Company Quick10K Filing
Axim Biotechnologies
Price0.73 EPS-0
Shares63 P/E-9
MCap46 P/FCF-13
Net Debt-1 EBIT-5
TEV45 TEV/EBIT-9
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-06-29
10-K 2019-12-31 Filed 2020-05-14
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-04-08
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-03-15
10-Q 2017-09-30 Filed 2017-11-20
10-Q 2017-06-30 Filed 2017-08-21
10-Q 2017-03-31 Filed 2017-05-22
10-K 2016-12-31 Filed 2017-04-17
10-Q 2016-09-30 Filed 2016-11-21
10-Q 2016-06-30 Filed 2016-08-22
10-Q 2016-03-31 Filed 2016-05-23
10-K 2015-12-31 Filed 2016-04-14
10-Q 2015-09-30 Filed 2015-11-23
10-Q 2015-06-30 Filed 2015-08-19
10-Q 2015-03-31 Filed 2015-05-13
10-K 2014-12-31 Filed 2015-04-14
10-Q 2014-09-30 Filed 2014-11-14
10-Q 2014-06-30 Filed 2014-08-19
10-Q 2014-03-31 Filed 2014-05-20
10-K 2013-12-31 Filed 2014-03-04
10-Q 2013-09-30 Filed 2013-11-18
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-04-15
10-Q 2012-09-30 Filed 2012-11-19
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-17
10-K 2011-12-31 Filed 2012-04-16
10-Q 2011-09-30 Filed 2011-11-17
8-K 2020-07-21 Officers, Amend Bylaw, Exhibits
8-K 2020-05-14
8-K 2020-05-13
8-K 2020-05-06
8-K 2020-03-27
8-K 2020-03-17
8-K 2020-01-03
8-K 2019-12-16
8-K 2019-07-02
8-K 2019-05-31
8-K 2019-04-19
8-K 2019-04-02
8-K 2019-02-20
8-K 2019-01-15
8-K 2019-01-02
8-K 2018-11-30
8-K 2018-09-10
8-K 2018-08-21
8-K 2018-05-07
8-K 2018-04-05
8-K 2018-03-30

AXIM 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1: Organization
Note 2: Acquisition of Sapphire Biotech, Inc.
Note 3: Basis of Presentation:
Note 4: Going Concern
Note 5: Significant Accounting Policies
Note 6: Prepaid Expenses
Note 7: Marketable Securities
Note 8: Investment in Third Party
Note 9: Promissory Note - Related Party
Note 10: Related Party Transactions
Note 11: Due To First Insurance Funding
Note 12: Convertible Notes Payable
Note 13: Stock Incentive Plan
Note 14: Stockholders' Deficit
Note 15: Stock Options
Note 16: Business Combination - Sapphire
Note 17: Commitment and Contingencies
Note 18: Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
Item 15. Exhibits.
EX-31.1 f10q033120_ex31z1.htm
EX-31.2 f10q033120_ex31z2.htm
EX-32.1 f10q033120_ex32z1.htm
EX-32.2 f10q033120_ex32z2.htm

Axim Biotechnologies Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
4.53.01.50.1-1.4-2.92012201420172020
Assets, Equity
0.5-0.1-0.7-1.2-1.8-2.42012201420172020
Rev, G Profit, Net Income
4.02.81.70.5-0.6-1.82012201420172020
Ops, Inv, Fin

10-Q 1 f10q033120_10q.htm FORM 10-Q QUARTERLY REPORT Form 10-Q Quarterly Report

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2020

 

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

 

Document1.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)

 

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 [X] No [   ]

 

Indicate by check mark whether registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [   ] No [X]

 

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 [X]

Emerging growth Company [   ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [   ] No [X]


1


 

 

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: 131,089,578 of common stock, par value $0.0001 per share, outstanding as of June 29, 2020.

 

Explanatory Note

 

As previously disclosed in the Current Report on Form 8-K filed by AXIM Biotechnologiest, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”) on May 15, 2020, the filing of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Form 10-Q”) was delayed as a result of the disruptions caused by the novel coronavirus (“COVID-19”) pandemic, including the impact of (a) certain employees working from home, which slowed the Company’s routine quarterly close process, (b) delays in communications with various counterparties and (c) the need to perform additional analyses and procedures relating to the COVID-19 pandemic’s impact on the Company’s business and operations and on the financial statements included in the Form 10-Q. The Company has relied on the “Order Under Section 36 of the Securities Exchange Act Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies” dated March 25, 2020 (Release No. 34-88465), issued by the SEC in light of the COVID-19 pandemic, to delay the filing of the Form 10-Q.

 


2


 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

AXIM BIOTECHNOLOGIES, INC.

 

 

 

 

Page

 

 

Condensed Consolidated Balance Sheet as of March 31, 2020 (unaudited) and December 31, 2019

4

 

 

Condensed Consolidated Statements of Operations for the three months periods ended March 31, 2020 and 2019 (unaudited)

5

 

 

Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the three months ended March 31, 2020 and 2019 (unaudited)

6

 

 

Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited)

7

 

 

Notes to Condensed Consolidated Financial Statements (unaudited).

8

 

 

 

 

 


3


 

 

AXIM BIOTECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

December 31, 2019

ASSETS

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash

$

442,749

$

511,630

 

Accounts receivable

 

175

 

315,843

 

Inventory

 

510,301

 

487,814

 

Prepaid expenses

 

43,634

 

77,606

 

Loan receivable

 

5,000

 

5,000

 

Marketable securities

 

109,040

 

213,745

 

Investment in Joint Venture

 

27,490

 

27,490

 

 

Total current assets

 

1,138,389

 

1,639,128

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation

 

25,273

 

2,237

 

 

 

 

 

 

 

Other Assets:

 

 

 

 

 

Acquired intangible asset - intellectual property licensing agreement, net

 

47,375

 

50,534

 

Patent - Sapphire

 

249,521

 

-

 

Goodwill

 

3,541,451

 

-

 

Research in progress

 

5,900,000

 

-

 

Security deposit

 

12,785

 

-

 

 

Total other assets

 

9,751,132

 

50,534

 

 

 

 

 

 

 

TOTAL ASSETS

$

10,914,794

$

1,691,899

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’  DEFICIT

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued liabilities

$

939,625

$

774,781

 

Due to Cross & Company

 

518,948

 

-

 

Due to shareholder

 

5,000

 

5,000

 

Due to first insurance funding

 

7,782

 

42,121

 

Due to related party

 

1,526,603

 

1,526,603

 

Promissory note (related party note payable $1,053,436, including $173,436 interest)

 

1,382,571

 

1,046,926

 

 

 

 

 

 

 

 

 

Total current liabilities

 

4,380,529

 

3,395,431

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

Deferred tax liability

 

1,845,000

 

-

 

Convertible note payable net of unamortized debt discount

 

5,050,977

 

5,056,865

 

 

 

 

 

 

 

 

 

Total long-term liabilities

 

6,895,977

 

5,056,865

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

11,276,506

 

8,452,296

 

 

 

 

 

 

 

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 and outstanding, respectively

 

50

 

50

 

 

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, 300,000,000 shares authorized

 

 

 

 

 

 

123,309,045 and 64,854,539 shares issued and outstanding, respectively

 

12,331

 

6,485

 

Additional paid in capital

 

37,094,266

 

28,623,060

 

Common stock to be issued

 

-

 

50,000

 

Accumulated deficit

 

(37,468,409)

 

(35,440,042)

TOTAL STOCKHOLDERS’  DEFICIT

 

(361,712)

 

(6,760,397)

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’  DEFICIT

$

10,914,794

$

1,691,899

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


4


 

 

AXIM BIOTECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

For the

 

For the

 

 

Three Months Ended

 

Three Months Ended

 

 

March 31, 2020

 

March 31, 2019

 

 

 

 

 

Revenues

$

7,140

$

17,061

 

 

 

 

 

Cost of goods sold

 

2,417

 

4,381

Gross profit

 

4,723

 

12,680

 

 

 

 

 

Operating Expenses:

 

 

 

 

Research and development expenses

 

620,510

 

532,679

Selling, general and administrative

 

1,231,046

 

1,772,831

Depreciation

 

839

 

839

 

 

 

 

 

Total operating expenses

 

1,852,395

 

2,306,349

 

 

 

 

 

Loss from operations

 

(1,847,672)

 

(2,293,669)

 

 

 

 

 

Other (income) expenses:

 

 

 

 

Unrealized loss on marketable securities

 

104,705

 

(25,000)

Amortization

 

19,363

 

18,662

Interest expense

 

56,627

 

55,346

Total other (income) expenses

 

180,695

 

49,008

 

 

 

 

 

Loss before provision of income tax

 

(2,028,367)

 

(2,342,677)

Provision for income tax

 

-

 

-

 

 

 

 

 

NET LOSS

$

(2,028,367)

$

(2,342,677)

 

 

 

 

 

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(2,028,367)

$

(2,342,677)

 

 

 

 

 

Loss per common share - basic and diluted

$

(0.03)

$

(0.04)

 

 

 

 

 

Weighted average common shares outstanding - basic and diluted

 

75,052,908

 

60,252,001

 

 

 

 

 

 

 

 

 

 

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


5


 

 

AXIM BIOTECHNOLOGIES, INC.

Unaudited Condenses Consolidated Statement of Stockholders’ Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A

Convertible

Series B

Convertible

Series C

Convertible

Common Stock

Additional

 

 

 

Common Stock

Preferred Stock

Preferred Stock

Preferred Stock

Preferred Stock

to be

Paid In

Accumulated

 

 

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

Issued

Capital

Deficit

Total

Balance at December 31, 2018

59,582,890

$5,958

-

$     -

-

$     -

500,000

$50

500,000

$50

$41,000

$22,863,608

$(28,992,485)

$(6,081,819)

 

Common stock issued against common stock to be issued

-

-

-

-

-

-

-

-

-

-

7,500

-

-

7,500

 

Stock based compensation - stock options

-

-

-

-

-

-

-

-

-

-

-

1,137,500

-

1,137,500

 

Common stock issued under registration statement on Form S-3

1,250,000

125

-

-

-

-

-

-

-

-

-

1,592,687

-

1,592,812

 

Common stock issued per stock purchase agreement

239,521

24

-

-

-

-

-

-

-

-

-

399,976

-

400,000

 

Net loss

-

-

-

-

-

-

-

-

-

-

-

-

(2,342,677)

(2,342,677)

 

Balance at March 31, 2019

61,072,411

$6,107

-

$     -

-

$     -

500,000

$50

500,000

$50

$48,500

$25,993,771

$(31,335,162)

$(5,286,684)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

64,854,539

$6,485

-

$     -

-

$     -

500,000

$50

500,000

$50

$50,000

$28,623,060

$(35,440,042)

$(6,760,397)

 

Common stock issued against common stock to be issued

250,000

25

-

-

-

-

-

-

-

-

(50,000)

49,975

-

-

 

Common stock issued for services

662,839

66

-

-

-

-

-

-

-

-

-

287,434

-

287,500

 

Common stock issued under registration statement on Form S-3

3,541,667

355

-

-

-

-

-

-

-

-

-

962,145

-

962,500

 

Subscription price adjustment

-

-

-

-

-

-

-

-

-

-

-

(518,948)

-

(518,948)

 

Beneficial conversion of 190K convertible note

-

-

-

-

-

-

-

-

-

-

-

190,000

-

190,000

 

Common stock issued for acquisition

54,000,000

5,400

-

-

-

-

-

-

-

-

-

7,500,600

-

7,506,000

 

Net loss

-

-

-

-

-

-

-

-

-

-

-

-

(2,028,367)

(2,028,367)

 

Balance at March 31, 2020

123,309,045

$12,331

-

$     -

-

$     -

500,000

$50

500,000

$50

$     -

$37,094,266

$(37,468,409)

$(361,712)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


6


 

 

 

AXIM BIOTECHNOLOGIES, INC.

