici Health Sciences, LLC. In partnership with Vici Health Sciences, LLC (“Vici”), we are co-developing a drug product, CPT60621 – a focus on Parkinson’s Disease. Through this partnership, Vici and Coeptis would co-develop, seek FDA approval and share ownership rights to CPT60621.
CPT60621 – a focus on Parkinson’s Disease. CPT60621 is a novel, ready to use, easy to swallow, oral liquid version of an already approved drug used for the treatment of Parkinson’s Disease (PD). The currently approved dosage form is only available as an oral solid tablet which can be difficult to swallow for some PD patients. Per Symphony Health data, an estimated 555,000 prescriptions are dispensed per year for the oral solid tablet version alone.
PD affected nearly 1,000,000 people in the U.S. in 2020, and nearly 10,000,000 people worldwide. Experts also predict that the PD affected rate is expected to increase at a rate of 2.2% per year for the next 10 years. The direct medical cost to treat PD is estimated to be over $25 billion per year, in which $4.1 billion of that is in medication cost alone.
Typical PD symptoms include thinking difficulties, uncontrolled shaking and tremors, loss of automatic movements, rigidity, and eating, speaking, and swallowing difficulties. During the course of their disease, nearly 80% of PD patients will develop a condition known as dysphagia which is defined as difficulty or discomfort in swallowing. Oral liquid dosage forms are easier to swallow than oral solid dosage forms. PD patients who suffer from dysphagia often must crush and dissolve tablets in juice in order to consume their medication. In more extreme cases, feeding tubes are utilized. This is costly to the healthcare system and is simply impractical.
CPT60621 can be administered to the patient using an easy-to-use oral syringe, eliminating time consuming, costly, and uncontrolled tablet crushing. This novel dosage form, if approved, we believe will fulfill a market need and provide a beneficial treatment option for many PD patients.
As we continue to direct our operational focus towards the Vy-Gen opportunities described elsewhere herein, we have recently shifted away from allocating priority resources to CPT60621.
We expect to generate revenue from product sales and technology licensing. We cannot be certain of the timing of this revenue and will likely need funding to support continuing operations and support our growth strategy. We may have to finance operations by offering any combination of equity offerings, debt financing, collaborations, strategic alliances, or other licensing arrangements.
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Fiscal Year End
On February 12, 2021, our board of directors approved a change in fiscal year end from February 28 to December 31 to align with the Coeptis fiscal year end. The fiscal year change became effective with our 2020 fiscal year, which, for transition year 2020, begins March 1, 2020 and ends December 31, 2020.
Our Results of Operations
In General.
Revenue. To date, we have generated minimal revenue mostly from consulting arrangements and product sales. If our strategic business discussions progress to agreements we expect to generate additional revenue from collaboration partners.
Operating Expenses. General and administrative expenses consist primarily of salaries and related costs for personnel and professional fees for consulting services related to regulatory, pharmacovigilance, quality, legal, and business development. We expect that our general and administrative expenses will increase in the future as we increase our headcount to support the business growth. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, insurance, and investor relation expenses associated with operating as a public company.
Research and Development Costs. Research and developments costs will continue to be dependent on the strategic business collaborations and agreements will are anticipating in the future. We expect development costs to increase to support our new strategic initiatives.
Comparison of the twelve months ended December 31, 2021 and December 31, 2020.
Revenues. Revenues, which were generated from consulting services of $75,000 and $14,561 recorded in the twelve months ended December 31, 2021 and 2020 respectively, continue to be minimal. The Company’s activities primarily include product development, raising capital, and building infrastructure. Management does not expect the Company to generate any significant revenue for at least the next two years, during which time drug development will continue toward the goal of commercializing, through a partnership or otherwise, one or more of the Company’s target products or technologies.
Operating Expenses.
Overview. Operating expenses increased from $5,927,947 in the twelve months ended December 31, 2020 to $14,308,066 in the twelve months ended December 31, 2021. The increase is mainly due to higher professional services fees, as well as new requirements for D&O insurance.
General and Administrative Expenses. For the twelve months ended December 31, 2020 and 2021, general and administrative expenses are included in operating expenses. All costs incurred can be attributed to the planned principal operations of product development, raising capital, and building infrastructure. Management may separate out G&A expenses in 2022, especially if new personnel are hired consistent with the Company’s financial regulatory and filings obligations as a publicly traded entity.
Interest Expense. Interest expense was $148,192 for the twelve months ended December 31, 2020 and was $187,133 for the twelve months ended December 31, 2021. Interest was related to notes payable, which are discussed in detail in the Footnotes to the financial statements, incorporated by reference herein. Management expects that in 2022 and thereafter, interest expense will increase, as it may take on debt from insiders or independent third parties to fund operations either while awaiting receipt of the proceeds of equity capital financings or as a stand-alone strategy in addition to raising capital through equity capital financings.
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Financial Condition, Liquidity and Capital Resources
At December 31, 2021. Our company had limited financial resources during the twelve months ended December 31, 2020, with cash and cash equivalents of just $202,965 at December 31, 2020. Cash and cash equivalents was increased significantly at December 31, 2021 to $2,179,558, as we raised capital in connection with a private placement that terminated in December 2021. We continue to operate a minimal infrastructure, in order to maintain our ability to fund operations, keep full focus on all product development targets and to stay current with all of our scientist consultants, legal counsel and accountants. During 2022, we believe that the ability to raise capital through equity transactions will increase liquidity and enable the execution of our management’s operating strategy.
At December 31, 2020. At December 31, 2020, we had cash and cash equivalents of $202,965. On such date we did not possess sufficient working capital to fund our planned operations. During the year ended December 31, 2020, we borrowed funds from two of Coeptis’ former shareholders in the aggregate amount of $1 million (which amounts were subsequently converted into equity and are no longer outstanding debt obligations of our company). After deploying these funds, we had accumulated an accounts payable balance of $1,623,840 at December 31, 2020.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The financial statements required to be filed pursuant to this Item 8 are appended to this report and are incorporated herein by reference. An index of those financial statements is found in Item 15 of Part IV of this Annual Report on Form 10-K.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
As previously disclosed, in connection with the Merger and the adoption of Coeptis’ historical business as that of the Company, Turner, Stone & Company, L.L.P, Coeptis’ independent auditors, became our auditors.
| ITEM 9A. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, and as a result of the material weaknesses described below, our principal executive officer and principal financial officer concluded that, as of December 31, 2021, our disclosure controls and procedures were not effective. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
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Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 Framework). Based on this assessment, management concluded that, as of December 31, 2021, the Company’s internal control over financial reporting was not effective, due to the material weakness described below. A material weakness is a deficiency or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses, as of December 31, 2021:
| 1. | The Company has not designed or implemented a system of internal controls. As a result, the Company does not have (i) segregation of duties and evidence of fiduciary oversight related to the financial statement close process, cash disbursements process, contract approval process and time and expense reimbursement process; (ii) formally documented accounting policies and procedures that are effective and consistently applied in accordance with GAAP; and (iii) effective controls and resources to address the accounting requirements for new accounting pronouncements. | |
| 2. | The Company’s financial statement close process and disclosure controls and procedures, including the secondary review and approval of financial information generated to prepare the consolidated financial statements, and the lack of integration of the underlying IT systems used to consolidate the Company’s subsidiaries, are ineffective. As a result, the Company has been unable to close its books or fulfill its SEC reporting requirements in a timely manner. |
The Company intends to remediate these material weaknesses by (i) hiring additional resources to effectively allow for segregation of duties, formally documenting accounting policies, and ensuring compliance with accounting requirements and (ii) adopting financial systems that support a timely financial statement close, secondary reviews, and consolidation of the Company’s subsidiaries within an integrated financial solution.
Changes in Internal Control Over Financial Reporting
In an effort to address the Company’s internal accounting personnel deficiencies, in February 2021 we hired a consulting group to assist our Chief Financial Officer. As part of our acquisition of Coeptis, the existing Coeptis finance team is now part of the internal accounting and financial control process.
Attestation Report of Independent Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm, as non-accelerated filers are exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
| ITEM 9B. | OTHER INFORMATION |
None.
