U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
or
For the transition period from ________ to ________
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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.
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Smaller reporting Company |
Emerging growth Company |
| ☐ | ☐ | |
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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. ☐
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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: of common stock, par value $0.0001 per share, outstanding as of August 18, 2023.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
AXIM BIOTECHNOLOGIES, INC.
2
AXIM BIOTECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| 30-Jun-23 | 31-Dec-22 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Other Current Assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net of accumulated depreciation | ||||||||
| Other Assets: | ||||||||
| Intangible Asset, net | ||||||||
| Security deposit | ||||||||
| Operating lease right-of-use asset | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Lease liability obligations (see Note 14) current portion | ||||||||
| Due to first insurance funding | ||||||||
| Advances from shareholder | ||||||||
| Deferred revenue | ||||||||
| Derivative liability conversion feature | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Convertible
note payable related party (Including accrued interest of $ | ||||||||
| Convertible
note payable (including accrued interest of $ | ||||||||
| Convertible
note payable - related party (including accrued interest of $ | ||||||||
| Lease liability obligations (see Note 14) | ||||||||
| Total long-term liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock, $ par value, shares authorized; | ||||||||
| Series B Convertible Preferred Stock, $ par value shares designated, and shares issued, and outstanding, respectively | ||||||||
| Series C Convertible Preferred Stock, $ par value shares designated, and shares issued and outstanding, respectively | ||||||||
| Common stock, $ par value, shares authorized and shares issued and outstanding, respectively | ||||||||
| Stock Subscription receivable | ( | ) | ( | ) | ||||
| Additional paid in capital | ||||||||
| Common stock to be issued | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements
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AXIM BIOTECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the | For the | For the | For the | |||||||||||||
| Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | $ | $ | |||||||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses from continuing operations | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (income) expenses: | ||||||||||||||||
| Interest income | ( | ) | ||||||||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||||||||||
| Derivative liability insufficient shares | ||||||||||||||||
| Amortization of debt discount | ||||||||||||||||
| Loss (Gain) on extinguishment of debt | ( | ) | ||||||||||||||
| Interest expense | ||||||||||||||||
| Total other expenses (income) | ||||||||||||||||
| Loss before provision of income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income tax | ||||||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
4
AXIM BIOTECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
| Series C Convertible | Additional | |||||||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Common Stock to be | Paid In | Subscription | Accumulated | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Issued | Capital | receivable | Deficit | Total | ||||||||||||||||||||||||||||
| Balance at December 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Common stock issued under S-1 | ||||||||||||||||||||||||||||||||||||
| Common stock issued against common stock to be issued purchase of ATD assets | ( | ) | ||||||||||||||||||||||||||||||||||
| Common stock issued against common stock to be issued received in PY | ( | ) | ||||||||||||||||||||||||||||||||||
| Common stock issued stock purchase agreements | ||||||||||||||||||||||||||||||||||||
| Common stock issued for services | ( | ) | ||||||||||||||||||||||||||||||||||
| Cashless exercise stock options | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock issued on settlement of debt | ||||||||||||||||||||||||||||||||||||
| Stock based compensation - stock options | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Stock issued on settlement of debt | ||||||||||||||||||||||||||||||||||||
| Stock based compensation - stock options | ||||||||||||||||||||||||||||||||||||
| Common stock issued under S-1 | ||||||||||||||||||||||||||||||||||||
| Stock issued settlement of claim | ||||||||||||||||||||||||||||||||||||
| Beneficial conversion refinance of debt | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Common stock issued under S-1 | ||||||||||||||||||||||||||||||||||||
| Common stock issued against common stock to be issued | ( | ) | ||||||||||||||||||||||||||||||||||
| Shares issued extinguishment of debt Beneficial conversion payment of interest | ||||||||||||||||||||||||||||||||||||
| Debt modifications / conversions | ||||||||||||||||||||||||||||||||||||
| Stock based compensation - stock options | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Common stock issued under S-1 | ||||||||||||||||||||||||||||||||||||