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the

 

For the

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

March 31, 2020

 

March 31, 2019

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net loss

$

(2,028,367)

$

(2,342,677)

 

 

 

 

 

 

 

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation

 

839

 

839

 

Stock based compensation

 

287,500

 

1,145,000

 

Amortization of prepaid insurance

 

31,280

 

25,768

 

Amortization of debt discount

 

19,363

 

18,662

 

Amortization of intangible assets

 

3,637

 

3,158

 

Unrealized gain (loss) on marketable securities

 

104,705

 

(25,000)

 

 

 

 

 

 

 

Changes in operating assets & liabilities:

 

 

 

 

 

Decrease (increase) in accounts receivable

 

315,668

 

(13,000)

 

Decrease in prepaid expenses

 

2,692

 

-

 

Increase in Inventory

 

(22,487)

 

(68,676)

 

Increase in due to First Insurance Funding

 

(34,339)

 

(23,280)

 

Increase in accounts payable and accrued expenses

 

211,656

 

545,705

 

Decrease in security deposits

 

-

 

4,952

 

Increase in property and equipment

 

(3,342)

 

-

 

Net cash used in operating activities

 

(1,111,195)

 

(728,549)

 

 

 

 

 

 

CASH FLOW FROM INVESTING ACTIVITIES:

 

 

 

 

 

Cash acquired in acquisition

 

79,814

 

-

 

Net cash provided by investing activities

 

79,814

 

-

 

 

 

 

 

 

CASH FLOW FROM FINANCING ACTIVITIES:

 

 

 

 

 

Repayment of related party loans

 

-

 

(7,500)

 

Common stock issued under registration statement on Form S-3

 

962,500

 

1,592,812

 

Net cash provided by financing activities

 

962,500

 

1,585,312

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(68,881)

 

856,763

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

511,630

 

1,805,627

 

Cash and cash equivalents at end of period

$

442,749

$

2,662,390

 

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

$

50,000

$

-

 

Account receivable against conversion of debt and interest

$

75,074

$

-

 

Common stock issued against CS subscription

$

-

$

400,000

 

Shares issued for acquisition of Sapphire Biotechnology

$

7, 506,000

$

-

 

Deferred tax liability accounted for as a result of Sapphire Biotech Acquisition

$

1,845,000

$

-

 

Assets acquired and liability assumed as a result of Sapphire Biotech Acquisition

$

525,365

$

-

 

BCF related to discount on conversion

$

190,000

$

-

 

Other

$

71,782

$

-

 

Subscription price adjustment

$

518,948

$

-

 

 

 

 

 

 

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


7


 

 

AXIM BIOTECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020 and 2019

 

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 45 Rockefeller Plaza 20th Floor, Suite 83, New York, NY 10111. 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 100% interest in Can Chew License Company a Nevada incorporated licensing Company, through the exchange of 5,826,706 shares of its common stock.

 

NOTE 2: ACQUISITION OF SAPPHIRE BIOTECH, INC.

 

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:  (i) acquire 100% of Sapphire’s outstanding capital (consisting of 100,000,000 shares of common stock and zero (0) shares of Preferred Stock); and (ii) assume all of the outstanding debt of Sapphire. The outstanding debt includes two (2) convertible notes in the principal amounts of $310,000 and $190,000, respectfully.

 

Pursuant to the terms of the Share Exchange Agreement, the Company acquired 100% of the issued and outstanding shares of Sapphire by means of a share exchange with the Sapphire Stockholders in exchange for 54,000,000 newly issued shares of the common stock of AXIM (the “Share Exchange”).  As a result of the Share Exchange, Sapphire became a 100% owned subsidiary of AXIM, which on a going forward basis will result in consolidated financial reporting by AXIM to include the results of Sapphire. The closing of the Share Exchange occurred concurrently with entry into the Share Exchange Agreement (the “Closing”).  

 

NOTE 3: BASIS OF PRESENTATION:

 

The unaudited condensed consolidated financial statements of AXIM Biotechnologies, Inc. (formerly Axim International, Inc.) as of March 31, 2020, and for the three months period ended March 31, 2020 and 2019 have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”).

 

The following (a) balance sheets as of March 31, 2020 (unaudited) and December 31, 2019, which have been derived from audited financial statements, and (b) the unaudited interim statements of operations and cash flows of AXIM Biotechnologies, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020. These unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on May 14, 2020.


8


 

 

NOTE 4: GOING CONCERN

 

The Company’s condensed consolidated financial statements have been presented assuming that the Company will continue as a going concern. As shown in the condensed consolidated financial statements, the Company has negative working capital of $3,242,140 and has an accumulated deficit of $37,468,409 has cash used in operating activities of continuing operations $1,111,195. The Company extinguished its old debt and entered in debt exchange agreement. On April 16, 2018, the Company entered into a Stock Purchase Agreement and sold 3,945,000 shares of our common stock registered under the Registration Statement on Form S-3 declared effective by the Securities and Exchange Commission on September 14, 2017. This includes sales for the three months ended March 31, 2020, during which the Company sold 3,541,667 shares and raised additional capital of $962,500 through this 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 the unaudited condensed consolidated 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 and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate and expected dividend rate.

 

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, 2020 and December 31, 2019, 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, 2020 and December 31, 2019. 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, 2020 and December 31, 2019, one customer and two customers accounted for 100% and 100% of accounts receivable, respectively. For the three months period ended March 31, 2020, one customer accounted for 24% of total revenue. For the three months period ended March 31, 2019, one customer accounted for 76% of total revenue.

 

Inventory

 

Inventory consists of finished goods available for sale and raw materials owned by the Company and are stated at the lower of cost or market. As of March 31, 2020 and December 31, 2019, the Company had $218,829 and $175,304 of finished goods and $291,472 and $312,511 of raw materials; respectively.

 

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. For the three months ended March 31, 2020 and 2019 the Company recorded $839 of depreciation expenses for each of these periods.


9


 

 

Intangible Assets

 

As required by generally accepted accounting principles, trademarks and patents are amortized if they have a definite life, and not amortized if they have an indefinite life and then they are tested annually for impairment. Intangible assets as of March 31, 2020 and December 31, 2019 amounted to $9,738,347 and $50,534 net of accumulated amortization and impairment losses of $668,535 and $664,898, respectively. During the three months period ended March 31, 2020 and 2019, the company recorded $3,637 and $3,158 of amortization and impairment loss, respectively.

 

Revenue Recognition

 

On January 1, 2018 the Company adopted 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. Previous practices were broadly consistent with this approach, and the company determined the amount of revenue based on the amount customer paid or promised to pay.

 

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 three month ended March 31, 2020 and 2019 amounted to $7,140 and $17,061, respectively.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Axim Biotechnologies, Inc. and its wholly owned subsidiaries Axim Holdings, Inc. Can Chew License Company, Marina Street LLC, Axim Biotechnologies (the Netherland Company) and Sapphire Biotech, Inc. and wholly-owned subsidiary Sapphire Diagnostics LLC as of March 31, 2020. All significant intercompany transactions and balances have been eliminated in consolidation.

 

Derivative Liabilities

 

The Company assessed the classification of its derivative financial instruments as of March 31, 2020 and December 31, 2019, which consist of convertible instruments and rights to shares of the Company’s common stock and determined that such derivatives meet the criteria for liability classification under ASC 815.

 

ASC 815 generally provides 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 instrument 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 subject to the requirement of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.

 

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 provisions of ASC 820-10 only apply to the Company’s investment securities, which are carried at fair value.


10


 

 

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

 

The Company categorizes a financial instrument in the fair value hierarchy based on the lowest level of input that is significant to its fair value measurement.

 

 

As of March 31, 2020

 

 

Quoted Market Prices in Active Markets
(Level 1)

 

Internal Models with Significant Observable
Market Parameters
(Level 2)

 

Internal Models
with Significant Unobservable
Market Parameters
(Level 3)

 

 

Total Fair Value
Reported in
Financial Statements

 

 

 

 

 

 

Marketable Securities

$109,040

$ -

$ -

$109,040

 

 

As of December 31, 2019

 

 

Quoted Market Prices in Active Markets
(Level 1)

 

Internal Models with Significant Observable
Market Parameters
(Level 2)

 

Internal Models
with Significant Unobservable
Market Parameters
(Level 3)

 

 

Total Fair Value

Reported in

Financial Statements

 

 

 

 

 

 

Marketable securities

$213,745

$ -

$ -

$213,745

 

The Company recorded a change in FMV of trading securities as unrealized loss of $104,705 and unrealized gain of $25,000 for the three months ended March 31, 2020 and 2019, respectively. These securities are classified as trading.

 

The Company did not have any Level 2 or Level 3 assets or liabilities as of March 31, 2020 and December 31, 2019, except for its convertible notes payable and derivative liability. The carrying amounts of these liabilities at March 31, 2020 and December 31, 2019 approximate their respective fair value based on the Company’s incremental borrowing rate.

 

Cash is as of March 31, 2020 and December 31, 2019 is classified as Level 1 within our fair value hierarchy.

 

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”.


11


 

 

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.

 

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 places its cash and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit. The Company had $240,769 and 0 allowance for doubtful accounts at March 31, 2020 and December 31, 2019. The Company had $175 accounts receivable at March 31, 2020 and $315,843 at December 31, 2019.


12


 

 

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.

 

There were 22,367,172 common share equivalents at March 31, 2020 and 16,295,498 common shares at December 31, 2019. For the three months ended March 31, 2020 and 2019 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.

 

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.

 

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. The Company incurred research and development expenses of $620,510 and $532,679 for the three months ended March 31, 2020 and 2019 respectively.

 

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.

 

Recently Issued Accounting Standards

 

In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements, which provides clarification on implementation issues associated with adopting ASU 2016-02. The implementation issues noted in ASU 2019-01 include determining the fair value of the underlying asset by lessors that are not manufacturers or dealers, presentation on the statement of cash flows for sales-type and direct financing leases, and transition disclosures related to Topic 250, Accounting Changes and Error Corrections. We will apply the guidance, if applicable, as of January 1, 2019, the date we adopted ASU 2016-02. Refer to the discussion of ASU 2016-02 below for the impact on our financial position, results of operations, cash flows, or presentation thereof. In February 2016, FASB issued an update 2016-02 and created Topic 842, Leases. Topic 842 effects any entity that enters into a lease arrangement with another person. The guidance in this update supersedes Topic 840. The main difference between previous GAAP and Topic 842 is the recognition of accounting policies for leases classified as operating leases under previous GAAP. The amendments in this update for public business entities that file with the Securities and Exchange Commission are effective for fiscal years beginning after Dec. 15, 2018 and the interim periods within that year with early application permitted for all entities. The Company is adopting the lease accounting model as described in Topic 842 for the fiscal year begins on January 1, 2019.

 

The Company has a long-term operating lease, and the long-term operating lease only took effect in April 2020. Thus the adoption of ASC 842 had no impact on the condensed consolidated financial statements.


13


 

 

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 818): Clarifying the Interaction Between Topic 808 and Topic 606, which clarifies when transactions between participants in a collaborative arrangement are within the scope of the FASB’s revenue standard, Topic 606. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. We do not expect the adoption of this ASU to have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

 

In October 2018, the FASB issued ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, that changes the guidance for determining whether a decision-making fee paid to a decision makers and service providers are variable interests. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. The adoption of this ASU did not have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

 

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. We determined it had no material impact of this ASU on our financial position, results of operations, cash flows, or presentation thereof.

 

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 March 31, 2020 and December 31, 2019:

 

 

 

March 31,

2020

 

December 31,

2019

Prepaid insurance

$

36,455

$

67,734

Prepaid raw material/inventory

 

7,179

 

9,872

 

$

43,634

$

77,606

 

For the three months ended March 31, 2020 and 2019, the Company recognized amortization of prepaid expense of $31,280 and $25,768, respectively.

 

NOTE 7: MARKETABLE SECURITIES

 

The Company received marketable securities, 10,300,000 fully paid ordinary unrestricted shares in Impression Healthcare Limited (Australian Company), traded on Australian Security Exchange by the code IHL as part of the agreement and letter of intent (LOI). The Company categorize these securities as trading securities and report them at fair value, with unrealized gains and losses included in earnings. On December 31, 2019, the Company received another 2,000,000 shares and sold 7,375,000 shares. On December 31, 2019 the stock price was A$ 0.062 per share as quoted on asx.com.au and exchange rate of $0.7 AUD/USD as quoted on oanda.com and had FMV $213,745. The change to the FMV in marketable security for this period resulted in realized and unrealized gain of $268,274 and $113,748 respectively. As of March 31, 2020 the stock price was A$ 0.036 per share as quoted on asx.com.au and exchange rate of $0.615 AUD/USD as quoted on olanda.com. The Company recorded securities at FMV valued at $109,040. For the three months ended March 31, 2020 and 2019, the Company recorded realized and unrealized gain (loss) of $-0-, $-0-, ($104,705) and $25,000, respectively.