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PART III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
The following persons are our executive officers, non-executive officers and directors and hold the positions set forth opposite their name.
| Name | Age | Position(s) |
| David Mehalick | 53 | Chairman of the Board of Directors, CEO and President |
| Christine Sheehy | 54 | Director, Chief Financial Officer and Secretary |
| Daniel Yerace | 39 | Director, Vice President of Operations |
| Michael Handley | 50 | Director |
Dave Mehalick – Director, President and Chief Executive Officer: Mr. Mehalick is a successful executive with a career spanning over 30 years across a variety of industries including life sciences, technology, financial services, military contracting, entertainment, and consumer products. His career has allowed him deep immersion into all facets of executive management notably mergers and acquisitions, corporate finance, C- Suite management, product development and licensing, partnerships, product commercialization, and corporate communications. Mr. Mehalick has assisted and managed several organizations towards successful investor monetization across all aspects of company evolution resulting in billions of dollars in transactions and financings. Currently, Mr. Mehalick is our Chairman, Chief Executive Officer and President, and one of our co-founders. He has been involved in several companies in a variety of positions and functions prior to Coeptis spanning many different industries. Mr. Mehalick began his career in the financial services industry in the wealth management area before transitioning to investment banking in the early 2000’s. He held positions of Vice President and Senior Vice President at multiple firms notably First Union Capital Markets, Gruntal and Co. and Ferris Baker Watts. He then began working earnestly with companies to assist them in all aspects of growth. He was a founding partner in American Defense Systems, a military contractor designing lightweight antiballistic armor and hardening systems for transportation and solid structures. After procuring several military contracts, the company grew revenues to a point that they became public on the AMEX stock exchange. Throughout his career Mr. Mehalick was involved in numerous similar situations either in a management or consultant role to allow strong returns for shareholders via acquisitions or public strategies.
Christine Sheehy – Director, Chief Financial Officer and Secretary: Christine Sheehy is a pharmaceutical business leader with over 25 years of experience, including globally commercializing drug products and working in development of targeted therapeutics including cell and gene therapies. Ms. Sheehy was Senior Vice-President of Operations for Kadmon Pharmaceuticals, leading the global supply chain, distribution, and IT organizations. She was a founding employee of start-up pharmaceutical company Three Rivers Pharmaceuticals, which was acquired by Kadmon Pharmaceuticals in 2010. During that time, she launched branded and generic products in the U.S., leading the operational business. Globally, Ms. Sheehy has executed international supply and distribution partnerships in Europe and Asia. Prior to Three Rivers Pharmaceuticals, Ms. Sheehy held various roles ranging from business and finance consulting to financial management. Strategically minded, with a strong ability to understand all aspects of the business, her leadership skills have been developed by working substantially in start-ups and early-stage companies. Additionally, over the past 15 years Ms. Sheehy has held board of director and advisory positions for multiple industry organizations, and she holds a bachelor’s degree in accounting from Penn State University.
Daniel Yerace – Director and Vice President of Operations: Dan Yerace is a co-founder of Coeptis Pharmaceuticals and serves as the Vice President of Operations. Mr. Yerace has over ten years of experience in the pharmaceutical industry and is a key strategist responsible for supply chain management, business development, portfolio management, and corporate strategy. Mr. Yerace has broad operational experience and has held leadership positions in procurement, global supply chain management, operations, and business development for small private firms and fortune 500 multi-national corporations. Prior to joining Coeptis, Mr. Yerace served as Senior Director of Global Supply Chain and Commercial Business Development for Kadmon Pharmaceuticals. Mr. Yerace holds a bachelor’s degree in economics, and a masters of business administration from Waynesburg University.
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Michael Handley - Director: Michael Handley serves as a Director and member of the Company’s Board of Directors. Mr. Handley is a successful life science business professional with over 23 years of cross-functional experience in drug/device commercialization, operations, mergers/acquisitions, regulatory/clinical affairs, venture formation/financing, market development and partnering/licensing. Mr. Handley has successfully assisted or led in the global commercialization of seventeen devices or drugs that account for over three billion dollars of sales annually. He has experience successfully leading management teams in a variety of capacities in high growth organizations and has secured millions of dollars in venture capital. Currently, Mr. Handley is serving as Chief Executive Officer and Director of Statera BioPharma, Inc. (formerly Cytocom, Inc.), a clinical-stage biopharmaceutical company developing novel small molecule immunotherapies targeting autoimmune, inflammatory, infectious diseases and cancers. Prior to Cytocom, Mr. Handley was the CEO and Director of Armis Biopharma (aka CHD Biosciences), a multi-product development-stage healthcare company that has created a technology platform for the prevention and treatment of topical infectious disease. In his role with Armis, Mr. Handley was responsible for day-to-day operations, executing a profitable growth strategy, obtaining global product approvals, overseeing intellectual property strategy, product commercialization, business development and financing. Prior to his work at Armis, Mr. Handley served in senior management roles at multiple life science companies. Specifically, Mr. Handley was one of the founders and on the management team of Vessix Vascular, Inc. in Laguna Hills California from 2011 to 2012. As a result of his work at Vessix Vascular the company was acquired for $435M by Boston Scientific. Before his time at Vessix Vascular, Mr. Handley was Global Head of Regulatory at Acclarent (that was acquired by Johnson & Johnson) from 2010 – 2011 and assisted in the integration of the $785M acquisition of Acclarent and their five product lines and driving the global revenue growth of the Ethicon franchise for ENT products. Prior to working with Acclarent/J&J, Mr. Handley was the Global Vice President of Regulatory Affairs and Chief Compliance Officer at Spectranetics Corporation, a NASDAQ listed (SPNC) medical device company specializing in laser treatments of blocked arteries and removal of pacemaker leads from 2007 to 2010. Before his time at Spectranetics, Mr. Handley was the CEO and Vice President of Business development, Quality and Regulatory at a privately funded biosciences technology company, Accelapure Corporation, from 2005 – 2007. Mr. Handley expanded his executive skill set as a Senior Management Consultant in the healthcare field at Pittiglio Rabin Todd & McGrath (PRTM) (now PricewaterhouseCoopers) from 2004-2005. As a Senior Principal at PRTM, Mr. Handley assisted Genentech in the successful launch of Avastin (a multi-billion dollar bio-oncology drug) and Tarceva (a multi-million dollar cancer small molecule drug) and assisted in the successful commercial launch for these drug franchises.
Code of Ethics
Our securities are not listed on a national securities exchange, and we are, therefore, not required and do not have a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. Our management promotes honest and ethical conduct, full and fair disclosure in our reports to the SEC, and compliance with applicable governmental laws and regulations.
Consultants and Advisors
Coeptis has several fee-for-service consultancy arrangements with highly qualified firms and individuals who provide consulting services in the areas of regulatory affairs, quality assurance, chemistry, manufacturing and control (CMC), and clinical/medical affairs. We don’t anticipate the expenses related to these agreements to be material to the Company, and any cost to be incurred in the future will be on a case-by-case basis as determined by us prior to the provision of any services under such contracts. Each of these consulting arrangements are terminable at any time by the Company without penalty.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by our stockholders or us to become directors or executive officers.
Corporate Governance
There are no understandings between any director of the Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director.
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Scientific and Clinical Advisory Board
We currently have a scientific and advisory board comprised of the following three persons who are leading scientists in cell and gene therapy:
Evren Alici M.D., PhD. Dr. Alici is the Head of the Gene and Cell Therapy Group, Division of Hematology, Department of Medicine, Karolinska Institutet (“KI”), Karolinska University Hospital. As a senior researcher and group leader in Hematology at KI, Department of Medicine, he also serves as co-director of NextGenNK, an international Competence Center for the development of next-generation NK cell-based cancer immunotherapies based at KI. Dr. Alici received his M.D. and did his residency at the Ege University, Turkey. He earned his Ph.D. in 2006 at KI. Dr. Alici’s main research interests are novel approaches to generating universal cells including allogeneic NK cells, multiple myeloma, lentiviral and retroviral gene transfer, stem cell transplantation and immunology. Dr. Alici participated in the planning and design of the first clinical study with gene-modified cells in Sweden and authored the final publication. Additionally, he was also responsible for the first-in-man autologous NK cell therapy clinical trial that was classified as advanced therapy medicinal product use. Dr. Alici is affiliated with VyGen-Bio.
