UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________ to _______________
Commission
file number:
(Exact name of registrant as specified in Its Charter)
(State of other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| OTCQB Venture Marketplace (“OTCQB”) |
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the Registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b 2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act). Yes ☐ No
As of May 10, 2024, there were shares of Common Stock, $0.001 par value outstanding.
Table of Contents
| i |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information which are the accounting principles that are generally accepted in the United States of America and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, the condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the interim periods presented.
The results for the period ended March 31, 2024 are not necessarily indicative of the results of operations for the full year. These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our audited consolidated financial statements for the fiscal years December 31, 2023 and 2022 included in our annual report on Form 10-K filed with the US. Securities and Exchange Commission (the “SEC”) on March 22, 2024.
| 1 |
ACCUSTEM SCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Equipment, net | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Related party payable | ||||||||
| Accrued expenses | ||||||||
| Note Payable | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock $ par value; shares authorized; issued and outstanding | ||||||||
| Common stock $ par value; shares authorized; and shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 2 |
ACCUSTEM SCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| OPERATING EXPENSES | ||||||||
| Research and development expenses | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| LOSS, BEFORE TAX | ( | ) | ( | ) | ||||
| Income tax benefit (expense) | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| Net loss per share attributable to common stockholders, basic and diluted | $ | ) | $ | ) | ||||
| Weighted average common shares outstanding used in computing net loss per share attributable to common stockholders, basic and diluted | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
ACCUSTEM SCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)
| Common Stock | Additional | |||||||||||||||||||
| Number
of Shares | Amount | Paid-in Capital | Accumulated Deficit | Stockholders’ Deficit | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Share-based compensation | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common Stock | Additional | |||||||||||||||||||
| Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Stockholders’ Deficit | ||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Share-based compensation | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
ACCUSTEM SCIENCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Year Three Months Ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in (provided by) operating activities | ||||||||
| Depreciation | ||||||||
| Share-based compensation | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Related party payable | ||||||||
| Accrued expenses | ||||||||
| Net cash used in (provided by) operating activities | ( | ) | ( | |||||
| Financing Activities | ||||||||
| Advances from related party | ||||||||
| Payments on note payable | ( | ) | ( | ) | ||||
| Net cash used in (provided by) financing activities | ( | ) | ||||||
| (Decrease) Increase in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
ACCUSTEM SCIENCES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
AccuStem Sciences, Inc. is an early-stage life sciences company committed to developing and commercializing novel products for the treatment and management of many cancers. The principal activities of the Company are that of a genomics-based personalized medicine business, particularly focused on breast and lung cancer patients.
Liquidity and Going Concern
The
condensed consolidated financial statements have been prepared on the going concern basis, which contemplates the realization of assets
and discharge of liabilities in the normal course of business. The Company has financed its activities principally from support from
a related party. The Company has incurred a net loss in every fiscal period since inception. For the three months ended March 31, 2023,
the Company incurred a net loss of $
Management believes that the Company does not have sufficient cash and current assets to support its operations through at least 12 months from the issuance date of these condensed consolidated financial statements, and will require significant additional cash resources to continue its planned research and development activities.
The Company will need additional funds for promoting new products and working capital required to support research and development activities and generate sales from its products. There can be no assurance, however, that such financing will be available when needed, if at all, or on favorable terms and conditions. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the quality of product development efforts, management of working capital, and the continuation of normal payment terms and conditions for purchase of services.
In order to address its capital needs, including its planned research and development activities and other expenditures, the Company is actively pursuing additional equity financing in the form of a private investment and public equity. The Company has been in ongoing discussions with institutional investors and other parties with respect to such possible offerings. Adequate financing opportunities might not be available to the Company, when and if needed, on acceptable terms or at all. If the Company is unable to obtain additional financing in sufficient amounts or on acceptable terms or if the Company fails to consummate the private placement or a public offering, the Company will be forced to delay, reduce or eliminate some or all of its research and development programs and product portfolio expansion, which could adversely affect its operating results or business prospects. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding in terms acceptable to the Company to fund continuing operations, if at all. After considering the uncertainties, management determined it is appropriate to continue to adopt the going concern basis in preparing the condensed consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these condensed consolidated financial statements are set out below.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on February 15, 2023. Unless otherwise indicated, all references to “$” are to U.S. dollars, and all references to “£” or “GBP” are to Great Britain Pounds. The Company’s reporting currency is U.S. dollars.
Basis of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary after elimination of intercompany transactions and balances.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
| 6 |
Comprehensive Loss
Comprehensive loss of all periods presented is comprised primarily of net loss and foreign currency translation adjustments.
Risk and Uncertainties
The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including but not limited to, the success of its exploration to research and development activities, need for additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, dependence on key individuals, and risks associated with changes in information technology.
Cash
The
Company considers all highly liquid investments purchased with an original maturity date of three months or less at the date of purchase
and money market accounts to be cash equivalents. At March 31, 2023 and December 31, 2022, the Company had
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant contribution of credit risk consist of cash. Periodically, the Company maintains deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality and the Company has not experienced any losses in these deposits.
Equipment, net
Equipment
is stated at cost, less accumulated depreciation. The Company depreciates its equipment for financial reporting purposes using the straight-line
method over the estimated useful lives of the assets. The Equipment consists of computer equipment, which has a useful life of
The Company may award stock options, performance-based options and other equity-based instruments to its employees, directors and consultants. Compensation cost related to equity-based instruments is based on the fair value of the instrument on the grant date, and is recognized over the requisite service period on a straight-line basis over the vesting period except for performance-based options. Performance-based stock options vest based on the achievement of performance targets. Compensation costs associated with performance-based option awards are recognized over the requisite service period based on probability of achievement. Performance-based stock options require management to make assumptions regarding the likelihood of achieving performance targets.
The Company estimates the fair value of service based and performance-based stock option awards, including modifications of stock option awards, using the Black-Scholes option pricing model. This model derives the fair value of stock options based on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rate and dividend yield.
| 7 |
Recent Accounting Standards
Adopted Accounting Standards
None
Standards not yet adopted
There are no recently issued accounting standards that have not been adopted that would affect the financial statements of the Company.
3. EQUIPMENT
Equipment consists of the following:
| March 31, 2024 | December 31, 2023 | |||||||
| Computer equipment | $ | $ | ||||||
| Less: Accumulated depreciation | ||||||||
| Equipment, net | $ | $ | ||||||
Depreciation
expense was approximately $
Depreciation expense is included within General and Administrative expenses in the accompanying Consolidated Statement of Operations and Comprehensive Loss.