14


 

 

NOTE 8: INVESTMENT IN THIRD PARTY

 

On June 11, 2019 the Company entered in operating agreement as 1/3 member of KAM Industries, LLC, a Wyoming Limited Company. On June 18, 2019 KAM Industries LLC, entered into Joint Venture Agreement to receive a percentage of the industrial hemp harvest yield on a parcel of land in Wayne County, North Carolina owned by Farm Share, LLC with whom KAM contracted to purchase a percentage of the hemp harvest for the 2019 growing season. Once the hemp is harvested from the 2019 growing season The Company will get its 1/3 share at no additional cost. The agreement then expires unless renewed for 2020 with an additional payment. The Company paid $27,490 for 33.3% of KAM Industries, LLC and recorded $27,490 as current asset as of December 31, 2019. This investment is counted by using cost method of accounting. An officer in KAM Industries, LLC is the Company’s CEO.

 

As of March 31, 2020, Farm Share, LLC is in the middle of the processing of the entire 2019 crop. During the virus shut down the extraction laboratories were not considered essential, but they were back in business as of June 11, 2020.

 

NOTE 9: PROMISSORY NOTE - RELATED PARTY

 

On August 8, 2014 the Company entered into a Promissory Note Agreement with CanChew Biotechnologies, LLC (CCB), a related party (the owners of CCB also own a majority of the outstanding shares of the Company), under which it borrowed $1,000,000 to fund working capital. The original loan was a demand note bearing interest at the rate of 7% per annum, which amount, along with principal, was payable upon demand. The demand note was amended effective January 1, 2015 to reduce the annual interest rate to 3%. All other terms and conditions shall remain in full force and effect. The Company is in discussions to have the demand note modified or exchanged for a longer term, fixed maturity note.

 

The following table summarizes promissory note payable as of March 31, 2020 and December 31, 2019:

 

 

 

March 31,

2020

 

December31,

2019

Promissory note payable, due on demand, interest at 3% p.a.

$

880,000

$

880,000

Accrued Interest

 

173,436

 

166,926

 

$

1,053,436

$

1,046,926

 

For the three months ended March 31, 2020 and 2019 the Company recognized interest expense of $6,510 and $6,510, respectively on this note.

 

NOTE 10: RELATED PARTY TRANSACTIONS

 

The Company has received working capital advances from CanChew totaling $1,526,603 and $1,526,603 as of March 31, 2020 and December 31, 2019 respectively. The advances are payable on demand. The Company is in discussions to have the advances reduced to a longer term, fixed maturity note.

 

The Company owes $5,000 to the chairman of the board of the Company for a working capital advance of $5,000 made in May of 2014.

 

Under an agreement Mr. Changoer received on March 20, 2018 the Company issued 50,000 restrictive shares of its common stock and recorded $235,000 of compensation expenses in the accompanying consolidated financial statements to account for the issuance of the incentive shares. As of March 31, 2020 and December 31, 2019, the total outstanding balance was $20,000 and $23,696 respectively for consulting fees to Mr. Changoer.

 

On September 25, 2018, the Company amended Independent Director Compensation agreement. Under the agreement in lieu of the share compensation due to independent director of the Company for his annual service ending May 23, Dr. Philip A. Van Damme shall receive cash compensation of $20,000. Started from August 1, 2019 the company has been paying monthly clinical trial fee of $5,000. As of March 31, 2020 and December 31, 2019, the total outstanding balance was $21,877 and $9,377 respectively.

 

Effective January 1, 2019 the company entered into a thirty-months consulting agreement with the chairman of the board which pays a monthly consulting fee of $20,000. The company has also been paying a monthly bonus fee of 15,000; this additional fee is on a month to month basis at the discretion of management. As of March 31, 2020 and December 31, 2019, the total outstanding balance was $35,000 and $35,000 respectively for consulting fees.


15


 

 

NOTE 11: DUE TO FIRST INSURANCE FUNDING

 

On June 25, 2019, the Company renewed its D&O and EPLI insurance policy with total premiums, taxes and fees for $97,000 and $6,849 respectively. A cash down payment of $20,850 was paid on July 16, 2019. Under the terms of the insurance financing, payments of $9,501, which include interest at the rate of 7.2% per annum, are due each month for nine months commencing on July 25, 2019.

 

On October 22, 2019, the Company renewed its CL Products Liability insurance policy with total premiums, taxes and fees for $18,864. A cash down payment of $1,886 was paid on October 24, 2019. Under the terms of the insurance financing, payment of $1,945, which include interest at the rate of 7.451% per annum, are due each month for nine months commencing on November 22, 2019.

 

The total outstanding due to First Insurance Funding as of March 31, 2020 and December 31, 2019 is $7,782 and $42,121; respectively.

 

NOTE 12: CONVERTIBLE NOTES PAYABLE

 

The following table summarizes convertible note payable- shareholder as of March 31, 2020 and December 31, 2019

 

 

 

March 31,

2020

 

December 31,

2019

Convertible note payable, due on July 1, 2028, interest at 3.5% p.a.

$

45,000

$

45,000

Accrued interest

 

5,972

 

5,578

 

$

50,972

$

50,578

 

The Convertible Note (“Note”) bears interest at the rate of 3.5% per annum, payable annually beginning on July 1, 2017, and matures on July 1, 2028. The Note is convertible, in whole or in part at any time at the option of the holder, into the Company’s common stock at a conversion price of $0.01, provided however, the holder of the Note is not permitted to convert an amount of the Note that would result in the holder and its affiliates owning more than 4.9% of the Company’s outstanding common stock. The balance on the Note as of March 31, 2020 and December 31, 2019 is $50,972 and $50,578, including interest accrued thereon of $5,972 and $5,578, respectively.

 

The following table summarizes convertible note payable as of March 31, 2020 and December 31, 2019:

 

 

 

March 31,

2020

 

December 31,

2019

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

$

484,478

$

484,478

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

 

1,000,000

 

1,000,000

Convertible note payable, due on November 1, 2021, interest at 3.5% p.a.

 

4,000,000

 

4,000,000

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

 

190,000

 

-

Accrued interest

 

235,897

 

261,541

Total

 

5,910,375

 

5,746,019

Less: unamortized debt discount/finance premium costs

 

(910,370)

 

(739,732)

Convertible note payable, net

 

5,000,005

 

5,006,287

Less: current portion

 

-

 

-

Long term portion

$

5,000,005

$

5,006,287

 

 

 

 

 

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 (i) $0.2201 or (ii) 80% of closing price of the Company’s common stock as of the date of conversion. At the inception of the Convertible Promissory Note, the Company determined a fair value of $1,062,500 of the embedded derivative. On October 20, 2016, the terms of a above Convertible note was modified into convertible note with fixed conversion price of $0.2201. The derivative liability balance on the Note as of modified date is $1,274,422 re-classed into additional paid in capital.


16


 

 

On March 8, 2018, the holder converted $210,422 note, which included $10,422 interest into 956,030 restricted shares of the Company’s common stock. On March 13, 2018 the holder converted $176,080 of convertible note, which included $10,558 interest, into 800,000 shares of the Company’s common stock. As of March 31, 2020 and December 31, 2019, the balance of secured convertible notes was $543,467 and $539,227, which included $58,989 and $54,749 accrued interest, respectively.

 

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 to (i) $0.2201 or (ii) 80% of closing price of the Company’s common stock as of the date of conversion. 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. On October 20, 2016, the terms of a above Convertible note was modified into convertible note with fixed conversion price of $0.2201. Since the modification happened on the same day, the note was treated to have fixed conversion price and accordingly debt discount was recorded related to beneficial conversion feature. In connection with this convertible note, the Company recorded a $499,318 discount on debt, 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, 2020 and December 31, 2019, this note has not been converted and the balance of secured convertible notes was $1,122,208 and $1,113,458, which included $122,208 and $113,458 accrued interest, respectively.

 

In 2018 the Company extinguished debt with Investor. Investor had proposed a financing transaction pursuant to which the Company will satisfy and retire the Original Note and Original Note current balance in simultaneous exchange for and upon delivery by the Company of a (1) new Convertible Promissory Note in the principal amount of $4,000,000 (the “Exchange Note”), and (2) 400,000 shares of the Company’s restricted common stock (the “Origination Shares”).

 

Simultaneously, a third-party Investor and the Company entered in Debt Exchange Agreement with Medical Marijuana Inc. As part of this agreement Investor will exchange and deliver the AXIM note to Medical Marijuana in exchange for a Convertible Promissory note. Axim consented to the transfer and assignment of the Axim Note in exchange for the issuance by the Medical Marijuana of the Exchange Note. The interest on this note is payable bi-annually every May 1 and November 1. On May 1, 2019 the Company paid accrued interest of $60,278.

 

As of March 31, 2020 and December 31, 2019, the balance of secured convertible note was $4,053,259 and $4,093,333 which included $53,259 and $93,333 accrued interest respectively.

 

On December 31, 2019, Sapphire Biotech, Inc. entered into an 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, see Note 8 for additional information. 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, Sapphire Biotech, Inc. 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.


17


 

 

During the three months ended March 31, 2020 and 2019, the Company amortized the debt discount on all the notes of $19,363 and $18,662, respectively, to other expenses. As of March 31, 2020 and December 31, 2019, the balance of secured convertible note was $191,441 and $0 which included $1,441 and $0 accrued interest respectively. As of March 31, 2020 and 2019, unamortized debt discount was $910,370 and $796,341, respectively.

 

On December 31, 2019, the Company 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 the Company 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. For the three months ended March 31, 2020, the principal and accrued interest balances were $324,218 and $756, respectively.

 

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. There were 9,806,000 shares available for issuance under the Plan as of December 31, 2019. On January 2, 2019, John Huemoeller the CEO was granted the option to purchase 2 million shares of Axim Common stock under the plan at a purchase price of $0.75 per share. 1 million options vested immediately and 1 million options vest at the end of 2019. For the three months ended March 31, 2020 and 2019 the Company recorded compensation expense of $287,500 and $1,145,000, respectively. As of March 31, 2020, John Huemoeller the CEO hasn’t exercised the option.

 

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 March 31, 2020, and December 31, 2019 there are -0- and -0- shares of undesignated preferred shares issued and outstanding, respectively.

 

Series A Convertible Preferred Stock

 

The Company also has authorized 1,000,000 shares of Series A Convertible Preferred Stock, which had been previously issued to Sanammad Foundation and subsequently assigned and transferred by Sanammad to Treo Holdings, LLC (“Treo”). On June 28, 2016 the Company, Sanammad and Treo agreed that the issuance of the Series A Convertible Preferred be rescinded and that such share issuance be cancelled. The Company accounted for this cancelation of preferred stock as equity transaction and accordingly the par value of preferred stock adjusted against additional paid in capital account.

 

Each share of the Series A Convertible Preferred Stock is convertible into five (5) shares of the Company’s common stock at any time at the discretion of the holder. The Series A Convertible Preferred Stock provides for a liquidation preference as follows; In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (a “Liquidation”), the assets of the Company available for distribution to its shareholders shall be distributed as follows. The holders of the Series A Convertible Preferred Stock shall be entitled to receive, prior to the holders of the other series of preferred stock, if any, and prior and in preference to any distribution of the assets or surplus funds of the Company to the holders of any other shares of stock of the Company by reason of their ownership of such stock: (i) all shares of common stock of any subsidiary of the Company which are held by the Company: and (ii) an amount equal to $1.00 per share with respect to each share of Series A Convertible Preferred stock, plus all declared but unpaid dividends with respect to such share. The Series A Convertible Preferred Stock also contains super-majority voting rights and a number of protective covenants. As of March 31, 2020, and December 31, 2019 there are -0- and -0- Series A Convertible Preferred shares issued and outstanding; respectively.

 

Series B Convertible Preferred Stock

 

On August 17, 2016 the Company designated up to 500,000 shares of a new Series B Convertible Preferred Stock (Series B Preferred Stock). The holders of the Series B Preferred are entitled to elect three 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 B Convertible Preferred is convertible into one share of the Company’s common stock. The Series B 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 B Preferred or the unanimous vote of all three Series B Directors.


18


 

 

On August 18, 2016 the Company issued all 500,000 shares of its newly designated Series B Preferred Stock to Sanammad Foundation in exchange for cash of $50,000. As the holders of the Series B Preferred Stock, Sanammad has designated the current directors, Dr. George E. Anastassov, Dr. Phillip A. Van Damme and Mr. Lekhram Changoer as their three Series B Directors.

 

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.

 

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.

 

Effective April 2, 2019, Blake N. Schroeder resigned as a member of the Company’s Board of Directors. Mr. Schroeder’s resignation was not because of any disagreements with the Company on matters relating to its operations, policies and practices.

 

On April 3, 2019 pursuant to the Company’s Amended and Restated Bylaws, the holder of the Company’s Series C Preferred Stock appointed Mauricio Javier Gatto-Bellora to fill the director seat vacated by the resignation of Mr. Schroeder.