Hans-Gustaf Ljunggren M.D., PhD. Professor Ljunggren is the former Dean of Research at Karolinska Institutet and founder of the Center for Infectious Medicine, Department of Medicine, Karolinska Institutet, Karolinska University Hospital and has functioned as Dean of Research at KI. He is a member of the Nobel Assembly at KI, which awards the Nobel Prize in Physiology or Medicine. Professor Ljunggren earned his medical and doctoral degrees at KI and also serves as Center Director of NextGenNK, an international Competence Center for the development of next-generation NK cell-based cancer immunotherapies based at KI. In 2001, he was appointed Professor of Infection Medicine and Director of the Center for Infectious Medicine (CIM), a Strategic Research Center at the Department of Medicine, and has authored over 300 articles within the fields of immunology, infectious diseases and cancer and been cited more than 40,000 times. Professor Ljunggren has been a member of the organizing or scientific committees of numerous international conferences and has had multiple national and international assignments, involving external research evaluations and participation in international advisory boards. Dr. Ljunggren is affiliated with VyGen-Bio.
Arnika Kathleen Wagner PhD., Assistant Professor. Since 2019, Dr. Wagner has been an assistant professor at the KI’s Dept. of Medicine Huddinge, studying NK cells in immunotherapy in Multiple Myeloma. Dr. Wagner is particularly interested in advancing the use of genetically modified NK cells in different immunotherapeutic approaches. Dr. Wagner earned her M.Sc. in 2008 from the University of Lübeck, Germany and conducted her Ph.D. studies under the supervision of Klas Kärre at the Dept of Microbiology, Tumor and Cell Biology, at KI, where her research focused on NK cells in mouse models for immunotherapy and studied the crosstalk of NK cells with other immune cells. Dr. Wagner is affiliated with VyGen-Bio.
We intend to continue to review our scientific advisory board to enlist when and if needed further support from highly qualified and well-respected experts and advisors who bring a wealth of academic as well as clinical expertise to us.
Committees of the Board of Directors
There are currently no established committees of the Board of Directors. We do not have a requirement to have committees at this time. Our Board of Directors is expected to appoint an audit committee and adopt an applicable charter in 2022. We believe that the audit committee will play a critical role in ensuring robust and transparent financial reporting, disclosure, and internal control over financial reporting. Our Board of Directors is also expected to analyze the need for and timing for appointing a governance committee and compensation committee, and if and when appointed will also adopt charters relative to each such committee.
| ITEM 11. | EXECUTIVE COMPENSATION |
The following is a discussion and analysis of the compensation arrangements for our named executive officers, or NEOs. We are currently considered a “smaller reporting company” for purposes of the SEC’s executive compensation disclosure rules. In accordance with such rules, we are providing a Summary Compensation Table and an Outstanding Equity Awards at Fiscal Year-End Table as well as narrative disclosures regarding our executive compensation program. For 2020, our only named executive officer was Erik Nelson, who resigned as at February 12, 2021, and at the same time each of David Mehalick, Christine Sheehy and Daniel Yerace were named as named as our executive officers. Mr. Mehalick, Ms. Sheehy, and Mr. Yerace were previously officers of Coeptis. For more information, see earlier discussion of the reverse merger of Coeptis and Vinings.
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Summary Compensation Table
The following table sets forth information regarding each element of compensation that we paid or awarded to our named executive officers and for fiscal year ended December 31, 2020 and 2021.
Summary Compensation Table
| Name and Principal Position | Year | Salary($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Deferred Compensation ($) | All Other Compensation ($) | Total Compensation ($) | |||||||||||||||||||||||||||
| David Mehalick | 2021 | 216,500 | 0 | 0 | 0 | 0 | 0 | 0 | 216,500 | |||||||||||||||||||||||||||
| Chairman, CEO and Pres. | 2020 | 148,500 | 0 | 0 | 0 | 0 | 0 | 0 | 148,500 | |||||||||||||||||||||||||||
| Daniel Yerace | 2021 | 205,500 | 0 | 0 | 0 | 0 | 0 | 0 | 205,500 | |||||||||||||||||||||||||||
| Vice President of Operations | 2020 | 137,077 | 0 | 0 | 0 | 0 | 0 | 0 | 137,077 | |||||||||||||||||||||||||||
| Christine Sheehy | 2021 | 133,500 | 0 | 0 | 0 | 0 | 0 | 0 | 133,500 | |||||||||||||||||||||||||||
| Chief Financial Officer | 2020 | 62,307 | 0 | 0 | 0 | 0 | 0 | 0 | 62,307 | |||||||||||||||||||||||||||
_______________________
Employment Arrangements with Officers and Directors
We recently entered into employment agreement with both David Mehalick and Daniel Yerace, each of which are described below. We do not currently have employment agreements with any of our other officers and directors. We intend to explore other employment arrangements on an ongoing basis in 2022.
David Mehalick: David Mehalick, our President and Chief Executive Officer, entered into an Employment Agreement with Coeptis Therapeutics, Inc. (the “Company”) on February 21, 2022 (the “Effective Date”) covering the Company and its subsidiary Coeptis Pharmaceuticals, Inc. The Employment Agreement is in effect immediately and will remain in effect until the termination of the Employment Agreement by either party in accordance with Section 5 of the Employment Agreement. Mr. Mehalick shall report to the Board of Directors of the Company (the “Board”) and shall have the duties, responsibilities and authority as may from time to time be assigned to him by the Company’s Board. Under the Employment Agreement, the Company will pay Mr. Mehalick an annualized salary at the initial rate of $275,000, which base salary will increase to $360,000 after the completion of a successful Financing Transaction (as defined in the Employment Agreement). Mr. Mehalick will also receive a guaranteed bonus equal to twenty (20%) of his base salary for each calendar year, and will be eligible to receive merit bonuses, certain milestone bonuses and awards of stock options, restricted stock units or other equity awards pursuant to any plans or arrangements the Company may have in effect from time to time. The foregoing is a summary does not purport to be complete and is qualified in its entirety by reference Mr. Mehalick’s Employment Agreement, which is filed as Exhibit 4.1 on the Form 8-K filed on February 21, 2022.
Daniel Yerace: Daniel A. Yerace, our Vice President of Operations, entered into an Employment Agreement with the Company on the Effective Date covering the Company and its subsidiary Coeptis Pharmaceuticals, Inc. The Employment Agreement is in effect immediately and will be effective from the Effective Date until the termination of the Employment Agreement by either party in accordance with Section 5 of the Employment Agreement. Mr. Yerace shall report to the President of the Company and shall have the duties, responsibilities and authority as may from time to time be assigned to him by the Company’s President. Under the Employment Agreement, the Company will pay Mr. Yerace an annualized salary at the initial rate of $275,000, which base salary will increase to $360,000 after the completion of a successful Financing Transaction (as defined in the Employment Agreement). Mr. Yerace will also receive a guaranteed bonus equal to twenty (20%) of his base salary for each calendar year, and will be eligible to receive merit bonuses, certain milestone bonuses and awards of stock options, restricted stock units or other equity awards pursuant to any plans or arrangements the Company may have in effect from time to time. The foregoing is a summary of the material terms of the Employment Agreement. The summary does not purport to be complete and is qualified in its entirety by reference Mr. Yerace’s Employment Agreement, which is filed as Exhibit 4.1 on the Form 8-K filed on February 21, 2022.
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Outstanding Equity Awards at Fiscal Year End
The Company had no outstanding options as at December 31, 2020 or December 31, 2021.
Employee, Director and Consultant Stock Plan
General
The Company does not currently have an equity incentive plan in place but intends to put one in place in 2022.
Option Grants and Stock Awards
There are currently no stock options outstanding.