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
| March 31, 2024 | December 31, 2023 | |||||||
| Legal expense | $ | $ | ||||||
| Other | ||||||||
| Total accrued expenses | $ | $ | ||||||
5. NOTE PAYABLE
On
May 20, 2023, the Company renewed its Directors and Officers Liability Insurance agreement for $
| 8 |
6. LICENSE
On
November 9, 2022, AccuStem and the IEO/University of Milan amended the License to clarify the regulatory path and timeline for the commercialization
of StemPrintER. Specifically, the regulatory requirement language has been modified to (i) extend the timeline for regulatory approval
or clearance of a licensed product to
In
addition, for the term of the license, the following milestone payments are required to be made (
| ● | € | |
| ● | € | |
| ● | € |
The License may be terminated by either party in the event of a material breach and in addition, we may terminate the License at any time upon 30 days’ notice.
For the three months ended March 31, 2023 and 2022, the Company did not recognize any expense related to this license agreement.
Basic and diluted net loss per common share were the same since the inclusion of common shares issuable pursuant to the exercise of options in the calculation of diluted net loss per common shares would have been antidilutive.
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Numerator: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted-average common shares outstanding, basic and diluted | ||||||||
| Net loss per common share, basic and diluted | $ | ) | $ | ) | ||||
The Company’s potentially dilutive securities, which include stock options and warrants, have been excluded from the computation of diluted net loss per common share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders is the same.
| 9 |
| For the Three Months Ended | For the Three Months Ended | |||||||
| March 31, | March 31, | |||||||
| 2024 | 2023 | |||||||
| Stock options to purchase common stock outstanding | ||||||||
| Warrants to purchase common stock outstanding | ||||||||
| Total | ||||||||
In August 2021, Limited adopted the 2021 Omnibus Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan provides that the Company may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, and Other Share-Based Awards to selected employees, directors, and independent contractors of the Company.
Each Award shall be exercisable at such time or times and subject to such terms and conditions set forth in the Incentive Plan, as shall be determined by the administrator in the applicable award agreement. Total shares authorized by the plan was . Awards under the Incentive Plan are exercisable for up to years from the date of issuance. There are remaining available shares to be issued under the Incentive Plan at March 31, 2023. The number of shares of Common Stock that are reserved and available for issuance under the Incentive Plan shall be subject to an annual increase on the first day of each calendar year beginning with the first January 1 following the effective date and ending with the last January 1 during the initial ten-year term of the Plan as defined in Section 4(a) of the Incentive Plan.
Options
There were options granted or modified for the three months ended March 31, 2023.
The Company issued options during the first quarter of 2023 for employees, directors and non-employees under the Incentive Plan. The options granted had an exercise price of $ and expire on the ten-year anniversary of the grant date.
| Number of Time-Based Share Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | ||||||||||||||
| Outstanding at January 1, 2023 | $ | $ | |||||||||||||||
| Issued | — | — | |||||||||||||||
| Exercised | — | — | |||||||||||||||
| Expired/Forfeited | — | — | |||||||||||||||
| Outstanding at March 31, 2023 | $ | $ | |||||||||||||||
| Vested and exercisable March 31, 2023 | $ | $ | |||||||||||||||
| 10 |
| Number of Performance- Based Share Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | ||||||||||||||
| Outstanding at January 1, 2023 | $ | $ | |||||||||||||||
| Issued | — | — | |||||||||||||||
| Exercised | — | — | |||||||||||||||
| Expired/Forfeited | — | — | |||||||||||||||
| Outstanding at March 31, 2023 | $ | $ | |||||||||||||||
| Vested and exercisable March 31, 2023 | — | ||||||||||||||||
| Number of Time-Based Share Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | ||||||||||||||
| Outstanding at January 1, 2024 | $ | $ | |||||||||||||||
| Issued | — | ||||||||||||||||
| Exercised | — | — | |||||||||||||||
| Expired/Forfeited | ( | ) | — | ||||||||||||||
| Outstanding at March 31, 2024 | $ | $ | |||||||||||||||
| Vested and exercisable March 31, 2024 | $ | $ | |||||||||||||||
| Number of Performance- Based Share Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | ||||||||||||||
| Outstanding at January 1, 2024 | $ | $ | |||||||||||||||
| Issued | — | — | |||||||||||||||
| Exercised | — | — | |||||||||||||||
| Expired/Forfeited | — | — | |||||||||||||||
| Outstanding at March 31, 2024 | $ | $ | |||||||||||||||
| Vested and exercisable March 31, 2024 | — | ||||||||||||||||
| 11 |
The aggregate intrinsic value is calculated as the difference between the estimated fair value of the underlying common stock as of March 31, 2023 and the option exercise price.
Total share-based compensation was approximately $ and $, respectively, for the three months ended March 31, 2024 and 2023, respectively.
Total share-based compensation expense is included in General and Administrative expenses on the Condensed Consolidated Statement of Operations and Other Comprehensive Income.
The weighted average grant date fair value for stock options granted during the three months ended March 31, 2024 is $. There was no time based or performance -based stock option granted during the three months ended March 31, 2023. The performance-based and time-based stock options are equity-classified.
The Company uses the Black-Scholes option pricing model to estimate the fair value of the option awards. The table below summarizes the resulting weighted average inputs used to calculate the estimated fair value of options awarded for the three months ended March 31, 2024 and 2023.
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| Risk-free interest rate | % | |||||||
| Expected dividend yield | ||||||||
| Expected term | years | — | ||||||
| Expected volatility | % | |||||||
The risk-free interest rate assumption is determined using the yield currently available on U.S. Treasury zero- coupon issues with a remaining term commensurate with the expected term of the award. The Company has historically been a private company and lacks company-specific historical and implied volatility information. Management has estimated expected volatility based on similar public companies. Expected life of the option represents the period of time options are expected to be outstanding. The estimate for dividend yield is % because the Company has not historically paid, and does not intend to pay, a dividend on common stock in the foreseeable future.
As of March 31, 2024, there was $ unrecognized compensation expense related to options. $ of this cost is subject to time-based conditions, and is to be recognized over a period of approximately years. The remaining $ of unrecognized compensation expense relates to performance-based conditions for unvested options. These costs are expected to be recognized over the required service period once the performance condition has occurred or becomes probable. Compensation costs related to the performance stock options are evaluated at each reporting period and subsequently adjusted for changes in the expected outcomes of the performance conditions.
As of March 31, 2023, there was $ unrecognized compensation expense related to options. $ of this cost is subject to time-based conditions and is to be recognized over a period of approximately years. The remaining $ of unrecognized compensation expense relates to performance-based conditions for unvested options.
