10-Q 1 axim_10q.htm FORM 10-Q axim_10q.htm

 

U.S.

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2024

 

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 000-54296

 

axim_10qimg2.jpg

 

AXIM Biotechnologies, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

 

27-4029386

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

6191 Cornerstone Court, E. Suite 114 San Diego, CA 92121

(Address of principal executive offices) 

 

(858) 923-4422

(Registrant’s telephone number, including area code) 

 

__________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report) 

 

Securities registered pursuant to Section 12(b) of the Act:  None

 

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. Yes ☒     No ☐

 

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). Yes ☒     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.

 

Large

accelerated

Filer

Accelerated

Filer

Non-accelerated Filer

(Do not check if smaller

reporting company)

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 ☒

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ☐     No ☐

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 291,458,824 of common stock, par value $0.0001 per share, outstanding as of May 20, 2024.

 

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

AXIM BIOTECHNOLOGIES, INC.

 

 

 

Page

 

Condensed Consolidated Balance Sheet as of March 31, 2024 (unaudited) and December 31, 2023

 

3

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 (unaudited)

 

4

 

 

 

 

 

Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the three months ended March 31, 2024 and 2023 (unaudited)

 

5

 

 

 

 

 

Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited)

 

6

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited).

 

7

 

 

 
2

Table of Contents

 

AXIM BIOTECHNOLOGIES, INC.

COSOLIDATED BALANCE SHEETS

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$96,711

 

 

$156,457

 

Total current assets

 

 

96,711

 

 

 

156,457

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation

 

 

127,510

 

 

 

134,067

 

Other Assets:

 

 

 

 

 

 

 

 

Intangible Asset 510k License and Patents-Eye Care Division, net

 

 

3,496,369

 

 

 

3,594,981

 

Security deposit

 

 

9,014

 

 

 

9,014

 

Operating lease right-of-use asset

 

 

205,012

 

 

 

227,029

 

Total other assets

 

 

3,710,395

 

 

 

3,831,024

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$3,934,616

 

 

$4,121,548

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$1,624,946

 

 

$2,781,068

 

Lease liability obligations (see Note 16) current portion

 

 

91,306

 

 

 

94,829

 

 

 

 

-

 

 

 

-

 

Due to related parties

 

 

11,000

 

 

 

21,500

 

Advances from shareholders

 

 

338,170

 

 

 

295,170

 

 

 

 

 

 

 

 

 

 

Deferred Revenue

 

 

250,148

 

 

 

303,127

 

Derivative Liability Conversion feature

 

 

2,487,235

 

 

 

2,482,723

 

Total current liabilities

 

 

4,802,805

 

 

 

5,978,417

 

 

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Convertible note payable (including accrued interest of $97,792 and $76,163 respectively) net of unamortized debt discount of $1,168,296 and $1,209,806, respectively(see note 8)

 

 

1,500,335

 

 

 

1,408,766

 

Convertible note payable - related parties (including accrued interest of $203,202 and $160,091, respectively)(Net of unamortized debt discount of $852,548 and $631,123, respectively See note 8)

 

 

4,961,779

 

 

 

4,253,968

 

Lease liability obligations (see Note 13)

 

 

118,031

 

 

 

137,044

 

Total long-term liabilities

 

 

6,580,145

 

 

 

5,799,778

 

TOTAL LIABILITIES

 

 

11,382,950

 

 

 

11,778,195

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 5,000,000 shares authorized;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series B Convertible Preferred Stock, $0.0001 par value 500,000 shares designated, 500,000 and 500,000 shares issued, 0 and 0 outstanding, respectively

 

 

-

 

 

 

-

 

Series C Convertible Preferred Stock, $0.0001 par value 500,000 shares designated, 500,000 and 500,000 shares issued and outstanding, respectively

 

 

50

 

 

 

50

 

Common stock, $0.0001 par value, 1,000,000,000 shares authorized 278,429,403 and 245,929,403 shares issued and outstanding, respectively

 

 

27,843

 

 

 

24,593

 

 

 

 

 

 

 

 

 

 

Stock subscription receivable

 

 

(19,543)

 

 

(24475)

Additional paid in capital

 

 

65,005,073

 

 

 

64,528,043

 

Common stock to be issued

 

 

15,400

 

 

 

0

 

Accumulated deficit

 

 

(72,477,157)

 

 

(72,184,858)

TOTAL STOCKHOLDERS' DEFICIT

 

 

(7,448,334)

 

 

(7,656,647)

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$3,934,616

 

 

$4,121,548

 

 

See accompanying notes to these consolidated financial statements

 

 
3

Table of Contents

 

AXIM BIOTECHNOLOGIES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

For the

 

 

For the

 

 

 

Three Months Ended

 

 

Year Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Revenues

 

$52,979

 

 

$7,397

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

Research and development expenses

 

 

15,495

 

 

 

20,336

 

Selling, general and administrative

 

 

333,840

 

 

 

590,940

 

Depreciation and amortization

 

 

108,007

 

 

 

106,755

 

Total operating expenses

 

 

457,342

 

 

 

718,031

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(404,363)

 

 

(710,634)

 

 

 

 

 

 

 

 

 

Other (income) expenses:

 

 

 

 

 

 

 

 

Miscellaneous income

 

 

5,000

 

 

 

 

 

Derivative Liability insufficient shares

 

 

-

 

 

 

2,033,074

 

(Gain) loss on change in value of derivative liability

 

 

(334,345)

 

 

98,640

 

Loss on extinguishment/conversion of debt

 

 

(6,400)

 

 

(172,731)

Amortization of note discount

 

 

60,084

 

 

 

35,172

 

Interest expense

 

 

163,597

 

 

 

57,839

 

Total other expenses

 

 

(112,064)

 

 

2,051,994

 

 

 

 

 

 

 

 

 

 

Loss before provision of income tax

 

 

(292,299)

 

 

(2,762,628)

Provision for income tax

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(292,299)

 

 

(2,762,628)

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$(292,299)

 

$(2,762,628)

 

 

 

 

 

 

 

 

 

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$(292,299)

 

$(2,762,628)

Earnings per share

 

 

 

 

 

 

 

 

Basic

 

$(0.001)

 

$(0.013)

Diluted

 

$(0.001)

 

$(0.013)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic and diluted

 

 

261,396,070

 

 

 

214,494,489

 

 

See accompanying notes to these consolidated financial statements

 

 
4

Table of Contents

 

AXIM BIOTECHNOLOGIES, INC.

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible

 

 

Series B Convertible

 

 

Series C Convertible

 

 

 Common

 

 

 Additional

 

 

 Stock

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Preferred Stock

 

 

 Stock to

 

 

Paid In

Subscription

 

 

 Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 be Issued

 

 

Capital

 

 

Receivable

 

 

Deficit

 

 

Total

 

 

 

#

 

 

 $

 

 

 #

 

 

 $

 

 

 #

 

 

$

 

 

#

 

 

$

 

 

#

 

 

$

 

 

 $

 

 

$

 

 

 

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2022

 

 

192,441,917

 

 

 

19,245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500,000

 

 

 

50

 

 

 

135,000

 

 

 

59,191,469

 

 

 

(46,000)

 

 

(64,125,176)

 

 

(4,825,412)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 common stock issued under s-1

 

 

8,000,000

 

 

 

800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

169,200

 

 

 

5,000

 

 

 

 

 

 

 

175,000

 

 common stock issued against common stock to be issued

 

 

1,000,000

 

 

 

100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(135,000)

 

 

134,900

 

 

 

 

 

 

 

 

 

 

 

-

 

 Common stock issued on conversion of debt

 

 

22,207,486

 

 

 

2,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

686,212

 

 

 

 

 

 

 

 

 

 

 

688,432

 

 Debt Discount modifications issuance of notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

459,522

 

 

 

 

 

 

 

 

 

 

 

459,522

 

 Stock based compensation - stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

103,822

 

 

 

 

 

 

 

 

 

 

 

103,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,762,628)

 

 

(2,762,628)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2023 (unaudited)

 

 

223,649,403

 

 

 

22,365

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500,000

 

 

 

50

 

 

 

-

 

 

 

60,745,125

 

 

 

5,000

 

 

 

(66,887,804)

 

 

(6,161,264)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2023

 

 

245,929,403

 

 

 

24,593

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500,000

 

 

 

50

 

 

 

 

 

 

 

64,528,043

 

 

 

(24,475)

 

 

(72,184,858)

 

 

(7,656,647)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued in settlement of claim

 

 

20,000,000

 

 

 

2,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

378,000

 

 

 

 

 

 

 

 

 

 

 

380,000

 

Common stock issued under S-1

 

 

12,500,000

 

 

 

1,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

89,417

 

 

 

4,932

 

 

 

 

 

 

 

95,599

 

Stock based compensation- stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,613

 

 

 

 

 

 

 

 

 

 

 

9,613

 

Common stock to be issued pursuant to stock puchase agreement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,400

 

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(292,299)

 

 

(292,299)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2024 (unaudited)

 

 

278,429,403

 

 

 

27,843

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

500,000

 

 

 

50

 

 

 

15,400

 

 

 

65,005,073

 

 

 

(19,543)

 

 

(72,477,157)

 

 

(7,448,334)

 

See accompanying notes to these consolidated financial statements

 

 
5

Table of Contents

 

AXIM BIOTECHNOLOGIES, INC.

Unaudited Consolidated Statements of Cash Flows

 

 

 

For the

 

 

For the

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

(Unaudited)

 

 

(Unaudited)

 

Net Loss

 

 

(292,299)

 

 

(2,762,628)

Depreciation and amortization

 

 

108,007

 

 

 

106,755

 

Derivative Liability insufficient Shares

 

 

 

 

 

 

2,033,074

 

Stock based compensation

 

 

9,613

 

 

 

103,822

 

Amortization of prepaid expenses

 

 

 

 

 

 

42,858

 

Amortization of debt discount

 

 

60,084

 

 

 

35,172

 

Amortization of deferred rent

 

 

(519)

 

 

 

 

Common Stock issued for services/equipment

 

 

 

 

 

 

 

 

Non Cash Loss (gain) on extinguishment of debt

 

 

(6,400)

 

 

(172,731)

Loss on conversion of convertible debt

 

 

 

 

 

 

 

 

Common stock issued/to be issued in settlement of obligations

 

 

380,000

 

 

 

 

 

decrease in other assets

 

 

 

 

 

 

10,825

 

Non cash interest expense

 

 

98,857

 

 

 

 

 

Change in fair value of derivative

 

 

(334,345)

 

 

98,640

 

Amortization Of Debt Issuance Cost

 

 

 

 

 

 

 

 

Loss on settlement of litigation

 

 

 

 

 

 

 

 

Changes in operating assets & liabilities:

 

 

 

 

 

 

 

 

Decrease in due to related parties

 

 

(10,500)

 

 

 

 

Increase (decrease) in other assets

 

 

 

 

 

 

 

 

Increase in shareholder advances

 

 

43,000

 

 

 

150,000

 

Increase in due to first insurance funding

 

 

 

 

 

 

 

 

(Increase) decrease in prepaid expenses

 

 

 

 

 

 

 

 

Increase (decrease) in accounts payable and accrued expenses

 

 

(1,069,580)

 

 

219,651

 

Decrease in deferred revenue

 

 

(52,979)

 

 

(7,397)

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

 

(1,067,061)

 

 

(141,959)

CASH FLOW FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in property and equipment

 

 

(2,839)

 

 

 

 

Net cash provided by (used in) investing activities

 

 

(2,839)

 

 

0

 

CASH FLOW FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from convertible note

 

 

100,000

 

 

 

 

 

Common stock issued under registration statement on Form S-1

 

 

95,599

 

 

 

175,000

 

Repayment of convertible notes

 

 

 

 

 

 

 

 

Common stock to be issued in settlement of a liability

 

 

814,555

 

 

 

 

 

Common stock issued under share purchase agreement

 

 

 

 

 

 

 

 

Repayment of first insurance funding

 

 

 

 

 

 

(26,781)

Net cash provided by (used in) financing activities

 

 

1,010,154

 

 

 

148,219

 

Net increase (decrease) in cash and cash equivalents

 

 

(59,746)

 

 

6,260

 

Cash and cash equivalents at beginning of year

 

 

156,457

 

 

 

47,282

 

Cash and cash equivalents at end of year

 

$96,711

 

 

 

53,542

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

CASH PAID DURING THE PERIOD FOR:

 

 

 

 

 

 

 

 

Interest

 

$-

 

 

 

 

 

Income taxes - net of tax refund

 

$-

 

 

$-

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Common stock issued against common stock to be issued

 

$

 

 

 

$

135,000

 

Initial derivative liability at issuance of notes

 

$338,857

 

 

$

 

 

Common stock issued against CS subscription

 

$4,932

 

 

$40,000

 

Common Stock to be issued against settlement of debt

 

$15,400

 

 

$

 

 

Convertible note converted to common stock

 

$

 

 

 

$

688,432

 

Initial debt discount on extinguishment of notes

 

$

 

 

 

$

209,522

 

Convertible debt issued against settlement of libilities

 

$380,000

 

 

$250,000

 

Initial debt discount at issuance of notes

 

$240,000

 

 

$250,000

 

 

 The accompanying notes are an integral part of these consolidated financial statements.

 

 
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AXIM BIOTECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

 

NOTE 1: ORGANIZATION

 

AXIM Biotechnologies, Inc. (the “Company”) was originally incorporated in Nevada on November 18, 2010, as Axim International Inc. On July 24, 2014, the Company changed its name to AXIM Biotechnologies, Inc. to better reflect its business operations. The Company’s principal executive office is located at 6191 Cornerstone Court E Suite 114 San Diego, California 92121.

 

On October 16, 2018, the Company formed a wholly owned disregarded entity Marina Street, LLC as part of improvement of internal control over cash management and bank activities. In March 2020, we acquired Sapphire Biotech, Inc. (“Sapphire”), a diagnostic healthcare solutions company, changing our business operations. Sapphire’s operations are located in the greater San Diego, California area.

 

Russia-Ukraine and Israeli-Hamas wars impact and related risks

 

The ongoing wars in Russia-Ukraine and Israeli-Hamas conflict could impact global supply chains. This could impact business operations by effecting the company’s ability to procure necessary supplies and equipment. This could possibly interrupt the continuing sale of tests which would eliminate the company’s only source of revenue.