2020 and 2021 Director Compensation
No compensation was earned or paid to any non-employee director for service as a director during 2021 or 2020.
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| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The following table sets forth certain information regarding our common stock beneficially owned on March 11, 2022, for (i) each stockholder known to be the beneficial owner of more than 5% of our outstanding Company Common Stock, (ii) each executive officer and director, and (iii) all executive officers and directors as a group. In general, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of such security, or the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which the person has the right to acquire beneficial ownership within 60 days, through the exercise of a warrant or stock option, conversion of a convertible security or otherwise. The table assumes a total of 45,966,063 shares of our common stock outstanding as of March 11, 2022, based on 37,966,063 shares of common stock outstanding and 8,000,000 shares of common stock issuable upon conversion of our currently outstanding Series B Convertible Preferred Stock. Unless otherwise noted below the address of each person identified is c/o Coeptis Therapeutics, Inc., 105 Bradford Rd, Suite 420, Wexford, Pennsylvania 15090.
|
Name of Shareholder |
Shares Owned |
Percentage Owned (1) | ||||||
| Common Stock | ||||||||
| Executive Officers and Directors | ||||||||
| David Mehalick | 9,800,000 (2) | 21.32 | % | |||||
| Daniel Yerace | 3,000,000 | 6.53 | % | |||||
| Christine Sheehy | 3,000,000 | 6.53 | % | |||||
| Michael Handley | – | 0 | % | |||||
| Officers and directors, as a group (4 persons) | 15,800,000 | 34.44 | % | |||||
| 5% Owners | ||||||||
| Lisa Pharma LLC (3) | 4,250,000 | 9.25 | % | |||||
| Lena Pharma LLC (4) | 4,250,000 | 9.25 | % | |||||
| Series B Convertible Preferred Stock (5) | ||||||||
| David Mehalick | 8,000 | 100 | % | |||||
| (1) | Based on 45,966,063 shares outstanding, which includes 37,966,063 issued shares and 8,000,000 unissued shares that underlie 8,000 issued shares of our Series B Convertible Preferred Stock convertible within 60 days of the date hereof. |
| (2) | 8,000,000 of such shares have not been issued, but underlie 8,000 issued shares of our Series B Convertible Preferred Stock convertible within 60 days of the date hereof. |
| (3) | Lisa Kuchera is the manager of this entity and possesses voting control over securities owned by it. |
| (4) | Lena Kuchera is the manager of this entity and possesses voting control over securities owned by it. |
| (5) | Each holder of outstanding shares of Series B Convertible Preferred Stock shall be entitled to the number of votes equal to 1,000 shares of our common stock for each share of Series B Convertible Preferred Stock. Except as provided by law, or by the provisions establishing any other series of our Preferred Stock, holders of Series B Convertible Preferred Stock and of any other outstanding series of Preferred Stock shall vote on an as-converted basis together with the holders of our common stock as a single class. |
Changes in Control
We are not aware of any arrangements or a party to arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change of control.
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| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Divestiture
Prior to the closing of the Merger, we had a 100% ownership interest in NDYN Delaware, Inc. In December 2020, prior to the Closing of the Merger, we divested our 100% ownership interest NDYN Delaware, LLC to Sterling Acquisition I, LLC, an entity controlled by our pre-Merger board member Erik Nelson. The divestiture was accomplished through the sale of all of our share ownership of NDYN Delaware, Inc. pursuant to a Divestiture Agreement, a copy of which is attached as Exhibit 10.1 to our Current Report on Form 8-K that was filed on December 31, 2020.
Pre-Merger Promissory Notes
Through the period ended January 31, 2021, Coral Investment Partners, an entity 100% controlled by Erik Nelson, had extended the Company $45,000 in demand loans at an interest rate of 18%. Erik Nelson was the pre-Merger Chief Executive Officer as well as the only Director pre-Merger. As of January 31, 2021, $6,835 in interest had accrued on this demand loan, which loan was repaid in full in connection with the closing of the Merger.
Pre-Merger Series B Preferred Stock and Common Stock
On February 12, 2021, (i) David Mehalick purchased 8,000 shares of Series B Preferred Stock from Coral Investment Partners, LP for an aggregate purchase price of $1,000 and (ii) we repurchased 328,000 shares of our Common Stock from Coral Partners, LP for an aggregate purchase price of $247,164.95 and retired such shares of Common Stock.
Director Independence
Board Independence and Committees. We are not currently listed on any national securities exchange or in an inter-dealer quotation system that has a requirement that the Board of Directors be independent. However, in evaluating the independence of our members and the composition of the committees of our Board of Directors, our Board utilizes the definition of “independence” as that term is defined by applicable listing standards of the Nasdaq Stock Market and SEC rules, including the rules relating to the independence standards of an audit committee and the non-employee director definition of Rule 16b-3 promulgated under the Exchange Act.
Our Board of Directors expects to continue to evaluate its independence standards and whether and to what extent the composition of the Board and its committees meets those standards. We ultimately intend to appoint such persons to our Board and committees of our Board as are expected to be required to meet the corporate governance requirements imposed by a national securities exchange. Therefore, we intend that prior to any listing, if ever, on a national securities exchange a majority of our directors will be independent directors of which at least one director will qualify as an “audit committee financial expert,” within the meaning of Item 407(d)(5) of Regulation S-K, as promulgated by the SEC.
Additionally, our Board of Directors is expected to appoint an audit committee and adopt an applicable charter in 2022. Our Board of Directors is also expected to analyze the need for and timing for appointing a governance committee and compensation committee, and if and when appointed will also adopt charters relative to each such committee.
We believe that none of our current Directors qualify as an “independent” director as that term is defined by the Nasdaq Stock Market, Inc. Marketplace Rules.
Code of Ethics. We have not adopted a written code of ethics. We intend to adopt a written code of ethics in the future.
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Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of our directors for monetary damages for breach of their fiduciary duty as directors, except to the extent such exemption or limitation thereof is not permitted under the Delaware General Corporate Law and applicable law. Delaware law provides that such a provision may not limit the liability of directors:
| · | for any breach of their duty of loyalty to us or our stockholders; | |
| · | for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; | |
| · | for unlawful payment of dividend or unlawful stock repurchase or redemption, as provided under Section 174 of the DGCL; or | |
| · | for any transaction from which the director derived an improper personal benefit. |
Any amendment, repeal or modification of these provisions will be prospective only and would not affect any limitation on liability of a director for acts or omissions that occurred prior to any such amendment, repeal or modification. Our certificate of incorporation also requires us to pay any expenses incurred by any director or officer in defending against any such action, suit or proceeding in advance of the final disposition of such matter to the fullest extent permitted by law, subject to the receipt of an undertaking by or on behalf of such person to repay all amounts so advanced if it shall ultimately be determined that such person is not entitled to be indemnified as authorized by our amended and restated bylaws or otherwise. We have entered indemnification agreements with each of our directors and executive officers. These agreements require us to indemnify these individuals to the fullest extent permitted under Delaware law against liability that may arise by reason of their service to us and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We believe that the limitation of liability provision in our certificate of incorporation and the indemnification agreements facilitate our ability to continue to attract and retain qualified individuals to serve as directors and officers.