Warrants
There
were
| 12 |
For the three months ended March 31, 2023, warrant activity of the Company are as follows:
| Number of shares | Weighted Average Exercise Price | Weighted average remaining contractual life (in years) | Aggregate Intrinsic Value | ||||||||||||||
| Outstanding at January 1, 2023 | $ | $ | |||||||||||||||
| Issued | — | — | |||||||||||||||
| Exercised | — | — | |||||||||||||||
| Expired/Forfeited | — | — | |||||||||||||||
| Outstanding at March 31, 2023 | $ | $ | |||||||||||||||
| Vested and exercisable March 31, 2023 | — | ||||||||||||||||
For the three months ended March 31, 2024, warrant activity of the Company are as follows:
| Number of shares | Weighted Average Exercise Price | Weighted average remaining contractual life (in years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at January 1, 2024 | $ | $ | ||||||||||||||
| Issued | — | — | ||||||||||||||
| Exercised | — | — | ||||||||||||||
| Expired/Forfeited | — | — | ||||||||||||||
| Outstanding at March 31, 2024 | $ | $ | ||||||||||||||
| Vested and exercisable March 31, 2024 | — | |||||||||||||||
There was share-based compensation expense recognized during the three months ended March 31, 2024 and 2023 for warrants.
As of March 31, 2024 and 2023, there was $ of total performance-based unrecognized compensation costs related to unvested common stock warrants. These costs are expected to be recognized once the performance condition has occurred or becomes probable.
9. RELATED PARTY TRANSACTIONS
Tiziana
is a related party as it is under common control. The Company and Tiziana share directors, officers and significant shareholders. The
Company has also been formed due to an acquisition of a subsidiary company from Tiziana. As of March 31, 2024, Tiziana owns approximately
Effective
with the demerger agreement, the Company entered into a shared services agreement, where the Company outsources certain limited management
and administrative services. The Company notes that the fees consist of payroll costs associated with time spent providing services for
the Company and are based on actual time spent and the allocated payroll costs. In addition, the Company is charged, at cost, for utilization
of certain office space. There was no mark-up associated with fees charged for these services. For the three months ended March 31, 2024
and 2023, the Company has incurred approximately $
As
of March 31, 2024 and December 31, 2023, $
In
January 2022, the Company and Gabriele Cerrone, who is the Chairman of the Board of Directors and the largest shareholder, entered into
an agreement in which he will provide consulting services to the Company for a monthly fee of $
10. INCOME TAXES
The Company recorded no provision or benefit for income tax expense for the three months ended March 31, 2024. For all periods presented, the pretax losses incurred by the Company received no corresponding tax benefit because the Company concluded that it is more likely than not that the Company will be unable to realize the value of any resulting deferred tax assets. The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance in the future.
The Company has no open tax audits with any taxing authority as of March 31, 2024.
| 13 |
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 15, 2023. In addition to our historical condensed consolidated financial information, the following contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-Q.
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the “safe harbor” created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy,” “future,” “likely” or the negative thereof or other variations thereon or other comparable terminology. All statements other than statements of historical facts included in this Form 10-Q regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding: expectations for revenues, cash flows and financial performance and the anticipated results of our ongoing development and business strategies.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, but are not limited to, the following:
| ● | the success, cost and timing of our clinical development of our products, including the progress of, and results from, our preclinical and | |
| ● | clinical trials of StemPrintER products, our discovery programs and other potential product candidates; | |
| ● | our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations or warnings in the label of any of our product candidates, if approved; | |
| ● | our ability to compete with companies currently marketing or engaged in the development of treatments for indications that our product candidates are designed to target; | |
| ● | our plans to pursue research and development of other future product candidates; | |
| ● | the potential advantages of our product candidates and those being developed; | |
| ● | the rate and degree of market acceptance and clinical utility of our product candidates; | |
| ● | the success of our collaborations and partnerships with third parties; | |
| ● | our estimates regarding the potential market opportunity for our product candidates; | |
| ● | our sales, marketing and distribution capabilities and strategy; | |
| ● | our ability to establish and maintain arrangements for manufacture of our product candidates; | |
| ● | our intellectual property position; | |
| ● | our expectations related to the use of capital; | |
| ● | the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations, including but not limited to our preclinical studies and future clinical trials; | |
| ● | our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; | |
| ● | the impact of government laws and regulations; and | |
| ● | our competitive position. |
The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included in this report. You should not place undue reliance on these forward-looking statements.
| 14 |
This report also contains or may contain estimates, projections and other information concerning our industry and our business, including data regarding the estimated size of our markets and their projected growth rates. Information that is based on estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, studies and similar data prepared by third parties, industry and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.
Unless otherwise stated or the context otherwise requires, the terms “AccuStem” “we,” “us,” “our” and the “Company” refer collectively to AccuStem and, where appropriate, its subsidiaries.
Overview
We are a clinical stage diagnostics company dedicated to improving quality of life and outcomes for the more than 18 million people worldwide who are diagnosed with cancer each year. Our plan is to develop and commercialize a suite of novel genomic tests that support decision making along the entire continuum of oncology care. Our focus will be the commercialization of our proprietary genomic test, StemPrintER, for patients with early-stage breast cancer, and we estimate this market opportunity represents more than $1.3 billion in annual revenue.
Our primary product candidate is StemPrintER, a 20-gene prognostic assay intended to predict the risk of distant recurrence (“DR”) in luminal (ER+/HER2-negative) breast cancer patients. The assay was developed to measure the “stemness” of tumors, or how much a tumor behaves like stem cells which could indicate how likely a cancer is to recur or be resistant to standard treatments, ultimately impacting how patients are managed by their multi-disciplinary care team. StemPrintER has been validated in several clinical cohorts and studies, the largest of which are a consecutive series of approximately 2,400 patients from the European Institute of Oncology (“IEO”) and approximately 800 patients from the TransATAC study. In the IEO cohort, StemPrintER High Risk patients (“SPRS High”) were 1.85 times more likely to have a distant recurrence compared to Low Risk (“SPRS Low”) patients (Figure 1) and in the TransATAC cohort, SPRS High patients were 4.27 times more likely to experience a distant recurrence compared to SPRS Low Risk patients (Figure 2). Together, these data confirm that StemPrintER is highly prognostic for outcomes in patients with breast cancer and indicate the potential utility of the test in the oncology clinic.
*SPRS- StemPrintER Recurrence Score; SPRS High- StemPrintER High Risk; SPRS Low- StemPrintER Low Risk
Beyond our initial plans for StemPrintER, we believe there is significant opportunity to expand our product portfolio. First, given the broad applicability of tumor “stemness”, which has been evaluated in a multitude of different cancers, we believe the StemPrint platform will have meaningful clinical utility beyond breast cancer. As such, we will seek to validate and commercialize StemPrint for a variety of different tumor types. Each tumor type, where applicable, would also include ancillary testing to boost our value proposition to physicians and their patients. In addition, we plan to offer ancillary commodity testing (e.g., hereditary genetic testing, somatic mutation testing) that augments our proprietary assays and provides additional information and value to patients and physicians throughout the patient care continuum.