 

Common Stock

 

The Company has authorized 300,000,000 shares of common stock, with a par value of $0.0001 per share. As of March 31, 2020, and December 31, 2019, the Company had 123,309,045 and 64,854,539 shares of common stock issued and outstanding, respectively.

 

2020 Transactions:

 

During the period between January 1, 2020 and March 31, 2020 the Company issued total 3,541,667 shares valued $962,500 pursuant to the Company’s Registration Statement on Form S-3. The Company received $962,500 in cash. The Company has an outstanding subscription price adjustment of $518,948 related to the issuance of the S-3 shares, which it expects to satisfy with the issuance of additional shares.

 

On January 13, 2020 the Company issued 250,000 restricted shares of its common stock to third party valued at $50,000, which were carried on the books as stock to be issued.

 

On January 23, 2020 and February 26, 2020 the Company issued 600,000, and 62,839 restricted shares of its common stock to third party valued at $262,500, and $25,000 pursuant to the stock purchase agreement for certain services, recorded as advertising and promotion expense and License, permits & Patents, respectively.


19


 

 

On March 17, 2020 the company acquired 100% of the issued and outstanding shares of Sapphire by means of a share exchange with the Sapphire Stockholders in exchange for 54,000,000 restricted shares of its common stock.

2019 Transactions:

 

During the period between January 1, 2019 and March 31, 2019 the Company issued total 1,250,000 shares valued $1,592,813 pursuant to the Company’s Registration Statement on Form S-3. The Company received $1,592,813 in cash.

 

On March 12, 2019 the Company issued 239,521 restricted shares of its common stock to third party valued at $400,000 pursuant to the stock purchase agreement. The cash was received in 2018.

 

NOTE 15: STOCK OPTIONS

 

On January 02, 2019, the Company granted 2,000,000 options with an exercise price of $0.75 per share to the Company owned by Mr. John Huemoeller, Chief Executive Officer of the Company.

 

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, 2020:

 

 

Options Outstanding

Options Exercisable

Exercise

Prices ($)

Number

Outstanding

Weighted

Average

Remaining

Contractual Life

(Years)

Weighted

Average

Exercise

Price ($)

Number

Exercisable

Weighted

Average

Exercise

Price ($)

$0.75

2,000,000

9

$0.75

2,000,000

$0.75

 

The stock option activity for the year ended March 31, 2020 is as follows:

 

 

Options

Outstanding

Weighted Average

Exercise Price

Outstanding at December 31, 2019

2,000,000

$0.75

Granted

-

-

Exercised

-

-

Expired or canceled

-

-

Outstanding at March 31, 2020

2,000,000

$ 0.75

 

For the three months ended March 31, 2020 and 2019 stock-based compensation expense related to vested options was $0 and $1,137,500, respectively. The Company determined the value of share-based compensation for options vesting during 2019 using the Black-Scholes fair value option-pricing model with the following weighted average assumptions: estimated fair value of Company’s common stock of $0.91, risk-free interest rate of 2.66%, volatility of 318%, expected lives of 10 years, and dividend yield of 0%.

 

NOTE 16: BUSINESS COMBINATION – SAPPHIRE

 

In March 2020, the Company acquired SAPPHIRE BIOTECH, Inc., a biotechnology company focusing on improving cancer care through the development of proprietary therapeutics for inhibiting cancer growth and metastasis. The Company issued 54,000,000 shares of common stock with a total fair value of $7,506,000, in exchange for all outstanding shares of SAPPHIRE BIOTECH, Inc. The Company accounted for the acquisition using the purchase method of accounting for business combinations. The purchase price and costs associated with the acquisition exceeded the preliminary estimated fair value of net assets acquired by $9,573,233, which was preliminarily assigned to intangible asset and goodwill. The Company incurred $6,000 of acquisition-related costs, which will be recorded as expense after the evaluation work been completed.

 

The Company expects to complete the valuation of the intangible assets acquired in the SAPPHIRE BIOTECH, Inc. transaction by July 2020. Pursuant to the valuation, the Company may assign a portion of the purchase price to in-process technology that previously had been initially assigned to goodwill. In management’s judgment, the amount assigned to in process research and development would reflect the amount the Company would reasonably expect to pay an unrelated party for each project included in the technology. Based on the final valuation, the remaining excess purchase price will be allocated existing patents and goodwill.

 

The aggregate purchase price of $7,506,000 consisted of common stock valued at $7,506,000. The value of the $7,506,000 common shares issued was determined based on the closing price of the Company’s common shares at the acquisition date.


20


 

 

The following table summarizes the consideration paid for SAPPHIRE BIOTECH and the estimated amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

 

Consideration:

 

 

Cash and cash equivalents

$

79,814

Property and equipment, net

 

20,533

Intangible assets including goodwill

 

9,763,233

Security deposit

 

12,785

Total asset acquired

$

9,876,365

 

 

 

Accrued expenses and other current liabilities

$

5,767

Deferred taxes liability

 

1,845,000

Notes Payable including convertible and discount on conversion

 

519,598

Total liabilities assumed

$

2,370,365

Net assets acquired

$

7,506,000

 

 

 

Of the $9,763,233 of acquired intangible assets, $5,900,000 was assigned to in-process research and development and $3,613,233 to goodwill that are not subject to amortization, and $1,845,000 was assigned to deferred tax liability at the date of acquisition. The remaining $250,000 of patent have a weighted-average useful life of approximately 20 years.

 

The $3,613,233 of goodwill is not expected to be deductible for tax purposes.

 

The allocation of the purchase price is based on preliminary data and could change when final valuation of certain intangible assets is obtained. The effective settlement of receivable/payable between the Company and Sapphire was deemed to be not material.

 

Disclosure of Pro Forma Information

 

The following (unaudited) pro forma consolidated results of operations have been prepared as if the acquisition of SAPPHIRE BIOTECH, Inc. had occurred at January 1, 2019:

 

 

 

March 31,

2020

 

March 31,

2019

Revenues

$

$7,140

$

$17,061

Net income(loss)

$

(2,455,268)

$

(2,403,488)

Net loss per share—Basic

$

(0.02)

$

(0.02)

Net loss per share—Diluted

$

(0.02)

$

(0.02)

 

The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results. During the three months ended March 31, 2020 Sapphire had no revenue transactions.

 

NOTE 17: COMMITMENT AND CONTINGENCIES

 

On September 1, 2016, the Company entered into an amended and restated employment agreement with Dr. George Anastassov, its Chief Executive Officer, Chief Financial Officer and Secretary. The agreement does not have a set term and may be terminated at any time by the Company or Dr. Anastassov with proper notice. Under the agreement, Dr. Anastassov receives an annual base compensation of $240,000 and an incentive payment of 2,000,000 shares of the Company’s common stock due upon execution of the agreement. On March 20, 2018 the Company issued 50,000 restrictive shares of its common stock and recorded $235,000 of compensation expenses in the accompanying consolidated financial statements to account for the issuance of the incentive shares. In addition, Dr. Anastassov is currently receiving an additional $15,000 per month as bonus compensation. On January 2, 2019 Dr. George Anastassov resigned as the Chief Executive Officer of Axim Biotechnologies, Inc. Dr. Anastassov will remain a member and Chairman of the Board of Directors and will retain the title of Founder in a consulting role with the Company.


21


 

 

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. As of December 31, 2019 the Company recorded $1,820,000 of compensation expenses for vested stock options. Beginning in October 2019, the board decided to increase CEO base salary to $35,000 per month. As of March 31, 2020 the Company recorded $287,500 of compensation expenses for common stock issued for services.

 

On September 1, 2016, the Company entered into an amended and restated employment agreement with Mr. Lekhram Changoer, its Chief Technology Officer. The agreement does not have a set term and may be terminated at any time by the Company or Mr. Changoer with proper notice. Under the agreement Mr. Changoer receives an annual base compensation of $240,000 and an incentive payment of 2,000,000 shares of the Company’s common stock due upon execution of the agreement.

 

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.

 

On August 21, 2018, AXIM Biotechnologies, Inc. (the “Company”) entered into an agreement with Revive Therapeutics Ltd. (“Revive”) to begin selling the Company’s flagship nutraceutical product throughout the rapidly expanding Canadian cannabis market. The agreement defines a relationship where Revive will seek regulatory approval for AXIM’s proprietary, controlled-release functional chewing gum which contains hemp oil and cannabidiol (CBD). Under the terms of the agreement, Revive will have a minimum purchase amount annually, which increases each year for the term of the agreement.

 

On September 10, 2018, AXIM Biotechnologies, Inc. (the “Company”) entered into a Letter of Intent (“LOI”) with Impression Healthcare Limited (“Impression”), Australia’s largest home dental impression company, for exclusive distribution of all AXIM® Biotech products throughout Australia and New Zealand.

 

Pursuant to the LOI, both parties will endeavor to enter into a definitive agreement whereby the parties will co-develop new products, initially for pre-clinical and phase 1 trials (among other clinical trials), including an oral rinse liquid targeted for the treatment of oral mucositis, strep throat, oral infections and gum disease. Pending initial discussions and an internal review of AXIM® Biotech and its product offerings, Impression will collaborate with AXIM® Biotech for the licensing and distribution of its current and future medicinal cannabis products for distribution in Australia and New Zealand. On December 20, 2018 the Company signed Exclusivity Agreement on terms that include Exclusivity period of 90 days after the date on which this agreement is executed with Impression in exchange for 10,300,000 ordinary fully paid shares in Impression at the price of A$0.02 per share and exchange rate of $0.74 AUD/USD valued $150,000 which the Company recognized as a revenue in 4th quarter of 2018. During the year ended December 31, 2019, the Company received another 2,000,000 shares and sold 7,375,000 shares. On March 31, 2020 the Company valuated the change on FMV of marketable securities and recorded unrealized loss of $104,705.

 

On May 31, 2019, AXIM Biotechnologies, Inc. (“AXIM”) entered into a cannabinoid product supply agreement with Impression Healthcare Limited (“Impression”), Australia’s largest home dental impression company, for the supply of the AXIM’s toothpaste and mouthwash containing cannabidiol (CBD) for its clinical trial for the treatment of periodontitis. The supply agreement is in preparation for a clinical trial to test the effectiveness of CBD in treating periodontitis. The clinical trial will be performed at Swinburne University of Technology in Melbourne, Australia. In accordance with the agreement, AXIM will supply the first batch of its patented toothpaste and mouthwash products containing CBD, along with associated placebo units for Impression to perform a randomized control clinical trial.


22


 

 

On July 2, 2019, AXIM Biotechnologies, Inc. (“AXIM”) entered into a multi-term, non-exclusive license and distribution agreement (“Agreement”) with Colorado based gum developer, KISS Industries, LLC (“KISS Industries”).  Under the terms of the Agreement, AXIM grants KISS Industries a non-exclusive license to formulate and sell products that fall within AXIM’s cannabinoid chewing gum patent in exchange for royalties to be paid to AXIM based upon KISS Industries sales in the United States and Mexico.  The Agreement also grants AXIM the right to: (i) acquire 10 percent of KISS Industries under certain conditions; and (ii) match any outside future offer to acquire KISS Industries as a whole.  Further, AXIM’s CEO John W. Huemoeller II will also join the Board of Directors of KISS Industries..

 

In exchange for this license Kiss Industries will pay Axim 6% of gross sales as a royalty on all licensed products sold by Kiss. In the territory covered by this license which is the USA and Mexico. (Minimum annual royalty $50,000). Kiss will manufacture for Axim various licensed products at a price equal to 140% of Kiss’s cost. As of December 31, 2019 and March 31, 2020 Kiss Industries did not sell any Axim’s products.

 

Industry Sponsored Research Agreement— SAPPHIRE BIOTECH, Inc. 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. In consideration of the License executed between Skysong Innovations and the Company, the SRA provides for a reduced overhead of 5% instead of the usual 67.7%. This overhead fee differential of $89,851 will be deferred for five (5) years with interest of 5% compounded annually.

 

Operating Lease

 

The Company is renting an office at 45 Rockefeller Plaza 20th Floor Suite 83, New York, NY 10111 on a month to month basis the monthly rent is $295.

 

The Company is renting a warehouse at Boelewerf 32, 2987 VD, Ridderkerk, Netherlands on a month to month basis, monthly rent is EUR 1,731 or approximately $2,000.

 

Lease Agreement—On March 3, 2020, SAPPHIRE BIOTECH, Inc. entered into a 3-year lease agreement (“Lease”) to relocate to a larger space within the same business park. The current lease was due to expire September 30, 2020 and afforded 1,166 square feet at $2,595 base rent. The new space totals 1,908 square feet with base rent in the 1st year $4,713, 2nd year $4,854 and 3rd year $5,000. Upon commencement of the Lease on April 25, 2020, the previous lease will expire.

