BIOSTAX CORP. FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
The following management's discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following financial information is derived from our condensed consolidated financial statements and should be read in conjunction with such condensed consolidated financial statements and notes thereto and set forth elsewhere herein.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This report contains certain forward-looking statements that are based on the beliefs of management as well as assumptions made by and currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, future demand for our products and services, the successful commercialization of our products, general domestic and global economic conditions, government and environmental conditions and regulations, competition and customer strategies, changes in our business strategy or development plans, capital deployment, business disruptions, including those by fires, raw material supplies, environmental regulations, and other risks and uncertainties, certain of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those forward-looking statements. For further discussion of certain of the matters described above see the Cautionary Note Regarding Forward-Looking Statements included in our 2021 Annual Report on Form 10-K.
Undue reliance should not be placed on our forward-looking statements. Except as required by law, we disclaim an obligation to update any factors or to publicly announce the results of any revisions to any of the forward-looking statements contained in this quarterly report on Form 10-Q to reflect new information, future events, or other developments. The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q.
Forward-looking statements can be identified by words such as "future,"
"anticipates," "believes," "estimates," "expects," "intends," "will," "would,"
"could," "can," "may," and similar terms. Forward-looking statements are not a
guarantee of future performance and the Company's actual results may differ
significantly from the results discussed in the forward-looking statements. Each
of the terms the "Company", "we", "us" or "our" as used herein refers
collectively to
COMPANY OVERVIEW
Our strategy has been limited due to lack of capital. Management is seeking to secure new investment capital with which to continue to pursue the Company's strategy. There is no guarantee that the Company will be successful in securing additional capital.
GOING CONCERN
As of
For the nine months ended
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Since our own financial resources are insufficient to satisfy our capital
requirements, we may seek to sell additional equity or debt securities or obtain
additional credit facilities. During the nine months ended
Historically the Company has relied on the funding of operations through private equity financings and management expects operating losses and negative cash flows to continue at more significant levels in the future. As the Company continues to incur losses, transition to profitability is dependent upon the successful development, approval, and commercialization of its current or future product candidates as they become available and the achievement of a level of revenues adequate to support the Company's cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic partners or from other sources. If the Company is unable to secure new working capital, other alternatives strategies will be required.
Based on our operating plan, working capital at
Historically, the Company has been able to acquire and develop assets, spin them out and retain both an equity stake and royalties and milestone payments. In so doing, the Company has acted as an incubator for late-stage drug development. Management believes that this strategy can continue to be successful.
At this time, the Company continues to review several opportunities which it may pursue as soon as funding is available. At present no definitive actions have been taken.
There can be no guarantees that the Company will be successful in:
? Executing its restructuring plan
? Securing adequate capital to continue operations.
? Identifying and acquiring assets for future development.
RESULTS FROM OF THE THREE MONTHS ENDED SEPTEMBER 30, 2022
COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2021
Revenues
We had no revenues from operations for the three months ended
Operating Expenses
Selling, General and Administrative Expenses
For the three months ended
For the three months ended
September 30
2022 2021
Shareholder and investor relations
(6,432 )
Consulting fees with related parties 93,500 -
Board fees 75,000 30,000
Occupancy 49,433 -
Salaries and benefits 46,504 82,127
Other expenses 9,294 3,362
Total $ 420,862 $ 114,567
Increase (decrease) from prior year
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The increase in selling, general and administrative expenses for the three
months ended
The selling, general and administrative expense for the three months ended
? Professional advisors were engaged in the areas of legal, tax, accounting, and
administrative support in connection with the Company's financial
reorganization efforts and licensing strategies.
? During the third quarter, the Company increased its board to five members each
earning $5,000 per month.
? The Company initiated a month-month sublease of a temporary corporate office
utilized by the Company's CEO. This sublease was terminated in October 2022 .
? The Company issued 50,000 common shares, at $1.87 per share, to a shareholder
in connection with advisory services provided during the third quarter.
? Payroll expenses reflect salaries and statutory tax benefits in support of
financial reporting.
Research and Development Expenses
The Company did not incur research and development related costs during the
third quarters ended
Non-operating Income (Expense)
The Company recognized several non-recurring non-operating transactions during
the three-month period ended
? The Company recognized a non-cash charge of$1,467,271 upon the receipt of signed releases of obligations from certain vendors, employees, and notes holders in connection with the corporate recapitalization designed to improve the financial condition of the Company and to position it for future growth. ? During the third quarter, the Company entered into agreements to allow certain warrants holders of and promissory notes currently in default to exercise and convert these instruments at$0.05 per share. The Company recognized the fair market value of the warrants using the Black Scholes valuation model and recognized a charge of$594,288 in connection with this action. Interest Expense
Interest expense for the three months ended
For the three months ended
September 30
2022 2021
Interest expense $ 11,034 $ 32,197
(Decrease) from prior year
The Company reduced interest expense through the reduction of outstanding
principal on notes as of
? The assignment of
? The conversion of
during the second and third quarters of 2022. and
? These principal reductions were offset by the issuance of
short-term notes during the second and third quarters of 2022.