 

In addition to operational adjustments, the consequences of the Russia-Ukraine and Israeli- Hamas conflicts have led to uncertainties related to The Company’s business growth and ability to forecast the demand for its diagnostic testing and resulting revenues.

 

The full extent to which the Russia-Ukraine and Israeli- Hamas conflicts and the various responses to it might impact The Company’s business, operations and financial results will depend on numerous evolving factors that are not subject to accurate prediction and that are beyond The Company’s control.

 

In addition the impact of inflation on the Company’s ability to purchase supplies and manufacture products in a cost effective manner is currently unknown.

 

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. The COVID-19 pandemic, as it was declared by the World Health Organization, has continued to spread and has already caused severe global disruptions. The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.

 

We expect COVID-19, along with the resulting government-imposed restrictions on businesses, to negatively impact our operations due to decreased consumer demand as well as potential production and warehouse limitations which results in an event or condition, before consideration of management’s plans, that could impact our ability to meet future obligations.

 

NOTE 2: ACQUISITION OF INTELLECTUAL PROPERTY OF ADVANCED TEAR DIAGNOSTIC, LLC.

 

AXIM entered into two substantially contemporaneous transactions to acquire patents and 510(K) Licenses from Advance Tear Diagnostics, LLC (the “Seller”) (collectively, the “Asset Acquisition”) for a total amount of $4,520,000.

 

The first transaction occurred on July 29, 2021, in which AXIM purchased five patents (the “Patents”) from the Seller for $250,000 (which includes assuming and paying $30,000 of the Seller’s liabilities). The bulk of the purchase price ($210,000) was in a note that requires seven equal monthly payments of $30,000, which payment started on September 3, 2021.

 

 
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The second transaction occurred on August 26, 2021, in which AXIM purchased certain eye disease diagnostic technology, which consisted of a 510(K) license for Lactoferrin, a biomarker for dry eye disease and a 510(K) license for IgE, a biomarker for allergic ocular reaction (collectively, the “510(K) Licenses”). The purchase price for the 510(K) Licenses was $4,270,000, which price was paid by issuing to the Seller 7 million shares of AXIM restricted common stock.

 

Together, the Patents and the 510(K) Licenses constitute the acquired technology asset (the “Technology Asset”), which for accounting purposes, are considered one unit of account. We are amortizing the Technology Asset ratably over the 9.1 years average remaining life of the Patents. The net value of these intangibles as of December 31, 2023 and March 31, 2024 is $3,594,981 and $3,496,369 respectively.

 

In accordance with FASB’s requirements for accounting for business combinations (FASB Accounting Standards Codification, Topic 805, Business Combinations (“Topic 805”)), since all of the value of this acquisition resides in one asset, the Technology Asset, we have accounted for this transaction as the acquisition of an asset. The seller had not been able to commercialize or complete development of the Technology Asset prior to the asset acquisition and AXIM has established an Ophthalmology Division to commercialize and market the diagnostic technology. In an asset acquisition, the total purchase price of the transaction, including transaction expenses, is allocated to the assets acquired based on the fair value of the assets acquired. In our acquisition of the Technology Asset, the total amount of the purchase price was allocated to the Technology Asset.

 

NOTE 3: BASIS OF PRESENTATION:

 

The unaudited condensed consolidated financial statements of AXIM Biotechnologies, Inc. (formerly Axim International, Inc.) as of March 31, 2024, and 2023 have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”).

 

Principles of Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of Axim Biotechnologies, Inc. and its wholly owned subsidiaries Axim Holdings, Inc., Marina Street LLC, Axim Biotechnologies (the Netherland Company) and Sapphire Biotech, Inc. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated upon consolidation.

 

NOTE 4: GOING CONCERN

 

The Company’s unaudited condensed consolidated financial statements have been presented assuming that the Company will continue as a going concern. As shown in the unaudited condensed consolidated financial statements, the Company has negative working capital of $4,706,095 and has an accumulated deficit of $72,477,157, has cash used in operating activities of operations $1,067,061. During the three months ended March 31, 2024 and 2023, the Company raised additional capital of $95,599 and $175,000 through Stock Purchase Agreements. This capital provides funds for research, development, and ongoing operations. The Company intends to raise substantial additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. That will raise a doubt about the ability of the Company to continue as a going concern. The consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation

 

NOTE 5: SIGNIFICANT ACCOUNTING POLICIES

 

Use of estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during reporting periods. Actual results could differ from these estimates. Significant estimates are assumptions about collection of accounts receivable, useful life of intangible assets, impairment analysis, derivative liability and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate and expected dividend rate, for leases weighted number of life and discount rate.

 

 
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Operating lease

 

We lease property under various operating leases which are disclosed on our Balance sheet in accordance with ASC 842.

 

Risks and uncertainties

 

The Company operates in a dynamic and highly competitive industry and is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturer and contract research organizations, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows; ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.

 

Products developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that the products will receive the necessary approvals, or that any approved products will be commercially viable. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval, it could have a materially adverse impact on the Company. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

 

Beginning in late 2019, the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, has evolved into a global pandemic. The extent of the impact of the coronavirus outbreak on the Company’s business will depend on certain developments, including the duration and spread of the outbreak and the extent and severity of the impact on the Company’s clinical trial activities, research activities and suppliers, all of which are uncertain and cannot be predicted. At this point, the extent to which the coronavirus outbreak may materially impact the Company’s financial condition, liquidity or results of operations is uncertain. The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company may require additional funds to commercialize its products. The Company is unable to entirely fund these efforts with its current financial resources. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and operations.

 

There have been no material changes in the accounting policies from those disclosed in the financial statements and the related notes included in the Form 10-K.

 

 
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NOTE 5: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

 

Cash equivalents

 

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of March 31, 2024 and December 31, 2023, the Company had no cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company had no uninsured balances at March 31, 2024 and December 31, 2023. The Company has never experienced any losses related to these balances.

 

Accounts Receivable

 

It is the Company’s policy to review accounts receivable at least on a monthly basis for conductibility and follow up with customers accordingly. Covid19 has slowed collection as our customers are in a mandated pause. We do not have geographic concentration of customers.

 

Concentrations

 

At March 31, 2024, there was no accounts receivable. For the three months ended March 31, 2024 and 2023, one customer accounted for 100% of total revenue. Revenue was all generated from normal operations for the three months  ending March 31, 2024 and March 31, 2023.

 

Property and equipment

 

Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using straight-line method over the estimated useful life. New assets and expenditures that extend the useful life of property or equipment are capitalized and depreciated. Expenditures for ordinary repairs and maintenance are charged to operations as incurred. The Company’s property and equipment relating to operations consisted of the following at March 31, 2024 and December 31, 2023, respectively.

 

 

 

March 31,

2024

 

 

December 31,

2023

 

Equipment of operations

 

$259,631

 

 

$256,792

 

Less: accumulated depreciation

 

 

132,121

 

 

 

122,725

 

 

 

$127,510

 

 

$134,067

 

 

Depreciation expense was $9,396 and $8,143 for the three months ended March 31, 2024 and March 31, 2023, respectively.

 

Intangible Assets

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. We conduct an impairment analysis for goodwill annually in the fourth quarter or more frequently if indicators of impairment exist or if a decision is made to sell or exit a business. Significant judgments are involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others. The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill. There is no goodwill balance as of March 31, 2024 or December 31, 2023.

 

 
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Impairment of Indefinite-Lived Intangible Assets

 

For indefinite-lived intangible assets such as in-process research and development (IPRD), we conduct an impairment analysis annually in the fourth quarter or more frequently if indicators of impairment exist. We first perform a qualitative assessment to determine if it is more likely than not that the carrying amount of each of the in-process research and development assets exceeds its fair value. The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions, and changes in projected future cash flows. If we determine it is more likely than not that the fair value is less than its carrying amount of the in-process research and development assets, a quantitative assessment is performed. The quantitative assessment compares the fair value of the in-process research and development assets to its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized for the excess. There is no Indefinite-Lived Intangible Assets balance as of March 31, 2024.

 

Long-Lived Assets

 

The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment and definite-lived intangible assets, to determine whether indicators of impairment exist that warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objectives. If the Company determines that events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable, the Company evaluates the realizability of its long-lived assets (asset group) based on a comparison of projected undiscounted cash flows from use and eventual disposition with the carrying value of the related asset. Any write-downs (which are measured based on the difference between the fair value and the carrying value of the asset) are treated as permanent reductions in the carrying amount of the assets (asset group).

 

As at December 31, 2023, none of the Company’s long-lived assets were deemed impaired.

 

The Company’s intangible assets relating to operations consisted of the following at March 31, 2024 and December 31, 2023, respectively:

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Patents

 

$250,000

 

 

$250,000

 

Licenses

 

 

4,270,000

 

 

 

4,270,000

 

 

 

 

4,520,000

 

 

 

4,520,000

 

Less: accumulated amortization

 

 

1,023,631

 

 

 

925,019

 

 

 

$3,496,369,

 

 

$3,594,981

 

 

Estimated aggregate amortization expense for each of the five succeeding years ending December 31 is as follows:

 

 

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

2028

 

 

2029 and onwards

 

Amortization expense 

 

$292,618

 

 

$391,230

 

 

$391,230

 

 

$391,230

 

 

$391,230

 

 

$1,638,831

 

 

Amortization expense recorded for the three months ended March 31, 2024 and March 31, 2023 was $98,612 and $98,612; respectively.

 

Revenue Recognition

 

The Company follows the guidance contained in Topic 606 (FASB ASC 606). The core principle of Topic 606 (FASB ASC 606) is that an entity should recognize revenue to depict the transfer of goods of services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revenue recognition guidance contained in Topic 606, to follow the five-step revenue recognition model along with other guidance impacted by this standard: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transportation price; (4) allocate the transportation price; (5) recognize revenue when or as the entity satisfies a performance obligation. All revenue was from operations that were divested.

 

 
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Revenues are recognized when title for goods is transferred; non-refundable fees and proceeds from irrevocable agreements recognized when inflows or other enhancements of assets of the Company are received.

 

Revenues from operations recognized for the three months  ended March 31, 2024 and March 31, 2023 amounted to $52,979 and $7,397, respectively.

 

Collaboration Revenue

 

Revenue recognition for collaboration agreements will require significant judgment. The Company’s assessments and estimates are based on contractual terms, historical experience and general industry practice. Revisions in these values or estimations have the effect of increasing or decreasing collaboration revenue in the period of revision.

 

On August 21, 2020, the Company entered into a Distribution, License and Supply Agreement (“License Agreement”) with Empowered Diagnostics, LLC (“Empowered Diagnostics”“). The License Agreement provides Empowered Diagnostics with a right to commercialize the Company’s products worldwide with the exception of Mexico.

 

Under the License Agreement, the Company is responsible for applying for and obtaining necessary regulatory approvals in the US and EU, as well as marketing, sales and distribution of the products. Empowered Diagnostics will pay a transfer price for all licensed products, and upon achievement of certain regulatory and sales milestones, the Company may receive payments from Empowered Diagnostics equal to 8% of the monthly gross revenue. Agreement continues until terminated by mutual consent or uncorrected breach.

 

This agreement with Empowered Diagnostics was terminated in February, 2022. The Company did not recognize any revenue from this agreement.

 

Grant Income

 

In 2021 the Company has received government grants to drive its research and development efforts. Through these government grants, the government has provided funding for the Company to perform research and development activities which will assist in developing its products. The Company believes the government entities funding these grants are interested in the Company advancing its underlying technologies through research activities and not providing incentives for hiring employees or building facilities that would suggest that the grant monies are not for specific research activities. These grants were not renewed and are no longer in effect.

 

In determining how to classify the monies received under government grants, the Company acknowledges that there is no specific guidance under US GAAP and that the FASB and AICPA have often drawn upon the guidance in IAS 20 for classification. In considering the alternatives provided by IAS 20 for the presentation of these grants in the Company’s financial statements, the Company believes that recognizing the government grant proceeds as a component of other revenue is a better reflection of the economics of the arrangements as the Company earns the funding through the performance of research and development which is not one of the Company’s primary business activities or central to its operations. The Company believes that presenting research and development funding from government grants, as other revenue provides consistency in our financial reporting. The Company also believes that this presentation clearly presents to users of its financial statements in one line the Company’s sources of funding from these grants. The Company notes that there are no contingencies associated with the receipt of or ability to retain the funds under the grant, other than undertaking and performing the related research and development activities.

 

The Company recognizes funds received from contractual research and development services and from government grants as other revenue. These contracts and grants are not considered an ongoing major and central operation of the Company’s business. Our Income from Grants from Government for the  three months ended March 31, 2024 and March 31, 2023, was $-0- and $-0- respectively.

 

 
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Cost of Sales

 

Cost of sales includes the purchase cost of products sold and all costs associated with getting the products to the customers including buying and transportation costs. There was no cost of sales incurred for the three months ended March 31, 2024 and 2023.

 

Shipping Costs

 

Shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the company are recorded in general and administrative expenses. There were no shipping costs incurred for the three months ended March 31, 2024 and 2023.

 

Fair Value Measurements

 

The Company applies the guidance that is codified under ASC 820-10 related to assets and liabilities recognized or disclosed in the financial statements at fair value on a recurring basis. ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

The Company’s financial instruments are cash and cash equivalents, accounts receivable, accounts payable, notes payable, and long-term debt. The recorded values of cash and cash equivalents and accounts payable approximate their fair values based on their short-term nature. The recorded values of notes payable and long-term debt approximate their fair values, as interest approximates market rates.

 

ASC 820-10 clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. ASC 820-10 requires valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

 

Fair Value

Hierarchy

 

Inputs to Fair Value Methodology

Level 1

 

Quoted prices in active markets for identical assets or liabilities

Level 2

 

Quoted prices for similar assets or liabilities; quoted markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the financial instrument; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from, or corroborated by, observable market information

Level 3

 

Pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption is unobservable or when the estimation of fair value requires significant management judgment

 

All items required to be recorded or measured on a recurring basis are based upon Level 3 inputs.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

 

The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company.

 

 
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Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of March 31, 2024.

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Derivative liabilities

 

$2,487,235

 

 

$-

 

 

$-

 

 

$2,487,235

 

 

December 31, 2023:

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Derivative liabilities

 

$2,482,723

 

 

$-

 

 

$-

 

 

$2,482,723

 

 

Convertible Instruments

 

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities.”

 

Professional standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instruments are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional Convertible Debt Instrument.”