 

Litigation

 

As of March 31, 2020, and this report issuing date, the Company is not a party to any pending material legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. To the knowledge of management, no director, executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent of the Company’s Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

 

NOTE 18: SUBSEQUENT EVENTS

 

On April 1, 2020 the Company issued 1,953,125 S-3 shares valued at $250,000 pursuant to the Company’s Registration Statement on Form S-3. The cash was received subsequent to March 31, 2020.

 

On April 21, 2020 the Company issued 2,000,000 S-3 shares valued at $298,000 pursuant to the Company’s Registration Statement on Form S-3. The cash was received subsequent to March 31, 2020.

 

On April 21, 2020 the Company issued 1,176,470 restricted shares of its common stock to third party valued at $100,000 pursuant to the stock purchase agreement. The cash was received subsequent to March 31, 2020.

 

On May 22, 2020 the Company issued 190,810 and 286,215 S-8 shares valued at $20,000 and $35,000 pursuant to the Company’s Registration Statement on Form S-8 for severance.

 

On June 10, 2020 the Company issued 2,173,913 restricted shares of its common stock to third party valued at $500,000 pursuant to the stock purchase agreement. The cash was received subsequent to March 31, 2020.


23


 

 

On June 24, 2020 the Company issued 625,000 restricted shares of its common stock to third party valued at $100,000 pursuant to the stock purchase agreement. The cash was received subsequent to March 31, 2020.

 

Impression Settlement Agreement

 

On April 14, 2020 the company terminated its marketing and production agreement with impression healthcare by mutual consent of both parties.

 

COVID-19

 

As previously discussed in the Current Report on Form 8-K filed by AXIM Biotechnologies, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”) on May 15, 2020, the filing of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Form 10-Q”) was delayed as a result of the disruptions caused by the novel coronavirus (“COVID-19”) pandemic, including the impact of (a) certain employees working from home, which slowed the Company’s routine quarterly close process, (b) delays in communications with various counterparts and (c) the need to perform additional analyses and procedures relating to the COVID-19 pandemic’s impact on the Company’s business and operations and on the financial statements included in the Form 10-Q. The Company has relied on the “Order Under Section 36 of the Securities Exchange Act Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies” dated March 25, 2020 (Release No. 34-88465), issued by the SEC in light of the COVID-19 pandemic, to delay the filing of Form 10-Q; and expects to file its Quarterly report for the period ended March 31, 2020, on Form 10-Q approximately 45 days after May 15, 2020.

 

Sanammad Settlement Agreement

 

On May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc., a Nevada corporation (the “Company”), entered into an Agreement (the “Separation Agreement”) by and among the Company, CanChew License Company (“CanCo”), CanChew Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad Foundation, US (collectively, the “Sanammad Parties”), pursuant to which, among other matters as described herein, Drs. Anastassov and Van Damme and Mr. Changoer resigned as members of the Company’s Board of Directors.

 

Pursuant to the Separation Agreement, the Company transferred and assigned to an entity designated by Dr. Anastassov all of the Company’s cannabis-related intellectual property other than the inventions and discoveries described in that certain cannabis-related patent application filed by the Company’s wholly-owned subsidiary, Sapphire Biotech, Inc. (water-soluble cannabinoid molecules). The Company also transferred 100% of its interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set forth above, any and all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in its entirety.

 

In addition, in consideration for the payment by the Company of $65,000, the Company purchased 100% of the issued and outstanding shares of Series B Preferred Stock held by the Sanammad Parties. Such shares shall be retired to treasury of the Company. The Sanammad Parties also agreed to forfeit and assign back to treasury, for no consideration, a total of 18,570,356 shares of the Company’s common stock.

 

In addition, each of Drs. Anastassov and Van Damme and Mr. Changoer have agreed to subject the shares of the Company’s common stock held by each of them to lock-up and leak-out restrictions, as follows: they shall not sell shares for a period of 12 months following the Effective Date and, thereafter, subject to a daily volume limitation of 5%, on an aggregate basis among them.

 

Further, the Company terminated the Consulting Agreement of Dr. Anastassov and the Employment Agreements for each of Dr. Van Damme and Mr. Changoer. In connection with the termination of Dr. Anastassov’s Consulting Agreement, the Company agreed to pay severance in the amount of $35,000 for March 2020 and $20,000 per month thereafter through July 2021 (the termination date contemplated by the Consulting Agreement). Commencing for the April 2020, the Company may, in its sole discretion, pay the $20,000 severance obligation by the issuance of shares of the Company’s common stock registered pursuant to the Registration Statement on Form S-8 filed with the Commission on May 29, 2015 (“S-8 Shares”). If the gross cash proceeds from the sale of any S-8 Shares issued in lieu of cash severance is less than $20,000, as determined 20 days after issuance of such S-8 Shares, then the Company has agreed to issue additional shares that would serve to “true-up” the value of the shares to the $20,000 monthly severance obligation; provided, however, that if 30 days after the date the severance payment is due the gross proceeds from the sale of S-8 Shares is less than $20,000, the Company must pay the shortfall in cash. In addition, for each month that Dr. Anastassov is entitled to receive severance, he shall receive S-8 Shares in an amount equal to the lesser of (a) 150,000 S-8 Shares, or (b) S-8 Shares valued at $15,000 based upon the closing price of the Company’s common stock as of the due date of the severance payment obligation.


24


 

 

In connection with the termination of the Employment Agreements of Dr. Van Damme and Mr. Changoer, Mr. Changoer’s severance payments shall be $20,000 per month for 12 months, commencing April 2020 (paid in arrears) and Dr. Van Damme’s severance payments shall be $5,000 per month for 12 months, similarly commencing April 2020 and paid in arrears. The Company has the right to pay each of Dr. Van Damme’s and Mr. Changoer’s monthly severance payments in S-8 shares in lieu of cash subject to the same terms and restrictions (including true-up terms) as set forth above for Dr. Anastassov.

 

The Company retains the right to prepay the severance obligations to Drs. Anastassov and Van Damme and Mr. Changoer, without penalty.

 

No claims were alleged by the Company against any party, and no claims were alleged against the Company. However, in connection with the transactions described above, the parties entered into a general mutual release of all claims.

 

Convertible Promissory Note

 

As reported on the Company’s Current Report on Form 8-K dated December 7, 2018, on November 30, 2018, the Company issued to an institutional investor a Convertible Promissory Note (the “Note”), and the Note was later transferred to Medical Marijuana, Inc. (“Lender”). On May 6, 2020, the parties entered into an Addendum to the Note pursuant to which, commencing on May 1, 2020, interest shall accrue, at the original rate of 3.5%, and shall be payable on a semi-annual basis commencing November 1, 2020. The maturity date of the Note was extended until November 1, 2026. In addition, the Conversion Price was reduced in the Addendum from $1.50 to $0.25 per share.

 

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 $350,000 and a remaining balance due of approximately $100,000 (the “Note”). The purchase price for the Note was $100,000 payable by the Company issuing Seller One Million (1,000,000) restricted shares of the Company’s Common Stock. Effective May 6, 2020, the Company and Maker entered into a Forbearance Agreement whereby the Company agreed to forbear from making any collection efforts on the Note for a period of 24 months so long as Maker has not breached the Separation Agreement. Following 24 months, if there has been no breach of the Separation Agreement by Maker, repayment of the Note, including all principal and unpaid interest, will be waived in full.


25


 

 

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”). You may read and copy any document we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549, U.S.A. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also 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 Quarterly Report on Form 10-Q, 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, was 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. to better reflect our business operations. Our principal corporate headquarters are located at 6191 Cornerstone Court, E., Suite 114, San Diego, CA 92121. Our website address is www.aximbiotech.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. The trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.

 

Acquisition of Sapphire Biotech, Inc.

 

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 became a wholly owned subsidiary of AXIM.


26


 

 

Current Operations Following the Acquisition of Sapphire Biotech, Inc.

 

As we look forward to the next 12 months year with the acquisition of Sapphire Biotech, we anticipate that we will advance our mission of improving global cancer care through the development of novel therapeutics for controlling metastatic cancer spread, and diagnostics for early cancer detection, response to treatment, and for monitoring post-treatment recurrence.  We have made significant progress with our lead therapeutic drug candidate, SPX-1009, having successfully completed in vitro studies.  As we commence our animal studies, we plan to prove that SPX-1009 will demonstrate its ability to block cancerous tumor growth and the spread of metastasis in vivo, a key milestone for 2020. This year, we also anticipate completing the development of our universal companion diagnostic test to measure the efficacy of cancer treatment by tracking QSOX1 levels in blood.

 

As we look forward to the next 12 months year with the acquisition of Sapphire Biotech, we anticipate that we will advance our mission of improving global cancer care through the development of novel therapeutics for controlling metastatic cancer spread, and diagnostics for early cancer detection, response to treatment, and for monitoring post-treatment recurrence. We have made significant progress with our lead therapeutic drug candidate, SPX-1009, having successfully completed in vitro studies. As we commence our animal studies, we plan to prove that SPX-1009 will demonstrate its ability to block cancerous tumor growth and the spread of metastasis in vivo, a key milestone for 2020. This year, we also anticipate completing the development of our universal companion diagnostic test to measure the efficacy of cancer treatment by tracking QSOX1 levels in blood.

 

Anticipated Milestones for 2020

 

Sapphire has been investigating the enzyme Quiescin Sulfhydryl Oxidase 1 (QSOX1), a master regulator of extracellular matrix remodeling, and its overexpression by tumor cells. Overexpression of QSOX1 has been unambiguously linked to promoting tumor invasion and metastasis. One of the Company’s co-founders, Dr. Douglas Lake, has discovered that a small molecule SBI-183 inhibited the enzymatic activity of QSOX1 and as a result suppressed tumor cell invasion in vitro and metastasis of breast tumor cells in vivo. Through its medicinal chemistry efforts the Company synthesized multiple structural analogs of SBI-183 and unveiled SPX-1009 lead compound that demonstrated ten-fold improvement in suppressing invasion and metastasis in several cancer models.

 

The Company believes that its therapeutic drug development strategy targeting the metastatic spread is a unique, novel and pioneering approach to saving lives. The near-term objective of the Company is to demonstrate the ability of its lead anti-QSOX1 drug candidates to suppress tumor growth and metastasis and to advance them into pre-clinical studies.

 

Additionally, the Company believes that QSOX1 has a significant potential to be developed into an important biomarker for liquid biopsy cancer test. The Company anticipates that ongoing diagnostic product development in 2020 will result in a commercial prototype in early 2021 of a universal companion diagnostic to measure the efficacy of any ongoing cancer treatments based on measuring QSOX1 levels. Ultimately, the Company aims to develop a blood test that makes possible the early detection of cancer.

 

The Company’s anticipated key milestone achievements for 2020 include:

 

Diagnostic Product Development

 

Immunohistochemistry (IHC) Diagnostic Test 

 

Development of an IHC test using existing proprietary anti-QSOX1 polyclonal antibodies and novel monoclonal antibodies. The company will test the top 3-4 proprietary antibodies on different tumor types, utilizing commercial tissue arrays for rapid screening and discovery, and subsequently, collaborate with pathology labs for evaluation by practicing oncologists. Status: Ongoing

 

Universal Companion Diagnostic Test 

 

The company has developed proprietary assays to detect QSOX1 levels in patients undergoing cancer treatment. Sapphire has already tested over 200 bladder cancer samples seeking to establish a correlation of QSOX1 levels with tumor progression/regression. In addition, the Company’s test is currently the subject of an ongoing clinical trial relating to pancreatic cancer samples. Ongoing testing in vitro and in vivo will continue throughout 2020. The Company has signed an agreement with Translational Drug Development, LLC (TD2) to conduct retrospective mouse studies to measure QSOX1 levels in tissue as well as blood as tumors continue to progress. Status: Animal studies to commence mid-April with expected duration of 8-12 weeks.


27


 

 

Universal Cancer Biomarker 

 

The Company continues research and development relating to QSOX1 with the objective of studying QSOX1 levels in the blood at various stages of cancer. QSOX1 overexpression in tissues of cancer patients has been documented in various studies, but additional work is required with the blood of cancer patients to make the correlation between QSOX1 levels with various cancer stages. The ultimate goal is to validate QSOX1 as a blood biomarker for cancer. Breast, lung and pancreatic cancer-focused validation studies are planned for 2020. Status: Ongoing.