We intend to enter into indemnification agreements with each of our directors and executive officers. We expect the indemnification agreement to provide, among other things, that we will indemnify and hold harmless each person subject to an indemnification agreement (each, an “Indemnified Party”) to the fullest extent permitted by applicable law from and against all losses, costs, liabilities, judgments, penalties, fines, expenses and other matters that may result or arise in connection with such Indemnified Party serving in his or her capacity as a director of ours or serving at our direction as a director, officer, employee, fiduciary or agent of another entity. We expect the indemnification agreement to further provide that, upon an Indemnified Party’s request, we will advance expenses to the Indemnified Party to the fullest extent permitted by applicable law. Pursuant to the indemnification agreement, we will intend that an Indemnified Party is presumed to be entitled to indemnification and we have the burden of proving otherwise. We also intend to secure and maintain in full force and effect directors’ liability insurance. If indemnification under an indemnification agreement is unavailable to an Indemnified Party for any reason, we, in lieu of indemnifying the Indemnified Party, will contribute to any amounts incurred by the Indemnified Party in connection with any claim relating to an indemnifiable event in such proportion as is deemed fair and reasonable in light of all of the circumstances to reflect the relative benefits received or relative fault of the parties in connection with such event.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
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Policies and Procedures for Review of Related Party Transactions
A “Related Party Transaction” is a transaction, arrangement or relationship in which we or any of our subsidiaries was, is or will be a participant, the amount of which involved exceeds $50,000 in any one fiscal year, and in which any related person had, has or will have a direct or indirect material interest. A “Related Person” means:
| · | any person who is, or at any time during the applicable period was, one of our executive officers, one of our directors, or a nominee to become one of our directors; | |
| · | any person who is known by us to be the beneficial owner of more than 5.0% of any class of our voting securities; | |
| · | any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, executive officer or a beneficial owner of more than 5.0% of any class of our voting securities, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5.0% of any class of our voting securities; and | |
| · | any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest in any class of the Company’s voting securities. |
Our board of directors intends to adopt a related party transactions policy. Pursuant to this policy, we expect that our audit committee, once established, will review all material facts of all Related Party Transactions and either approve or disapprove entry into the Related Party Transaction, subject to certain limited exceptions. In determining whether to approve or disapprove entry into a Related Party Transaction, our audit committee shall take into account, among other factors, the following: (i) whether the Related Party Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and (ii) the extent of the Related Person’s interest in the transaction. Further, the policy will require that all Related Party Transactions required to be disclosed in our filings with the SEC be so disclosed in accordance with applicable laws, rules and regulations.
| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
The following table shows the fees paid or accrued for the audit and other services provided by Tuner, Stone & Company, LLP, our independent auditors for the fiscal years ended December 31, 2021 and December 31, 2020.
| 12-31-2021 | 12-31-2020 | |||||||
| Audit fees | $ | 148,564 | $ | 58,000 | ||||
| Total | $ | 148,564 | $ | 58,000 | ||||
Audit fees consist of fees billed for services rendered for the audit of our financial statements and review of our financial statements included in this Annual Report on Form 10–K.
Audit–related fees consist of fees reasonably related to the performance of the audit or review of the Company’s financial statements that are not reported as “Audit Fees.”
Tax fees consist of fees billed for professional services related to the preparation of our U.S. federal and state income tax returns and tax advice.
All other fees consist of fees for other miscellaneous items.
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PART IV
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | |
| (a) | The following documents are filed as part of this report: | |
| (1) | Financial Statements—See Index to Consolidated Financial Statements at Item 8 of this Annual Report on Form 10-K, beginning on page F-1. | |
| (2) | Financial Statement Schedules—Financial statement schedules have been omitted in this Annual Report on Form 10-K because they are not applicable, not required under the instructions, or the information requested is set forth in the consolidated financial statements or related notes thereto. | |
| (3) | Exhibits—The exhibits listed in the accompanying index to exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K. | |
| ITEM 16. | FORM 10-K SUMMARY |
None.
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EXHIBIT INDEX [UPDATE]
| Exhibit | Exhibit Description |
| 2.1 | Agreement and Plan of Merger and Reorganization, dated as of December 31, 2019, by and among Vinings Holdings, Inc. a Delaware corporation, Coeptis Acquisition Corp., a Delaware corporation and Coeptis Pharmaceuticals, Inc., a Delaware corporation (incorporated by reference from Exhibit 2.1 to Vinings Holdings, Inc.’s Current Report on Form 8-K, as filed with the SEC on January 4, 2021) |
| 2.2 | Amendment No. 1 and Modification to Agreement and Plan of Merger (incorporated by reference from Exhibit 2.2 to Vinings Holdings, Inc.’s Current Report on Form 8-K, as filed with the SEC on February 12, 2021) |
| 2.3 | Certificate of Merger as filed with the Delaware Secretary of State effective February 12, 2021 (incorporated by reference from Exhibit 2.3 to Vinings Holdings, Inc.’s Current Report on Form 8-K, as filed with the SEC on February 12, 2021) |
| 3.1 | Certificate of Incorporation of Vinings Holdings, Inc. (incorporated by reference from Exhibit 3(i).18 to Vinings Holdings, Inc.’s Form 10, as filed with the SEC on August 12, 2020) |
| 3.2 | Certificate of Incorporation of Coeptis Pharmaceuticals, Inc., as filed with the Secretary of State of the State of Delaware on October 16, 2018 (incorporated by reference from Exhibit 3.2 to Vinings Holdings, Inc.’s Current Report on Form 8-K, as filed with the SEC on February 12, 2021) |
| 3.4 | Bylaws of Vinings Holdings, Inc. (incorporated by reference from Exhibit 3(i).22 to Vinings Holdings, Inc.’s report on Form 10, as filed with the SEC on August 12, 2020) |
| 3.5 | Bylaws of Coeptis Pharmaceuticals, Inc. (incorporated by reference from Exhibit 3.5 to Vinings Holdings, Inc.’s Current Report on Form 8-K, as filed with the SEC on February 12, 2021) |
| 4.1 | Certificate of Designation, Preferences and Rights of Series A Preferred Stock (incorporated by reference from Exhibit 4.1 to Vinings Holdings, Inc.’s Form 10, as filed with the SEC on August 12, 2020) |
| 4.2 | Certificate of Designation, Preferences and Rights of Series A Preferred Stock (incorporated by reference from Exhibit 4.2 to Vinings Holdings, Inc.’s Form 10, as filed with the SEC on August 12, 2020) |
| 4.3 | Form of A Warrant (incorporated by reference from Exhibit 4.2 to Vinings Holdings, Inc.’s Current Report on Form 8-K, as filed with the SEC on December 7, 2020) |
| 4.4 | Form of B Warrant (incorporated by reference from Exhibit 4.3 to Vinings Holdings, Inc.’s Current Report on Form 8-K, as filed with the SEC on December 7, 2020) |
| 10.1 | Indemnity Agreement, effective February 12, 2021, among Vinings Holdings, Inc., and Sterling Acquisition I, LLC as indemnitor (incorporated by reference from Exhibit 10.1 to Vinings Holdings, Inc.’s Current Report on Form 8-K, as filed with the SEC on February 12, 2021) |
| 10.2 | Divestiture Agreement, effective December 23, 2020, among Vinings Holdings, Inc. and Sterling Acquisition I, LLC regarding NDYN Delaware, Inc. (incorporated by reference from Exhibit 10.1 to Vinings Holdings, Inc.’s Current Report on Form 8-K, as filed with the SEC on December 31, 2020) |
| 10.3 | Employment Agreement – David Mehalick (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K as field with the SEC on February 25, 2022) |
| 10.4 | Employment Agreement – Daniel Yerace (incorporated by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K as field with the SEC on February 25, 2022) |
| 21.1 | Subsidiaries of Vinings Holdings, Inc. (incorporated by reference from Exhibit 21.1 to Vinings Holdings, Inc.’s Current Report on Form 8-K, as filed with the SEC on February 12, 2021) |
| 23.1 | Consent of Independent Registered Public Accounting Firm* |
| 31.1 * | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 * | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1 * | Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
______________________
| * | Filed herewith |
| 38 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| COEPTIS THERAPEUTICS INC. | ||
| Date: March 11, 2022 | By: | /s/ David Mehalick |
| David Mehalick | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: March 11, 2022 | By: | /s/ Christine Sheehy |
| Christine Sheehy | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
| Signature | Title | Date | ||
|
/s/ David Mehalick David Mehalick |
Chief Executive Officer (Principal Executive Officer) and Director |
March 11, 2022 | ||
|
/s/ Christine Sheehy Christine Sheehy |
Chief Financial Officer (Principal Financial and Accounting Officer) and Director | March 11, 2022 | ||
|
/s/ Daniel Yerace Daniel Yerace |
Director | March 11, 2022 | ||
|
/s/ Michael Handley Michael Handley |
Director | March 11, 2022 | ||
| 39 |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Coeptis Therapeutics, Inc.
(formerly Vinings Holdings, Inc.)