We plan to launch StemPrintER once we have achieved several key milestones. First, we plan to identify or build a laboratory that will be responsible for processing, testing and reporting StemPrintER results for all commercial samples. Further, we plan to transfer the StemPrintER assay from the laboratories in which they were developed to our commercial laboratory. Finally, upon establishing testing capabilities in our commercial laboratory, we will seek to obtain U.S. Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certification so that we are able to report results for clinical use and to seek reimbursement from the Centers for Medicare and Medicaid Services. We anticipate that it will take at least 18 months to complete these milestones. Once those tasks are complete, we plan to initially launch StemPrintER in the US and then expand to other markets as we evaluate clinical need and revenue opportunity.
| 15 |
Financial Operations Overview
We have no products approved for commercial sale and have not generated revenue to date. We have never been profitable and have incurred net losses in each year since inception. We incurred net losses of $833,341 and $790,534 for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, we had an accumulated deficit of $5,304,622. Substantially all of our net losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.
Segment Information
As of March 31, 2023, we viewed our operations and managed our business as one operating segment consistent with how our chief operating decision maker, our Chief Executive Officer, makes decisions regarding resource allocation and assessing performance. As of March 31, 2023, substantially all of our assets were located in the United States. Our headquarters and operations are located in New York, NY and London, UK.
Results of Operations
The following discussion and analysis of our results of operations includes a comparison of the three months ended March 31, 2023 to the three months ended March 31, 2022:
| Three Months Ended March 31, | ||||||||||||||||
| 2023 | 2022 | $ Change | % Change | |||||||||||||
| Revenue | $ | — | $ | — | $ | — | — | % | ||||||||
| Research and development expenses | 23,197 | 15,602 | 7,595 | 49 | % | |||||||||||
| General and administrative expenses | 503,405 | 817,739 | (314,334 | ) | (38 | %) | ||||||||||
| Loss from operations | 526,602 | 833,341 | (306,739 | ) | (37 | %) | ||||||||||
| Loss, before income tax | (526,602 | ) | (833,341 | ) | (306,739 | ) | (37 | %) | ||||||||
| Income tax benefit (expense) | — | — | — | — | % | |||||||||||
| Net loss | $ | (526,602 | ) | $ | (833,341 | ) | $ | (306,739 | ) | (37 | %) | |||||
Research and development
Research and development expenses for the three months ended March 31, 2024, increased to $7,595, compared to $21,143 for the three months ended March 31, 2023 primarily due to decrease in patent related expenses, and laboratory work and consulting.
General and administrative
General and administrative expenses for three months ended March 31, 2024, decreased to $503,405, compared to $817,739 for the three months ended March 31, 2023 primarily due to a decrease of payroll related costs as a result of a reduction in headcount, the absence of a bonus accrual, as well as costs related to legal fees and other compliance expenses.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue and have incurred significant operating losses. Our potential products are at various phases of development. We do not expect to generate significant revenue from product sales for several years, if at all. Pursuant to the demerger, Tiziana transferred $1,353,373 (£1,000,000) in cash in January 2022 to the Company. In addition, subject to the terms of the supplemental demerger agreement, Tiziana invested $2,675,940 (£2,000,000) in cash in March 2022 for additional shares of the Company. Our cash flows may fluctuate and are difficult to forecast and will depend on many factors. As of March 31, 2024, our cash balance is $9,373, which is inadequate for our current planned level of operations.
Cash Flows
The following table summarizes our cash flows:
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows (used in) provided by operating activities | $ | (237,351 | ) | $ | (446,090 | ) | ||
| Cash flows used in investing activities | — | — | ||||||
| Cash flows (used in) provided by financing activities | 225,243 | 107,253 | ||||||
| Net (decrease) increase in cash and cash equivalents | (12,108 | ) | (553,343 | ) | ||||
| Cash and cash equivalents at beginning of period | 21,481 | 733,978 | ||||||
| Cash and cash equivalents at end of period | $ | 9,373 | $ | 180,635 | ||||
| 16 |
Operating Activities
During the three months ended March 31, 2024 and 2023, net cash used in operating activities was primarily the result of net losses, partially offset by prepaid expenses, and accrued expenses.
Investing Activities
There were no cash flows from investing activities during the three months ended March 31, 2024 and 2023.
Financing Activities
During the three months ended March 31, 2024, net cash used in financing activities was primarily due to cash advances from a related party offset by payments on a note payable.
During the three months ended March 31, 2023, net cash used in financing activities was primarily due to payments on a note payable.
Market Capital Expenditure Commitments
We have no material commitment for capital expenditures.
Funding Requirements
We expect that our expenses will increase and operating losses will be generated, and we have $7,048,547 of accumulated deficit as at March 31, 2024. Based on our current plans, we believe our existing cash and cash equivalents will be sufficient to fund our operations and capital expenditure requirements until May 2024. We expect to incur substantial additional expenditures in the near term to support our acceleration of activities. We expect to incur net losses for the foreseeable future. Our ability to fund our product development and clinical operations as well as commercialization of our product candidates, will depend on the amount and timing of cash received from planned financings. Our future capital requirements will depend on many factors, including:
| ● | the costs, timing and outcomes of clinical trials and regulatory reviews associated with our product candidates; | |
| ● | the costs of commercialization activities, including product marketing, sales and distribution; | |
| ● | the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; | |
| ● | the emergence of competing technologies and products and other adverse marketing developments; | |
| ● | the effect on our product development activities of actions taken by the FDA, EMA or other regulatory authorities; | |
| ● | our degree of success in commercializing our product candidates, if and when approved; and | |
| ● | the number and types of future products we develop and commercialize. |
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
| 17 |
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity financings, debt financings, collaborations with other companies or other strategic transactions. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.
Critical Accounting Policies
There have been no significant changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Form 10-K for the year ended December 31, 2023.
Off-Balance Sheet Arrangements
We have no other off-balance sheet arrangements that have had, or are reasonably likely to have, a material current or future effect on our consolidated financial statements or changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Recent Accounting Pronouncements
For information on recent accounting pronouncements, see our condensed consolidated financial statements - Note 2 and the related notes found elsewhere in this quarterly report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes to our quantitative and qualitative disclosures about market risk as discussed in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” included our Form 10-K for the year ended December 31, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Exchange Act Rules 13a-15I and 15d-15(e)) as of March 31, 2024, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Based on the evaluation of our disclosure controls and procedures as of March 31, 2023, our management, with the participation of our principal executive officer and principal financial officer has concluded that, based on such evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective due to the material weakness described below.
| 18 |
Material Weaknesses in Internal Controls Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Management has determined that we did not maintain effective internal control over financial reporting as of the period ended March 31, 2024 due to a lack of accounting resources resulting in inadequate monitoring controls and other oversight procedures. Our management has determined that our disclosure controls and procedures and internal controls were ineffective due to weaknesses in our financial closing process, inadequate segregation of duties over authorization, review and recording of transactions, lack of accounting resources, as well as the financial reporting of such transactions.