| Stock based compensation- stock options | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
5
AXIM BIOTECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
| For the | For the | |||||||
| Six Months Ended | Six Months Ended | |||||||
| 30-Jun-23 | 30-Jun-22 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net loss to cash provided by (used in) operating activities: | ||||||||
| Depreciation | ||||||||
| Derivative Liability insufficient Shares | ||||||||
| Stock based compensation | ||||||||
| Amortization of prepaid insurance/expense | ||||||||
| Amortization of debt discount | ||||||||
| Common stock issued for services | ||||||||
| Amortization of intangible assets | ||||||||
| Loss (gain) on extinguishment of debt | ( | ) | ||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Non-cash interest expense | ||||||||
| Proceeds from convertible notes | ||||||||
| Changes in operating assets & liabilities: | ||||||||
| Decrease in other assets | ||||||||
| Increase in shareholder advances | ||||||||
| (Increase) in prepaid expenses | ( | ) | ||||||
| Decrease in deferred revenue | ( | ) | ||||||
| Increase (decrease) in accounts payable and accrued expenses | ||||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash (used in) investing activities | ( | ) | ||||||
| CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
| Common stock issued under registration statement on Form S-1 | ||||||||
| Common stock issued under SPA | ||||||||
| Repayment of first insurance funding | ( | ) | ||||||
| Proceeds from convertible notes | ||||||||
| Repayment of convertible notes | ( | ) | ||||||
| Repayment of promissory note | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | |||||||
| 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 | $ | $ | ||||||
| Initial derivative liability at issuance of notes | $ | $ | ||||||
| Initial debt discount at issuance of notes | $ | $ | ||||||
| Convertible note converted to common stock | $ | $ | ||||||
| Convertible note issued against settlement of liabilities | $ | $ | ||||||
| Initial debt discount on extinguishment of notes | $ | $ | ||||||
| Common stock issued against stock subscription receivable | $ | $ | ||||||
| Common stock issued on cashless exercise of options | $ | $ | ||||||
| Common stock issued against Common stock to be issued for acquisition | $ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
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AXIM BIOTECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
NOTE 1: ORGANIZATION
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 Ca 92121. On August 7, 2014, the Company formed a wholly owned Nevada subsidiary named
Axim Holdings, Inc. This subsidiary will be used to help facilitate the anticipated activities planned by the Company. On May 11, 2015
the Company acquired a
On March 17, 2020, the Company acquired Sapphire Biotech, Inc., (“Sapphire’) which is research and Development Company that has a mission to improve global cancer care through the development of proprietary therapeutics for inhibiting cancer growth and metastasis. Sapphire is also developing a line of novel diagnostics for early cancer detection, response to treatment, and recurrence monitoring. Additionally, with the onset of the COVID-19 pandemic, the Company decided to begin creating COVID-19 rapid diagnostic tools, including multiple first-in-class COVID-19 neutralizing antibody tests and other innovations.
Sapphire’s operations are located in the Greater San Diego Area.
COVID-19 impact and related risks
The ongoing global outbreak of COVID-19, and the various attempts throughout the world to contain it, have created significant volatility, uncertainty and disruption. In response to government directives and guidelines, health care advisories and employee and other concerns, A number of the Company’s employees have had to work remotely from home and those on site have had to follow the Company’s social distance guidelines, which could impact their productivity. COVID-19 could also disrupt the Company’s operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who cannot effectively work remotely but who elect not to come to work due to the illness affecting others in the Company’s office or laboratory facilities, or due to quarantines.
Because of COVID-19, travel, visits, and in-person meetings related to The Company’s business have been severely curtailed or canceled and the Company has instead used on-line or virtual meetings to meet with potential customers and others.
In addition to operational adjustments, the consequences of the COVID-19 pandemic 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 COVID-19 pandemic 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.
Changes to the Company’s Board of Directors
On January 4, 2022, Mauricio Gatto Bellora tendered his resignation as a member of the Company’s Board of Directors, and the Company on that date accepted his resignation. Mr. Bellora’s decision to resign was not the result of any disagreement with the Company.
On
January 6, 2022,
7
Mr.
Blake N. Schroeder, 42, began his career with a commercial litigation law firm in Salt Lake City, Utah. Beginning in 2008, Schroeder
focused on the sale and marketing of natural products and opening international marketplaces to those products. From 2008 to 2014 Mr.
