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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported): April 1, 2024
Aditxt, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
|
001-39336 |
|
82-3204328 |
(State or other jurisdiction
of incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
2569 Wyandotte St., Suite 101, Mountain View, CA |
|
94043 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including
area code: (650) 870-1200
N/A
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b)
of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
Common Stock, par value $0.001 |
|
ADTX |
|
The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the
Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Explanatory Note:
On
April 4, 2024, Aditxt, Inc. (the “Company” or “Aditxt”) filed a Current Report on Form 8-K (the “Original
Current Report”) disclosing that on April 1, 2024, the Company entered into an Arrangement Agreement (the “Arrangement
Agreement”) with Adivir, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Adivir”) and
Appili Therapeutics, Inc., a Canadian corporation (“Appili”), pursuant to which, Adivir will acquire all of the issued
and outstanding Class A common Shares of Appili (the “Appili Shares”) on the terms and subject to the conditions set
forth in the Arrangement Agreement. The acquisition of the Appili Shares (the “Arrangement”) will be completed by
way of a statutory plan of arrangement under the Canada Business Corporation Act (the “CBCA”). On
July 8, 2024, the Company filed a Current Report on Form 8-K (the “First Amendment Current Report”) disclosing that
on July 1, 2024, the Company, Adivir and Appili entered in entered into an Amending Agreement (the “Amending Agreement”),
pursuant to which the Parties (as defined in the Arrangement Agreement) agreed that: (i) the Outside Date (as defined in the Arrangement
Agreement) would be changed to August 30, 2024; (ii) Adivir agreed that it would convene the Company Meeting (as defined in the Arrangement
Agreement) no later than August 30, 2024, provided that Appili shall be under no obligation to convene the Company Meeting prior to the
date that is 50 days following the date that Aditxt delivers to Appili all complete Additional Financial Disclosure (as defined in the
Arrangement Agreement) required for inclusion in the Company Circular (as defined in the Arrangement Agreement); (iii) Aditxt shall use
commercially reasonable efforts to complete the Financing (as defined in the Arrangement Agreement) no later than August 30, 2024; and
(iv) Aditxt or Appili may terminate the Arrangement Agreement if the Financing is not completed by 5:00 p.m. (ET) on August 30, 2024
or such later date as the Parties may agree in writing. On July 22, 2024, the Company filed a Current Report on Form 8-K (the “Second
Amendment Current Report” and together with the Original current Report and the First Amendment Current Report, the “Current
Reports”) disclosing that on July 18, 2024, the Company, Adivir and Appili entered in entered into a Second Amending Agreement
(the “Second Amending Agreement”), pursuant to which the Arrangement Agreement was further amended to provide that
(i) the Outside Date will be extended to September 30, 2024, (ii) the Appili Meeting will be conducted no later than September 30, 2024,
provided that Appili shall be under no obligation to hold the Appili Meting prior to the date that is 50 days following the date that
the Company delivers all complete Additional Financial Disclosure required for inclusion in the circular; (iii) the Company shall use
commercially reasonable efforts to complete the Financing on or prior to September 15, 2024; and (iv) the Company and Appili may terminate
the Arrangement Agreement if the Financing is not completed on or before 5:00 p.m. (ET) on September 15, 2024 or such later date as the
Parties may in writing agree.
This Amendment No. 1 on Form
8-K/A (“Amendment No. 1”) amends the Current Reports to include the required historical financial statements of Appili and
the pro forma financial information required by Items 9.01(a) and 9.01(b) of Form 8-K and should be read in conjunction with the Current
Reports.
The pro forma financial information
included as Exhibit 99.2 to this Current Report on Form 8-K/A has been presented for informational purposes only, as required by Form
8-K, and does not purport to represent the actual results of operations that the Company and Evofem would have achieved had the entities
been combined at and during the period presented in the pro forma financial information, and is not intended to project the future results
of operations that the combined company may achieve following the transactions.
This Amendment No. 1 does
not amend any other item of the Original Report or purport to provide an update or a discussion of any developments at the Company or
its subsidiaries subsequent to the filing date of the Original Report.