Management’s Plan to Remediate the Material Weakness
Management intends to remediate this item in the following manner:
i. Recruit appropriately skilled accounting resources (the “Remediation Plan”)
Accordingly, management has determined that these control deficiencies constitute a material weakness. Management has begun implementing the Remediation Plan described herein and intends to continue working on it through the year ended December 31, 2024.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 19 |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2022
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
101.INS* Inline XBRL Instance 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)
| 20 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on May 20, 2024.
| ACCUSTEM SCIENCES, INC. | |
| /s/ Keeren Shah | |
| Keeren Shah | |
| Chief Financial Officer |
In accordance with the Securities Exchange Act of 1934, this Report has been signed below on May 20, 2024 by the following persons on behalf of the Registrant and in the capacities indicated.
| /s/ Wendy Blosser | |
| Wendy Blosser | |
| Chief Executive Officer and Director | |
| /s/ Keeren Shah | |
| Keeren Shah | |
| Chief Financial Officer |
| 21 |
Exhibit 31.1
CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER
I, Wendy Blosser, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of AccuStem Sciences Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: May 20, 2024
| /s/ Wendy Blosser | ||
| Name: | Wendy Blosser | |
| Title: | Chief Executive Officer |
Exhibit 31.2
CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER
I, Keeren Shah, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of AccuStem Sciences Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: May 20, 2024
| /s/ Keeren Shah | ||
| Name: | Keeren Shah | |
| Title: | Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of AccuStem Sciences Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Wendy Blosser, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Dated: May 20, 2024
| /s/ Wendy Blosser | ||
| Name: | Wendy Blosser | |
| Title: | Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AccuStem Sciences Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Keeren Shah, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Dated: May 20, 2024
| /s/ Keeren Shah | ||
| Name: | Keeren Shah | |
| Title: | Chief Financial Officer |
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Current Assets | ||
| Cash | $ 9,373 | $ 21,481 |
| Prepaid expenses | 38,428 | 108,368 |
| Total Current Assets | 47,801 | 129,849 |
| Equipment, net | 3,140 | 4,048 |
| TOTAL ASSETS | 50,941 | 133,897 |
| Current Liabilities | ||
| Accounts payable | 649,480 | 578,378 |
| Related party payable | 1,801,908 | 1,454,986 |
| Accrued expenses | 219,567 | 156,434 |
| Note Payable | 55,679 | |
| Total Current Liabilities | 2,670,955 | 2,245,477 |
| TOTAL LIABILITIES | 2,670,955 | 2,245,477 |
| Stockholders’ Equity | ||
| Preferred stock $.001 par value; 10,000,000 shares authorized; none issued and outstanding | ||
| Common stock $.001 par value; 150,000,000 shares authorized; 11,346,535 and 11,346,535 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | 11,346 | 11,346 |
| Additional paid-in capital | 4,417,187 | 4,399,019 |
| Accumulated deficit | (7,048,547) | (6,521,945) |
| TOTAL STOCKHOLDERS’ EQUITY | (2,620,014) | (2,111,580) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 50,941 | $ 133,897 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 150,000,000 | 150,000,000 |
| Common stock shares issued | 11,346,535 | 11,346,535 |
| Common stock shares outstanding | 11,346,535 | 11,346,535 |
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| OPERATING EXPENSES | ||
| Research and development expenses | $ 23,197 | $ 15,602 |
| General and administrative expenses | 503,405 | 817,739 |
| Total operating expenses | 526,602 | 833,341 |
| LOSS FROM OPERATIONS | (526,602) | (833,341) |
| LOSS, BEFORE TAX | (526,602) | (833,341) |
| Income tax benefit (expense) | ||
| NET LOSS | $ (526,602) | $ (833,341) |
| Net loss per share attributable to common stockholders, basic | $ (0.05) | $ (0.07) |
| Net loss per share attributable to common stockholders, diluted | $ (0.05) | $ (0.07) |
| Weighted average common shares outstanding used in computing net loss per share attributable to common stockholders, basic | 11,346,535 | 11,346,535 |
| Weighted average common shares outstanding used in computing net loss per share attributable to common stockholders, diluted | 11,346,535 | 11,346,535 |
Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Total |
|---|---|---|---|---|
| Balance at Dec. 31, 2022 | $ 11,346 | $ 4,320,385 | $ (4,471,281) | $ (139,550) |
| Balance, shares at Dec. 31, 2022 | 11,346,535 | |||
| Share-based compensation | 26,209 | 26,209 | ||
| Net loss | (833,341) | (833,341) | ||
| Balance at Mar. 31, 2023 | $ 11,346 | 4,346,594 | (5,304,622) | (946,682) |
| Balance, shares at Mar. 31, 2023 | 11,346,535 | |||
| Balance at Dec. 31, 2023 | $ 11,346 | 4,399,019 | (6,521,945) | (2,111,580) |
| Balance, shares at Dec. 31, 2023 | 11,346,535 | |||
| Share-based compensation | 18,168 | 18,168 | ||
| Net loss | (526,602) | (526,602) | ||
| Balance at Mar. 31, 2024 | $ 11,346 | $ 4,417,187 | $ (7,048,547) | $ (2,620,014) |
| Balance, shares at Mar. 31, 2024 | 11,346,535 |
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Operating Activities | ||
| Net loss | $ (526,602) | $ (833,341) |
| Adjustments to reconcile net loss to net cash used in (provided by) operating activities | ||
| Depreciation | 908 | 908 |
| Share-based compensation | 18,168 | 26,209 |
| Change in operating assets and liabilities: | ||
| Prepaid expenses | 69,940 | 108,276 |
| Other current assets | 29,603 | |
| Accounts payable | 71,102 | (4,759) |
| Related party payable | 66,000 | 21,004 |
| Accrued expenses | 63,133 | 206,010 |
| Net cash used in (provided by) operating activities | (237,351) | (446,090) |
| Financing Activities | ||
| Advances from related party | 280,922 | |
| Payments on note payable | (55,679) | (107,253) |
| Net cash used in (provided by) financing activities | 225,243 | (107,253) |
| (Decrease) Increase in cash | (12,108) | (553,343) |
| Cash, beginning of period | 21,481 | 733,978 |
| Cash, end of period | 9,373 | 180,635 |
| Supplemental cash flow information | ||
| Cash paid for interest | $ 697 | $ 702 |
DESCRIPTION OF BUSINESS |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Accounting Policies [Abstract] | |
| DESCRIPTION OF BUSINESS | 1. DESCRIPTION OF BUSINESS
AccuStem Sciences, Inc. is an early-stage life sciences company committed to developing and commercializing novel products for the treatment and management of many cancers. The principal activities of the Company are that of a genomics-based personalized medicine business, particularly focused on breast and lung cancer patients.