Consolidated Financial Statements
Years Ended December 31, 2021 and 2020
| F-1 |
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Coeptis Therapeutics, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Coeptis Therapeutics, Inc. (formerly Vinings Holdings, Inc.) and Subsidiaries (the “Company”) as of December 31, 2021 and 2020 and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the years then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position for the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations since inception and has insufficient working capital to fund future operations both of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
| · | Co-development agreements – as discussed in Note 3 to the financial statements, during the year, the Company entered into two agreements to jointly develop and commercialize two products, which we identified as a critical audit matter. There was a high degree of auditor judgment to evaluate the significant assumptions used by management in determining the accounting recognition and related disclosures, including the period over which those costs were to be amortized and related impairment considerations. The sensitivity of reasonably possible changes to those assumptions could have had a significant impact on the determination of recorded amounts of such assets. |
The following are the primary procedures we performed to address this critical audit matter. We reviewed the underlying documents, verified the cash payments made pursuant to the agreements, confirmed the note payable balances and other terms with the co-developers, and evaluated the reasonableness of the Company’s amortization period and its impairment assessment.
/s/ Turner, Stone & Company, LLP
We have served as the Company’s auditor since 2020
March 10, 2022
| 2 |
COEPTIS THERAPEUTICS, INC formerly known as VININGS HOLDINGS, INC
CONSOLIDATED BALANCE SHEETS
Audited
| 12 Months Ended | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Furniture and fixtures | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Furniture and fixtures, net | ||||||||
| OTHER ASSETS | ||||||||
| Co-development options | ||||||||
| Right of use asset, net of accumulated amortization | ||||||||
| Other assets | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Notes payable | ||||||||
| Notes payable, related parties, current portion | ||||||||
| Right of use liability, current portion | ||||||||
| Deferred revenue | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| LONG TERM LIABILITIES | ||||||||
| Note payable | ||||||||
| Right of use liability, non-current portion | ||||||||
| TOTAL LONG TERM LIABILITIES | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 7) | ||||||||
| STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Series B Preferred Stock, $ par value, shares authorized, and -- shares issued and outstanding, respectively | ||||||||
| Common stock, $ par value, shares authorized, issued and outstanding at December 31, 2021, and shares issued and outstanding at December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, shares at cost | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-3 |
COEPTIS THERAPEUTICS, INC formerly known as VININGS HOLDINGS, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
Audited
| 12 Months Ended | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| SALES | ||||||||
| Consulting services | $ | $ | ||||||
| Sales | ||||||||
| Total sales | ||||||||
| Cost of goods, including inventory obsolescence | ||||||||
| Gross profit | ( | ) | ||||||
| COST OF OPERATIONS | ||||||||
| Research and development | ||||||||
| General and administrative expenses | ||||||||
| Selling and marketing | ||||||||
| Interest expense | ||||||||
| Total operating expenses | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Royalties and licensing fees | ( | ) | ( | ) | ||||
| Licensing income | ||||||||
| Other Income | ||||||||
| Gain (Loss) on Write Down of Assets | ( | ) | ||||||
| TOTAL OTHER INCOME (EXPENSE) | ( | ) | ||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| PROVISION FOR INCOME TAXES (BENEFIT) | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| LOSS PER SHARE | ||||||||
| Loss per share, basic and fully diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-4 |
COEPTIS THERAPEUTICS, INC formerly known as VININGS HOLDINGS, INC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Audited
| SERIES B | ADDITIONAL | COMMON | ||||||||||||||||||||||||||||||||||
| PREFERRED STOCK | COMMON STOCK | PAID-IN | STOCK | TREASURY | ACCUMULATED | |||||||||||||||||||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | CAPITAL | SUBSCRIBED | STOCK | DEFICIT | TOTAL | ||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2019 (as restated)* | ( | ) | ||||||||||||||||||||||||||||||||||
| Retroactive application of recapitalization | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Shares issued for cash | – | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued for services | – | |||||||||||||||||||||||||||||||||||
| Net income (loss) | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2020 | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Recapitalization | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Purchase of treasury stock | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Shares issued for cash | – | |||||||||||||||||||||||||||||||||||
| Shares issued for services | – | |||||||||||||||||||||||||||||||||||
| Warrants issued for services | – | – | ||||||||||||||||||||||||||||||||||
| Shares issued through conversion of debt | – | |||||||||||||||||||||||||||||||||||
| Stock based compensation | – | – | ||||||||||||||||||||||||||||||||||
| Shares surrendered in payment of debt | – | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net income (loss) | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
______________________
*Restated to reflect the retroactive impacts of the recapitalization on equity.
The accompanying notes are an integral part of the consolidated financial statements.
| F-5 |
COEPTIS THERAPEUTICS, INC formerly known as VININGS HOLDING, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
Audited
| 12 Months Ended | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Impairment loss of licensing right | ||||||||
| Forgiveness of debt | ( | ) | ||||||
| Interest paid | ||||||||
| Loss on termination of licensing agreement (in exchange for convertible debt) | ||||||||
| Shares issued for non-employee services | ||||||||
| Warrants issued for services | ||||||||
| Stock based compensation | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ||||||||
| Right of use asset/liability | ( | ) | ( | ) | ||||
| Other assets | ||||||||
| Increase (decrease) in: | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of license right | ( | ) | ||||||
| Purchase of property and equipment | ||||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ||||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from notes payable, related parties | ||||||||
| Repayment of notes payable | ( | ) | ||||||
| Repayment of notes payable, related parties | ( | ) | ||||||
| Cash paid for debt as part of merger/rec | ( | ) | ||||||
| Repurchase of Treasury shares | ( | ) | ||||||
| Shares issued for cash | ||||||||
| Cash received for stock subscription | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET INCREASE IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid (refunded) | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-6 |
COEPTIS THERAPEUTICS, INC.
(formerly Vinings Holding, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Nature of Business – Coeptis Pharmaceuticals, LLC (LLC) was formed in July 12, 2017 as a Pennsylvania multi-member limited liability company. On December 1, 2018, the members of LLC contributed their interest to a newly formed corporation, Coeptis Pharmaceuticals, Inc (“Coeptis”). As of December 1, 2018, the LLC became a disregarded single-member limited liability company which is wholly owned by the newly formed corporation. On February 12, 2021, Vinings Holdings, Inc., a Delaware corporation (“Vinings”), merged (the “Merger”) with and into Coeptis Pharmaceuticals, Inc. On July 12, 2021, the company has legally changed its name from Vinings Holdings, Inc. to Coeptis Therapeutics, Inc. Coeptis was the surviving corporation of that Merger. As a result of the Merger, Vinings acquired the business of Coeptis and will continue the existing business operations of Coeptis as a wholly owned subsidiary. The Merger was treated as a recapitalization of the Company for financial accounting purposes. The historical financial statements of Vinings, before the Merger, except for it’s capital structure as the surviving corporation, were replaced with the historical financial statements of Coeptis before the Merger in all future filings with the Securities and Exchange Commission (the “SEC”).
The Company is located in Wexford, PA, and engages primarily in the acquisition, development, and commercialization of pharmaceutical products.
Basis of Presentation - The accompanying audited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and with the instructions to Form 10-K Accordingly, they include all of the information and notes required by generally accepted accounting principles in the United States of America for complete financial statements. In the opinion of the Company’s management, any adjustments contained in the accompanying audited consolidated financial statements are of a normal recurring nature, and are necessary to fairly present the financial position of the Company as of December 31, 2021.
As a result of the Merger, the financial statements included in this report reflect (1) the historical operating results of Coeptis prior to the Merger; (2) the combined results of the Company and Coeptis following the closing of the Merger; (3) the assets and liabilities of Coeptis at their historical cost; and (4) the Company’s equity structure for all periods presented.
Principles of Consolidation – The accompanying audited consolidated financial statements include the accounts of Coeptis Therapeutics Inc., Coeptis Pharmaceuticals, Inc. and its wholly-owned subsidiary, Coeptis Pharmaceuticals, LLC. All material intercompany accounts, balances and transactions have been eliminated.