Item 9.01. Financial Statements and Exhibits.
(a) Financial statements of business or funds
acquired.
The (i) audited consolidated statements
of financial position of Appili as of March 31, 2024 and 2023, and the related audited consolidated statements of changes in shareholders’
equity, loss and comprehensive loss and cash flows, for each of the two fiscal years in the period ended March 31, 2024 are filed as Exhibit
99.1 hereto and are incorporated herein by reference.
(b) Pro forma financial information.
The unaudited pro forma condensed
combined financial information of the Company giving pro forma effect to the acquisitions of Evofem Biosciences, Inc. and Appili, consisting
of the (i) unaudited pro forma consolidated statement of financial position as at March 31, 2024, the unaudited pro forma consolidated
statement of financial position for the three months ended March 31, 2024, and the unaudited consolidated pro forma statement of earnings
for the three months ended March 31, 2024, and the (ii) unaudited pro forma consolidated statement of financial position as at December
31, 2023, the unaudited pro forma consolidated statement of financial position for the year ended December 31, 2023, and the unaudited
consolidated pro forma statement of earnings for the year ended December 31, 2023, are filed as Exhibit 99.2 and Exhibit 99.3, respectively,
hereto and are incorporated herein by reference.
(d) Exhibits.
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 hereunto
duly authorized.
|
ADITXT, INC. |
|
|
|
Date: August 1, 2024 |
By: |
/s/ Amro Albanna |
|
|
Amro Albanna |
|
|
Chief Executive Officer |
-3-
Exhibit 99.1
Appili Therapeutics Inc.
Consolidated Financial Statements
March 31, 2024
June 25, 2024
Management’s Responsibility for Financial Reporting
The accompanying consolidated financial statements of Appili Therapeutics
Inc. (the “Company”) are the responsibility of management and have been approved by the Board of Directors. The consolidated
financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board (“IFRS Accounting Standards”). The consolidated financial statements include some
amounts and assumptions based on management’s best estimates, which have been derived with careful judgment.
In fulfilling its responsibilities, management has developed and maintained
a system of internal accounting controls. These controls are designed to ensure that the financial records are reliable for preparation
of the consolidated financial statements. The Board of Directors reviewed and approved the Company’s consolidated financial statements.
(signed) |
“Don Cilla” |
(signed) |
“Kenneth Howling” |
|
President & Chief Executive Officer |
|
Acting Chief Financial Officer |
Independent
auditor’s report
To
the Shareholders of Appili Therapeutics Inc.
Our
opinion
In
our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Appili
Therapeutics Inc. and its subsidiary (together, the Company) as at March 31, 2024 and 2023, and its financial performance and
its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board (IFRS Accounting Standards).
What
we have audited
The
Company’s consolidated financial statements comprise:
| ● | the
consolidated statements of financial position as at March 31, 2024 and 2023; |
| ● | the
consolidated statements of changes in shareholders’ equity for the years then ended; |
| ● | the
consolidated statements of loss and comprehensive loss for the years then ended; |
| ● | the
consolidated statements of cash flows for the years then ended; and |
| ● | the
notes to the consolidated financial statements, which include material accounting policy information and other explanatory information. |
Basis
for opinion
We
conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our
report.
We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We
are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.
PricewaterhouseCoopers
LLP
Cogswell
Tower, 2000 Barrington Street, Suite 1101, Halifax, Nova Scotia, Canada B3J 3K1
T.:
+1 902 491 7400, F.: +1 902 422 1166, Fax to mail: ca_halifax_main_fax@pwc.com
“PwC”
refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Material
uncertainty related to going concern
We
draw attention to note 1 to the consolidated financial statements, which describes events or conditions that indicate the existence of
a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. Our opinion
is not modified in respect of this matter.
Key
audit matters
Except
for the matter which is described in the Material uncertainty related to going concern section, we have determined that there
are no other key audit matters to communicate in our report.
Other
information
Management
is responsible for the other information. The other information comprises the Management’s Discussion and Analysis.
Our
opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In
connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated.