 

Therapeutic Product Development

 

Pre-Clinical Animal Studies/Stage 1: SPX-1009 Safety & Efficacy  

 

The Company has signed an agreement with TD2 to determine the effectiveness of its lead drug candidate SPX-1009 to block the spread of metastasis. The animal studies will be conducted in a mouse model of triple-negative breast cancer using human tumor xenografts. The study will entail the injection of human tumor cells into the mice to grow as a primary tumor that will also metastasize to the lungs. Mice will be administered SPX-1009 and SBI-183 to measure tumor growth/metastasis as compared with control mice. Concurrently a pharmacokinetics (pK) study will be conducted with SPX-1009 to evaluate its absorption, distribution, metabolism and excretion profile early in development. Status: Animal studies to begin mid-April, 2020 with an expected duration of 5-6 weeks.

 

Pre-Clinical Animal Studies/ Stage 2: SPX-1009 Efficacy in Combination Therapy. 

 

The Company plans to conduct Stage 2 Animal Studies with SPX-1009 at the TD2 facility. The study will test the concept of combination therapy of SPX-1009 with several cytotoxic drugs. The purpose is to assess tumor cell survival and invasion in the presence of several cytotoxic drugs and immune checkpoint inhibitor antibodies in combination with SPX-1009 in 2 breast cancer and 2 pancreatic cancer cell lines. The determination will be made regarding the synergy or additive effects occurring during the administration of SPX-1009 and several cytotoxic drugs. Status: Estimated to begin June 2020.

 

Clinical Human Studies  

 

Upon successful completion of Pre-Clinical Animal Studies Stages 1 & 2, we anticipate identifying an Institutional Review Board to review and approve its protocol to conduct research and testing with humans and/or human tissues. Status: Estimated 1st Quarter, 2021.

 

Milestones 2019 to Date

 

On January 1, 2019, Sapphire Biotech, Inc., an Arizona State University startup in partnership with Mayo Clinic, is formed to develop novel therapeutic approaches for the treatment of cancer.

 

On February 4, 2019, Sapphire tests 200 bladder cancer patient samples from Mayo Clinic to validate a unique biomarker to detect cancer. For the first time, Sapphire isolates the QSOX1 Long (QSOX1-L) splice variant as a biomarker in serum for bladder cancer and possibly other cancers. Sapphire develops a prototype rapid diagnostic test that measures levels of QSOX1-L in blood.

 

On April 4, 2019, Sapphire announced the discovery of a new biomarker for the detection of certain cancers in blood and files for patent protection. Sapphire discovers QSOX1-L, which is highly specific for the presence of cancer in blood and has the potential to be detected earlier than circulating tumor cells.

 

On August 21, 2019, a clinical trial begins to evaluate Sapphire’s rapid diagnostic test to detect the QSOX1 peptide in patients with or at risk for pancreatic cancer. The purpose of the trial is to evaluate the diagnostic potential of Sapphire’s test to detect QSOX1 in patients with or at risk for pancreatic cancer. Status: Ongoing

 

On September 5, 2019, Sapphire Biotech files for a Small Business Investigational Research grant to develop potent and soluble analogs of SBI-183, a compound that has been shown to inhibit tumor growth and metastasis. Ultimately, Sapphire’s goal is to develop a therapeutic treatment for cancers that overexpress QSOX1. Application is in final review for Funding.

 

On September 26, 2019, Axim Biotechnologies and Sapphire Biotech enter into Joint Venture to develop polyfunctional cannabidiol derivatives with the higher potency.

 

On October 25, 2019, Sapphire Biotech files two patent applications for anti-metastatic compounds to treat cancer and prevent metastasis.


28


 

 

On December 5, 2019, Sapphire Biotech files patent application for the anti-metastatic compound to suppress tumor cell growth and block metastasis. Identified as SPX-1009, the compound is an analog of SBI-183, and in vitro testing demonstrates ten-fold greater potency than the parent compound.

 

On January 13, 2020, Sapphire Biotech enters into an agreement with Skysong Innovations, LLC for an exclusive license to technology relating to SBI-183, an anti-metastatic compound suppressing tumor cell growth and blocking metastasis (and grants equity to Mayo Clinic Ventures and Arizona State University).

 

On February 6, 2020, Sapphire Biotech signs Sponsored Research Agreement (SRA) with Arizona State University to conduct in vitro testing and in vivo pre-clinical animal studies re cancer inhibitory agents that will prevent metastases.

 

On March 18, 2020, Axim Biotechnologies announces the acquisition of Sapphire Biotech.

 

On March 24, 2020, Sapphire announces the completion of in-vitro studies on the new compound, SPX-1009 proving ten-fold greater inhibition of tumor metastasis than parent compound SBI-183 following testing of over 80 analogs.

 

On March 27, 2020, Sapphire Biotech signs an agreement with TD2 to initiate animal studies to evaluate the efficacy of SPX-1009 as an anti-metastatic treatment and to measure levels of QSOX1 as a potential companion diagnostic test.

 

Cannabinoid Development

 

Although AXIM is transitioning its focus from a cannabinoid biotech to a cancer biotech company there is still a crossover and a potential large market opportunity. That is because cannabinoids are showing to exert various palliative effects in cancer patients and cannabinoids are proving to inhibit the growth of different types of tumor cells, in laboratory animals. Additionally, drug cocktails are a promising strategy for diseases such as cancer, because cocktails can be more effective than individual drugs and can overcome problems of drug resistance. A recent study showed that mice treated with both CBD oil and chemotherapy survived almost 3x longer than chemotherapy alone.

 

Other studies in vitro and in vivo focusing on pancreatic cancer found that cannabinoids can help slow tumor growth, reduce tumor invasion, and induce tumor cell death. A 2019 study indicated that CBD could provoke cell death and make glioblastoma cells more sensitive to radiation, but with no effect on healthy cells. A study in experimental models of colon cancer in vivo suggests that CBD may inhibit the spread of colorectal cancer cells. Other research demonstrated the efficacy of CBD in pre-clinical models of metastatic breast cancer. The study found that CBD significantly reduced breast cancer cell proliferation and invasion.

However, there is a huge problem, cannabinoids are not water-soluble.

 

Cannabinoids are lipophilic molecules (i.e., oil-based compounds that are not soluble in water). This means that when you place extracted hemp oils into water, they float. Cannabionoids in their natural lipophilic state do not mix with water and will not dissolve in the water. This has always been the problem for oil-based compounds—because the human body is 60% water, they have difficulty dissolving, and more importantly, absorbing these molecules.

 

The term “water solubility” refers to a compound’s ability to dissolve into water at a specific temperature. The term bioavailability refers to the amount of active ingredient in the compound, which makes it into the bloodstream. If an ingredient is injected directly into the bloodstream, it is 100% bioavailability.

 

When CBD is ingested, it is absorbed by the digestive system. From the stomach, the compounds enter the hepatic portal system, where they are carried through into the liver. The liver then metabolizes the CBD molecules, in what’s referred to as the “first pass effect.” Here, CBD can be significantly broken down before reaching the blood.

 

Other reasons for decreased oral bioavailability include destruction of the drug by gastric acidity, intestinal membrane enzymes, complexion with food constituents or bacterial enzymes. Foods, especially fat, can slow gastric emptying. Absorption can be limited by the short transit period of the drug through the small intestine (2-4 hours). These functions act on CBD, reducing the concentration of the compounds before passing on what remains to the bloodstream. The first pass metabolism effects a large portion of the CBD and its metabolites are excreted, which means that a lot of the benefits are literally flushed away. Lastly there are questions about liver toxicity, especially in large doses.

 

It is estimated that the bioavailability of CBD is as low as 5-10 percent going through the stomach into the bloodstream.


29


 

 

Axim’s New Solution

 

We have been working for the last several months in the laboratory to develop water soluble polyfuncitional cannabinoids. We recently perfected our reaction process and have filed for a new patent. It shows that our CBD molecule is about 338x more water-soluble than CBD. To put it into perspective, if one dissolves 1G of CBD in water-octanol mixture, only 3.9 micrograms of it will end up in water; while for 1G of our new polyfuncitional CBD 1,318 micrograms will go into water. We believe this could be a game changer for the entire cannabinoid world.

 

Anticipated Milestones for 2020 Cannabinoid Development

 

We now plan to generate next generation multifunctional cannabinoid constructs that may produce more potent response then individual cannabinoid molecules with an added benefit of being more water-soluble and bioavailable. The newly generated compounds will then be tested in several cell-based assays alongside with corresponding individual cannabinoids and mixtures thereof.

 

Another advantage of such hybrid systems is that bioactive compounds can be specifically tailored to have a broad spectrum of receptor affinities via single administration of a chimeric compound instead of a specific ratio of two different compounds. This is especially true for heterobifunctional compounds comprised of CBD and CBG molecules. While action of CBD is well understood and includes anti-epileptic, anti-inflammatory, anti-biotic and other activities, the biological function of CBG is still poorly understood. It is believed that CBG is beneficial for cardiac health, helps heal inflammatory bowel disease and, most important, inhibits growth of colon cancer. The CBD-CBG hybrid may prove to have synergystic effects, which combined with improved solubility and bioavailability will provide a general new platform for the design of future cannabinoid-based drugs.

 

Bifunctional Cannabinoids

 

Next we are planning to synthesize combinations of cannabinoids: (1) CBD-CBD; (2) CBD -CBG; and (3) CBG-CBG. Three differently sized linkers will be used to determine best possible balance between water-solubility and activity. Hence, 9 different compounds will be produced in this section. These new chemical entities will be tested side by side with individual CBD/CBDA and CBG/CBGA molecules for solubility and activity (see below).

 

Multifunctional Cannabinoids

 

We plan to expand the bifunctional strategy to include three, four, … and more poly-valent CBD/CBG constructs over the next 12 months. Such linkers can be modified with the same or different cannabinoid molecules, which will further enhance their effectiveness, may produce unexpected and diverse effects, while at the same time supporting good water solubility and bioavailability. Additionally, such multifunctional constructs will allow labeling with different tracers. For example, a unique feature is the ability to add two cannabinoid molecules and a fluorescent or radioactive label. This will give us a unique opportunity to track biodistribution of the cannabinoid hybrids throughout cells or even live animals.

 

Biological Activity

 

The biological activity of the resulting compounds will be tested against native (unconjugated) CBD, CBG, CBDA and CBGA in functional binding, antibacterial/antifungal, and cancer proliferation assays as follows.

 

Antimicrobial assays: DH10B E. coli cells will be grown in our lab overnight, at 37C at 270 rpm rotation in LB medium with streptomycin (0.1%) to a cell density of 2 x 106 CFUmL-1. In control experiments, the above procedure will be repeated with no compound in the culture as a negative control.

 

Cancer proliferation assay and Cancer cell migration assay tests are planned using human breast cancer cell lines, MDA-MB-231 and MCF-7, The assays will be performed exactly as specified by the manufacturer’s protocol.

 

Pre-Clinical Animal Studies/ Stage 1: Polyfuncitional Cannabinoids Efficacy in Combination Therapy. Axim plans to conduct Stage 1 Animal Studies with our polyfunctional cannabinoids together with drug compound SPX-1009 and several cytotoxic drugs at the TD2 facility. The purpose is to assess tumor cell survival and invasion in the presence of several cytotoxic drugs and immune checkpoint inhibitor antibodies in combination with our polyfuncitional cannabinoids, SPX-1009 in 2 breast cancer and 2 pancreatic cancer cell lines. The determination will be made regarding the synergy or additive effects occurring during the administration of polyfuncitional cannabinoids, SPX-1009 and several cytotoxic drugs. Status: Estimated to begin June 2020.


30


 

 

Clinical Human Studies

 

Upon successful completion of Pre-Clinical Animal Studies with Polyfuncitional Cannabinoids, we anticipate identifying an Institutional Review Board to review and approve its protocol to conduct research and testing with humans and/or human tissues. Status: Estimated 1st Quarter, 2021.

 

Anticipated Expenses

 

During the next twelve months we anticipate incurring costs related to: (i) filing Exchange Act reports, (ii) contractual obligations, (iii) clinical trials, and (iv) continued research and development.

 

Intellectual Property

 

Currently, our intellectual property includes patents, trademarks and other proprietary, confidential and/or trade secret information.   Our patent applications include fourteen (14) patent application families for oral care compositions, sugar alcohol kneading method, cosmetics, THC extraction method, antimicrobial compositions, nicotine dependence treatment gum, opioid dependence treatment gum, restless leg treatment gum, suppositories, method to treat psoriasis, method to treat atopic dermatitis, method to treat vitiligo, chewing gum for treatment of migraine, and polyfunctional cannabinoids. Eleven (11) of our patent applications are in non-provisional stage in the U.S., and twelve (12) are currently in national stage in foreign jurisdictions. Our patents include nine (9) patents, for ophthalmic solutions, method to use the ophthalmic solution to treat glaucoma and conjunctivitis, two patents on process to extract THC, two patents on suppositories, oral care compositions, method to treat atopic dermatitis, and anti-microbial powder; and two (2) licensed patents (chewing gum containing cannabidiol, and chewing gum containing cannabinoids, covering all cannabinoids, including THC). We are in the process of developing and filing more patent applications.