Risks and Uncertainties – In late 2019, an outbreak of a novel strain of the Coronavirus 2019 Disease (COVID-19) was identified and infections have been found in a number of countries around the world, including the United States. COVID-19 and its impact on trade including customer demand, travel, employee productivity, supply chain, and other economic activities has had, and may continue to have, a potentially significant effect on financial markets and business activity. The extent of the impact of COVID-19 on the Company’s operational and financial performance is currently uncertain and cannot be predicted.
| F-7 |
COEPTIS THERAPEUTICS, INC.
(formerly Vinings Holding, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents – For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents. At times, balances of cash and cash equivalents at financial banking institutions exceeded the federally insured limit of $250,000. The Company regularly monitors the financial condition of the institutions in which it has depository accounts and believes the risk of loss is minimal.
Inventory – Inventories consisted
primarily of finished goods that are packaged pharmaceutical products, as well as a small amount of raw materials used in the development
of pharmaceutical drug products, and are accounted for using the specific cost method. At December 31, 2021 the company held
Property
and Equipment – Fixed assets are stated at cost and depreciation is computed using the accelerated and
straight-line method for financial statement purposes over estimated useful lives of between five and forty years. Intangibles are
being amortized using the straight-line method over estimated useful lives of five years. For the year ended December 31, 2021 and
2020, depreciation expense totaled $
Research and Development – Research
and development costs are expensed when incurred. During the year ended December 31, 2021 and 2020, research and development expenses
totaled $
Impairment - The Company’s property
and equipment are reviewed for possible impairment when events or changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss would be recognized if and when the estimated future cash flows expected to result from the use of
the asset and its eventual disposition is less than its carrying amount. For the year ended December 31, 2021 and 2020, the Company identified
impairment losses related to its license agreement totaling $
Income Taxes – Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to temporary differences between reporting of income and expenses for financial reporting purposes and income tax purposes. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future federal income taxes.
The Income Taxes Topic of FASB ASC clarifies
the accounting and reporting for uncertainties in income tax law within subtopic FASB ASC 740-10-25-5. The guidance prescribes a comprehensive
model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected
to be taken in income tax returns. Management believes that there is
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| F-8 |
COEPTIS THERAPEUTICS, INC.
(formerly Vinings Holding, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Adoption of New Accounting Pronouncements – In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principals in Topic 740. The amendments also improve consistent application of and simplify generally accepted accounting principles (GAAP) for other areas of Topic 740 by clarifying and amending the existing guidance. For public business entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The adoption of this standard, effective January 1, 2021, did not have a material impact on these financial statements.
During the Year Ended December 31, 2021 and 2020, there were several other new accounting pronouncements issued by the FASB,. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial statements.
Revenue Recognition – The Company
derived its revenue in 2020 from licensing and sales of product, and in 2021 primarily from consulting services. Revenues are recognized
when services are provided to its customers or the product is sold, in an amount that reflects the consideration the Company expects
to be entitled to in exchange for those services or goods. Sales and other taxes the Company collects concurrent with revenue-producing
activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense.
The amount received for consulting services for year ended December 31, 2021 and 2020 was $
The majority of the Company’s revenue is recognized at a point in time based on the transfer of control. Revenue recognized over time primarily consists of performance obligations that are satisfied within one year or less. In addition, the majority of the Company’s contracts do not contain variable considering and contract modifications are generally minimal. For these reasons, there is not a significant impact as a result of electing these transition practical expedients.
The majority of the Company’s revenue arrangement generally consist of a single performance obligation to transfer promised goods or services.
Accounts Receivable – Accounts receivable consists of consulting revenues. The Company records an allowance for doubtful accounts to allow for any amounts that may not be recoverable, which is based on an analysis of the Company’s prior collection experience, customer credit worthiness, and current economic trends. Accounts are considered delinquent when payments have not been received within the agreed upon terms and are written off when management determines that collection is not probable.
| F-9 |
COEPTIS THERAPEUTICS, INC.
(formerly Vinings Holding, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Going
Concern – The accompanying financial statements have been prepared in conformity with generally accepted accounting
principles in the United States of American (GAAP), which contemplate continuation of the Company as a going concern, which is
dependent upon the Company’s ability to obtain sufficient financials or establish itself as a profitable business. As of the
year ended December 31, 2021 and 2020, the Company had accumulated deficit of $
Fair Value of Financial Instruments - The Company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. The methods and assumptions applied in determining the fair value of each class of financial assets and financial liabilities of the Company are disclosed in the respective accounting policies. The estimated fair value of cash, accounts receivable and accounts and note payable approximate their carrying amounts due to the short-term nature of these instruments.
NOTE 3 – LICENSE RIGHT
In 2019, the Company entered into an agreement
with a foreign entity to market, distribute, and sell the Consensi product (Product) on an exclusive basis within the United States and
Puerto Rico. Upon execution of the Agreement the Company paid $1,000,000 to the foreign entity. Milestone payments were due as follows;
(1) $1,500,000 upon completion of the CMC Plan as reimbursements of costs incurred by the foreign entity, (2) $1,000,000 was due upon
first commercial sale of the Product which occurred in June 2020. Milestones were not met during the year ended December 31, 2021 and
2020. As of December 31, 2020, $
During the fourth quarter of 2020, the
Company determined that there was a reduction of the useful life, resulting in an impairment charge of $
In September of 2021, the Company executed a
license termination agreement with the foreign entity to cease all efforts for sales and promotion of the product in the United States
and Puerto Rico. The termination included issuance of $
During the year ended December 31, 2021, the Company and VyGen-Bio,
Inc. (“Vy-Gen”) entered into agreements to jointly develop and commercialize two Vy-Gen product candidates, CD38-GEAR-NK
and CD38-Diagnostic (the “CD38 Assets”). The Company paid $
| F-10 |
COEPTIS THERAPEUTICS, INC.
(formerly Vinings Holding, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
NOTE 4 – LONG-TERM DEBT
The Company entered into a note payable agreement
with an unrelated company with a conversion option. The principal amount of $
In January 2020, the Company entered into a Senior
Secured Note agreement with an unrelated party. The principal amount of $
In January 2020, the Company entered into a Senior
Secured Note agreement with a related party stockholder. The principal amount of $
In January 2020, the Company entered into another
Senior Secured Note agreement with a stockholder. The principal amount of $
In January 2020, the Company entered into a Senior
Secured Note agreement with an unrelated party. The principal amount of $
In January 2020, the Company entered into a Senior
Secured Note agreement with an unrelated party. The principal amount of $
In September 2020, the Company entered a non-interest
bearing, unsecured note agreement with two shareholders for $
In September 2021, as part of a termination
of license agreement with Purple BioTech (See Note 7), the Company issued a convertible note in the principal amount of $
Interest
accrued on the related party notes at December 31, 2021 and 2020 was $
Loans under the CARES Act -- On May 6,
2020, the Company received loan proceeds in the amount of approximately $
| F-11 |
COEPTIS THERAPEUTICS, INC.
(formerly Vinings Holding, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
On July 8, 2020, the Company received a loan
of $
Maturities of long-term debt are as follows for the years ended December 31,
| 2022 | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| Thereafter | $ | |||
| Total long-term debt | $ | |||
NOTE 5 – CAPITAL STRUCTURE
The total number of shares of stock which the corporation shall have authority to issue is shares, of which shares of $ par value shall be designated as Common Stock and shares of $ shall be designated as Preferred Stock. The Preferred Stock authorized by these Articles of Incorporation may be issued in one or more series. The Board of Directors of the Corporation is authorized to determine or alter the rights, preferences, privileges, and restrictions granted or imposed upon any wholly unissued series of Preferred Stock, and within the limitations or restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series, to determine the designation and par value of any series and to fix the numbers of shares of any series.
Common Stock - As of December 31, 2021 the Company had shares of its common stock issued and outstanding, and on December 31, 2020 the Company had shares of its common stock issued and outstanding. All references to the common shares outstanding have been retroactively adjusted to reflect the stock splits unless stated otherwise.