If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Responsibilities
of management and those charged with governance for the consolidated financial statements
Management
is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting
Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In
preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those
charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s
responsibilities for the audit of the consolidated financial statements
Our
objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As
part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
| ● | Identify
and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
| ● | Obtain
an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. |
| ● | Evaluate
the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| ● | Conclude
on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going concern. |
| ● | Evaluate
the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
| ● | Obtain
sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion. |
We
communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We
also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From
the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of
the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The
engagement partner on the audit resulting in this independent auditor’s report is Alexander Christianson.
/s/
PricewaterhouseCoopers LLP
Chartered
Professional Accountants
Halifax,
Nova Scotia
June 25, 2024
Appili Therapeutics Inc.
Consolidated Statements of Financial Position
As at March 31, 2024 and March
31, 2023
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Assets | |
| | |
| |
Current Assets | |
| | |
| |
Cash | |
| 94,493 | | |
| 2,465,882 | |
Accounts receivable (note 4) | |
| 1,158,035 | | |
| 119,984 | |
Investment tax credits receivable | |
| 15,300 | | |
| 300,800 | |
Prepaid expenses and deposits | |
| 192,433 | | |
| 231,099 | |
| |
| 1,460,261 | | |
| 3,117,765 | |
Non-Current Assets | |
| | | |
| | |
Property and equipment (note 5) | |
| 30,142 | | |
| 14,610 | |
Total Assets | |
| 1,490,403 | | |
| 3,132,375 | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable and accrued liabilities (note 6 and 7) | |
| 4,183,176 | | |
| 2,823,001 | |
Current portion of long-term debt (note 9) | |
| 7,309,657 | | |
| 113,125 | |
Corporate taxes payable | |
| 47,149 | | |
| 41,008 | |
| |
| 11,539,982 | | |
| 2,977,134 | |
Non-Current liabilities | |
| | | |
| | |
Long-term debt (note 9) | |
| 875,200 | | |
| 7,552,220 | |
Total Liabilities | |
| 12,415,182 | | |
| 10,529,354 | |
| |
| | | |
| | |
Shareholders’ equity | |
| (10,924,779 | ) | |
| (7,396,979 | ) |
| |
| | | |
| | |
Total Liabilities and Shareholder’s Equity | |
| 1,490,403 | | |
| 3,132,375 | |
| |
| | | |
| | |
Going concern (note 1) | |
| | | |
| | |
Subsequent event (note 18) | |
| | | |
| | |
Approved by the Board of Directors
Signed |
“Prakash Gowd” |
Signed |
“Theresa Matkovits” |
|
Director |
|
Director |
The accompanying notes are an integral part of
these consolidated financial statements.
Appili Therapeutics Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended March 31,
2024 and 2023
| |
Share
Capital | | |
Contributed
Surplus | | |
Warrants | | |
Deficit | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
| |
(note 10) | | |
(note 11) | | |
(note 12) | | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| |
Balance- March 31, 2022 | |
| 39,653,314 | | |
| 5,013,399 | | |
| 8,131,937 | | |
| (56,069,192 | ) | |
| (3,270,542 | ) |
Issuance of class A common shares in public offering | |
| 3,214,286 | | |
| - | | |
| - | | |
| - | | |
| 3,214,286 | |
Share issuance costs | |
| (544,241 | ) | |
| - | | |
| - | | |
| - | | |
| (544,241 | ) |
Issuance of warrants | |
| - | | |
| - | | |
| 1,822,720 | | |
| - | | |
| 1,822,720 | |
Warrant issuance costs | |
| - | | |
| - | | |
| (251,312 | ) | |
| - | | |
| (251,312 | ) |
Expired Warrants | |
| - | | |
| 524,440 | | |
| (524,440 | ) | |
| - | | |
| - | |
Employee share options: | |
| | | |
| | | |
| | | |
| | | |
| | |
Value of services recognized | |
| - | | |
| 875,124 | | |
| - | | |
| - | | |
| 875,124 | |
Net loss and comprehensive loss for the year | |
| - | | |
| - | | |
| - | | |
| (9,243,014 | ) | |
| (9,243,014 | ) |
Balance- March 31, 2023 | |
| 42,323,359 | | |
| 6,412,963 | | |
| 9,178,905 | | |
| (65,312,206 | ) | |
| (7,396,979 | ) |
Expired Warrants | |
| - | | |
| 6,203,902 | | |
| (6,203,902 | ) | |
| - | | |
| - | |
Employee share options: | |
| | | |
| | | |
| | | |
| | | |
| | |
Value of services recognized | |
| - | | |
| 191,346 | | |
| - | | |
| - | | |
| 191,346 | |
Fair value of related party loan | |
| - | | |
| 61,764 | | |
| - | | |
| - | | |
| 61,764 | |
Net loss and comprehensive loss for the year | |
| - | | |
| - | | |
| - | | |
| (3,780,910 | ) | |
| (3,780,910 | ) |
Balance- March 31, 2024 | |
| 42,323,359 | | |
| 12,869,975 | | |
| 2,975,003 | | |
| (69,093,116 | ) | |
| (10,924,779 | ) |
The accompanying notes are an integral part of these consolidated financial
statements.