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RESULTS FROM THE NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED
TO NINE MONTHS ENDED SEPTEMBER 30, 2021
Revenues
We had no revenues from operations for the nine months ended
Operating Expenses
Selling, General and Administrative Expenses
For the nine months ended
For the nine months ended
September 30
2022 2021
Shareholder and investor relations
299,829 -
Board fees 125,000 90,000
Occupancy 51,704 -
Salaries and benefits 175,014 220,926
Other expenses 16,503 9,804
Total $ 894,596 $ 438,583
Increase (decrease) from prior year
During the nine months ended
The selling, general and administrative expenses for the three months ended
? Professional advisors were engaged in the areas of legal, tax, accounting, and
administrative support in connection with the Company's financial
reorganization efforts and licensing strategies.
? The Company utilized the services of three related parties during the nine
months ended September 30, 2022 : Noreen Griffin was issued a $200,000
convertible note for services provided in connection with the
recapitalization, 50,000 common shares, valued at $1.87 per share, were issued
to a shareholder for advisory services and another shareholder was paid $6,000
for financial advisory services.
? During the third quarter, the Company increased its board to five members each
earning $5,000 per month.
? The Company initiated a month-month sublease in May 2022 that is utilized by
the Company's CEO.
? Payroll expenses reflect salaries and statutory tax benefits in support of
financial reporting.
Research and Development Expenses
The Company did not incur any research and development related costs during the
nine-month period ended
During the nine months ended
Non-operating Income (Expense)
The Company recognized several non-recurring non-operating transactions during
the nine-month period ended
? The Company recognized a non-cash gain of
certain Company defaulted notes and other vendor and employee obligations by
Forte. The assignments of these obligations were made as consideration for the
21 ? The Company recognized a non-cash charge of$1,169,691 upon the receipt of signed releases of obligations from certain vendors, employees, and notes holders in connection with the corporate recapitalization which allowed for certain of these obligations to be converted into common stock at$0.05 per share. ? During the nine-month period endedSeptember 30, 2022 , the Company recognized an asset impairment associated of$2,645,000 associated with the carrying value of the shares of common stock of STAB held by the Company. ? OnJune 29, 2022 , the Company entered into agreements to allow certain warrants holders of and promissory notes currently in default to exercise and convert these instruments at$0.05 per share. The Company recognized the fair market value of the warrants using the Black Scholes valuation model and recognized a charge of$1,605,913 in connection with this action. Interest Expense
Interest expense for the nine months ended
For the nine months ended September 30
2022 2021
Interest expense $ 107,102 $ 164,731
Decrease from prior year $ (57,629) $ (36,466 ) The Company reduced interest expense through the reduction of outstanding
principal on notes as of
? The assignment of
? The conversion of
during the second and third quarters of 2022. and
? These principal reductions were offset by the issuance of
short-term notes during the second and third quarters of 2022.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Liquidity is measured by our ability to secure enough cash to meet our
contractual and operating needs as they arise. The Company does not anticipate
generating sufficient cash flows from our operations to fund the next twelve
months. We had cash on hand of
Summary of Cash Flows
For the nine months ended
The Company had
During the nine months ended
The Company received
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The Company does not expect to generate revenues in the foreseeable future. If the Company is unable to raise additional working capital to meet its operating obligations and expenditures, the Company will be required to modify its business plan.
OFF BALANCE SHEET ARRANGEMENTS
During the nine months ended
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have identified the policies below as critical to our business operations and the understanding of its results of operations. The Company's senior management has reviewed these critical accounting policies and related disclosures with the Company's board of directors. The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results.
Fair Value of Financial Instruments
In accordance with the reporting requirements of
Cash, cash equivalents and accounts payable are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of the Company's investment in the common stock of Statera BioPharma, Inc. ("STAB") reflects an asset impairment charge taken in the second quarter of 2022 and is carried at zero in the consolidated balance sheet. The carrying value of notes payable approximate fair value since they bear market rates of interest and other terms. None of these instruments are held for trading purposes.
Research and Development Costs
Research and development costs are charged to expense as incurred and are typically comprised of expenses associated with advancing the commercialization of our technologies.
Income Taxes
The Company follows ASC Topic 740, Income Taxes, 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 statements 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 asset 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.
Stock-Based Compensation and Issuance of Stock for Non-Cash Consideration
The Company measures and recognizes compensation expense for share-based awards based on estimated fair values equaling either the market value of the shares issued, or the value of consideration received, whichever is more readily determinable. Generally, the non-cash consideration pertains to services rendered by consultants and others and has been valued at the fair value of the Company's common stock at the date of the agreement.
The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC Topic 718, "Compensation-Stock Compensation." The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete.
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