Schroeder served in various capacities at MonaVie, LLC developing international business plans and growing international businesses.
From August 2014 to February 2016, Mr. Schroeder served as the Chief Operating Officer of For evergreen International, where he was responsible
for global operation and sales of the multinational organization, including oversight of a global supply chain. From 2021 to the present,
Mr. Schroeder has served as the Chief Executive Officer and Chairman of the Board of Medical Marijuana, Inc. From 2016 to the present,
Mr. Schroeder serves as the chief executive officer of Kannaway USA, LLC, a wholly owned subsidiary of Medical Marijuana, Inc. Medical
Marijuana, Inc. is one of the Company’s largest shareholders holding approximately
Changes in the Business
On March 7, 2022, the Company announced that is has shifted its focus for its rapid COVID-19 Neutralizing Antibody (“Nab”)(NAb) Test to become For Research Use Only (“RUO”). The test will provide researchers an important tool for COVID-19 research and is not intended for use in diagnostic procedures. The Company has also entered a separation agreement with Empowered Diagnostics, LLC following the FDA recall of Empowered’s products, including the NabNAb test.
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 Advanced Tear Diagnostics, LLC
(the “Seller”) (collectively, the “Asset Acquisition”) for a total amount of $
The
first transaction occurred on July 29, 2021, in which AXIM purchased five patents (the “Patents”) from the Seller for $
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 $
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
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.
8
NOTE 3: BASIS OF PRESENTATION:
The interim unaudited condensed financial statements included herein reflect all material adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) which, in the opinion of the Company’s management, are ordinary and necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Company’s management believes the disclosures are adequate to make the information presented not misleading.
The condensed balance sheet information as of December 31, 2022 was derived from the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022 (“2022 Annual Report”), filed with the SEC pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on April 17, 2023. These interim unaudited condensed financial statements should be read in conjunction with the 2022 Annual Report. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year or for any other period.
Principles of Consolidation
The 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 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 consolidated financial statements have been presented assuming that the Company will continue as a going concern. As
shown in the consolidated financial statements, the Company has negative working capital of $
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 useful life of intangible assets and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate and expected dividend rate.
9
Operating lease
We lease property under various operating leases which are disclosed on our consolidated 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.
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 June 30, 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 June 30, 2023 and December 31, 2022. The Company has never experienced any losses related to these balances.
10
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
June 30, 2023 and December 31, 2022, there were no accounts receivable. For the three and six months ended June 30, 2023 one customer
accounted for
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 consisted of the following at June 30, 2023 and December 31, 2022, respectively.
June 30, 2023 | December 31, 2022 | |||||||
| Equipment | $ | $ | ||||||
| Less: accumulated depreciation | $ | $ | ||||||
| $ | $ | |||||||
Depreciation
expense was $
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.
We first may assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test included in U.S. GAAP. To the extent our assessment identifies adverse conditions, or if we elect to bypass the qualitative assessment, goodwill is tested using a quantitative impairment test.
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.
11
We elected to perform a quantitative assessment of indefinite-lived intangible assets and determined that the fair value of the goodwill and IPRD related to the Sapphire acquisition was less than its carrying amount and that in-process research and development were fully impaired.
The Company’s intangible assets relating to continuing operations consisted of the following at June 30, 2023 and December 31, 2022, respectively.
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Patents | $ | $ | ||||||
| Licenses | ||||||||
| Less: accumulated amortization | ||||||||
| $ | $ | |||||||
Estimated aggregate amortization expense for each of the five succeeding years ending December 31 is as follows:
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 and thereafter | |||||||||||||||||||
| Amortization expense | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Amortization
expense recorded for the three and six months ended June 30, 2023 and 2022 was $
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.
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 continuing operations recognized for three and six months ended June 30, 2023 and 2022 amounted to $
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.
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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.
Items recorded or measured at fair value on a recurring basis in the accompanying condensed consolidated financial statements consisted of the following items as of June 30, 2023.
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities - Insufficient shares | $ | $ | ||||||||||||||
December 31, 2022
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
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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.
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.
14
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 Oncocyte 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 $
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.