Appili Therapeutics Inc.
Consolidated Statements of Loss and Comprehensive Loss
For the years ended March 31,
2024 and 2023
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Income | |
| | |
| |
Revenue (note 8) | |
| 827,407 | | |
| 334,177 | |
Interest income | |
| 16,812 | | |
| 29,882 | |
| |
| 844,219 | | |
| 364,059 | |
| |
| | | |
| | |
Expenses | |
| | | |
| | |
Research and development | |
| 5,622,274 | | |
| 3,623,869 | |
General and administrative | |
| 3,047,135 | | |
| 4,438,750 | |
Business development | |
| 208,189 | | |
| 185,839 | |
Financing costs | |
| 1,631,005 | | |
| 1,096,083 | |
Government assistance | |
| (5,887,401 | ) | |
| (138,466 | ) |
Exchange (gain)/loss | |
| (65,656 | ) | |
| 364,606 | |
| |
| 4,555,546 | | |
| 9,570,681 | |
| |
| | | |
| | |
Loss before income taxes | |
| (3,711,327 | ) | |
| (9,206,622 | ) |
| |
| | | |
| | |
Provision for income taxes | |
| 69,583 | | |
| 36,392 | |
| |
| | | |
| | |
Net loss and comprehensive loss for the year | |
| (3,780,910 | ) | |
| (9,243,014 | ) |
| |
| | | |
| | |
Basic and diluted loss per share | |
| (0.03 | ) | |
| (0.08 | ) |
| |
| | | |
| | |
Weighted-average shares outstanding | |
| 121,266,120 | | |
| 113,731,873 | |
The accompanying notes are an integral part of these consolidated financial
statements.
Appili Therapeutics Inc.
Consolidated Statements of Cash Flows
For the years ended March 31,
2024 and 2023
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Cash provided by (used in) | |
| | |
| |
Operating activities | |
| | |
| |
Net loss and comprehensive loss for the year | |
| (3,780,910 | ) | |
| (9,243,014 | ) |
Changes to operations not involving cash: | |
| | | |
| | |
Amortization of property and equipment | |
| 13,662 | | |
| 6,266 | |
Non-cash finance costs | |
| 485,576 | | |
| 1,096,083 | |
Share-based compensation | |
| 191,346 | | |
| 875,124 | |
(Gain) loss on disposal of property and equipment | |
| (131 | ) | |
| 24,546 | |
Unrealized (gain) loss from changes in foreign currency | |
| (54 | ) | |
| 6,381 | |
Unrealized foreign exchange translation - long-term debt | |
| (35,356 | ) | |
| 372,366 | |
| |
| (3,125,867 | ) | |
| (6,862,248 | ) |
| |
| | | |
| | |
Net changes in non-cash operating working capital | |
| | | |
| | |
(Increase) decrease in amounts receivable | |
| (1,038,051 | ) | |
| 346,694 | |
Decrease in investment tax credits receivable | |
| 285,500 | | |
| 623,600 | |
Decrease (increase) in prepaids expenses and deposits | |
| 38,666 | | |
| (47,553 | ) |
Increase (decrease) in accounts payable and accrued liabilities | |
| 1,375,327 | | |
| (4,158,329 | ) |
| |
| (2,464,425 | ) | |
| (10,097,836 | ) |
Financing activities | |
| | | |
| | |
Proceeds from the issuance of Class A common shares in a public offering | |
| - | | |
| 3,214,286 | |
Share issuance costs | |
| - | | |
| (444,241 | ) |
Proceeds from the issuance of warrants | |
| - | | |
| 1,285,714 | |
Warrant issuance costs | |
| - | | |
| (177,714 | ) |
Proceeds from long-term debt | |
| 300,000 | | |
| 2,500,000 | |
Costs associated with issuance of long-term debt | |
| (9,011 | ) | |
| (300,652 | ) |
Repayment of long-term debt | |
| (96,423 | ) | |
| (85,600 | ) |
Accreted interest involving cash | |
| (72,521 | ) | |
| (83,377 | ) |
| |
| 122,045 | | |
| 5,908,416 | |
Investing activities | |
| | | |
| | |
Proceeds from disposal of property and equipment | |