Liquidity and Going Concern
The condensed consolidated financial statements have been prepared on the going concern basis, which contemplates the realization of assets and discharge of liabilities in the normal course of business. The Company has financed its activities principally from support from a related party. The Company has incurred a net loss in every fiscal period since inception. For the three months ended March 31, 2023, the Company incurred a net loss of $526,602. The Company has an accumulated deficit of $7,048,547 as of March 31, 2024. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, further development of its technology and products, and expenses related to the commercialization of its products.
Management believes that the Company does not have sufficient cash and current assets to support its operations through at least 12 months from the issuance date of these condensed consolidated financial statements, and will require significant additional cash resources to continue its planned research and development activities.
The Company will need additional funds for promoting new products and working capital required to support research and development activities and generate sales from its products. There can be no assurance, however, that such financing will be available when needed, if at all, or on favorable terms and conditions. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the quality of product development efforts, management of working capital, and the continuation of normal payment terms and conditions for purchase of services.
In order to address its capital needs, including its planned research and development activities and other expenditures, the Company is actively pursuing additional equity financing in the form of a private investment and public equity. The Company has been in ongoing discussions with institutional investors and other parties with respect to such possible offerings. Adequate financing opportunities might not be available to the Company, when and if needed, on acceptable terms or at all. If the Company is unable to obtain additional financing in sufficient amounts or on acceptable terms or if the Company fails to consummate the private placement or a public offering, the Company will be forced to delay, reduce or eliminate some or all of its research and development programs and product portfolio expansion, which could adversely affect its operating results or business prospects. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding in terms acceptable to the Company to fund continuing operations, if at all. After considering the uncertainties, management determined it is appropriate to continue to adopt the going concern basis in preparing the condensed consolidated financial statements.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Accounting Policies [Abstract] | |
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these condensed consolidated financial statements are set out below.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on February 15, 2023. Unless otherwise indicated, all references to “$” are to U.S. dollars, and all references to “£” or “GBP” are to Great Britain Pounds. The Company’s reporting currency is U.S. dollars.
Basis of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary after elimination of intercompany transactions and balances.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Comprehensive Loss
Comprehensive loss of all periods presented is comprised primarily of net loss and foreign currency translation adjustments.
Risk and Uncertainties
The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including but not limited to, the success of its exploration to research and development activities, need for additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, dependence on key individuals, and risks associated with changes in information technology.
Cash
The Company considers all highly liquid investments purchased with an original maturity date of three months or less at the date of purchase and money market accounts to be cash equivalents. At March 31, 2023 and December 31, 2022, the Company had no cash equivalents and all cash amounts consisted of cash on deposit.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant contribution of credit risk consist of cash. Periodically, the Company maintains deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality and the Company has not experienced any losses in these deposits.
Equipment, net
Equipment is stated at cost, less accumulated depreciation. The Company depreciates its equipment for financial reporting purposes using the straight-line method over the estimated useful lives of the assets. The Equipment consists of computer equipment, which has a useful life of 3 years. Maintenance and repairs are expensed when incurred. Additions and improvements that extend the economic useful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any resulting gain or loss is reflected in current earnings.
The Company may award stock options, performance-based options and other equity-based instruments to its employees, directors and consultants. Compensation cost related to equity-based instruments is based on the fair value of the instrument on the grant date, and is recognized over the requisite service period on a straight-line basis over the vesting period except for performance-based options. Performance-based stock options vest based on the achievement of performance targets. Compensation costs associated with performance-based option awards are recognized over the requisite service period based on probability of achievement. Performance-based stock options require management to make assumptions regarding the likelihood of achieving performance targets.
The Company estimates the fair value of service based and performance-based stock option awards, including modifications of stock option awards, using the Black-Scholes option pricing model. This model derives the fair value of stock options based on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rate and dividend yield.
Recent Accounting Standards
Adopted Accounting Standards
None
Standards not yet adopted
There are no recently issued accounting standards that have not been adopted that would affect the financial statements of the Company.
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EQUIPMENT |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||
| EQUIPMENT | 3. EQUIPMENT
Equipment consists of the following:
Depreciation expense was approximately $908 and $908 for the three months ended March 31, 2024 and 2023, respectively.
Depreciation expense is included within General and Administrative expenses in the accompanying Consolidated Statement of Operations and Comprehensive Loss.
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ACCRUED EXPENSES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||
| ACCRUED EXPENSES | 4. ACCRUED EXPENSES
Accrued expenses consist of the following:
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NOTE PAYABLE |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Debt Disclosure [Abstract] | |
| NOTE PAYABLE | 5. NOTE PAYABLE
On May 20, 2023, the Company renewed its Directors and Officers Liability Insurance agreement for $372,880. Under the terms of the agreement, the Company made a down payment of $75,000, with the remaining balance financed over the remaining term at an annual percentage rate of 7.50%. Beginning June 2023, the Company will make 10 monthly payments of $30,822, with the last payment made in March 2024. In August 2023, the Company amended the agreement, which reduced the monthly payment from $30,822 to $18,792. At the end of March 31,2024, the outstanding balance on the note payable was $0. At December 31, 2023, the outstanding balance on the note payable was $55,769.
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LICENSE |
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|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||
| LICENSE | 6. LICENSE
On November 9, 2022, AccuStem and the IEO/University of Milan amended the License to clarify the regulatory path and timeline for the commercialization of StemPrintER. Specifically, the regulatory requirement language has been modified to (i) extend the timeline for regulatory approval or clearance of a licensed product to 36 months from the date of the amendment, (ii) clarify that contractual regulatory requirements can be satisfied by the approval or clearance of the test as a Laboratory Developed Test (i.e., approval or clearance can be achieved via the CLIA regulatory path rather than the FDA) and (iii) the timeline for commercial launch has been extended for an additional 60 months from the date of the amendment. The amendment provides for a separate licensing payment of $175,000 to the IEO.
In addition, for the term of the license, the following milestone payments are required to be made (converted from EUROS to USD using exchange rate of €1:$1.0675)
The License may be terminated by either party in the event of a material breach and in addition, we may terminate the License at any time upon 30 days’ notice.
For the three months ended March 31, 2023 and 2022, the Company did not recognize any expense related to this license agreement.
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LOSS PER SHARE |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOSS PER SHARE |
Basic and diluted net loss per common share were the same since the inclusion of common shares issuable pursuant to the exercise of options in the calculation of diluted net loss per common shares would have been antidilutive.