 

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

 

ASC 815-40 provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

 

Income Taxes

 

The Company follows Section 740-10, Income tax (“ASC 740-10”) Fair Value Measurements and Disclosures of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax Bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.

 

 
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The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including reversals of any existing taxable temporary differences, projected future taxable income, tax planning strategies, and the results of recent operations. If the Company determines that it would be able to realize a deferred tax asset in the future in excess of any recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

 

No amounts were accrued for the payment of interest and penalties as of March 31, 2024 and December 31, 2023. The Company is not aware of any uncertain tax positions that could result in significant additional payments, accruals, or other material deviation for the three months ended March 31, 2024 and March 31, 2023 and December 31, 2023.

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “Cares Act”) was enacted. The CARES Act included loans and grants to certain businesses, and temporary amendments to the Internal Revenue Code which changed net loss carryforward and back provisions and the business interest expenses limitation. Under the CARES Act provisions, the most relevant income tax considerations to the Company relate to the amounts received under the Paycheck Protection Program loan program and the possible forgiveness of those loans by the SBA.

 

On December 21, 2020, the U.S. president has signed into law the “Consolidated Appropriations Act, 2021” which includes further COVID-19 economic relief and extension of certain expiring tax provisions. The relief package includes a tax provision clarifying that businesses with forgiven PPP loans can deduct regular business expenses that are paid for with the loan proceeds for federal tax purposes. Additional pandemic relief tax measures include an expansion of the employee retention credit, enhanced charitable contribution deductions, and a temporary full deduction for business expenses for food and beverages provided by a restaurant.

 

Concentrations of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company had $-0- and $-0- allowance for doubtful accounts at March 31, 2024 and December 31, 2023, respectively and had $-0- accounts receivable at March 31, 2024 and December 31, 2023.

 

Net Loss per Common Share

 

Net loss per common share is computed pursuant to section 260-10-45 Earnings Per Share (“ASC 260-10”) of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding and the member potentially outstanding during each period. In periods when a net loss is experienced, only basic net loss per share is calculated because to do otherwise would be anti-dilutive. Basic and diluted net loss per share of common stock, par value $0.0001 per share (“Common Stock”) is presented in conformity with ASC 260-10 “Earnings Per Share.”

 

Diluted net loss per share is the same as basic net loss per share for the three months ended March 31, 2024 and 2023 as the inclusion of 24,118,329 in stock options, 2,469,247 in warrants, and 343,290,099 in convertible notes would be anti-dilutive.

 

 
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There were common share equivalents 370,377,675 at March 31, 2024 and 250,027,250 at December 31, 2023. For the three months ended March 31, 2024 and 2023 these potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share.

 

Stock Based Compensation

 

All stock-based payments to employees and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options, are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the relevant service period. Stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached, or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable the measurement date is the date the award is issued. The Company accounts for stock options issued to non-employees based on the estimated fair value of the awards using the Black-Scholes option pricing model in accordance with ASC 505-50, Equity-Based Payment to Non-employees. Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options vest. The Company believes that the fair value of the stock options is more reliably measurable than the fair value of the services received. Stock options granted to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustments as such options vest and at the end of each reporting period, and the resulting change in value, if any, is recognized in the Company’s statements of operations and comprehensive loss during the period the related services are rendered.

 

Research and Development

 

The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. For the three months ended March 31, 2024 and March 31, 2023, the Company incurred research and development expenses of $15,495 and $20,336 from operations, respectively. The Company has entered into various agreements with CROs. The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made to CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

 

In November 2021, the FASB issued a new accounting standard around the recognition and measurement of contract assets and contract liabilities from revenue contracts with customers acquired in a business combination. The new standard clarifies that contract assets and contract liabilities acquired in a business combination from an acquiree should initially be recognized by applying revenue recognition principles and not at fair value. The standard is effective for interim and annual periods beginning on January 1, 2023, and early adoption is permitted. The impact of this standard will depend on the facts and circumstances of future transactions.

 

In August 2020, the FASB issued ASC Update No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in Update No. 2020-06 simplify the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. The provisions of these standards have not had and are not expected to have a material impact on our consolidated financial statements.

 

 
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Recently Adopted Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of the standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this standard replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for the Company beginning January 1, 2023 with early adoption permitted. The Company adopted the standard on January 1, 2023. The adoption of this standard did not have a material effect on the Company’s audited consolidated financial statements and related disclosures.

 

Recently Issued Accounting Pronouncements Not Yet Adopted

 

In October 2023, the FASB issued ASU 2023-06—Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. The main objective of the amendment is to modify the disclosure or presentation requirements of various Topics in the Codification. Certain amendments represent clarifications to or technical corrections of the current requirements. to eliminate disclosure requirements that were redundant, duplicative, overlapping, outdated, or superseded. The effective date for each amendment will be when the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company is still evaluating the impact of the adoption of this standard.

 

Other recent accounting pronouncements issued by the FASB and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

NOTE 7: PROMISSORY NOTE

 

On December 31, 2019, Sapphire Biotech, Inc. had entered into a Debt Exchange Agreement whereas the Company assumed three (3) loans totaling $128,375 of Debt owned by Sapphire Diagnostics, LLC which had an interest rate of 6% per annum. In the same Debt Exchange Agreement, the Company assumed four (4) additional loans made to Sapphire in 2019, which had an interest rate of 6% per annum. All seven (7) loans totaling $310,000, plus the aggregate interest accrued thereon of $14,218 making the face value of the new note $324,218. As of March 31, 2024 and December 31, 2023 respectively, the principal and accrued interest balances were $380,832 and $378,067 respectively. The note was refinanced January 27, 2022. With an effective date of April 01, 2022 the Note is convertible into Axim common shares at a strike price of $0.1075 per share. The interest rate is 3% compounded monthly. The note is due January 27, 2032. This note now shows as a long term convertible note payable (see Note 11).

 

NOTE 9: RELATED PARTY TRANSACTIONS

 

Related Party

 

The Company has an employment agreement with Catalina Valencia at a rate of $15,000 per month commencing March 17, 2020. The agreement can be terminated with 30 days’ notice by either party.

 

The Company has a consulting agreement with Glycodots LLC whereby it will provide the services of Dr. Sergei A. Svarovsky at a rate of $15,000 per month commencing March 17, 2020. The agreement can be terminated with 30 days’ notice by either party.

 

 
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NOTE 11: CONVERTIBLE NOTES PAYABLE

 

The following table summarizes convertible note payable of related parties as of March 31, 2024 and December 31, 2023:

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Convertible note payable, due on November 1, 2026, interest at 3.5% p.a.

 

$4,000,000

 

 

$4,000,000

 

 Convertible notes Payable MMI due on December 26, 2033 and March 28,2034 interest at 5.25% p.a. (7)

 

 

200,000

 

 

 

100,000

 

Convertible Note Payable John Huemoeller due on January 23, 2033 interest at 4.0% p.a. (6)

 

 

250,000

 

 

 

250,000

 

Convertible Note Payable John Huemoeller due on March 1, 2034 interest at 4.25% p.a. (6)

 

 

250,000

 

 

 

 

 

Convertible note payable, due on February 10, 2032, interest at 3.0% p. a. (5)

 

 

375,000

 

 

 

375,000

 

Convertible notes payable due to Board of directors due on March 15,2034 interest at 4.25% p.a.(9)

 

 

140,000

 

 

 

 

 

Convertible note Payable CFO (9)

 

 

53,500

 

 

 

 

 

Convertible notes due to employees due on March 1,2034 interest at 4.25 % p.a. (9)

 

 

342,625

 

 

 

 

 

Accrued Interest

 

 

203,202

 

 

 

160,091

 

Total

 

$5,814,327

 

 

$4,885,091

 

Less: unamortized debt discount/finance premium costs

 

 

852,548

 

 

 

631,123

 

Convertible notes payable related parties, net

 

 

4,961,779

 

 

 

4,253,968

 

 

The interest on this note is payable bi-annually every May 1 and November 1.

 

On May 1, 2020, the Company agreed to modify its existing convertible note with a principal balance of $4 million, 3.5% interest rate convertible note with the current holder of that note. There were two changes to the existing agreement – (a) the conversion price was reduced from the $1.50 conversion price in the original Note to $0.25 cents in the modified Note and (b) the term of the note was extended from the original maturity date of November 1, 2021, to November 1, 2026. The Company’s stock closed trading on the day of the modification at $0.13 per share. The amendment of this convertible Note was also evaluated under ASC Topic 470-50-40,”Debt Modifications and Extinguishments.” Based on the guidance, the instruments were determined to be substantially different due to the change in the conversion price being substantial, and debt extinguishment accounting was applied. The fair value of the modified convertible note was not different than the carrying value of the original note as such no extinguishment loss was recorded, The Note prior to the amendment of approximately $4 million, and the fair value of the Note and embedded derivatives after the amendment of approximately $4 million. There were no unamortized debt issuance costs and the debt discount associated with the original 2018 Note.

 

On January 23, 2023, Creditor agreed to waive and forfeit all interest accrued on the MMI Note through December 31, 2023, in the aggregate amount of $261,537, and to waive all prior defaults on the MMI Note through the Effective Date. Interest shall accrue on the MMI Note at the original rate of 3.5% per annum through September 30, 2023, and be payable on that date. Thereafter interest will be payable on a monthly basis beginning on August 1, 2023. In addition, the Conversion Price for the MMI Note is hereby reduced from $0.25 to $0.075 the reduction in conversion price was also effective January 23, 2023. This Agreement serves to modify and amend the MMI Note as set forth herein, in all other respects the terms of the MMI Note remain in full force and effect. The Company determined that the debt modification including conversion feature added resulted in a debt extinguishment due to the change in the fair values exceeding 10% of the debt carrying value. As a result of the debt modification the company recorded a gain on Extinguishment of debt in the amount of $261,537.

 

For the three months ended March 31, 2024 and March 31, 2023, interest expense was $35,000 and $35,000, respectively.

 

 
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As of March 31, 2024 and December 31, 2023, the balance of secured convertible note was $4,175,000 and $4,140,000 which included $175,000 and $140,000 accrued interest, respectively.

 

The following table summarizes convertible note payable as of March 31, 2024 and December 31, 2023:

 

 

 

 March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Convertible note payable, due on October 1, 2029, interest at 3.5% p.a. (1)

 

$484,478

 

 

$484,478

 

Convertible Note Payable, due on January 27,2032 interest at 3% p.a. (4)

 

 

367,931

 

 

 

367,931

 

Convertible note payable, due on October 1, 2029, interest at 3.5% p.a. (2)

 

 

500,000

 

 

 

500,000

 

Convertible note payable, due on February 10, 2032, interest at 3.0% p. a. (5)

 

 

425,000

 

 

 

1,150,000

 

Convertible note payable, due on December 31, 2034, interest at 3% p.a. (3)

 

 

190,000

 

 

 

190,000

 

Convertible note payable, due on May 23, 2033, interest at 3.75% p.a. see 8 below

 

 

250,000

 

 

 

250,000

 

Convertible note payable, due on May 23, 2033, interest at 3.75% p.a. see 8 below

 

 

325,000

 

 

 

325,000

 

 Convertible note payable due May 15,2024 interest at 4.25% p.a.

 

 

28,430

 

 

 

 

 

Accrued interest (The accrued interest and principal are both included in the captions titled “convertible note payable” in the balance sheet)

 

 

97,792

 

 

 

76,163

 

Total

 

 

2,668,631

 

 

 

2,618,572

 

Less: unamortized debt discount/finance premium costs

 

 

(1,168,296 )

 

 

(1,209,806 )

Convertible note payable, net

 

$1,500,335

 

 

$1,383,416

 

 

(1) On September 16, 2016, we entered into a convertible note purchase agreement (the “Convertible Note Purchase Agreement” or “Agreement”) with a third-party investor. Under the terms of the Convertible Note Purchase Agreement the investor may acquire up to $5,000,000 of convertible notes from the Company. With various closings, under terms acceptable to the Company and the investor as of the time of each closing. Pursuant to the Agreement, on September 16, 2016 the investor provided the Company with $850,000 secured convertible note financing pursuant to four (4) Secured Convertible Promissory Notes (the “Notes”). Each of the Notes matures on October 1, 2029, and pay 3.5% compounded interest paid bi-annually. The Note are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company common stock at a conversion price equal to $0.04 per share.

 

As of March 31, 2024 and December 31, 2023 respectively, the balance of secured convertible notes was $506,145 and $501,811, which included $17,333 and $17,333 accrued interest, respectively. See below for debt modification treatment.

 

(2) On October 20, 2016, a third-party investor provided the Company with $1,000,000 secured convertible note financing pursuant to three (3) Secured Convertible Promissory Notes (the “Notes”). Each of the Notes mature on October 1, 2029 and pay 3.5% compounded interest paid bi-annually. The Notes are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company’s common stock at a fixed conversion price equal of $0.2201 per share. The investor paid cash of $500,000 for one of the Notes and issued to the Company two (2) secured promissory notes of $250,000 each for two (2) Convertible Notes of $250,000 each. The two secured promissory notes issued by the investor (totaling $500,000) as payment for two (2) secured Notes totaling $500,000 mature on February 1, 2017 ($250,000) and March 1, 2017 ($250,000), bear interest at the rate of 1% per annum, are full recourse and additionally secured by 10,486,303 shares of Medical Marijuana, Inc. (Pink Sheets symbol: MJNA) and were valued at $858,828 based upon the closing price of MJNA on October 20, 2016. A debt discount was recorded related to beneficial conversion feature inn connection with this convertible note of $499,318, related to the beneficial conversion feature of the note to be amortized over the life of the note or until the note is converted or repaid. As of March 31, 2024 and December 31, 2023 respectively, this note has not been converted and the balance of secured convertible notes was $517,888 and $517,888, which included $22,360 and $17,888 accrued interest, respectively. See below for debt extinguishment treatment.

 

 
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(1) & (2) On January 23, 2023, Creditor agreed to waive and forfeit all interest accrued on the Secured Notes through December 31, 2023, in the aggregate amount of $216,572. All prior defaults on the Secured Notes are hereby waived through the Effective Date, and the next interest payments due on each of the Secured Notes is extended from April 1, 2023, to July 1, 2023. In addition, the Conversion Price for each of the Secured Notes is hereby reduced from $0.2201 to $0.04. The Agreement served to modify and amend each of the Secured Notes as set forth above, in all other respects the terms of the Secured Notes remained in full force and effect. The Company determined that the debt modification including conversion feature added resulted in a debt extinguishment due to the change in the fair values exceeding 10% of the debt carrying value.