| 654 | | |
| - | |
Acquisition of property and equipment | |
| (29,717 | ) | |
| (3,175 | ) |
| |
| (29,063 | ) | |
| (3,175 | ) |
| |
| | | |
| | |
Net change in cash during the year | |
| (2,371,443 | ) | |
| (4,192,595 | ) |
Cash - Beginning of year | |
| 2,465,882 | | |
| 6,664,855 | |
Changes due to foreign exchange | |
| 54 | | |
| (6,378 | ) |
Cash - End of period | |
| 94,493 | | |
| 2,465,882 | |
| |
| | | |
| | |
Supplementary cash flow | |
| | | |
| | |
Interest paid | |
| 1,103,315 | | |
| 476,267 | |
Taxes paid | |
| 62,601 | | |
| 12,417 | |
The accompanying notes are an integral part of these consolidated financial
statements.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
1 | Nature of operations and liquidity risk |
Appili Therapeutics Inc. (the “Company”
or “Appili”) is a biopharmaceutical company dedicated to advancing the global fight against infectious diseases by matching
clearly defined patient needs with drug development programs that provide solutions to existing challenges patients, doctors and society
face. Appili has one wholly owned subsidiary, Appili Therapeutics Inc. USA. The Company is domiciled in Halifax, Nova Scotia. The Company
exists under the Canada Business Corporations Act, and its Class A common shares (“common shares”) are listed for trading
on the Toronto Stock Exchange (“TSX”) under the symbol “APLI”. The Company also trades in the United States on
the OTCPink Exchange. The address of its principal place of business is #21-1344 Summer Street, Halifax, Nova Scotia, Canada.
Going concern
These consolidated financial statements
have been prepared using International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS
Accounting Standards”) applicable to a going concern, which contemplates the realization of assets and settlement of liabilities
in the normal course of business as they come due.
For the year ended March 31, 2024, the
Company reported a loss of $3,780,910 (2023 - $9,243,014) and an accumulated deficit of $69,093,116 (2023 - $65,312,206). In addition
to repaying or refinancing the Company’s debt facilities that mature in the next twelve months and funding its ongoing working capital
requirements, the Company must secure sufficient funding through financing activities to cover research and development expenditures to
advance the programs in its pipeline that are planned for the next twelve months. These circumstances lend significant doubt as to the
ability of the Company to fund planned expenditures and, accordingly, the appropriateness of the use of accounting principles applicable
to a going concern.
The ability of the Company to repay
or refinance its debt facilities and fund working capital requirements to advance its programs in its pipeline is dependent on successfully
closing the proposed transaction with Aditxt, Inc (“Aditxt”) (note 18) or raising additional financing through equity and/or
non-dilutive funding and/or partnerships. There can be no assurance that additional financing will be available on acceptable terms or
at all. If the Company is unable to obtain additional financing when required, Appili may have to substantially reduce or eliminate planned
expenditures. Management is evaluating alternatives to secure additional financing so that the Company can continue to operate as a going
concern. Nevertheless, there is no assurance that these initiatives will be successful.