The Company’s potentially dilutive securities, which include stock options and warrants, have been excluded from the computation of diluted net loss per common share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders is the same.
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SHARE-BASED COMPENSATION |
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| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SHARE-BASED COMPENSATION |
In August 2021, Limited adopted the 2021 Omnibus Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan provides that the Company may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, and Other Share-Based Awards to selected employees, directors, and independent contractors of the Company.
Each Award shall be exercisable at such time or times and subject to such terms and conditions set forth in the Incentive Plan, as shall be determined by the administrator in the applicable award agreement. Total shares authorized by the plan was . Awards under the Incentive Plan are exercisable for up to years from the date of issuance. There are remaining available shares to be issued under the Incentive Plan at March 31, 2023. The number of shares of Common Stock that are reserved and available for issuance under the Incentive Plan shall be subject to an annual increase on the first day of each calendar year beginning with the first January 1 following the effective date and ending with the last January 1 during the initial ten-year term of the Plan as defined in Section 4(a) of the Incentive Plan.
Options
There were options granted or modified for the three months ended March 31, 2023.
The Company issued options during the first quarter of 2023 for employees, directors and non-employees under the Incentive Plan. The options granted had an exercise price of $ and expire on the ten-year anniversary of the grant date.
For the three months ended March 31, 2024, stock option activity for time-based options of the Company are as follows:
For the three months ended March 31, 2024, stock option activity for performance-based options of the Company are as follows:
The aggregate intrinsic value is calculated as the difference between the estimated fair value of the underlying common stock as of March 31, 2023 and the option exercise price.
Total share-based compensation was approximately $ and $, respectively, for the three months ended March 31, 2024 and 2023, respectively.
Total share-based compensation expense is included in General and Administrative expenses on the Condensed Consolidated Statement of Operations and Other Comprehensive Income.
The weighted average grant date fair value for stock options granted during the three months ended March 31, 2024 is $. There was no time based or performance -based stock option granted during the three months ended March 31, 2023. The performance-based and time-based stock options are equity-classified.
The Company uses the Black-Scholes option pricing model to estimate the fair value of the option awards. The table below summarizes the resulting weighted average inputs used to calculate the estimated fair value of options awarded for the three months ended March 31, 2024 and 2023.
The risk-free interest rate assumption is determined using the yield currently available on U.S. Treasury zero- coupon issues with a remaining term commensurate with the expected term of the award. The Company has historically been a private company and lacks company-specific historical and implied volatility information. Management has estimated expected volatility based on similar public companies. Expected life of the option represents the period of time options are expected to be outstanding. The estimate for dividend yield is % because the Company has not historically paid, and does not intend to pay, a dividend on common stock in the foreseeable future.
As of March 31, 2024, there was $ unrecognized compensation expense related to options. $ of this cost is subject to time-based conditions, and is to be recognized over a period of approximately years. The remaining $ of unrecognized compensation expense relates to performance-based conditions for unvested options. These costs are expected to be recognized over the required service period once the performance condition has occurred or becomes probable. Compensation costs related to the performance stock options are evaluated at each reporting period and subsequently adjusted for changes in the expected outcomes of the performance conditions.
As of March 31, 2023, there was $ unrecognized compensation expense related to options. $ of this cost is subject to time-based conditions and is to be recognized over a period of approximately years. The remaining $ of unrecognized compensation expense relates to performance-based conditions for unvested options.
Warrants
There were no warrants issued during the three months ended March 31, 2024 or 2023.
For the three months ended March 31, 2023, warrant activity of the Company are as follows:
For the three months ended March 31, 2024, warrant activity of the Company are as follows:
There was share-based compensation expense recognized during the three months ended March 31, 2024 and 2023 for warrants.
As of March 31, 2024 and 2023, there was $ of total performance-based unrecognized compensation costs related to unvested common stock warrants. These costs are expected to be recognized once the performance condition has occurred or becomes probable.
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RELATED PARTY TRANSACTIONS |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | 9. RELATED PARTY TRANSACTIONS
Tiziana is a related party as it is under common control. The Company and Tiziana share directors, officers and significant shareholders. The Company has also been formed due to an acquisition of a subsidiary company from Tiziana. As of March 31, 2024, Tiziana owns approximately 11.8% of the Company.
Effective with the demerger agreement, the Company entered into a shared services agreement, where the Company outsources certain limited management and administrative services. The Company notes that the fees consist of payroll costs associated with time spent providing services for the Company and are based on actual time spent and the allocated payroll costs. In addition, the Company is charged, at cost, for utilization of certain office space. There was no mark-up associated with fees charged for these services. For the three months ended March 31, 2024 and 2023, the Company has incurred approximately $3,422 and $4,503, respectively.
As of March 31, 2024 and December 31, 2023, $1,653,408 and $1,322,986 respectively, was also due to Tiziana, as Tiziana had paid for expenses on behalf of the Company.
In January 2022, the Company and Gabriele Cerrone, who is the Chairman of the Board of Directors and the largest shareholder, entered into an agreement in which he will provide consulting services to the Company for a monthly fee of $5,500. As of March 31, 2024 and December 31, 2023, $148,500 and $132,000, respectively was due to Gabriele Cerrone.
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INCOME TAXES |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | 10. INCOME TAXES
The Company recorded no provision or benefit for income tax expense for the three months ended March 31, 2024. For all periods presented, the pretax losses incurred by the Company received no corresponding tax benefit because the Company concluded that it is more likely than not that the Company will be unable to realize the value of any resulting deferred tax assets. The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance in the future.
The Company has no open tax audits with any taxing authority as of March 31, 2024. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation | Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on February 15, 2023. Unless otherwise indicated, all references to “$” are to U.S. dollars, and all references to “£” or “GBP” are to Great Britain Pounds. The Company’s reporting currency is U.S. dollars.
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| Basis of Consolidation | Basis of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary after elimination of intercompany transactions and balances.