There were common share equivalents at June 30, 2023 and at December 31, 2022. For the Period ended June 30, 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. If necessary, the company would increase authorized shares to honour conversion agreements. The company recognized a derivative short share expense for the three and six months ending June 30, 2023 in the amounts of $ and $ respectively as a result of authorized shares being insufficient to redeem convertible securities and notes. This will be corrected in Quarter ending September 30, 2023. See subsequent events.
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.
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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 and six months ended June 30, 2023 and
2022 the Company incurred research and development expenses of $
Material Equity Instruments
The Company evaluates stock options, stock warrants and other contracts (convertible promissory note payable) to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for under the relevant sections of ASC 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity (“ASC 815”). The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative financial instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative financial instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC 815 are reclassified to a liability account at the fair value of the instrument on the reclassification date.
Certain of the Company’s embedded conversion features on debt and outstanding warrants are treated as derivative liabilities for accounting purposes under ASC 815-40 due to insufficient authorized shares to settle these outstanding contracts. Pursuant to SEC staff guidance that permits a sequencing approach based on the use of ASC 840-15-25 which provides guidance for contracts that permit partial net share settlement. The sequencing approach may be applied in one of two ways: contracts may be evaluated based on (1)earliest issuance date or (2) latest maturity date. In the case of insufficient authorized share capital available to fully settle outstanding contracts, the Company utilizes the earliest maturity date sequencing method to reclassify outstanding contracts as derivative instruments. These contracts are recognized currently in earnings until such time as the convertible notes or warrants are exercised, expire, the related rights have been waived and/or the authorized share capital has been amended to accommodate settlement of these contracts. These instruments do not trade in an active securities market.
Recently Issued Accounting Standards
Accounting Standards Implemented Since December 31, 2022
ASC Update 2021-04
Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).
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The amendments in this Update affect all entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. The amendments in this Update do not apply to modifications or exchanges of financial instruments that are within the scope of another Topic. That is, accounting for those instruments continues to be subject to the requirements in other Topics. The amendments in this Update do not affect a holder’s accounting for freestanding call options.
ASC Update No. 2020-10
In October 2020, the FASB issued ASC Update No. 2020-10, Codification Improvements. Update No. 2020-10 amends a wide variety of Topics in the Codification in order to improve the consistency of the Codification and the application thereof, while leaving Generally Accepted Accounting Principles unchanged.
ASC Update No. 2020-06
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.
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 6: PREPAID EXPENSES
Prepaid expenses consist of the following as of June 30, 2023 and December 31, 2022 respectively:
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid interest | ||||||||
| $ | $ | |||||||
For
the three and six months ended June 30, 2023 and 2022 the Company recognized amortization of prepaid expense and prepaid insurance of
$-
17
NOTE 7: RELATED PARTY TRANSACTIONS
Related Party
The
Company has an employment agreement with Catalina Valencia at a rate of $
The
company has a consulting agreement with Glycodots LLC whereby it will provide the services of Dr. Sergei A. Svarovsky at a rate of $
Purchase of Promissory Note and Forbearance Agreement
Effective
May 4, 2020, the Company acquired from TL-66, a California limited liability company (“Seller”), a promissory note issued
to Seller by Dr. Anastassov (“Maker”) dated December 1, 2017, with a face value of $
NOTE 8: DUE TO FIRST INSURANCE FUNDING
On
June 25, 2022, the Company renewed its D&O insurance policy with total premiums, taxes and fees for $
The
total outstanding due to First Insurance Funding as of June 30, 2023 and December 31, 2022 is $-
The policy was cancelled for non-payment of premium in April 2023.