 

We have twenty nine (29) trademark applications some of which are registered trademarks, received Notices of Allowance, or are pending in front of the United States Patent and Trademark Office: Axim, A Axim Biotech, Cannanimals, CanQuit, CannaCoal, CanChui, CanShu, Oraximax, ReneCann, OpthoCann, Cannonich, Cannocyn, HempChew, SuppoCann, CanChew, CanChew Hemp CBD Gum, CanChew Rx, MedChew, CanChew Plus, CanQuit OC, MedChew GP, MedChew RL, CanChew +, CanChew +10, CanChew +50, CanChew +100, Hangover Gum, Wellness Gum, and Hole in One. Corresponding trademark applications have been filed in other jurisdictions have received registration or are pending. We also recently acquired a U.S. registered trademark “Chemogum.”

 

Market, Customers and Distribution Methods

 

Our focus is on the development of innovative pharmaceutical, nutraceutical and cosmetic products focusing on diseases and conditions for which currently there are no known efficient therapeutic ingredients or delivery systems for known active pharmaceutical ingredients. The body of knowledge regarding therapeutic use of cannabinoid-based formulations is steadily increasing. We plan to be an active player in this field of biosciences with our extensive R&D and pipeline of innovative products.

 

Our target customers are primarily end consumers via Internet sales, direct-to-consumer health and wellness stores, collectives, cooperatives, affiliate sales and master distributors. Secondarily, we are targeting manufacturers of products that can readily replace their raw base materials with our materials, making the products more environmentally friendly and sustainable. Next, we will target retail stores with major distribution companies who have preexisting relationships with major retail chain stores. As we continue to develop our business, these markets may change, be re-prioritized or eliminated as management responds to consumer and regulatory developments.

 

Competition

 

There are many developers of hemp-based consumer products, many of which are under-capitalized which we consider to be viable acquisition targets. There are also large, well-funded companies that currently do not offer hemp-based products but may do so in the future.

 

Source and Availability of Raw Materials

 

The Company currently has arrangements with multiple reputable suppliers which are expected to meet the projected needs for materials for the upcoming year. These suppliers are based in The Netherlands. In addition, the Company entered into Joint Venture contract to own industrial hemp production of the harvest yield in Wayne County, North Carolina through KAM Industries, LLC.


31


 

 

Government Regulation

 

On December 20, 2018, the 2018 Farm Bill was signed into law. The law went into effect on January 1st, 2019.

 

As a consequence of the 2018 Farm Bill, hemp has now been permanently removed from the Controlled Substances Act (CSA).  It is now deemed an agricultural commodity, no longer able to be classified as a controlled substance, like marijuana.  Furthermore, by redefining hemp to include its “extracts, cannabinoids and derivatives,” Congress explicitly removed popular hemp products – such as hemp-derived CBD — from the purview of the CSA. 

 

Accordingly, the Drug Enforcement Administration (DEA) no longer has any claim to interfere with the interstate commerce of hemp products, so as long as the THC level is at or below 0.3%. State and Tribal governments may impose separate restrictions or requirements on hemp growth and the sale of hemp products.  However, they cannot interfere with the interstate transport of hemp or hemp products.

 

We believe that the 2018 Farm Bill should give comfort to federally regulated institutions, pharmacies, banks, merchant services, credit card companies, e-commerce sites and advertising platforms, to conduct commerce with the hemp and hemp CBD industry.

 

On September 27, 2018, the Department of Justice and Drug Enforcement Administration announced that Epidiolex, the newly approved medication by the Food & Drug Administration, is being placed in Schedule V of the Controlled Substances Act, the least restrictive schedule of the federal Controlled Substances Act of 1970 (the “CSA”). On June 26 2018, the FDA announced it approved Epidiolex for the treatment of seizures associated with two rare and severe forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, in patients two years of age and older. Epidiolex contains cannabidiol (CBD), a chemical constituent of the cannabis plant (commonly referred to as marijuana).  The CBD in Epidiolex is extracted from the cannabis plant and is the first FDA-approved drug to contain a purified extract from the plant. Schedule V drugs represents the least potential for abuse. Schedule V drugs, substances, or chemicals are defined as drugs with lower potential for abuse than Schedule IV and consist of preparations containing limited quantities of certain narcotics. Schedule V drugs are generally used for antidiarrheal, antitussive, and analgesic purposes. Some examples of Schedule V drugs are: cough preparations with less than 200 milligrams of codeine or per 100 milliliters (Robitussin AC), Lomotil, Motofen, Lyrica, and Parepectolin.

 

Despite the approvals by the FDA and DEA for Epidiolex, any of these foregoing factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market our planned products. Moreover, because our business is almost entirely dependent upon these product candidates, any such setback in our pursuit of regulatory approval would have a material adverse effect on our business and prospects.

 

Employees

 

As of June 29, 2020, we have 3 full-time employees and 1 part-time employees. We allow and utilize the services of independent contractors. We will be considering the conversion of some of our part-time employees to full-time positions. We are currently in discussions with qualified individuals to engage them for positions in sales and marketing, research and development, and operations. Management believes the Company has good relationships with its employees.

 

Costs and effects of compliance with environmental laws

 

The expense of complying with environmental regulations is of minimal consequence.

 

Results of Operations

 

The following discussion of our financial condition and results of operations for the period ended September 30,2019 should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate”, “estimate”, “plan”, “project”, “continuing”, “ongoing”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, and similar expressions to identify forward-looking statements.


32


 

 

Comparison of the three months ended March 31, 2020 to March 31, 2019.

 

For the three months periods ended March 31, 2020 and 2019, our revenues from continuing operations totaled $7,140 and $17,061 respectively, realized and unrealized gain(loss) on change in FMV of trading securities -0-, -0-, $(104,705) and $25,000, respectively for the same periods.

 

 

 

Three months

 

Three months

 

$ Change

 

% Change

Period Ended

Period Ended

 

31-March-20

31-March-19

 

 

 

 

 

 

 

 

 

 

Research and development

$

620,510

$

532,679

$

87,831

 

16.49%

Depreciation

 

839

 

839

 

-

 

0.00%

Advertising and promotions

 

320,011

 

48,740

 

271,271

 

556.57%

Travel and entertainment expenses

 

29,655

 

30,874

 

(1,219)

 

(3.95%)

Office/Other expenses

 

37,438

 

42,872

 

(5,434)

 

(12.67%)

Impairment

 

3,637

 

3,158

 

479

 

15.17%

Licenses and permits

 

53,041

 

2,400

 

50,641

 

2,110.04%

Legal and other fees

 

146,740

 

120,794

 

25,946

 

21.48%

Offices salary and wages

 

105,000

 

45,000

 

60,000

 

133.33%

Consulting fees

 

206,500

 

233,024

 

(26,524)

 

(11.38%)

Compensation costs

 

-

 

1,137,500

 

(1,137,500)

 

(100.00%)

Audit fees

 

20,000

 

57,500

 

(37,500)

 

(65.22%)

Filing fees

 

1,390

 

1,321

 

69

 

5.22%

Insurance expense

 

31,172

 

25,290

 

5,882

 

23.26%

Taxes

 

10,693

 

4,358

 

6,335

 

145.36%

Directors fees

 

25,000

 

20,000

 

5,000

 

25.00%

Bad debt expenses

 

240,769

 

-

 

240,769

 

100.00%

 

 

 

 

 

 

 

 

 

Total

$

1,852,395

$

2,306,349

$

(453,954)

 

(19.68%)

 

Our operating expenses for the three months periods ended March 31, 2020 and 2019, were $1,852,395 and $2,306,349, respectively. The changes for the three months period ended March 31, 2020, was primarily due to no compensation costs recorded for the three months period ended March 31, 2020. The Company spend more of money on advertising and promotions. As of March 31, 2020 the company recorded $240,769 bad debt expenses according to management’s estimate. The Company incurred $3,637 and $3,158 of amortization and impairment expense on intangible assets during the three months ended March 31, 2020 and 2019, respectively.

 

Other (Income) expenses:

 

Our interest expense for the three months ended March 31, 2020 and 2019, was $56,627 and $55,346; respectively.

 

The Company incurred $19,363 and $18,662 amortization expense on debt discount during the three months ended March 31, 2020 and 2019, respectively.

 

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 financial statements, the Company has negative working capital of $3,242,140 and has an accumulated deficit of $37,468,409, has cash used in operating activities of $1,111,195 and presently does not have the resources to accomplish its objectives during the next twelve months. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. The 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.

 

The Company intends to raise 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.


33


 

 

Three months ended March 31, 2020 and 2019

 

Net Cash Provided by/Used in Operating Activities

 

Net cash used in operating activities was $1,111,195 for the three months ended March 31, 2020, as compared to net cash used of $728,549 for the three months ended March 31, 2019. The cash used in operating activities is primarily attributable to our net loss from operations of $2,028,367 and offset by net changes in the balances of operating assets and liabilities and non-cash expenses. For the three months ended March 31, 2020 stock-based compensation was $287,500 and amortization was $19,363 For the three months ended March 31, 2019 these non-cash expenses were stock-based compensation of $1,145,000 and amortization of $18,662. For the three months ended March 31, 2020 and 2019 the Company recorded increase to accounts payable and accrued expenses $211,656 and $545,705.

 

Net Cash Provided by Investing Activities

 

Net cash provided by investing activities during the period ended March 31, 2020 was $79,814 due to cash received with Sapphire Biotech acquisition compared to $-0- for the same period in 2019.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities during the three months period ended March 31, 2020, was $962,500 compared to $1,585,312 for the same period in 2019. The Company has successfully raised significant capital in exchange for its common stock for the three months ended March 31, 2020.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Contractual Obligations

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

 

Critical accounting policies

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 3 to our unaudited condensed consolidated financial statements.

 

Recently issued accounting standards

 

In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements, which provides clarification on implementation issues associated with adopting ASU 2016-02. The implementation issues noted in ASU 2019-01 include determining the fair value of the underlying asset by lessors that are not manufacturers or dealers, presentation on the statement of cash flows for sales-type and direct financing leases, and transition disclosures related to Topic 250, Accounting Changes and Error Corrections. We will apply the guidance, if applicable, as of January 1, 2019, the date we adopted ASU 2016-02. Refer to the discussion of ASU 2016-02 below for the impact on our financial position, results of operations, cash flows, or presentation thereof.

 

The Company has a long-term operating lease, and the long-term operating lease only took effect in April 2020. Thus, the adoption of ASC 842 had no impact on the condensed consolidated financial statements.

 

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 818): Clarifying the Interaction Between Topic 808 and Topic 606, which clarifies when transactions between participants in a collaborative arrangement are within the scope of the FASB’s revenue standard, Topic 606. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. We do not expect the adoption of this ASU to have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.


34


 

 

In October 2018, the FASB issued ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, that changes the guidance for determining whether a decision-making fee paid to a decision makers and service providers are variable interests. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. The adoption of this ASU to have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

 

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. We determined that it had no material impact of this ASU on our financial position, results of operations, cash flows, or presentation thereof.

 

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

 

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.

 

Foreign Currency Transactions

 

Our Foreign currency gain(loss) were $598 for the three months ended in March 31, 2020, and ($382) for the same period in 2019.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As of March 31, 2020, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in rule 13a-15(f) of the Exchange Act. The Company’s internal control system is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s internal control over financial reporting includes those policies and procedures that:

 

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; 


35


 

 

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and 

 

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. 

 

These limitations preclude the board and management from having absolute assurance of the achievement of the entity’s objectives. Even an effective control system provides reasonable but not absolute assurances.

 

An evaluation was performed under the supervision and with the participation of the Company’s management of the effectiveness of the design and operation of the Company’s procedures and internal control over financial reporting as of March 31, 2020. In making this assessment, the Company used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework of 1992. Based on that evaluation, the Company’s management concluded that the Company’s internal controls over financial reporting were effective as of March 31, 2020. Management, board of directors, and other personnel use judgment every day to select, develop, and deploy controls across the Company. Management, among other personnel apply judgement as they monitor and assess the effectiveness of the system of internal control.

 

Attestation Report of the Registered Public Accounting Firm

 

This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, wherein non-accelerated filers are exempt from Sarbanes-Oxley internal control audit requirements.