In
2021 and 2020, the Company raised capital by issuance of common stock above the stated par value. The contributed capital recognized
as additional paid in capital during the year ended December 31, 2021 and 2020 was $
Treasury Stock – As part of the
Merger in February of 2021, the Company repurchased shares of its common stock previously held by Vinings’ shareholders.
The stock was recorded at the cost paid for it, of $
An additional shares of common stock were repurchased at cost from a former marketing partner in exchange for a cancellation of an outstanding debt. The shares were immediately cancelled.
Series A Preferred Stock - As of April 30, 2019, the Series A Preferred Stock had been canceled, and no shares remain outstanding. The rights and privileges of future issuances of the Series A Preferred stock will be determined at such time if and when they are issued. As of December 31, 2021, there were shares of Series A Preferred outstanding.
Series B Convertible Preferred Stock - The Company designated shares of Series B Convertible Preferred Stock with a par value of $ per share. Initially, there will be no dividends due or payable on the Series B Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.
| F-12 |
COEPTIS THERAPEUTICS, INC.
(formerly Vinings Holding, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
All shares of the Series B Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series B Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series B Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.
The Series B Preferred shall have no liquidation preference over any other class of stock.
Each holder of outstanding shares of Series B Preferred Stock shall be entitled to the number of votes equal to equal to one thousand (1,000) Common Shares. Except as provided by law, or by the provisions establishing any other series of Preferred Stock, holders of Series B Preferred Stock and of any other outstanding series of Preferred Stock shall vote together with the holders of Common Stock as a single class.
Each holder of shares of Series B Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series B Preferred Stock into a 1,000 of fully paid and nonassessable shares of Common Stock; provided, however, that any Optional Conversion must involve the issuance of at least 100 shares of Common Stock.
In the event of a reverse split, the conversion ratio shall not be changed. However, in the event a forward split shall occur then the conversion ratio shall be modified to be increased by the same ratio as the forward split.
The Company has evaluated the Series B Preferred Stock in accordance with ASC 815 and has determined their conversion options were for equity and ASC 815 did not apply as of December 31, 2021. The Company has evaluated the Series B Preferred Stock in accordance with FASB ASC Subtopic 47020 and has determined that there is no beneficial conversion feature that must be accounted for as of December 31, 2021.
As of December 31, 2021, there were shares of Series B Preferred outstanding.
Common Stock Warrants - On November 23,
2020, the Company issued a class A and a class B warrant to Coral Investment Partners, LP (“CIP”), with each warrant granting
CIP the right to purchase
On May 28, 2021, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On July 30th, 2021, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On September 22, 2021, the Company issued a warrant
in conjunction with the termination of the license right (see Note 3) with Purple Biotech, granting Purple Biotech the right to purchase
On December 20, 2021, the Company granted a warrant
to a third party in exchange for services to be provided, conditionally giving the warrant holder the right to purchase
| F-13 |
COEPTIS THERAPEUTICS, INC.
(formerly Vinings Holding, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
NOTE 6 – ASSET PURCHASE AGREEMENT
On June 18, 2019, the Company entered into an
Asset Purchase Agreement with ANI Pharmaceuticals, Inc. (ANI) for the sale of certain intellectual property and materials related to
the research and development related to potential ANDA candidates. The Company recognized revenue of approximately $
In addition to the original purchase price, the Company is due an additional $2,000,000 with respect to the Product that is Vigabatrin 500mg tablets (tablets) as follows; (A) $250,000 within 30 days following the completion of all bioequivalence studies related to tablets, (B) $250,000 within 45 days of the first date on which annual gross profit from the sale of tablets reaches $1,000,000 in a calendar year, (C) $500,000 within 45 days of the first date on which annual gross profit from the sale of tablets reaches $5,000,000 in a calendar year, (D) $1,000,000 within 45 days of the first date on which annual gross profit from the sale of tablets reaches $10,000,000 in a calendar year. As of Year Ended December 31, 2021 and 2020, and through this date, none of these milestones have occurred. Because collection of these milestone payments is not reasonably assured, we have not recorded any revenues in the accompanying financial statements.
Also, the Company is due an additional $1,750,000 with respect to the Product that is Vigabatrin 500mg powder for Oral Solution (powder) as follows; (A) $250,000 within 45 days of the first date on which annual gross profit from the sale of powder reaches $1,000,000 in a calendar year, (B) $500,000 within 45 days of the first date on which annual gross profit from the sale of powder reaches $5,000,000 in a calendar year, (C) $1,000,000 within 45 days of the first date on which annual gross profit from the sale of powder reaches $10,000,000 in a calendar year. As of year Ended December 31, 2021 and 2020, and through this date, none of these milestones have occurred. Because collection of these milestone payments is not reasonably assured, we have not recorded any revenues in the accompanying financial statements.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Leases - The Company leases office space
under an operating lease commencing December 1, 2017 through November 30, 2019 and a first lease extensions commending December 1, 2019
through May 31, 2020. The second lease extension extends the lease for twenty-four months, beginning on June 1, 2020 and ending on May
31, 2022. The monthly rent is $3,750. On January 1, 2019, the Company adopted ASC Topic 842, Leases, requiring this lease to be recorded
as an asset and corresponding liability on its consolidated balance sheet. The Company records rent expense associated with this lease
on the straight-line basis in conjunction with the terms of the underlying lease. During the year ended December 31, 2021 and 2020, rental
expense totaled $
Future minimum rental payments required under the lease are as follows:
| 2022 | $ |
On January 20, 2022, the Company entered into a third lease extension for twenty-four months beginning on June 1, 2022 and ending on May 31, 2024.
Legal Matters – The company is currently not a defendant in any litigation or threatened litigation that could have a material effect on the company’s financial statements.
Royalty Obligations - In connection
with the product licensing agreement discussed in Note 3, the Company owed a minimum royalty payment of $1,000,000 following the
first year of product sales. A minimum royalty amount was also due in subsequent years. This agreement was terminated and settled in
2021 as discussed in Note 4. As of December 31, 2021 and 2020, liabilities of $
Royalty Advances - In the year ended December 31, 2021 and
2020, the Company received royalty advances on future product sales of $
| F-14 |
COEPTIS THERAPEUTICS, INC.
(formerly Vinings Holding, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
The Company sponsors a qualified profit-sharing plan with a 401(k) feature that covers all eligible employees. Participation in the 401(k) feature of the plan is voluntary. Participating employees may defer up to 100% of their compensation up to the maximum prescribed by the Internal Revenue Code. The plan permits for employee elective deferrals but has no contribution requirements for the Company. During the Year Ended December 31, 2021 and 2020, no employer contributions were made.
NOTE 9 - CONCENTRATIONS
Major Customers – During the Year
Ended December 31, 2021 and 2020,
NOTE 10 – INCOME TAXES
The Company has established deferred tax assets and liabilities for the recognition of future deductions or taxable amounts and operating loss carry forward. Deferred tax assets and liabilities for the recognition of future deductions or taxable amounts and operating loss carry forwards. Deferred federal and state income tax expense or benefit is recognized as a result of the change in the deferred tax asset or liability during the year using the currently enacted tax laws and rates that apply to the period in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce deferred tax assets to the amount that will more likely than not be realized.
During the years ended December 31, 2021 and
2020, a reconciliation of income tax expense at the statutory rate of
| 2021 | 2020 | |||||||
| Income tax benefit at statutory rate | $ | $ | ||||||
| Change in valuation allowance | ( | ) | ( | ) | ||||
| Provision for federal/state income taxes | $ | |||||||
As of the year ended December 31, 2021, the Company has approximately
$
NOTE 11 – SUBSEQUENT EVENT
On January 20, 2022, the Company entered into a third lease extension for twenty-four months beginning on June 1, 2022 and ending on May 31, 2024. See Note 7.
On January 28, 2022, the Company issued warrants to various shareholders giving them the right to purchase a total of 3,595,100 shares, with strike prices between $1 and $2. The warrants expire January 31, 2024.
On February 4, 2022, the Company filed Form S-1: General form for Registration of Securities with the SEC, to register its shares for re-sale on the open market.
| F-15 |