NOTE 9: CONVERTIBLE NOTES PAYABLE
The following table summarizes convertible note payable of related party as of June 30, 2023 and December 31, 2022 respectively:
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Convertible note payable, due on | $ | $ | ||||||
| Accrued interest | ||||||||
| Convertible note payable, net | $ | $ | ||||||
On
January 23, 2023, Creditor agreed to waive and forfeit all interest accrued on the MMI Note through December 31, 2022, in the aggregate
amount of $
18
For
the three and six months ended June 30, 2023 and 2022, interest expense was $
As
of June 30, 2023 and December 31, 2022, the balance of secured convertible note was $
The following table summarizes convertible note payable as of June 30, 2023 and December 31, 2022 respectively:
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Convertible note payable, due on October 1, 2029, interest at 3.5% p.a. (1) | $ | $ | ||||||
| Convertible Note Payable, due on January 27,2032 interest at 3% p.a. (4) | ||||||||
| Convertible note payable, due on October 1, 2029, interest at 3.5% p.a. (2) | ||||||||
| Convertible note payable, due on February 10, 2032, interest at 3.0% p. a. (5) | ||||||||
| Convertible note payable, due on December 31, 2034, interest at 3% p.a. (3) | ||||||||
| Convertible note payable, due on May 23, 2033, interest at 3.75% p.a. | ||||||||
| Convertible note payable, due on May 23, 2033, interest at 3.75% p.a. | ||||||||
| Accrued interest (The accrued interest and principal are both included in the captions titled “convertible note payable” in the balance sheet) | ||||||||
| Total | ||||||||
| Less: unamortized debt discount/finance premium costs | ( | ) | ( | ) | ||||
| Convertible note payable, net | $ | $ | ||||||
(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 $ 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 $
As
of June 30, 2023 and December 31, 2022 respectively, the balance of secured convertible notes was $
(2)
On October 20, 2016, a third-party investor provided the Company with $
19
(1)
& (2) On January 23, 2023, Creditor agreed to waive and forfeit all interest accrued on the Secured Notes through December 31,
2022, in the aggregate amount of $
The
Renegotiation of the above TL-66 notes was deemed to be a debt extinguishment resulting in Amortization of the remaining debt discount
of $
On
June 7, 2021 the Company converted $
(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 $
Upon issuance, the Convertible Note was convertible into shares of the Company’s common stock at $ 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 $. After the acquisition, the Convertible Note was able to
convert shares of Axim’s common stock. Upon assumption of the note, the Company recorded a beneficial conversion feature
of $190,000. As of June 30, 2023 and December 31, 2022, the balance of secured convertible note was $
On
January 27, 2023, Creditor agreed to waive and forfeit all interest accrued on the Sapphire Note through December 31, 2022, in the aggregate
amount of $
(4)
On January 27, 2022, Sapphire Bitotech entered into a debt exchange agreement (effective April 1 2022) whereas the company exchanged
a convertible note with a balance of including accrued interest for a new note charging interest at a rate of
20
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.
Convertible Note payable – related party (officer)
As
of December 31, 2022, the Company owed to the Executive, for employment in his capacity as CEO of AXIM, $
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 (
As
of June 30, 2023 and December 31, 2022 the Balance due on the note was $
(5) Convertible Notes
Effective
February 10, 2022, the Company issued seven convertible notes to a series of investors having an aggregate face value of $
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 year ended December 31, 2022, $
21
During
the three and six months ended June 30, 2023 and 2022 respectively, the Company amortized the debt discount on all the notes of $
Effective
May 23, 2023, the Company issued 5 convertible notes to a series of investors having an aggregate face value of $
Each
of the Convertible Notes is (i) unsecured; (ii) bears interest at a rate of
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 $
NOTE 10: 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.
We have determined that certain convertible debt instruments outstanding as of the date of these financial statements include an exercise price “reset” adjustment that qualifies as derivative financial instruments under the provisions of ASC 815-40, Derivatives and Hedging - Contracts in an Entity’s Own Stock (“ASC 815-40”). Certain of the convertible debentures have a variable exercise price, thus are convertible into an indeterminate number of shares for which we cannot determine if we have sufficient authorized shares to settle the transaction with. Accordingly, the embedded conversion option is a derivative liability and is marked to market through earnings at the end of each reporting period. Any change in fair value during the period recorded in earnings as “Other income (expense) - gain (loss) on change in derivative liabilities.”