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
|
| Comprehensive Loss | Comprehensive Loss
Comprehensive loss of all periods presented is comprised primarily of net loss and foreign currency translation adjustments.
|
| Risk and Uncertainties | Risk and Uncertainties
The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including but not limited to, the success of its exploration to research and development activities, need for additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, dependence on key individuals, and risks associated with changes in information technology.
|
| Cash | Cash
The Company considers all highly liquid investments purchased with an original maturity date of three months or less at the date of purchase and money market accounts to be cash equivalents. At March 31, 2023 and December 31, 2022, the Company had no cash equivalents and all cash amounts consisted of cash on deposit.
|
| Concentrations of Credit Risk | Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant contribution of credit risk consist of cash. Periodically, the Company maintains deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality and the Company has not experienced any losses in these deposits.
|
| Equipment, net | Equipment, net
Equipment is stated at cost, less accumulated depreciation. The Company depreciates its equipment for financial reporting purposes using the straight-line method over the estimated useful lives of the assets. The Equipment consists of computer equipment, which has a useful life of 3 years. Maintenance and repairs are expensed when incurred. Additions and improvements that extend the economic useful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any resulting gain or loss is reflected in current earnings.
|
| Share-based Compensation |
The Company may award stock options, performance-based options and other equity-based instruments to its employees, directors and consultants. Compensation cost related to equity-based instruments is based on the fair value of the instrument on the grant date, and is recognized over the requisite service period on a straight-line basis over the vesting period except for performance-based options. Performance-based stock options vest based on the achievement of performance targets. Compensation costs associated with performance-based option awards are recognized over the requisite service period based on probability of achievement. Performance-based stock options require management to make assumptions regarding the likelihood of achieving performance targets.
The Company estimates the fair value of service based and performance-based stock option awards, including modifications of stock option awards, using the Black-Scholes option pricing model. This model derives the fair value of stock options based on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rate and dividend yield.
|
| Recent Accounting Standards | Recent Accounting Standards
Adopted Accounting Standards
None
Standards not yet adopted
There are no recently issued accounting standards that have not been adopted that would affect the financial statements of the Company. |
EQUIPMENT (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||
| SCHEDULE OF PROPERTY AND EQUIPMENT | Equipment consists of the following:
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ACCRUED EXPENSES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||
| SCHEDULE OF ACCRUED EXPENSES | Accrued expenses consist of the following:
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LOSS PER SHARE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LOSS PER SHARE |
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| SCHEDULE OF COMPUTATION OF DILUTED NET LOSS PER SHARE |
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SHARE-BASED COMPENSATION (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF STOCK VALUATION ASSUMPTIONS |
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| SCHEDULE OF WARRANTS OUTSTANDING | For the three months ended March 31, 2023, warrant activity of the Company are as follows:
For the three months ended March 31, 2024, warrant activity of the Company are as follows:
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| Time Based Options [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF STOCK OPTION ACTIVITY |
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| Performance Based Options [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF STOCK OPTION ACTIVITY |
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DESCRIPTION OF BUSINESS (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Accounting Policies [Abstract] | |||
| Net loss | $ 526,602 | $ 833,341 | |
| Accumulated deficit | $ 7,048,547 | $ 6,521,945 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|---|
| Property, Plant and Equipment [Line Items] | |||
| Cash equivalents | $ 0 | $ 0 | |
| Computer Equipment [Member] | |||
| Property, Plant and Equipment [Line Items] | |||
| Property, plant and equipment, useful life | 3 years |
SCHEDULE OF PROPERTY AND EQUIPMENT (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Property, Plant and Equipment [Abstract] | ||
| Computer equipment | $ 10,999 | $ 10,999 |
| Less: Accumulated depreciation | 7,859 | 6,951 |
| Equipment, net | $ 3,140 | $ 4,048 |
EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Property, Plant and Equipment [Abstract] | ||
| Depreciation expense | $ 908 | $ 908 |
SCHEDULE OF ACCRUED EXPENSES (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Legal expense | $ 146,594 | $ 146,594 |
| Other | 72,973 | 9,840 |
| Total accrued expenses | $ 219,567 | $ 156,434 |
NOTE PAYABLE (Details Narrative) - USD ($) |
1 Months Ended | ||||
|---|---|---|---|---|---|
Jun. 01, 2023 |
May 20, 2023 |
Aug. 31, 2023 |
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Debt Instrument [Line Items] | |||||
| Monthly payments | $ 30,822 | ||||
| Maximum [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Monthly payments | $ 30,822 | ||||
| Minimum [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Monthly payments | $ 18,792 | ||||
| Renewed Directors and Officers Liability Insurance Agreement [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Insurance agreement | $ 372,880 | ||||
| Monthly payments | $ 75,000 | ||||
| Annual percentage rate | 7.50% | ||||
| Notes payable | $ 0 | $ 55,769 |
LICENSE (Details Narrative) |
3 Months Ended | ||
|---|---|---|---|
|
Nov. 09, 2022
USD ($)
|
Mar. 31, 2024
USD ($)
|
Mar. 31, 2024
GBP (£)
|
|
| Exchange rate, description | converted from EUROS to USD using exchange rate of €1:$1.0675 | converted from EUROS to USD using exchange rate of €1:$1.0675 | |
| Stem Print ER [Member] | |||
| Extended regulatory approval or clearance of licensed product term | 36 months | ||
| Additional extended term for commercial launch | 60 months | ||
| Payments for license | $ 175,000 | ||
| Commercial Test [Member] | |||
| Milestone payment | $ 53,375 | £ 50,000 | |
| Licensed Product [Member] | |||
| Milestone payment | 106,750 | 100,000 | |
| US Market Approval [Member] | |||
| Milestone payment | $ 160,125 | £ 150,000 | |
SCHEDULE OF LOSS PER SHARE (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Earnings Per Share [Abstract] | ||
| Net Loss | $ (526,602) | $ (833,341) |
| Net loss attributable to common shareholders | $ (526,602) | $ (833,341) |
| Weighted-average common shares outstanding, basic | 11,346,535 | 11,346,535 |
| Weighted-average common shares outstanding, diluted | 11,346,535 | 11,346,535 |
| Net loss per common share, basic | $ (0.05) | $ (0.07) |
| Net loss per common share, diluted | $ (0.05) | $ (0.07) |
SCHEDULE OF COMPUTATION OF DILUTED NET LOSS PER SHARE (Details) - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive shares | 1,702,279 | 1,757,244 |
| Share-Based Payment Arrangement, Option [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive shares | 1,352,279 | 1,407,244 |
| Warrant [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Anti-dilutive shares | 350,000 | 350,000 |
SCHEDULE OF STOCK VALUATION ASSUMPTIONS (Details) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Share-Based Payment Arrangement [Abstract] | ||
| Risk free interest rate | 1.80% | |
| Expected dividend yield | ||
| Expected term | 5 years | |
| Expected volatility | 53.43% | |
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | ||
|---|---|---|---|---|
Jan. 31, 2022 |
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Related Party Transaction [Line Items] | ||||
| Proceeds from related party debt | $ 280,922 | |||
| Related Party [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Related party costs | 3,422 | $ 4,503 | ||
| Tiziana [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Due to affiliate | 1,653,408 | $ 1,322,986 | ||
| Gabriele Cerrone [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Due to affiliate | $ 148,500 | $ 132,000 | ||
| Proceeds from related party debt | $ 5,500 | |||
| Tiziana [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Ownership percentage | 11.80% | |||