The Company’s ability to continue as
a going concern is dependent on its ability to successfully complete the proposed transaction with Aditxt (note 18) and/or raise funding
to satisfy its debt and working capital requirements and fund its research and development programs. These consolidated financial statements
do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications
that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course
of operations. Such adjustments could be material.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
2 | Summary of material accounting policies and basis of preparation |
Basis of presentation
The Company prepares its consolidated
financial statements in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IASB”)
and Part I of the Chartered Professional Accountants of Canada Handbook – Accounting.
The policies applied in these consolidated
financial statements are based on IFRS Accounting Standards issued and outstanding as of June 25, 2024, the date the Board of Directors
approved the consolidated financial statements.
The material accounting policies used
in the preparation of these consolidated financial statements are described below.
Consolidation
The financial statements of the Company
consolidate the accounts of Appili Therapeutics Inc. and its subsidiary. All intercompany transactions, balances and unrealized gains
and losses from intercompany transactions are eliminated on consolidation. There are no non-controlling interests, therefore, all loss
and comprehensive loss is attributable to the shareholders of the Company.
Use of estimates and judgments
The preparation of consolidated financial
statements in conformity with IFRS Accounting Standards requires the use of certain critical accounting estimates. It also requires management
to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment
or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note
3.
Foreign currency translation
| i) | Functional and presentation currency |
Items included in the consolidated
financial statements of each consolidated entity of the Company are measured using the currency of the primary economic environment in
which the entity operates (the “functional currency”). Primary and secondary indicators are used to determine the functional
currency (primary indicators have priority over secondary indicators). The primary indicator that applies to the Company is the currency
that mainly influences revenues and expenses. Secondary indicators include the currency in which funds from financing activities are generated.
The Company operates one subsidiary with a US Dollar functional currency. An assessment of the primary and secondary indicators for the
subsidiary is performed to determine the functional currency of the subsidiary, which is then translated into Canadian dollars, the Company’s
presentation currency. The financial statements of the consolidated entity that has a U.S Dollar functional currency (“foreign operations”)
which is translated into Canadian dollars as follows:
| a) | assets and liabilities – at the closing rate at the
date of the consolidated balance sheet; and |
| b) | income and expenses – at the transaction date. |
All resulting exchange differences are
recognized in other comprehensive income (loss) as foreign currency translation adjustments.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
2 | Summary of material accounting policies and basis of preparation (continued) |
Foreign currency
translation (continued)
| ii) | Transactions and balances |
Foreign currency transactions are translated
into the functional currency of the Company using the exchange rates prevailing at the dates of these transactions. Foreign exchange gains
and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in currencies other than the Company’s functional currency are recognized in the consolidated
statements of loss and comprehensive loss, within general and administrative expenses.
Investment tax credits
The benefits of investment tax credits
(“ITCs”) for scientific research and experimental development (“SR&ED”) expenditures are recognized in the
year the qualifying expenditure is made providing there is reasonable assurance of recoverability. The ITCs recorded are based on management’s
estimates of amounts expected to be recovered and are subject to audit by taxation authorities. The ITCs are recorded as government assistance
in the consolidated statements of loss and comprehensive loss.
Financial instruments
Financial assets and liabilities are
recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the
rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks
and rewards of ownership.
Financial assets and liabilities are
offset, and the net amount is reported in the consolidated statements of financial position when there is a legally enforceable right
to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expires.
Recognition of day one gain or loss
on derivative financial instruments
The fair value of an investment at
initial recognition is often the transaction price, unless there is evidence that the fair value of the instrument is different when compared
with other observable current market transactions in the same instrument, or based on a valuation technique whose variables include only
data from observable markets. Such financial instruments are initially recognized at the transaction price, which is the best indicator
of fair value, although the market value derived by independent valuers may differ. The difference between the transaction price and the
market value (the day one gain or loss), is not recognized immediately for accounting purposes in the consolidated statements of loss
and comprehensive loss and is instead recognized through the consolidated
statements of loss and comprehensive loss progressively as the instrument is settled. Any subsequent measurement of the instrument excludes
the balance of the deferred day one gain or loss.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
2 | Summary of material accounting policies and basis of preparation (continued) |
Financial instruments (continued)
Classification as debt or equity
Debt and equity instruments are classified
as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a
financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract
that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the
Company are recognized as the proceeds received, net of direct issue costs.