 

The Renegotiation of the above TL-66 notes was deemed to be a debt extinguishment resulting in Amortization of the remaining debt discount of $381,760 and recognition of the Beneficial conversion feature upon modification of $209,522. And a gain on conversion of $35,537 calculated by comparing fair value of new note to old note including accrued interest.

 

(3) On December 31, 2019, Sapphire Biotech, Inc. entered into a Convertible Note Purchase Agreement whereas the Company issued a convertible note with a face value of $190,000 with a compounding interest rate of 3% per annum, the interest shall be payable annually beginning on December 31, 2020 until the maturity date of December 31, 2034, at which time all principal and interest accrued thereon shall be due and payable. The Convertible Note is secured by substantially all the Company’s tangible and intangible assets. In addition, the Convertible Note includes various non-financial covenants including the Company may not enter into any agreement, arrangement or understanding of any kind that would result in a transaction, or series of transactions, that would result in the sale of 50% or more of the Company’s capital stock without the prior approval of the holder.

 

Upon issuance, the Convertible Note was convertible into shares of the Company’s common stock at $1.90 per share. At December 31, 2019, the Company determined that the Convertible Note contained a beneficial conversion feature for which a full discount was recorded on the Convertible Note. The fair market value of the Company’s common stock was based upon the estimated per share acquisition price per the pending acquisition of the Company. The discount of $190,000 will be amortized using the effective interest method and will be fully amortized by December 31, 2034.

 

On March 17, 2020, the Company entered into a Share Exchange Agreement (“Agreement”) with Sapphire Biotech, Inc., a Delaware corporation (“Sapphire”) and all of the Sapphire stockholders (collectively, the “Sapphire Stockholders”). Following the closing of the transaction, Sapphire will become a wholly owned subsidiary of AXIM. Under the terms of the Agreement, the Company intends to assume the convertible notes in the principal amounts of $190,000. After the acquisition, the Convertible Note was able to convert 6,000,000 shares of Axim’s common stock. Upon assumption of the note, the Company recorded a beneficial conversion feature of $190,000. As of March 31, 2024 and December 31, 2023, the balance of secured convertible note was $197,127 and $195,701, which included $5,701 and $7,126 accrued interest, respectively.

 

On January 27, 2023, Creditor agreed to waive and forfeit all interest accrued on the Sapphire Note through December 31, 2023, in the aggregate amount of $17,115 and to waive all prior defaults on the Sapphire Note through the Effective Date. This was not deemed to be a debt extinguishment since the waiver of accrued interest was not deemed to produce a change in cash flow greater than 10%. The company recorded a gain on modification of $17,117 resulting from forgiveness of accrued interest. The share conversion formula was also changed on January 23, 2023 to .031667 on the full outstanding balance at time of conversion.

 

(4) On January 27, 2022, Sapphire Biotech entered into a debt exchange agreement (effective April 1, 2022) whereas the company exchanged a convertible note with a balance of 367,931 including accrued interest for a new note charging interest at a rate of 3% per annum first interest payment due January 27, 2023 compounded monthly. The maturity date is January 27, 2032. Upon issuance was convertible into shares of the Company’s common stock at a conversion price of $0.10 per share. As of March 31, 2024 and December 31, 2023, the balance of secured convertible note was $380,832 and $378,066, which included $12,901 and $10,135 accrued interest, respectively. This was not deemed to be a debt extinguishment.

 

 
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On January 23, 2023, Creditor agreed to waive and forfeit all interest accrued on the TL-66 Note through January 27, 2023, in the aggregate amount of $11,190, and to waive all prior defaults on the TL-66 Note through the Effective Date. This was not deemed to be a debt extinguishment since the waiver of accrued interest was not deemed to produce a change in cash flow greater than 10%. The company recorded a gain on modification of $11,190 resulting from forgiveness of accrued interest.

 

(5) Convertible Notes

 

Effective February 10, 2022, the Company issued seven convertible notes to a series of investors having an aggregate face value of $1,325,000 in exchange for $1,325,000 in cash (the “Convertible Notes”). One of the Convertible Notes, face value $25,000, was purchased by Blake N. Schroeder who is a director of the Company.

 

Each of the Convertible Notes is (i) unsecured; (ii) bears interest at a rate of 3% per annum; (iii) matures on February 10, 2032; and (iv) is convertible, in whole or in part, at any time by the holder, into restricted shares of the Company’s common stock at a conversion price equal to the lesser of $0.08125 or 70% of the average of the two lowest closing prices of the Company’s common stock in the ten trading days preceding any particular conversion, provided, the holder is prohibited from converting the convertible note, or portion thereof, if such conversion would result in beneficial ownership by the holder and its affiliates of more than 4.999% of Company’s issued and outstanding common stock as of the date of the conversion. A debt discount was recorded related to beneficial conversion feature in connection with this convertible note of $1,325,000, which to be amortized over the life of the note or until the note is converted or repaid. During the three months ended March 31, 2024, $175,000 of the note and accrued interest of $2,840 was retired and converted to 5,665,636 common shares valued at $349,535 and as a result recognized a loss on extinguishment of $111,807, including cancellation of balance debt discount of $167,571 and a gain due to cancellation of derivative liabilities as of date of settlement of $227,459 During the three months ended March 31, 2024, $350,000 of the note and accrued interest of $30,858 was retired and converted to 22,207,486 common shares valued at $688,432 and as a result of the debt modification the company recognized a loss on extinguishment of $626,414, including cancellation of balance debt discount of $318,840 and a loss on issuance of the shares of $307,574 and a gain due to cancellation of derivative liabilities as of date of settlement of $624,490. As of March 31, 2024 and December 31, 2023, respectively, the principal and accrued interest balances were $828,735 and $822,735 respectively, which include accrued interest of $28,735 and $22,735, respectively.

 

During the three months ended March 31, 2024 and March 31, 2023 respectively, the Company amortized the debt discount on all the notes of $60,084, $35,172, respectively. As of March 31, 2024 and December 31, 2023, unamortized debt discount was $2,020,844 and $1,840,929, respectively.

 

 Convertible Note payable – related party (officer)

 

(6) As of December 31, 2023, the Company owed to the Executive, for employment in his capacity as CEO of AXIM, $512,500 of unpaid salary which is overdue and payable immediately. Executive and AXIM desired to enter into this Agreement in order resolve the Amount Due in a way that preserves the Company’s working capital and incentivizes and retains Executive. Executive agreed to Issuance of Convertible Note as Partial Satisfaction of the Amount Due. $250,000 of the Amount Due will be paid by issuing to Executive a convertible note, face value $250,000 (the “Convertible Note”) Executive agreed that he shall waive/forfeit $50,000 of the Amount Due, leaving a remaining balance after such waiver of $212,500 ($512,500 minus $250,000 for the Convertible Note = $262,500 minus $50,000 waiver = $212,500), which shall not be payable at any time prior to July 1, 2023, and that Executive shall have no right prior to July 1, 2023 to seek payment of the remaining balance of the Amount Due. Executive further agrees that if in the reasonable discretion of the Board of Directors full payment of the remaining balance of the Amount Due on July 1, 2023 ($212,500) is too burdensome for the Company’s working capital position at that time, then Executive will either grant an additional 3-month extension for the payment of the remaining Amount Due or engage in good faith discussions with the Board in order to enter into a payment plan for the remaining Amount Due, or a combination of both.

 

Payment of Principal and Interest. From the date of this Convertible Note (the “Note” or “Convertible Note”), interest shall be payable annually on the basis of a three hundred sixty (360) day year and compounded on a yearly basis at a rate equal to Four Percent (4%) per annum (the “Interest Rate”). beginning on January 23, 2024 until the maturity date of January 23, 2033, at which time all principal and interest accrued thereon shall be due and payable. Upon issuance, the Convertible Note was convertible into shares of the Company’s common stock at $0.01 per share. At January 23, 2023, the modification date, the Company determined that the Convertible Note contained a beneficial conversion feature for which a full discount was recorded on the Convertible Note. The fair market value of the Company’s common stock was based upon the estimated per share acquisition price per the pending acquisition of the Company. The discount of $250,000 will be amortized using the effective interest method and will be fully amortized by January 23, 2033. This is a new note accounted for by recording the note at face value and a debt discount of $250,000 which will be amortized over the life of the note.

A second note was issued March 15, 2024 also for 250,000 also in payment of accrued salary Payment of Principal and Interest. From the date of this Convertible Note (the “Note” or “Convertible Note”), interest shall be payable annually on the basis of a three hundred sixty (360) day year and compounded on a yearly basis at a rate equal to Four Percent (4.25%) per annum (the “Interest Rate”). beginning on March 15, 2024 until the maturity date of March 1, 2034, at which time all principal and interest accrued thereon shall be due and payable. Upon issuance, the Convertible Note was convertible into shares of the Company’s common stock at $0.02 per share.

 

 
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As of March 31, 2024 and December 31, 2023 the balance due on these notes was $512,333 and $259,361 including accrued interest of $12,333 and $9,361 respectively.

 

Convertible note related party MMI

 

(7) The Company entered into a Convertible Note Purchase Agreement (“CNPA”) with its affiliated shareholder, Medical Marijuana, Inc. pursuant to the CNPA, the Company has issued an initial note dated December 26, 2023, in the principal amount of $100,000. Due December 26, 2033. Interest payable at 5.25% beginning December 26, 2024. The note is convertible at the lesser of 0.01 or 70% of the average two lowest closing prices of the company’s stock in the ten trading days prior to any particular conversion. A second note for 100,000 was issued March 28, 2024 on the same terms

 

The Board of Directors also approved the CNPA and the sale and the further issuance of notes in the aggregate principal amount of $750,000 to Medical Marijuana, Inc. As of March 31, 2024 and December 31, 2023 the balance due on the note was $201,385 and $100,073 including accrued interest of $1,385 and $73- respectively.

 

(8) Effective May 23, 2023, the Company issued 5 convertible notes to a series of investors having an aggregate face value of $575,000 in exchange for $575,000 in cash.

 

Each of the Convertible Notes is (i) unsecured; (ii) bears interest at a rate of 3.75% per annum; (iii) matures on May 23, 2033; and (iv) is convertible, in whole or in part, at any time by the holder, into restricted shares of the Company’s common stock at a conversion price equal to the lesser of $0.01 or 70% of the average of the two lowest closing prices of the Company’s common stock in the ten trading days preceding any particular conversion, provided, the holder is prohibited from converting the convertible note, or portion thereof, if such conversion would result in beneficial ownership by the holder and its affiliates of more than 4.999% of Company’s issued and outstanding common stock as of the date of the conversion. A debt discount was recorded related to beneficial conversion feature in connection with this convertible note of $575,000, which to be amortized over the life of the note or until the note is converted or repaid.

 

(9) On March 15, 2024, AXIM Biotechnologies, Inc. (the “Company”) issued Convertible Notes, having an aggregate face value of $814,555 (the “Notes”), to (i) its independent directors for past due director fees, (ii) certain officers and contractors of the Company for past due salaries and fees for services rendered, and (iii) employees of its wholly-owned subsidiary, Sapphire Biotech, Inc. (“Sapphire”), for past due salaries.  The Notes pay annual interest at the rate of 4.25% annually which shall accrue until the maturity date of March 1, 2034 (“Maturity Date”), at which time all principal and interest accrued thereon shall be due and payable.  Two of the Notes, aggregate face value $135,625, require a 25% payment of principal on each annual anniversary of the Notes (“Version 1 Notes”). The four Notes issued to the independent directors, aggregate face value of $140,000, are convertible into common stock of the Company at a conversion price of $0.01 (“Version 2 Notes”). The remaining Notes, aggregate face value $674,555, are convertible into common stock of the Company at a conversion price of $0.02 (“Version 3 Notes”). All of the Notes are restricted from converting into the Company's common stock until the earlier of the two-year anniversary of the Notes or at any time after the six-month anniversary of the Notes if the Company's common stock closes at or above $.20 for 30 consecutive days. In addition, the Notes. may not be sold, transferred, pledged or hypothecated by the holder at any time. In total, the $814,555 aggregate face value of the Notes are convertible into 47,727,750 shares of the Company's common stock.

The note to John Huemoeller was accounted for as disclosed above

 

 
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As of March 31, 2024 and December 31, 2023 the balance due on the note was $593,417 and $588,026 including accrued interest of $18,417 and $13,026 respectively.

 

Debt Obligations - 2022

 

Effective February 10, 2022, The Company issued the following debt obligations in exchange for cash. A portion of the funds received by the Company were used to pay off the GS Capital Partners, LLC note, as discussed below.

 

Short Term Promissory Notes

 

Effective February 10, 2022, the Company issued two short term notes, each having a face amount of $250,000, in exchange for a total of $500,000 in cash (the “Short Term Promissory Notes”). The Short Term Promissory Notes bear interest at the rate of 1.5% per annum and were due and payable on or before March 10, 2022, unless demand for payment is made prior to such date. Both the notes were paid in full in February 2022.

 

NOTE 12: DERIVATIVE LIABILITIES

 

Upon the issuance of certain convertible note payable having a variable conversion rate, the Company determined that the features associated with the embedded conversion option embedded in the debt, should be accounted for at fair value, as a derivative liability.

 

On February 10, 2022 i.e. on the date of issuance of derivative instrument, the Company estimated the fair value of the embedded derivatives of $2,641,846 using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 163.09%, (3) risk-free interest rate of 3.92%, and (4) expected life of 10 years. The value of notes $1,325,000 was debited to beneficial conversion feature and the balance $1,316,846 was recorded as non-cash interest expenses under interest expenses in statement of operation.

 

During 2023 the company issued derivative instruments and on the dates of issuance the Company estimated the fair value of the embedded derivatives of $1,465,000 using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 150.19%, (3) risk-free interest rate of 3.92, and (4) expected life of 10 years. The value of notes $675,000 was debited to beneficial conversion feature and the balance $790.000 was recorded as non-cash interest expenses under interest expenses in statement of operation.

 

During 2024 the company issued derivative instruments and on the dates of issuance the Company estimated the fair value of the embedded derivatives of $338,857using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 150.19%, (3) risk-free interest rate of 3.92, and (4) expected life of 10 years. The value of notes $240,000 was debited to beneficial conversion feature and the balance $98,857 was recorded as non-cash interest expenses under interest expenses in statement of operation.