 

Changes in Internal Control Over Financial Reporting

 

The Company has formal Compensation, Audit, Nominating and Governance Committees. Management and the Board established controls over financial reporting through policies and procedures that help ensure that management’s directives to mitigate risks to the achievement of objectives are carried out. Control activities are performed at all levels of the entity, at various levels within day-to-day procedures, and over technology environment. The Company’s control over financial reporting includes combination of preventive and detective controls and encompass a range of manual and automated activities such as authorizations and approvals, verifications, reconciliations, cash management and banking activities, and business performance reviews.

 

Inherent Limitations of Internal Controls

 

Internal control provides reasonable assurance of achieving entity’s objectives, limitations do exist. Internal control cannot prevent bad judgment or decisions, or external events that can cause the Company to fail to achieve its operational goals. However, even an effective system of internal control can experience a failure. The limitations include, but not limited to: suitability of objectives established as a precondition to internal control; reality that human judgment in decision making can be faulty and subject to bias; breakdowns that can occur because of human failures such as simple errors; ability of management to override internal control; ability of management, other personnel, and/or third parties to circumvent controls through collusion; external events beyond the organization’s control. Notwithstanding these inherent limitations, management is aware of them when selecting, developing, and deploying controls that minimize, to the extent practical, these limitations. Segregation of duties is built into the selection and development of control activities. Where segregation of duties is not practical, management selects and develops alternative control activities. Ongoing evaluations are built into business process at different hierarchy levels of the Company and provide timely information. Findings are evaluated against criteria established by regulations, recognized standard-setting bodies or management and the board of directors, and deficiencies are communicated to management and the board of directors as appropriate.


36


PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of our business. However, at this time, we are not aware on any material pending, threatened or unasserted claims.

 

Item 1A. Risk Factors.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the period between January 1, 2020 and March 31, 2020 the Company issued total 3,541,667 shares valued $962,500 pursuant to the Company’s Registration Statement on Form S-3. The Company received $962,500 in cash.

 

On January 13, 2020 the Company issued 250,000 restricted shares of its common stock to third party valued at $50,000, which were carried on the books as stock to be issued.

 

On January 23, 2020 and Feburary 26, 2020 the Company issued 600,000, and 62,839 restricted shares of its common stock to third party valued at $262,500, and $25,000 pursuant to the stock purchase agreement for certain services, recorded as advertising and promotion expense and License, permits & Patents, respectively.

 

On March 17, 2020 the company acquired 100% of the issued and outstanding shares of Sapphire by means of a share exchange with the Sapphire Stockholders in exchange for 54,000,000 restricted shares of its common stock.

 

The issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act of 1933 and Regulation D as transactions by an issuer not involving any public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. The sales of these securities were made without general solicitation or advertising.

 

The Company intends to use the proceeds from sale of the securities, if any, for the operations, research and development and clinical trials, and working capital.

 

There were no underwritten offerings employed in connection with any of the transactions set forth above.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable

 

Item 5. Other Information.

 

On January 2, 2019 Dr. George Anastassov resigned as the Chief Executive Officer (CEO) of AXIM Biotechnologies, Inc. Dr. Anastassov’s resignation was not because of any disagreements with the Company on matters relating to its operations, policies and practices. Dr. Anastassov will retain the title of Founder in a consulting role with the Company. The Board of Directors of the Company appointed Mr. John W. Huemoeller II as the Company’s Chief Executive Officer.

 

Effective April 2, 2019, Blake N. Schroeder resigned as a member of the Company’s Board of Directors.  Mr. Schroeder’s resignation was not because of any disagreements with the Company on matters relating to its operations, policies and practices. 

 

On April 3, 2019, pursuant to the Company’s Amended and Restated Bylaws, the holder of the Company’s Series C Preferred Stock appointed Mauricio Javier Gatto-Bellora to fill the director seat vacated by the resignation of Mr. Schroeder.

 

On April 3, 2019, the Company’s Board of Directors appointed Mauricio Javier Gatto-Bellora as a member of the Company’s Audit, Compensation and Nominating and Governance Committees.


37


 

 

Employment Agreements

 

On September 1, 2016, the Company entered into an amended and restated employment agreement with Dr. George Anastassov, its Chief Executive Officer. The agreement does not have a set term and may be terminated at any time by the Company or Dr. Anastassov with proper notice. Under the agreement, Dr. Anastassov receives an annual base agreement. Upon the one-year anniversary of the agreement, the Company has the direction to grant additional equity awards to Dr. Anastassov. On April 1, 2016 the Company was obligated to issue 120,000 restricted shares of the Company’s common stock pursuant to the terms of the June 13, 2014, employment agreement. On September 1, 2016, the Company was obligated to issue 2,000,000 restricted shares of the Company’s common stock pursuant to the terms of the September 1, 2016, employment agreement with Dr. Anastassov. The shares were issued in the 4th quarter 2016. At the year-end December 31, 2016 the Company recorded $600,000 compensation expense in the accompanying consolidated financial statements to account for the required issuance of the incentive shares. On March 20, 2018 the Company issued 50,000 restricted shares of its common stock and recorded $235,000 compensation expense. On May 15, 2018 the Company agreed to pay Dr. George Anastassov a bonus of $15,000 per month as a compensation. The Company recorded $120,000 of additional expense for the year ended December 31, 2019 as part of this bonus arrangement. On January 2, 2019 Dr. George Anastassov resigned as the Chief Executive Officer of Axim Biotechnologies, Inc.

 

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 September 1, 2016, the Company entered into an amended and restated employment agreement with Mr. Lekhram Changoer, its Chief Technology Officer. The agreement does not have a set term and may be terminated at any time by the Company or Mr. Changoer with proper notice. Under the agreement Mr. Changoer receives an annual base compensation of $240,000 and an incentive payment of 2,000,000 shares of the Company’s common stock due upon execution of the agreement. Upon the one year anniversary of the agreement, the Company has the direction to grant additional equity awards to Mr. Changoer.

 

On August 3, 2016, all AXIM affiliates, as such term is defined by the Securities Act of 1933, as amended (the “Act”), entered into an agreement whereby each affiliate agreed to be prohibited from selling any Company securities pursuant to Rule 144 of the Act until the later of: (i) twelve (12) months from the date of the agreement; or (ii) twelve (12) months from the date of acquisition of the securities.

 

On or about June 29, 2016, Robert Malasek was appointed as the Company’s Chief Financial Officer and Secretary. In April, 2017 the Company entered in employment agreement with Robert Malasek its, Chief Financial Officer and Secretary. The agreement does not have a set term and may be terminated by any time by the Company or Mr. Robert Malasek with proper notice. Under the agreement Mr. Malasek receives a monthly base compensation of $1,000 and on March 20, 2018 issued unrestricted 50,000 shares of the Company’s common stock. In April 2019 the Company agreed to increase monthly base compensation to $3,000 effective April 1, 2019.

 

Financing

 

On September 16, 2016, the Company entered into a convertible note purchase agreement (the “Convertible Note Purchase Agreement” or “Agreement”) with a third-party investor. Under the terms of 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 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 to $0.2201. As of March 31, 2020, the principal balance of this note was $484,478 and $58,989 in accrued interest.


38


 

 

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 to $0.2201. 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. The Company received $250,000 on February 1, 2017 and $250,000 on March 2, 2017 against the note receivable of $500,000.

 

In connection with this convertible note, the Company recorded a $499,318 discount on debt, 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, 2020, this note has not been converted, the principal balance of this note was $1,000,000 and $122,208 in accrued interest.

 

On November 27, 2018 the Company extinguished debt with Investor. Investor had proposed a financing transaction pursuant to which the Company will satisfy and retire the Original Note and Original Note current balance in simultaneous exchange for and upon delivery by the Company of a (1) new Convertible Promissory Note in the principal amount of $4,000,000 (the “Exchange Note”), and (2) 250,000 shares of the Company’s restricted common stock (the “Origination Shares”). On December 19, 2018 the Company entered into Amendment to Securities Purchase Agreement with Investor. Pursuant to amendments, the amount of Origination Shares increased from 250,000 to 400,000 shares of Company’s Common Stock.

 

On November 27, 2018, simultaneously, Investor and the Company entered in Debt Exchange Agreement with Medical Marijuana Inc. As part of this agreement Investor will exchange and deliver the AXIM note to Medical Marijuana in exchange for a Convertible Promissory note. Axim consented to the transfer and assignment of the Axim Note in exchange for the issuance by the Medical Marijuana of the Exchange Note. The principal amount of $4,000,000 together with interest computed on the basis of 360-day year and compounded semi-annual basis at the rate equal to 3.5% per annum. The interest shall be payable on a semi-annual basis beginning on May 1, 2019 and thereafter on the first day of each May and November until the Maturity Date – November 1, 2021, at which time all principal and interest accrued hereon shall be due and payable. As of March 31, 2020, the principal of secured convertible notes was $4,000,000 and $53,259 accrued interest.

 

Compensation of Company Directors and Advisory Board Members

 

Our Directors are compensated $5,000 on a quarterly basis plus on each annual anniversary of Board service additional $20,000. Our Directors and Advisory Board Members are reimbursed for reasonable out-of-pocket expenses related to attending board of directors’ meetings and for promoting our business. In the future, we may compensate our Directors for serving on Special Committees and our Advisory Board Members with additional cash or other compensation. From time to time we may request certain members of the board of directors to perform services on our behalf. In such cases, we will compensate the directors for their services at rates no more favorable than could be obtained from unaffiliated parties.

 

Item 6. Exhibits.

 

Statements

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019.

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Changes in Shareholders’ Deficit for the three months ended March 31, 2020 and 2019 (unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited)

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

 

 

 

 

 

 

 

 

Schedules

 

 

 

 

 

 

 

 

 

All schedules are omitted because they are not applicable, or the required information is shown in the Financial Statements or notes thereto.


39


 

 

Item 15. Exhibits.

 

 

 

Incorporated by Reference

(Form Type)

 

Filed

with

This

Report

Exhibits

Exhibit #

Filing Date

 

 

 

 

 

Articles of Incorporation, as filed with the Nevada Secretary of State on November 18, 2010.

3.1

10-Q

11/14/2014

 

 

 

 

 

 

Certificate of Amendment, as filed with the Nevada Secretary of State on July 24, 2014.

3.2

10-Q

11/14/2014

 

 

 

 

 

 

Amended and Restated (As of August 17, 2016) Bylaws of AXIM Biotechnologies, Inc.

3.3

10-Q

8/22/2016

 

 

 

 

 

 

Certificate of Designation of Series B Preferred Stock

3.4

10-Q

8/22/2016

 

 

 

 

 

 

Certificate of Designation of Series C Preferred Stock

3.5

10-Q

8/22/2016

 

 

 

 

 

 

Amended and Restated Employment Agreement effective September 1, 2016, by and between AXIM International, Inc. and Dr. George E. Anastassov

10.1

10-Q

11/21/2016

 

 

 

 

 

 

Amended and Restated Employment Agreement effective September 1, 2016, by and between AXIM International, Inc. and Lekhram Changoer

10.2

10Q

11/21/2016

 

 

 

 

 

 

Employment Agreement effective September 1, 2016, by and between AXIM International, Inc. and Dr. Philip A. Van Damme.

10.3

10-Q

11/21/2016

 

 

 

 

 

 

Code of Business Conduct and Ethics

14.1

10-Q

11/20/2017

 

 

 

 

 

 

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.1

 

 

X

 

 

 

 

 

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

 

 

X

 

 

 

 

 

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.1

 

 

X

 

 

 

 

 

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

 

 

X

 

 

 

 

 

Nominating and Governance Committee Charter

99.1

10-Q

11/20/2017

 

 

 

 

 

 

Compensation Committee Charter

99.2

10-Q

11/20/2017

 

 

 

 

 

 

Audit Committee Charter

99.3

10-Q

11/20/2017

 

 

 

 

 

 

XBRL Instance Document

101.INS

 

 

X

XBRL Taxonomy Extension Schema Document

101.SCH

 

 

X

XBRL Taxonomy Extension Calculation Linkbase Document

101.CAL

 

 

X

XBRL Taxonomy Extension Definition Linkbase Document

101.DEF

 

 

X

XBRL Taxonomy Extension Label Linkbase Document

101.LAB

 

 

X

XBRL Taxonomy Extension Presentation Linkbase Document

101.PRE

 

 

X


40


 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

AXIM BIOTECHNOLOGIES, INC.

 

 

 

Dated: June 29, 2020

By:

/s/ John W. Huemoeller II

 

 

John W. Huemoeller II

 

 

President and Director

Principal Executive Officer

 

 

 

Dated: June 29, 2020

By:

/s/ Robert Malasek

 

 

Robert Malasek

 

 

Principal Financial Officer

 


41