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 $
22
On
June 30, 2023, the Company estimated the fair value of the embedded derivatives of $
The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the six months ended June 30, 2023 and 2022:
| Balance, December 31, 2022 | $ | |||
| Issuance of shares in exchange for convertible note payable | ( | ) | ||
| Issuance of convertible notes payable | ||||
| Mark to market | ||||
| Balance, June 30, 2023 | $ | |||
| Loss on change in derivative liabilities for the six months ended June 30, 2023 | $ | |||
| Loss on Change in Fair Value of derivative liability for the three months ended June 30, 2023 | ||||
| Balance, December 31, 2021 | $ | |||
| Issuance of convertible notes payable | ||||
| Mark to market | ( | ) | ||
| Balance, March 31, 2022 | $ | |||
| Mark to Market during the three months ended June 30, 2022 | ( | ) | ||
| Balance June 30, 2022 | ||||
| Gain on change in derivative liabilities for the six months ended June 30, 2022 | $ | |||
| Gain on Change in Fair Value of derivative liability for the three months ended June 30, 2022 |
Derivative liability- insufficient shares
Certain of the Company’s embedded conversion features on debt, convertible preferred stock and outstanding options & warrants are treated as derivative liabilities for accounting purposes under ASC 815-40 due to insufficient authorized shares to settle these outstanding contracts. Pursuant to SEC staff guidance that permits a sequencing approach based on the use of ASC 840-15-25 which provides guidance for contracts that permit partial net share settlement. The sequencing approach may be applied in one of two ways: contracts may be evaluated based on (1) earliest issuance date or (2) latest maturity date. In the case of insufficient authorized share capital available to fully settle outstanding contracts, the Company utilizes the earliest maturity date sequencing method to reclassify outstanding contracts as derivative instruments. These contracts are recognized currently in earnings until such time as the convertible notes or preferred stock or option or warrants are exercised, expire, the related rights have been waived and/or the authorized share capital has been amended to accommodate settlement of these contracts. These instruments do not trade in an active securities market.
On
June 30, 2023, the Company estimated the fair value of the embedded derivatives of using the Black-Scholes Pricing Model based on the
following assumptions: (1) dividend yield of
The
Company recorded $
The
Company recorded $
23
NOTE 11: STOCK INCENTIVE PLAN
On
May 29, 2015, the Company adopted its 2015 Stock Incentive Plan. Under the Plan the Company may issue up to
On
August 2, 2021, Bijan Pedram the Senior Scientific of Sapphire Biotechnology was granted the options to purchase million shares of
Axim common stock under the plan at the purchase price of $
On
August 17, 2021, Jeff Busby the Senior Vice president of Sales of Axim Biotechnology was granted the options to purchase million of
shares of Axim common stock under the plan at the purchase price of $
On
September 1, 2021, Laura M. Periman Medical advisory board member of Axim Biotechnology was granted the options to purchase million
of shares of Axim common stock under the plan at the purchase price of $
On
September 4, 2021, Kelly K. Nichols Medical advisory Board member of Axim Biotechnology was granted the options to purchase million
of shares of Axim common stock under the plan at the purchase price of $
On
September 8, 2021, Joseph Tauber the Ophthalmic Chief Medical Officer (CMO) of Axim Biotechnology was granted the options to purchase
million of shares of Axim common stock under the plan at the purchase price of $
On
August 22, 2022, options were issued with a strike price of $
On
December 9, 2022, options were issued with a strike price of $
The
Company estimated the fair value of the Option value of $ using the Black-Scholes Pricing Model based on the following assumptions:
(1) dividend yield of , (2) expected volatility of , (3) risk-free interest rate of
For the three and six months ended June 30, 2023 and 2022 respectively the Company recorded compensation expense of $, $ and $, $ respectively.
24
NOTE 12: STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company has authorized shares of preferred stock, with a par value of $ per share. Of the 5,000,000 authorized preferred shares, 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 June 30, 2023, and December 31, 2022 there are -- and -- 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 June 30, 2023.
Series C Convertible Preferred Stock
On August 17, 2016 the Company designated up to 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.
On
August 18, 2016 the Company issued all shares of its newly designated Series C Preferred Stock to MJNA Investment Holdings, LLC
in exchange for cash of $
On
February 20, 2019, MJNA Investment Holdings LLC (“Seller”) sold its 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 $
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 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 shares of common stock, with a par value of $ per share. As of June 30, 2023 and December 31, 2022, the Company had and shares of common stock issued and outstanding, respectively.
2023 Transactions:
One
million shares were issued in satisfaction of Common stock to be issued Valued at
25
Twelve
million shares were issued during the first six months of 2023 pursuant to the Company’s S-1 in exchange for $