 

On March 31, 2024, the Company estimated the fair value of the embedded derivatives of $2,487,235 using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 150%, (3) risk-free interest rate of 3.92%, and (4) expected life of 9.86 years. The change of $334,345 was recorded as gain on change in fair value of derivative liabilities for the three months ended March 31, 2024.

 

On December 31, 2023, the Company estimated the fair value of the embedded derivatives of $2,482,723 using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 150.19%, (3) risk-free interest rate of 3.88%, and (4) expected life of 9.86 years. The change of $ 6.618 was recorded as gain on change in fair value of derivative liabilities for the year ended December 31, 2023.

 

 
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NOTE 12: DERIVATIVE LIABILITIES (CONTINUED)

 

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the three months ended March 31, 2024 and 2023:

 

Balance, December 31, 2023

 

$2,482,723

 

Issuance of convertible note payable

 

 

338,857

 

Issuance of shares in exchange for convertible note payable

 

 

 

 

Mark to market

 

 

(334,345 )

Balance, December 31, 2023

 

$2,487,235

 

 

NOTE 13: STOCK INCENTIVE PLAN

 

On May 29, 2015 the Company adopted its 2015 Stock Incentive Plan. Under the Plan the Company may issue up to 10,000,000 S-8 shares to officers, employees, directors or consultants for services rendered to the Company or its affiliates or to incentivize such parties to continue to render services. S-8 shares are registered immediately upon the filing of the Plan and are unrestricted shares that are free-trading upon issuance. On May 20, 2021 the board consent increased the issue up to 20,000,000 shares. Subsequently that amount was raised to 40,000,000 shares As of March 31, 2024 and December 31, 2023, there were 25,881,671 and 9,806,000 shares available for issuance under the Plan.

 

On August 22, 2022, 13,500,000 options were issued with a strike price of $0.052; 5,750,000 vesting immediately and the balance vesting between six months and a year from issuance.

 

On December 9, 2022, 900,000 options were issued with a strike price of $0.10; all of them vesting immediately.

 

On May 9, 2023 2,000,000 in options were issued with a strike price of 0.21 per share vesting over 6 months.

 

On September 1, 2023, 1,000,000 in options were issued with a strike price of 0.023 per share vesting over 3 months.

  

For the three months ended March 31, 2024 and March 31, 2023, the Company recorded compensation expense of $9,613 and $103,822 respectively.

 

NOTE 14: STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

The Company has authorized 5,000,000 shares of preferred stock, with a par value of $0.0001 per share. Of the 5,000,000 authorized preferred shares, 4,000,000 are undesignated “blank check” preferred stock. The Company may issue such preferred shares and designate the rights, privileges and preferences of such shares at the time of designation and issuance. As of December 31, 2023, and 2022 there are -0- and -0- shares of undesignated preferred shares issued and outstanding, respectively.

 

There are zero shares issued and outstanding of Series A and Series B Preferred stock as of December 31, 2023.

 

Series C Convertible Preferred Stock

 

On August 17, 2016 the Company designated up to 500,000 shares of a new Series C Convertible Preferred Stock (Series C Preferred Stock). The holders of the Series C Preferred are entitled to elect four members to the Company’s board of directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. Each share of Series C Convertible Preferred is convertible into one share of the Company’s common stock. The Series C Convertible Preferred designation contains a number of protective and restrictive covenants that restrict the Company from taking a number of actions without the prior approval of the holders of the Series C Preferred or the unanimous vote of all four Series C Directors. If at any time there are four Series C Directors, one such director must be independent as that term is defined in the Series C designation. Any challenge to the independence of a Series C Director is a right conferred only upon the holders of the Series B Convertible Preferred Stock and may only be made by the holders of the Series B Convertible Preferred Stock.

 

 
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On August 18, 2016 the Company issued all 500,000 shares of its newly designated Series C Preferred Stock to MJNA Investment Holdings, LLC in exchange for cash of $65,000. As the holders of the Series C Preferred Stock, MJNA Investment Holdings, LLC has designated Dr. Timothy R. Scott, John W. Huemoeller II, Robert Cunningham and Blake Schroeder as their four Series C Directors.

 

On February 20, 2019, MJNA Investment Holdings LLC (“Seller”) sold its 500,000 shares of AXIM Biotechnologies, Inc.’s, a Nevada corporation (the “Company”) Series C Preferred Stock to Juniper & Ivy Corporation, a Nevada corporation (“Purchaser”) for a purchase price of $500,000 (the “Purchase Price”) pursuant to a Preferred Stock.

 

Purchase Agreement (the “Purchase Agreement”). Payment of the Purchase Price was made as follows (i) a $65,000 payment made by check payable to Seller, which Purchaser borrowed from an unrelated third-party and which has no recourse against the Series C Preferred Stock or assets of Purchaser (the “Loan”), and (ii) the issuance by Purchaser to Seller of a promissory note, face value, $435,000, which has no recourse against the Series C Preferred Stock or assets of Purchaser (the “Note”). The Company’s Chief Executive Officer John W. Huemoeller II is the President of Purchaser. Mr. Huemoeller provided a personal guaranty for the Loan and the Note.

 

The holders of the Series C Preferred Stock are entitled to elect four members to the Company’s Board of Directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. As a result of this transaction, a change in control has occurred.

 

Common Stock

 

The Company has authorized 1,000,000,000 shares of common stock, with a par value of $0.0001 per share. As of March 31, 2024 and December 31, 2023, the Company had 278,429,403 and 245,929,403 shares of common stock issued and outstanding, respectively.

 

2024 Transactions:

 

The company issued 20,000,000 shares valued at $380,000 as part of a settlement of claims.

 

The company issued under S-1  12,500,000 for cash of $95,599.

 

On July 14, 2022, the Company entered into the Equity Purchase Agreement with Cross & Company, pursuant to which we have the right to “put,” or sell, up to $30,000,000 worth of shares of our common stock to Cross. As provided in the Equity Purchase Agreement, we may require Cross to purchase shares of our common stock from time to time by delivering a put notice to Cross specifying the total number of shares to be purchased (such number of shares multiplied by the purchase price described below, the “Investment Amount”); provided there must be a minimum of ten trading days between delivery of each put notice. We may determine the Investment Amount, provided that such amount may not be more than 300% of the average daily trading volume in dollar amount for our common stock during the five trading days preceding the date on which we deliver the applicable put notice, unless waived by Cross in its sole discretion. Additionally, such amount may not be lower than $10,000 or higher than $250,000. Cross will have no obligation to purchase shares under the Equity Line to the extent that such purchase would cause Cross to own more than 4.99% of our issued and outstanding shares of common stock.

 

NOTE 15: STOCK OPTIONS AND WARRANTS

 

Options to purchase common stock are granted at the discretion of the Board of Directors, a committee thereof or, subject to defined limitations, an executive officer of the Company to whom such authority has been delegated. Options granted to date generally have a contractual life of ten years.

 

 
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The stock option activity for the three months ended March 31, 2024 and March 31, 2023 and December 31, 2023 is as follows:

 

 

 

Options

Outstanding

 

 

Weighted

Average

Exercise Price

 

Outstanding at December 31, 2022

 

 

21,860,715

 

 

$0.13

 

Granted

 

 

3,000,000

 

 

 

0.02

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expired or canceled

 

 

(742,386 )

 

 

0.057

 

Outstanding at December 31, 2023

 

 

24,118,329

 

 

$0.013

 

Granted

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

Expired or Cancelled

 

 

 

 

 

 

 

 

Outstanding March 31, 2024

 

 

24,118,329

 

 

$0.013

 

 

The following table summarizes the changes in options outstanding, option exercisability and the related prices for the shares of the Company’s common stock issued to employees and consultants under a stock option plan at March 31, 2024 and December 31, 2023:

 

As of March 31, 2024

 

 

 

 

Options Outstanding

 

 

Options Exercisable

 

Weighted

Average

Exercise

Price ($)

 

 

Number

Outstanding

 

 

Weighted

Average

Remaining

Contractual Life

(Years)

 

 

Weighted

Average

Exercise

Price ($)

 

 

Number

Exercisable

 

 

Weighted

Average

Exercise

Price ($)

 

$0.15

 

 

 

24,118,329

 

 

 

8.0

 

 

$0.013

 

 

 

23,898,740

 

 

$0.013

 

 

As of December 31, 2023

 

 

 

 

Options Outstanding

 

 

Options Exercisable

 

Weighted

Average

Exercise

Price ($)

 

 

Number

Outstanding

 

 

Weighted

Average

Remaining

Contractual Life

(Years)

 

 

Weighted

Average

Exercise

Price ($)

 

 

Number

Exercisable

 

 

Weighted

Average

Exercise

Price ($)

 

$0.15

 

 

 

24,118,329

 

 

 

8.0

 

 

$0.013

 

 

 

22,313,683

 

 

$0.013

 

  

The Company determined the value of share-based compensation for options vested using the Black-Scholes fair value option-pricing model with the following weighted average assumptions:

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Expected life (years)

 

 

10

 

 

 

10

 

Risk-free interest rate (%)

 

 

3.53

 

 

 

3.53

 

Expected volatility (%)

 

 

224

 

 

 

224

 

Dividend yield (%)

 

 

-

 

 

 

-

 

Weighted average fair value of shares at grant date

 

$0.013

 

 

$0.013

 

 

 
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For the three months ended March 31, 2024 and March 31, 2023 stock-based compensation expense related to vested options was $9,613 and $103,822 respectively.

 

Warrants

 

The following table summarizes warrant activity during the three months ended March 31, 2024 and 2023:

 

 

 

Number of Warrants

 

 

Weighted Average Exercise

Price

 

Outstanding at December 31, 2020

 

 

-

 

 

$-

 

Granted

 

 

3,025,000

 

 

 

0.71

 

Forfeited/Cancelled

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

Outstanding at December 31, 2022

 

 

3,025,000

 

 

$0.71

 

Granted

 

 

519,247

 

 

 

0.31

 

Exercised

 

 

 

 

 

 

 

 

Outstanding at December 31, 2023  

 

 

3,544,247

 

 

$0.65

 

Forfeited/Cancelled

 

 

(1,075,000)

 

 

 

 

Outstanding at December 31, 2023  

 

 

2,469,247

 

 

$0.65

 

 

All outstanding warrants are exercisable at March 31, 2024 and there was no unrecognized stock-based compensation expense related to warrants.

 

NOTE 17: COMMITMENT AND CONTINGENCIES

 

On January 2, 2019 the Company entered into the term of Executive’s employment agreement, at a base salary of $10,000 per month with John W. Huemoeller II to serve as its Chief Executive Officer. The Company and Executive acknowledge and agree that Executive’s employment hereunder shall at all times be “at will,” which means that either Executive may resign at any time for any reason or for no reason, and that the Company may terminate Executive’s employment at any time for any reason or for no reason, in either case, subject to the applicable provisions of this Agreement. In further consideration for Executive’s services and subject to the approval of the Board, Executive will be granted an option to purchase 2,000,000 shares of the Company’s common stock (the “Option Shares”). The option will be subject to the terms and conditions applicable to stock options granted under the Company’s 2015 Stock Incentive Plan, as amended from time to time (the “Plan”), and as described in the Plan and the stock option agreement, which Executive will be required to sign. 50% of the Option Shares shall vest on the date of grant and the remaining 50% of the Option Shares shall vest on the 12- month anniversary of the grant date, subject to Executive’s continued employment by the Company. The exercise price per share will be equal to the fair market value per share on the date of grant, as determined by the last closing price of the Company’s common stock the day prior to grant. Beginning in October 2019, the board decided to increase CEO base salary to $35,000 per month.

 

On April 24, 2017 the company entered into an employment agreement with Robert Malasek, its Chief Financial Officer and Secretary. The agreement does not have a set term and may be terminated at any time by the Company or Mr. Malasek with proper notice. The shares were issued in the 1st quarter 2018. Beginning in October 2019, the board ratified to increase CFO base salary to $3,000 per month. During 2022 the board subsequently increased Mr. Malasek’s compensation to 7,500 per month.

 

Industry Sponsored Research Agreement— Sapphire entered into the Industry Sponsored Research Agreement (“SRA”) effective February 7, 2020 to test and confirm the inhibitory activity of SBI-183 (exclusively licensed on January 13, 2020) and SBI-183 analogs, including those synthesized by the Company. The testing will include cell-based in vitro assays, NMR binding studies and testing to determine if SBI-183 enhances the activity of cytotoxic drugs in vitro. Animal studies will also be conducted under the SRA. Specifically, SBI-183 analogs will be evaluated in a mouse model of triple negative breast cancer using human tumor xenografts. The work will be performed over a period of one year with the total cost of the SRA totaling $150,468 paid prior to acquisition. For the year December 31, 2021, the Company recorded research and development expenses of $284,869. This agreement is now being renegotiated.

 

 
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On August 25, 2020, we signed an exclusive licensing, manufacturing and distribution agreement with Empowered Diagnostics LLC to execute the high-volume production of our rapid point-of-care diagnostic test. AXIM and Empowered have completed the technology transfer and Empowered Diagnostics has built out their production facility to be able to manufacture millions of our neutralizing antibody tests for COVID-19 per month. In exchange for this license Empowered will pay Axim a royalty on net sales on all licensed products sold by Empowered covered by this license which global with the exception of Mexico.

 

This agreement was cancelled in February, 2022.

 

On September 15, 2022, the company entered into a license and distribution agreement for its Lactoferrin dry eye test, Ige allergy test for allergic conjunctivitis and quantitative MMp-9 test to identify ocular surface inflammation. The licensee is Versea Ophthalmics, LLC, A Delaware Limited Liability Company.

 

The agreement will provide Verséa with the exclusive commercial right to AXIM’s proprietary portfolio of point-of-care (POC) lab testing readers and three key biomarker diagnostic tests designed specifically to assist eye-care physicians in detecting and quantifying biomarkers associated with aqueous deficient Dry Eye Disease and non-specific allergic conjunctivitis. The three AXIM’s key biomarker tests – the Ocular Immunoglobulin E (IgE) test, the Lactoferrin test, and the future MMP-9 test – require the collection of 0.5 microliters in tears and provide quantitative results in under 10 minutes, an industry-leading return time.