Compound instruments
The component parts of loan arrangements
entered by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual
arrangements and the definitions of a financial liability and an equity instrument. At the date of issue, the fair value of the liability
component is estimated using the prevailing market interest rate for a similar instrument. This amount is recorded as a liability on an
amortized cost basis using the effective interest method until extinguished.
Transaction costs that relate to obtaining
the loan are allocated to the liability and compound instruments in proportion to the allocation of the gross proceeds. Transaction costs
relating to the equity component are recognised directly in equity. Transaction costs relating to the liability component are included
in the carrying amount of the liability component.
Classification and subsequent measurement
Financial instruments are classified
into the following specified categories: amortized cost, fair value through other comprehensive income (“FVOCI”) or fair value
through profit or loss (“FVTPL”). The classification depends on the nature and purpose of the financial instrument and is
determined at the time of initial recognition. Financial instruments do not include amounts due to or from government entities.
Derivatives embedded in contracts
where the host is a financial liability are separated from the host debt contract and accounted for separately at FVOCI, unless an election
is made to account for the whole debt instrument at FVTPL or if they are not closely related to the host contract.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
2 | Summary of material accounting policies and basis of preparation
(continued) |
Classification and subsequent
measurement (continued)
The Corporation has implemented the
following classifications:
| ● | Cash, and amounts receivable are classified as amortized cost.
After their initial fair value measurement, they are measured at amortized cost using the effective interest method; and accounts payable
and accrued liabilities, deferred credit and long-term debt are classified as amortized cost. After their initial fair value measurement,
they are measured at amortized cost using the effective interest method. |
Impairment of financial
assets
The Company applies the simplified method
of the expected credit loss model required under IFRS 9. Under this method, the Company estimates a lifetime expected loss allowance for
all receivables. Receivables are written off when there is no reasonable expectation of recovery.
If there is objective evidence that
an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and
the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial
asset’s original effective interest rate.
Property and equipment
Property and equipment are stated at
cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the
acquisition of the asset. The carrying amount of a replaced asset is derecognized when replaced. Repairs and maintenance costs are charged
to the consolidated statements of loss and comprehensive loss during the year in which they are incurred.
The major categories of property and
equipment are depreciated per year as follows:
Office furniture | |
| 20 | % |
Laboratory furniture | |
| 20 | % |
Laboratory equipment | |
| 20 | % |
Computers | |
| 30 | % |
Residual values, method of depreciation
and useful lives of the assets are reviewed annually and adjusted if appropriate. Gains and losses on disposals of property and equipment
are determined by comparing the proceeds with the carrying amount of the asset and are included as part of general and administrative
expenses in the consolidated statements of loss and comprehensive loss.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
2 | Summary of material accounting policies and basis of preparation
(continued) |
Impairment of non-financial assets
Property and equipment are tested for
impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of measuring
recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows (“cash-generating
units” or “CGUs”). The recoverable amount is the higher of an asset’s fair value less the costs to sell, and value
in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for
the amount by which the asset’s carrying amount exceeds its recoverable amount.
The Company evaluates impairment losses
for potential reversals when events or circumstances warrant such consideration.
Income tax
Income tax is comprised of current and
deferred income tax. Income tax is recognized in the consolidated statements of loss and comprehensive loss except to the extent that
it relates to items recognized directly in equity, in which case the income tax is also recognized directly in equity.
Current tax is the expected tax payable
on the taxable income for the year, using tax rates enacted or substantively enacted, at the end of the reporting period, and any adjustment
to tax payable in respect of previous years.