 

Verséa plans to launch IgE and Lactoferrin tests at the upcoming 2022 American Academy of Ophthalmology (AAO) and American Academy of Optometry (AAOPT) conferences. The MMP-9 test is anticipated to follow in the next 18-24 months.

  

In recent months, AXIM has been preparing for the scaling of production of its tests in anticipation of an agreement such as the one reached with Verséa and is now prepared to support new orders associated with the agreement and subsequent launch.

 

Due to the Agreement, the positions of: (i) National Sales Director; and (ii) Chief Medical Officer held by Jeff Busby and Dr. Joseph Tauber, respectively, were no longer necessary for Company operations and, therefore, eliminated.

 

The Company received an initial license fee of $150,000 and has the right to cancel the agreement if minimum sales targets are not reached. This amount was recorded as deferred revenue and amortized over 5 years beginning September 15, 2022. During the three months ended March 31, 2024 and 2023, the Company amortized $7,479 and $7,397. The carrying balance as of March 31, 2024 and December 31, 2023 was $103,648 and $111,209, respectively.

 

The Company also received $192,000 towards sale of its IgE and Lactoferrin tests. The tests were not shipped as of December 31, 2023 so the amount was disclosed as deferred revenue as of December 31, 2023. During the quarter ending March 31, 2024 4,550 in tests were shipped at 11 per test resulting in revenue recognition of $45,500; leaving a carrying value of $146,500.

 

Operating Lease

Lease Agreement—On March 29, 2023, Sapphire entered into a 3-year lease agreement (“Lease”) renewal to stay in the same space. with monthly base rent in the 1st year $8,014, 2nd year $8,335 and 3rd year $8668 and a final payment of $9,014 at implicit interest rate of 6%. Upon commencement of the Lease, the lease will expire on May 31, 2026.

 

Lease Agreement—On March 3, 2020, Sapphire entered into a 3-year lease agreement (“Lease”) to relocate to a larger space within the same business park. The new space totals 1,908 square feet with monthly base rent in the 1st year $4,713, 2nd year $4,854 and 3rd year $5,000 at implicit interest rate of 6%. Upon commencement of the Lease on April 25, 2020, the previous lease will expire.

 

 
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Operating Leases - Right of Use Assets and Purchase Commitments Right of Use Assets

 

We have operating leases for office space that expire through 2026. Below is a summary of our right of use assets and liabilities as of March 31, 2024.

 

Right-of-use assets

 

$205,012

 

 

 

 

 

 

Lease liability obligations, current

 

$91,306

 

Lease liability obligations, noncurrent

 

 

118,031

 

Total lease liability obligations

 

$209,337

 

 

 

 

 

 

Weighted-average remaining lease term

 

2.17 years

 

 

 

 

 

 

Weighted-average discount rate

 

 

6%

 

The following table summarizes the lease expense for the three months ended March 31, 2024 and March 31, 2023 and December 31, 2023 :

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Operating lease expense

 

$28,869*

 

$99,050

 

Short-term lease expense

 

 

-

 

 

 

43,936

 

Total lease expense

 

$28,869

 

 

$142,986

 

 

*We recorded $28,869 of operating lease expense this includes $4,827 of maintenance charges.

 

Approximate future minimum lease payments for our lease liability over the remaining lease periods as of December 31, 2023, are as follows:

 

2024

 

$74,694

 

2025

 

 

102,684

 

2026

 

 

43,686

 

 

 

 

 

 

Total minimum payments

 

 

221,064

 

Less: amount representing interest

 

 

(16,054 )

Total

 

$205,010

 

 

Litigation

 

Litigation: The company has been named as a defendant in the following legal action: Innovative Medical Supplies, LLC v. Advanced Tear Diagnostics, LLC, Case No. 37-2021-00032000-CU-FR-CTL filed in the Superior Court of the State of California, County of San Diego.

 

Allegations: The Company has been named as a defendant in this litigation. The Second Amended Complaint (“SAC”) alleges causes of action of Fraud; Conspiracy to Defraud; Unjust Enrichment/Constructive Trust, Intentional Interference with Contract; and Interference with Economic Relations against the Company. The SAC prays for relief of Compensatory damages and other Special, general and consequential damages of not less than $280,586 as well as Punitive and exemplary damages and attorney fees and cost of suit. AXIM Demurred and brought a Motion to Strick as to the SAC. That motion is pending before the Court.

 

 
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Status: The litigation has settled.

 

Settlement: The Company has entered into a Settlement Agreement with the Plaintiff’s manager to fully resolve the matter in its entirety. However, there is a dispute as to who has control over the Plaintiff limited liability company. The Court has scheduled an Evidentiary hearing with the intent to resolve the control issue and the enforceability of the Settlement Agreement.

 

Effective February 7, 2024, the Company entered into a confidential Global Settlement Agreement Pursuant to the Settlement, the Company agreed to pay the following compensation to IMS: a total cash payment of $100,000 payable in various payments over a 24 month period; a $0.35 cassette sales participation payment on all single dry eye lateral flow test cassettes sold by the Company up to a total of $475,000, with such payments having no limit as to the time it takes to reach $475,000; and the issuance of 20,000,000 restricted shares of Company common stock. The restricted shares of common stock are non-transferable, restricted from sale for 12 months, and thereafter, the right to sell the shares is subject to “drip-out” sales volume limitation not to exceed 1% of the Company’s issued and outstanding shares of common stock every 90 days, which such drip-out right is not cumulative.

 

These financial statements reflect a loss resulting from the settlement agreement in the amount of $955,000. As of March 31, 2024, $543,000 is outstanding.

 

NOTE 18: SUBSEQUENT EVENTS

 

The company issued 6,000,000 shares in settlement of a liability.

 

On March 17, 2024 the company received $50,000 from MMI in exchange for a note.

 

During April and May 2024 the company received $75,000 in additional advance from shareholder bring the total to $413,170.

 

The company received $18,543 against stock subscriptions receivable.

 

The company issued 6,000,000 shares of its stock under its S-1 in exchange for $39,582.

 

 
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 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the Securities and Exchange Commission (the “SEC”). Our SEC filings are available to the public from the SEC’s internet site at http://www.sec.gov.

 

On our Internet website, http://www.aximbiotech.com, we post the following recent filings as soon as reasonably practicable after they are electronically filed with or furnished to the SEC: our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

 

When we use the terms “AXIM,” “Company,” “we,” “our” and “us” we mean Axim Biotechnologies, Inc., a Nevada corporation, and its consolidated subsidiaries, taken as a whole, as well as any predecessor entities, unless the context otherwise indicates.

 

FORWARD LOOKING STATEMENTS

 

This Annual Report on Form 10-K, the other reports, statements, and information that the Company has previously filed with or furnished to, or that we may subsequently file with or furnish to, the SEC and public announcements that we have previously made or may subsequently make include, may include, or may incorporate by reference certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and that are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that Act. To the extent that any statements made in this report contain information that is not historical, these statements are essentially forward-looking. Forward-looking statements can be identified by the use of words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, marketability of our products; legal and regulatory risks associated with trading publicly; our ability to raise additional capital to finance our activities; the future trading of our common stock; our ability to operate as a public company; our ability to protect our proprietary information; general economic and business conditions; the volatility of our operating results and financial condition; our ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed from time to time in our filings with the SEC, or otherwise.

 

Information regarding market and industry statistics contained in this report is included based on information available to us that we believe is accurate. It is generally based on industry and other publications that are not produced for purposes of securities offerings or economic analysis. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. We do not undertake any obligation to publicly update any forward-looking statements. As a result, investors should not place undue reliance on these forward-looking statements.

 

Overview

 

Axim Biotechnologies, Inc., a Nevada corporation, is a leading developer of diagnostic healthcare solutions serving to enhance the health of people. Through the development of diagnostic solutions that quickly and accurately diagnose various diseases, our products allow healthcare workers to quickly test and treat at the point-of-care, which leads to improved patient outcomes and provides numerous economic benefits to the healthcare system.

 

Axim’s core competencies include development of rapid lateral flow immunoassays, reagents and monoclonal antibody development for such assays. Our current products fall into these categories:

 

(1) Eye Health, wherein we acquired two FDA cleared 510(k) tests for dye eye disease and have internally developed a third assay; and

 

(2) SARS-CoV-2 neutralizing antibody tests

 

Following the acquisition of two FDA cleared 510(k) tests for dye eye disease, the Company’s product focus has been primarily in the area of Eye Health. We continue to maintain the products and assays developed in connection with SARS-CoV-2 neutralizing antibody tests should a commercialization opportunity present itself in the future.

 

Our principal executive office is located at 6191 Cornerstone Court, E. Suite 114, San Diego, CA 92121. Our telephone number is (619) 206-7022 and our website is www.aximbiotech.com. Unless expressly noted, none of the information on our website is part of this Report. Our common stock is quoted on the OTCQB Marketplace operated by the OTC Markets Group, Inc., under the ticker symbol “AXIM.”

 

 
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Historical Business Operations

 

We were originally incorporated in the State of Nevada on November 18, 2010, under the name AXIM International, Inc. On July 24, 2014, we changed our name to AXIM Biotechnologies, Inc.

 

The Company’s historical business operations focused on the research, development and production of pharmaceutical, nutraceutical and cosmetic products based upon our proprietary technologies. This business and its related intellectual property were divested by the Company in May, 2020.

 

In March 2020, we acquired Sapphire Biotech, Inc. (“Sapphire”), a diagnostic healthcare solutions company, changing our business operations.

 

Acquisition of Sapphire Biotech, Inc.

 

On March 17, 2020, we entered into a Share Exchange Agreement with Sapphire and all of its stockholders, pursuant to which, upon closing of the transaction, we: (i) acquired 100% of Sapphire’s outstanding capital, consisting of 100,000,000 shares of common stock; and (ii) assumed all of the outstanding debt of Sapphire. The outstanding debt included two convertible notes in the principal amounts of $310,000 and $190,000, respectfully.

 

In exchange for 100% of the issued and outstanding shares of Sapphire, we issued an aggregate of 54,000,000 newly issued shares of Company common stock to Sapphire’s existing stockholders (the “Share Exchange”). As a result of the Share Exchange, Sapphire became a wholly owned subsidiary of the Company, which has resulted in consolidated financial reporting by the Company to include the results of Sapphire.

 

Acquisition of Advanced Tear Diagnostics, LLC Technology

 

On August 26, 2021, we purchased certain eye disease diagnostic technology from Advanced Tear Diagnostics, LLC, a Delaware Limited Liability Company (“Advanced Tear”), consisting of worldwide exclusive licenses to manufacture, distribute and sell 510(k) cleared medical diagnostic devices already being marketed for Lactoferrin, a biomarker for dry eye disease and a 510(k) license for IgE, a biomarker for allergic ocular reaction and ownership of the two FDA registered 510(k) clearances (collectively, the “DED Licenses”). Pursuant to the agreement, AXIM became the FDA registered owner of the two 510(k)’s. The purchase price for the technology licenses and the 510(k)’s was $4,270,000, which price was paid by issuing 7,000,000 restricted shares of Company common stock to Advanced Tear.

 

This asset purchase will prohibit another company from manufacturing the same devices under the 510(k)’s now owned by AXIM. Companies wishing to compete with AXIM by manufacturing the diagnostic devices acquired by AXIM must initiate a new 510(k) application and conduct costly clinical trials in support of the lengthy clearance process.

 

Also on August 26, 2021, we purchased technology and intellectual property relating to electrochemical impedance spectroscopy which included five pending patent applications, one of which has now been allowed by the US Patent & Trademark Office, from Advanced Tear for $250,000 (included assuming and paying $30,000 of the Advanced Tear liabilities). The bulk of the purchase price ($210,000) was in a note that requires seven equal monthly payments of $30,000, which payment started on September 3, 2021. The note has since been repaid in full.

 

Eye Health Overview

 

On August 26, 2021, we acquired the technology, intellectual property and the exclusive global rights to market two FDA cleared lateral flow assays which utilize a non-invasive, quantitative, point of care human tear test to aid in the diagnosis and selection of therapeutics for the treatment of eye diseases. With the acquisition, the Company became focused on improving the landscape for the diagnosis of ophthalmological conditions such as Dry Eye Disease (DED) through rapid diagnostic tests. The Company owns two of the only five FDA Cleared Diagnostic tests for Dye Eye Disease.

 

Currently, we have an FDA 510(k) clearance to test Lactoferrin (an aqueous deficiency biomarker) and IgE (a non-specific allergy biomarker). Our objective is to establish point of care testing for dry eye disease (“DED”) and to establish this modality as the new standard of care. The tests are quick, simple to use, and inexpensive to the clinic. The tests are CMS and private insurance reimbursable.

 

Low levels of Lactoferrin confirm inadequate glandular tear production (aqueous deficiency) and high levels of IgE indicate an active ocular allergy. If both biomarkers are normal, the cause of a patient’s dry eye condition could be attributed to evaporative dry eye. So, by performing these two tests, an eye doctor may now better assess the underlying cause of the tear film disorder, its severity and the appropriate treatment protocol to pursue. In addition, these tests are rapid, accurate, reimbursable, profitable and can be performed by a technician, which allows the physician to be more productive and attend to more patients.

 

 
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While at one time the tests were sold in numerous eye doctors’ locations, when the Company acquired the assays, they had been mothballed. The Company has had to redevelop the tests, reagents and select a quantitative reader. Since the acquisition of the technology, the Company has been successful in redevelopment and is launching sales.

 

We have signed a supply agreement with Barcelona-based IUL SA (“IUL”) for our iPeak DED readers, which will be deployed for diagnostic testing with a focus on Lactoferrin and IgE levels. This state-of-the-art portable reader is a colorimetric lateral flow reader designed to hold different cassette sizes and can read cassettes of up to five strips and seven lines per strip at a time.

 

iPeak is equipped with “Flash Eye” technology based on the principles of machine vision illumination. Its camera captures the image of the test illuminated from LED lights situated in the most studied geometry to achieve a precise and uniform illumination and enhance the colors of any lateral flow test. The iPeak technology also allows for more sensitivity, which is the main success of its application. 

 

We evaluated the iPeak readers in the lab against several other comparable products before deciding on IUL’s state-of-the-art products. The Company’s diagnostic testing process for DED, and specifically for Lactoferrin levels as a primary indicator, will include the use of reagent strip samples. The new readers are calibrated with the new test strips and will be distributed to ophthalmologists and optometrists at the point of care. The patients’ tear sample will be obtained and applied to the strips and then an ophthalmologist or optometrist will run the strips through a reader to determine Lactoferrin levels and incidence and severity of DED.

 

On September 19, 2022 the Company announced that it had signed an exclusive global commercialization agreement with Verséa Ophthalmics, LLC, a business division of Verséa Holdings, Inc. (“Verséa”), is one of the fastest growing U.S. healthcare companies, specialized in the sale and distribution of diagnostic and therapeutic solutions.

 

Our tests are considered moderately complex by CLIA. This requires the user of the test to obtain a CLIA certificate of compliance. This is done by filing a simple application with CMS (Form 116) and paying a fee. However, there are various lab requirements that must be in place first, and there is a considerable amount of ongoing record keeping that is required, which restricts potential growth of the business.

 

The FDA allows for CLIA waivers, and we intend to pursue a waiver for both current tests and all future product offerings. Our scientists have been diligently making patentable improvements to the tests which will simplify use by the clinician and enhance likelihood of CLIA waiver approval. We plan to file for the waiver in the second quarter of 2024 after conducting a fairly simple comparative clinical study. The objective will be to determine whether the AXIM Eye test system has equal or better simplicity than the other forms of diagnostic testing for DED, which we believe is the case. This study is a key component of the filing process with the FDA for a Clinical Laboratory Improvement Amendment (CLIA) Certificate of Waiver. We believe that the acquisition of these FDA 510(k) cleared diagnostic products, a waiver and the distribution partnership we have with Versea will allow the business to grow at a rapid pace.

 

Dye Eye Market

 

An estimated 16 million Americans have been diagnosed with DED, but the actual number of Americans suffering from dry eye symptoms is likely much higher. Some reports indicate that nearly half of all U.S. adults experience dry eye signs and symptoms, and 33% of patients in eye care clinics present with complaints about dry eye.

 

DED, though widespread, is under-diagnosed, in part because symptoms do not always correlate with objective signs. It has a highly variable symptom profile at different stages of the disease, and there is often a discordance between signs and symptoms. A patient can have severe symptoms yet show no sign of ocular surface damage, while others have advanced ocular surface damage, yet report no symptoms. This lack of correlation between clinical signs and symptoms of DED makes diagnosing and treating patients a challenge. Often times, inflammation is present before the clinical signs of DED.

 

 
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Currently, our eye business focuses exclusively on ophthalmology and optometry, in the United States, where there are 37,000 optometrists and 19,000 ophthalmologists performing approximately 400,000 medical (dilated) eye exams per day. Of this total, we believe that approximately 20% to 30% would present with symptoms where the Company’s Lactoferrin and IgE tests would be indicated. It is estimated that total US market for our eye care systems could approach 50,000 systems (USA Only).

 

We have completed development of our immunoassay system, which includes an automated colorimetric photometer reader and two FDA market-cleared point-of-care (POC) quantitative diagnostic ophthalmic lab tests and are now manufacturing the tests. These are:

 

Ocular Lactoferrin Lf) CPT code 83520 2021 CMS reimbursement $17.27/eye *

 

Ocular Immunoglobulin E (IgE) CPT Code 83520 2021 CMS reimbursement $16.46/eye*

 

Studies indicate that in 2021, 16-49 million Americans had DED, representing 32 - 98 million potential use cases for our POC tests. These tests are not limited to DED diagnostics, but can also be used to determine the Lactoferrin and allergic components of tear film prior to:

 

Contact lens fitting – approximately 45 million people wear contact lens in the US alone (2021).

LASIK surgery- approximately 718,000 (2020).

Cataract surgery with lens exchange - approximately 3.8 million (2018).

 

The barrier for entrance into the dry eye space is difficult and requires extensive clinical studies, large capital expense and FDA 510(k) clearance. This process alone can take several years and substantial investment, with no certainty that the product will receive FDA 510(k) clearance. For this reason, the Company determined that acquiring the two 510(k)’s would be a favorable strategic decision.

 

Business Model

 

Our eye business model utilizes a razor/razor blade model with the idea of placing as many readers into the field as possible and selling the disposable tests. It is anticipated that our gross profits will be generated from the manufacturing and sale of tests to our distribution partner who then resells the tests. Discounts will be offered to purchasing groups, corporate accounts, academic institutions engaged in research or training, and others as deemed appropriate. It is anticipated that the average price for the reader will be at our acquisition cost so we can get as many “razors” in the field, while pricing of consumable diagnostic kits will be at roughly half of the CMS published reimbursement floor rate.

 

Market demand for the system is expected to be moderate to begin with until we are granted a waiver from CLIA. At which time we expect extremely high demand for our system and tests. We also expect very high demand for our recently developed MMP-9 quantitative test once we obtain a FDA 510(k) clearance. While we must compete with other capital equipment expenditures under consideration in any ophthalmic physician’s office, we believe that no other ophthalmic device offers the combination of compelling clinical and financial benefits afforded by our system. The clinical utility of the tests offers important diagnostic precision, differentiation and treatment management direction. Inner-office efficiencies significantly improve the patient flow characteristics, reducing patients in office visit time and greatly reducing physicians chair time with each patient.

 

Financially, for every patient tested per day, the physician will receive, on average, $2 in reimbursement for every $1 expended on supplies. CMS and private insurance allow for physicians to retest their patients as often as deemed medically necessary.

 

 
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Dye Eye Disease Market Competition

 

Currently there are five FDA approved tests for DED:

 

Biomarker

Company

Type

CLIA status

 

 

 

 

Lactoferrin

Axim

(quantitative analysis)

moderate complexity

 

 

 

 

IgE

Axim

(quantitative analysis)

moderate complexity

 

 

 

 

MMP9

Quidel

(qualitative only)

waived

 

 

 

 

Osmolarity

TearLab

(quantitative analysis)

waived

 

 

 

 

Ocular Adenovirus

Quidel

(qualitative only)

waived

 

The preferred clinical analysis is quantitative, giving us an advantage over the competition. Since our reader can interpret many different analytes other than Lf and IgE, it also opens the possibility of additional quantitative test development.

 

New Quantitative MMP-9 Test

 

On March 8, 2022, we announced that we had successfully developed what we believe to be the first-ever rapid quantitative tear test for MMP-9, an inflammatory biomarker for DED. Matrix metalloproteinase-9 (MMP-9), an inflammatory biomarker consistently elevated in the tears of dry eye patients, may accelerate early diagnosis when detected.

 

Ocular surface disease (OSD) and dry eye syndrome are often mistakenly considered synonymous. OSD occurs when there is damage to the front surface of the eyes, the cornea. The central role of inflammation in OSD is widely recognized, but the ability to measure this in the clinic has been limited to the Quidel InflammaDry test, which measures tear matrix MMP-9 levels and provides a positive/negative result around a threshold of 40ng/ml of MMP-9. This “yes or no” report has clinical value, but it is limited. Currently available MMP-9 testing does not detect a reduction in tear MMP-9 levels until the concentration drops below 40ng/ml and, thus, may miss clinically significant improvement that did not reach that threshold.

 

The clinical benefits of our quantitative tear MMP-9 testing would be a significant advancement in the ability to measure the degree of inflammation affecting dry eye patients, allowing for more objective classification of their disease. Equally important would be the ability to measure improvement in control of inflammation that is the goal of many of our therapies for Ocular Surface Disease (OSD), including pharmaceuticals, thermal pulsation treatments and even light based therapies.

 

We intend to run a clinical study for MMP-9 in the 3rd quarter of 2024. The distribution agreement we have with Versea calls for Versea to pay for half of the expense in return for a paid up license to market the test after the 510(k) clearance is achieved.

 

We are also in the process of developing additional biomarker tests that will be used on the existing platform, without the constant need of the clinician to upgrade to a newer platform. The Lateral Flow test reader is software driven and can be programmed to interpret other biomarkers as they are clinically studied and FDA approved. The test uses 1.0 microliters of human tear fluid, that is applied to a disposable lateral flow cassette (one cassette per patient tested). The disposable single use cassette generates a substantial, recurring revenue stream for our eye business and our stakeholders.

 

 
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CURRENT OPERATIONS FOLLOWING ACQUISITION OF SAPPHIRE AND ADVANCED TEAR DIAGNOSTICS ASSETS

 

Summary:

 

 

AXIM’s strategic focus is on commercializing FDA-cleared Dry Eye Disease (DED) diagnostic system

 

Plans to address largely underserved DED diagnosis market with patent pending tear collection method and approved tests, supported by world-class DED management team

 

Supply agreements in place to fulfill demand for DED readers and test strips, creating large revenue opportunity

 

Company places emphasis on generating positive cash flow through DED program

 

The Company has been working diligently to further position AXIM for both immediate and long-term success. Since our acquisition of Sapphire Biotech and with the onset of the COVID-19 pandemic, we have been focused on three key areas specific to the diagnostic area: oncological, COVID-19, and most recently, dry eye disease (DED). Each of these provide strong upside potential for AXIM; however, each comes with its own set of regulatory and scientific hurdles that must be overcome. While the Company remains optimistic about each program, we believe it to be of the utmost importance to focus the most time and resources on the program with the ultimate potential for success, in the nearest term. While these other programs will not be abandoned, the Company recognizes that waiting on the painstaking slow regulatory approvals needed to generate revenue is not the best strategy to further our mission and unlock shareholder value. As such, following an extensive analysis by our management team, board of directors, and expert consultants with an objective perspective, the Company determined our best path forward lies with DED. The DED initiative is an extremely large opportunity for our Company and has been gaining strong momentum in recent months. The Company believes it offers the most potential for rapid and immediate growth, which could lead to ultimate profitability for the organization.

 

Since the third quarter of 2021, we have acquired substantial assets, including already approved diagnostic tests, which complement the research we had been conducting to-date. Despite DED being the most common ocular surface disorder, affecting approximately 350 million people worldwide—causing persistent eye irritation, blurred vision, pain and decreased quality of life—the sector has seen little innovation. There remains a desperate demand for better DED testing and diagnosis, especially at the point-of-care, and we believe we are well positioned to dominate this marketplace, while we actively work to develop and bring to market new solutions enabling us to offer comprehensive state-of-the-art suite of DED solutions.

 

Our next-generation solutions are unique in that they offer patients not only a fast and reliable answer as to why they are suffering, but offer a solution to physicians who are looking to help patients suffering from this overly common disease.

 

COVID Neutralizing Antibodies

 

Over the past few years, as COVID ravaged the world, our scientific team proved its world-class scientific acumen by swiftly developing first-in class COVID-19 neutralizing antibody tests. Shortly after its development, we filed for Emergency Use Authorization with the Food and Drug Administration (FDA), signed a distribution and manufacturing agreement, initiated live virus comparison studies, and filed several patent applications on the diagnostic tools. We waited in anticipation that the FDA would move quickly given the nature of the pandemic; however, we were disappointed week after week until we finally received a response that the FDA had changed its guidance and that they were denying our application. This was unfortunate especially given our firm belief in the efficacy of our test and the potential to assist in the global fight against this virus. That said, we are fearful that the U.S. government’s drive to approve such solutions is fading, and that it is unlikely to grant an EUA to ours or similar tests in the near future, although it is still a possibility since this virus is likely going to be around for a long time. It is this realism that further compelled readjustment of our focus on the DED program.

 

 
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DED Business

 

It is important to underscore the rationale supporting the Company’s decision to focus on DED. According to the American Academy of Ophthalmology, approximately 20 million people in the U.S. have DED and the number is growing in both young and old adults. It is imperative that clinicians determine how to best diagnose and treat DED.

 

Diagnosing DED is a particular challenge because of the multifactorial nature of the disease, with symptoms similar to other ocular surface conditions. There is often discordance between signs and symptoms, highlighting the need for more sensitive and accurate diagnostic tools. Figures from the American Journal of Ophthalmology corroborate this. As of July 2017, an estimated six million people reported DED symptoms without receiving a diagnosis.

 

The DED marketplace is massive, with analysts projecting the global market to grow at a CAGR of 6.6% from 2021 to 2026 and reach $6.1 billion by 2024.

 

Accordingly, in mid-2021, we started building the infrastructure and foundation needed to engage this large and dynamic market successfully. Our cutting-edge, next-generation solutions provide AXIM with far higher prospects of predictable growing revenue and earnings power.

 

On August 26, 2021, we signed an agreement to acquire two FDA-cleared 510(k)’s DED diagnostic testing technologies. The tests are part of a highly specialized point-of-care (POC) lab testing system explicitly designed to assist eye care physicians in detecting and quantifying various biomarkers associated with external ocular disorders. The tests are also approved for insurance and Medicare reimbursement. Both these tests are non-invasive, Rapid Lateral Flow Assays using tears.

 

The first is a rapid (10-minute) lateral flow diagnostic assay that tests for exact levels of Lactoferrin through the collection of 1.0 microliter in tears. The benefits of testing Lactoferrin Levels in the tear film include:

 

 

Low Lactoferrin levels directly correlate to DED caused by aqueous deficiency

 

The severity of DED can be determined by the Lactoferrin level

 

Low Lactoferrin levels may represent increased surgical risk or contact lens intolerance

 

Changes in Lactoferrin levels may show the efficacy of the prescribed treatment

 

The second test is for the measurement of Ocular Immunoglobulin E (IgE), a biomarker for allergies and a key biomarker primarily associated with Dry Eye Disease. The benefits of Testing IgE Levels in the Tear Film include:

 

 

The presence of IgE indicates the diagnosis of allergic conjunctivitis

 

Levels of IgE increase with the severity of the allergic response

 

IgE testing can help differentiate allergic conjunctivitis from dry eye syndrome

 

Allergic conjunctivitis is a contraindication for LASIK and other surgical procedures

 

Lactoferrin is a tear protein that protects the ocular surface through antimicrobial and anti-inflammatory properties. Lower concentrations of lactoferrin have been demonstrated in patients with dry eye, which is associated with decreased aqueous tear production. Ocular Immunoglobulin E (IgE) is a biomarker for allergies and a key biomarker primarily associated with allergic conjunctivitis. Mild allergic conjunctivitis is frequently challenging to clinically distinguish from dry eye. AXIM’s diagnostic technology allows for eye doctors to not only identify and differentiate clinically overlapping conditions but also drive more targeted therapeutic interventions. The tests provide doctors with access to real-time quantitative results at the point-of-care, allowing them to better prescribe a therapy to patients, leading to overall improved personalized patient care.

 

On March 8, 2022 we announced that we had successfully developed what we believe to be the first-ever rapid quantitative tear test for MMP-9, an inflammatory biomarker for DED. Matrix metalloproteinase-9 (MMP-9) is an inflammatory biomarker consistently elevated in the tears of dry eye patients. The central role of inflammation in Ocular Surface Disease (OSD) is widely recognized, but the ability to measure this in the clinic has been limited to the Quidel InflammaDry test, which provides a positive/negative result. This “yes or no” report has clinical value, but it is limited. OSD occurs when there is damage to the front surface of the eyes, the cornea. OSD includes dry eye syndrome, but also refers to a number of other disorders that affect the surface of the eye and can cause significant issues with vision and quality of life.

 

 
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The clinical benefits of our quantitative tear MMP-9 testing are a significant advance in the ability to measure the degree of inflammation affecting dry eye patients, allowing for more objective classification of their disease. Equally important would be the ability to measure improvement in control of inflammation that is the goal of many therapies for OSD, including pharmaceuticals, thermal pulsation treatments and even light based therapies.

 

Key Diagnostic Device Supply Agreement

 

In February of 2023, we entered into a key supply agreement for DED test strip readers which will be deployed for diagnostic testing, focusing on lactoferrin levels. The readers, a point of care medical device, will be supplied by Barcelona, Spain-based IUL SA (“IUL”). We will be utilizing state-of-the-art portable iPeak readers that were tested against other comparable products. These readers are designed to hold different cassette sizes and are equipped with connectivity and can read cassettes of up to five strips and seven lines per strip at a time. iPeak is equipped with “Flash Eye” technology based on the principles of machine vision illumination.

 

We are also in the process of developing additional biomarker tests that will be done on the existing platform, without the constant need of the clinician to upgrade to a newer platform. The Lateral Flow test reader is software-driven and can be programmed to interpret other biomarkers as they are clinically studied and FDA approved. The test uses 1.0 microliters of human tear fluid that is applied to a disposable lateral flow cassette (one cassette per patient tested). The disposable single use cassette generates a substantial, recurring revenue stream for our eye business. 

 

Exclusive Global Commercial Partnership

 

On September 19, 2022, the Company announced that it had signed an exclusive global commercialization agreement with Verséa Ophthalmics, LLC, a business division of Verséa Holdings, Inc. (“Verséa”), one of the fastest growing U.S. healthcare companies, specialized in the sale and distribution of ocular diagnostic and therapeutic solutions.

 

The agreement will provide Verséa with the exclusive commercial right to AXIM’s proprietary portfolio of point-of-care (POC) lab testing readers and three key biomarker diagnostic tests designed specifically to assist eye-care physicians in detecting and quantifying biomarkers associated with aqueous deficient Dry Eye Disease and non-specific allergic conjunctivitis. AXIM’s three key biomarker tests – the Ocular Immunoglobulin E (IgE) test, the Lactoferrin test, and the future MMP-9 test – require the collection of 1.0 microliters in tears and provide quantitative results in under 10 minutes, an industry-leading return time.

 

On September 30, 2022, Verséa launched the IgE and Lactoferrin tests at the 2022 American Academy of Ophthalmology (AAO) and American Academy of Optometry (AAOPT) conferences. The MMP-9 test is anticipated to follow in 2nd quarter 2024 upon FDA clearance. In recent months, AXIM has been preparing for the scaling of production of its tests in anticipation of significant new orders and is now prepared to support new orders associated with the Versea agreement and subsequent launch.

 

The commercial launch of the Company’s IgE and Lactoferrin tests mark the evolution of AXIM as a development-stage biotech company to a revenue generating healthcare organization. Since the development of our novel ocular diagnostic tests and subsequent success in proving their effectiveness, the Company had been searching for a partner with a solid commercial infrastructure and a firm commitment to eye care, capable of bringing our tests to clinical offices on a global scale. With existing sales channels to support their human amniotic membrane therapeutics, Verséa has added our technology to their expanding portfolio of healthcare solutions. Our partner’s mission aligns with that of the Company’s—together, we aim to change the landscape of dry eye disease diagnosis.

 

On October 4, 2022, the Company announced that it had received an initial order of 19,000 point-of-care (POC) diagnostic tests and 100 readers targeting ocular surface diseases through its exclusive global commercialization partner Verséa Ophthalmics, marking the Company’s first large-scale revenue generating order. To date we have delivered approximately 4000 tests.--

 

 
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The order is part of the recently announced exclusive global commercialization agreement reached between Verséa and AXIM to support the commercial launch of sales at the 2022 American Academy of Ophthalmology (AAO) conference in Chicago. The order represents the largest revenue-generating event in the history of the Company. AXIM is completing the manufacturing and is preparing the order for shipment from its laboratory facilities in San Diego, California as per Verséa’s direction. The order includes both the tear-based tests for Lactoferrin and Immunoglobulin E (IgE) as well as 100 of the associated digital reader that allows for quantitative test results. The tests provide doctors with access to real-time quantitative results within 10 minutes, allowing them to more accurately diagnose and prescribe targeted therapy to patients, leading to overall improved personalized patient care. Both tests are FDA-cleared and have dedicated Medicare CPT codes that allow for rapid POC diagnosis of common ocular conditions such as dry eye disease (DED) and allergic conjunctivitis. On February 20, 2024 we announced that Verséa Ophthalmics placed an order for an additional 50 digital readers.

 

This large order through our agreement with Verséa Ophthalmics marks a pivotal point for AXIM, where we are revenue generating. This initial order through Versea also supports the Company’s vision that our tests and readers will become available in clinics nationwide. While our readers can be used over and over again, our test strips are one-time use, and we expect to receive repeat orders from clinicians who have performed the tests. This will be a significant revenue additive to the growing new test demand.

 

The expectation with the Versea partnership is that the launch of the ocular surface disease testing platform is the beginning of a robust testing pipeline of future diagnostic test solutions that can be introduced on the same digital reader system. Eye care professionals have struggled with differentiating mild allergic conjunctivitis from dry eye disease as well as distinguishing between different causes of dry eye [aqueous deficient versus evaporative] which impacts clinical decision making. The portfolio of rapid, tear-based, quantitative point of care tests allows for more specific diagnoses, targeted therapeutic intervention and the potential for therapeutic monitoring which is a true breakthrough for the industry.

 

CLIA Waiver Process

 

Commencing in the 2nd quarter of 2024, the Company plans to conduct a comparative clinical study. The objective will be to prove that the AXIM Eye test system has equal or better simplicity than the other forms of diagnostic testing for DED. This study is a key component of our filing process with the FDA for a Clinical Laboratory Improvement Amendment (CLIA) Certificate of Waiver. We will be targeting a waiver for both IgE and the Lactoferrin diagnostic tests. The testing is expected to prove that the products are simple to use with minimal risks of erroneous results. The expected timeline for filing and receiving a final CLIA decision is approximately three to six months.

 

Patented Tear Collection System

 

Tear fluid analysis contributes to the greater understanding of various ocular and systemic diseases. However, there is a pressing need for a better tear collection system. AXIM is developing and filed for a patent of a novel tear sample collector system that is extremely cost-effective to produce on a mass scale. It is soft, non-intimidating, and easy to use by untrained personnel. It features a simple indicator that appears on the strip when enough tear fluid has been absorbed.

 

AXIM 2023: Goals and Targeting Positive Cash Flow

 

Our DED business strategy is starting to take off. Looking ahead we plan to:

 

 

Successfully complete our clinical trials to prove the accuracy and ease of use to achieve CLIA waivers.

 

Generate positive, peer reviewed reviews by eye care professionals as to the performance and ease of use.

 

Penetrate the ophthalmologist and optometrist marketplace through our partner with our industry-changing DED diagnostic technology.

 

Identify potential strategic acquisition targets to accelerate our DED diagnostic applications and capabilities expansion.

 

Grow our DED business to reach a positive cash flow run rate by the end of 2024 and build its profitability beyond.

 

With our partnership with Versea, AXIM is now commercializing a healthcare solution that holds the potential to truly revolutionize the world. With the sales launch of AXIM’s diagnostic platform, AXIM is executing on our vision of penetrating a market where DED impacts over 350 million people worldwide. This strategy will enable our business to grow revenues and increase our earnings power to enhance shareholder value.

 

 
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Milestones to Date

 

On August 03, 2021, we announced that the Company has signed a Binding Term Sheet to acquire the technology for the testing of Dry Eye Disease (DED), including two FDA clearances for the commercial sale of two ophthalmic diagnostic lab tests. The transaction closed on August 26, 2021.

 

On March 6, 2022, we announced that while the Company explores filing one or more EUA’s for point of care and/or at home use, it would begin to sell the Company’s neutralizing antibody (“Nab”) rapid test For Research Use Only (“RUO”) as it does not require FDA approval.

 

On March 8, 2022, we announced that we had successfully developed what we believe to be the first-ever rapid quantitative tear test for MMP-9, an inflammatory biomarker for Dry Eye Disease. Matrix metalloproteinase-9 (MMP-9), an inflammatory biomarker consistently elevated in the tears of dry eye patients, may accelerate early diagnosis when detected.

 

On April 27, 2022, we announced the successful development of a rapid quantitative tear test for Lacritin, a tear protein that autonomously promotes tearing and is deficient in all forms of Dry Eye Disease.

 

On May 10, 2022, we announced the development of a novel tear sample collector system and the filing of a provisional patent application for it with the U.S. Patent and Trademark Office that provides a more comfortable experience for patients and that facilitates the tear collection process.

 

On May 24, 2022, we announced that we had completed the optimization of a rapid diagnostics test for the quantitative measurement of Ocular Immunoglobulin E (IgE), a biomarker for ocular allergies. 

 

On June 2, 2022, we launched the Company’s new mobile-optimized website designed to provide doctors, researchers and other medical professionals with tailored, timely information and resources that will enable them to make informed decisions when purchasing AXIM’s proprietary diagnostic tests.

 

On July 12, 2022, we announced our publication in collaboration with researchers at Arizona State University (ASU) entitled, “Third COVID-19 Vaccine Dose Boosts Neutralizing Antibodies in Poor Responders” in Communications Medicine, part of the Nature family of journals.

 

On July 21, 2022, we announced that Axim’s CEO John Huemoeller had been featured on the Vision is More Than 20/20™ podcast.

 

On July 26, 2022, we announced that we had developed an enhanced version of our rapid Ocular Immunoglobulin E (IgE) test in response to a study recently published in Nature that climate change is making allergy season occur sooner and for a longer period of time than in recent years.

 

On September 19, 2022, we signed an exclusive global commercial partnership agreement with Verséa Ophthalmics, LLC, a business division of Verséa Holdings, Inc. (“Verséa”), one of the fastest growing US healthcare companies, specialized in the sale and distribution of ocular diagnostics relating to Axim’s proprietary portfolio of point-of-care (POC) lab testing readers and three key biomarker diagnostic tests designed specifically to assist eye-care physicians in detecting and quantifying biomarkers associated with aqueous deficient Dry Eye Disease and non-specific allergic conjunctivitis.

 

On September 29, 2022, we started selling our ophthalmic point-of-care (POC) diagnostic product portfolio in advance of the American Academy of Ophthalmology Annual Meeting through our exclusive commercialization partner Verséa Ophthalmics, LLC, a subsidiary of Verséa Holdings, Inc.

 

On October 4, 2022, we received an initial order of 19,000 point-of-care (POC) diagnostic tests and 100 readers targeting ocular surface diseases through our exclusive global commercialization partner Verséa Ophthalmics, LLC (“Verséa”), marking the Company’s first large-scale revenue generating order.

 

 
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On December 6, 2022, our commercial partner, Versea Ophthalmics highlighted the benefits of AXIM’s Eye Diagnostic Solutions in leading scientific media, including Eyes On 2023 and the Ophthalmology Times.

 

In both interviews, Dr. Rob Sambursky emphasized the improved features of AXIM’s tests, noting that while osmolarity testing is currently taking place with ocular surface disease patients, the rapid new tear-based tests are complementary to those existing tests and enhance a clinician’s ability to manage treatment in a more personalized way.

 

On December 13, 2022, AXIM announced the development of a novel dual IgE/MMP rapid ophthalmological diagnostic test for which the Company filed a provisional patent with the US Patent and Trademark Office. The new product offers clinicians an innovative new rapid ophthalmological diagnostic solution designed to reliably measure both Ocular Immunoglobulin E (IgE) and MMP-9 in a single test. The test is slated for further clinical development in the third quarter of 2024 and, once FDA approved, will be added to AXIM’s expanding catalog of ophthalmological diagnostic tools available to clinicians throughout North America.

 

On April 11, 2023, we announced the start of manufacturing of both the Company’s proprietary Ocular Immunoglobulin E (IgE) and Lactoferrin diagnostic assays to fulfill the orders placed by its commercialization partner Versea.

 

On May 23, 2023, we announced the appointment of Kurt Phinney as the Company’s new Chief Operating Officer. Phinney is a seasoned healthcare operations executive and will play a vital role in scaling and optimizing AXIM’s manufacturing operations for its proprietary ophthalmological diagnostic assays in order to meet rising demand.

 

On July 12, 2023, AXIM announced that it had begun shipping revenue generating validation kits for Ocular Immunoglobulin E (IgE), a key biomarker primarily associated with non-specific, allergic conjunctivitis, which often mimics Dry Eye Disease.

 

On July 25, 2023, Verséa™ Ophthalmics, LLC, a division of Verséa Health, Inc. announced the commencement of initial shipments of its T-POC TOTAL IgE Immunoassay and Lateral Flow Readers. The company focuses on delivering innovative Tear-based Point-of-Care (T-POC) testing and biologic solutions that optimize diagnosis, treatment, and management of various eye care conditions, including ocular surface disease and pterygium surgery.

 

AXIM supplies the readers and manufactures and supplies the IgE Immunoassay to Verséa, its distribution partner.

 

On August 1, 2023, AXIM announced that the U.S. Patent & Trademark Office sent the Company notices of U.S. patent allowances for three separate patents, including its rapid point of care neutralizing antibody test.

 

On September 12, 2023 AXIM announced that it has successfully developed the world’s first rapid, point-of-care, non-invasive diagnostic assay for the detection of abnormal alpha-synuclein, a known biomarker for Parkinson’s Disease using tears and filed for a provisional patent application with the U.S. Patent and Trademark Office.