In general, deferred income tax is recognized
in respect of temporary differences including non-refundable ITCs arising between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements. Deferred income tax is determined on a non-discounted basis using tax rates and laws
that have been enacted or substantively enacted at the consolidated statements of financial position dates and are expected to apply when
the deferred income tax asset or liability is settled. Deferred income tax assets are recognized to the extent that it is probable that
the assets can be recovered. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates,
except, in the case of subsidiaries, where the timing of the reversal of the temporary difference is controlled by the Company and it
is probable that the temporary difference will not reverse in the foreseeable future.
Share-based compensation
The Company grants equity-settled share
options periodically to certain employees, directors, officers and advisors.
The majority of the stock options
vest over 3 years and have a contractual life of ten years. Each tranche in an award is considered a separate award with its own vesting
period and grant date fair value. Fair value of each tranche is measured at the date of grant using the Black-Scholes valuation model.
Compensation expense is recognized over the tranche’s vesting period by increasing contributed surplus based on the number of awards
expected to vest. The number of awards expected to vest is reviewed at least annually, with any impact being recognized immediately in
the consolidated statements of loss and comprehensive loss.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
2 | Summary of material accounting policies and basis of preparation
(continued) |
Share capital and warrants
Common shares and warrants are classified
as equity. Incremental costs directly attributable to the issuance of common shares and warrants are recognized as a reduction from the
proceeds in equity in the period that the transaction occurs.
The Company has adopted a relative fair
value method with respect to the measurement of shares and warrants issued as public offering units. The relative fair value method allocates
value to each component on a pro rata basis, based on the fair value of the components calculated independently of one another. The Company
measures the fair value of the warrant component of the unit using the Black-Scholes valuation model. The unit value is then allocated,
pro rata, between the two components.
Research and development
All research costs are expensed in the
period incurred. Development costs are expensed in the period incurred, unless they meet the criteria for capitalization, in which case
they are capitalized and then amortized over the useful life. Development costs are written off when there is no longer an expectation
of future benefits. No development costs have been capitalized to date.
Clinical trial expenses result from
obligations under contracts with vendors, consultants and clinical site agreements in connection with conducting clinical trials. The
financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that
do not match the periods in which materials or services are provided to the Company. The appropriate level of clinical trial expenses
is reflected in the Company’s consolidated financial statements by matching period expenses with period services and efforts expended.
These expenses are recorded according to the progress of the clinical trial as measured by subjects’ progression and the timing
of various aspects of the clinical trial. Clinical trial accrual estimates are determined through discussions with internal clinical personnel
and outside service providers as to the progress or state of completion of clinical trials, or the services completed. Service provider
status is then compared to the contractually obligated fees to be paid for such services. During the course of a clinical trial, the Company
may adjust the rate of the clinical expense recognized if actual results differ from management’s initial estimates.
Government grants and assistance
Grants from the government are recognized
at their fair value where there is a reasonable assurance that the grant will be received, and the Company will comply with all attached
conditions. All grants are recorded as government assistance in the consolidated statements of loss and comprehensive loss.
Loans received from government entities
are recognized initially at fair value, with the difference between the fair value of the loan and the amount received, being recorded
as government assistance in the consolidated statements of loss and comprehensive loss to the extent that the loan reimburses previously
incurred expenses.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
2 | Summary of material accounting policies and basis of preparation
(continued) |
Revenue recognition
In general, when applicable, revenues
will be recognized as the Company satisfies its performance obligations under the terms of the contract. Performance obligations are considered
to be satisfied when the customer obtains control of the related asset. Revenue streams may include: (i) milestone payments generated
on entering into potential contractual partnerships and achieving development and sales milestones; (ii) future royalties or profit share
generated from the eventual commercialization of the Company’s products; and (iii) amounts generated for providing formulation and
research support services related to existing licencing and research agreements with partners.
The Company currently has a licence
agreement that includes an upfront payment, milestone payments and royalty payments. The Company also has a collaboration, development
and supply agreement, in which the Company will receive a profit share on Canadian and US commercial sales for a specified term and is
eligible to receive royalties on the rest of world sales. Revenues associated with those multiple element arrangements are allocated to
the various elements based on each unit’s fair value or using the residual method, and the applicable revenue recognition criteria
are applied to each of the separate units.
Licence fees representing non-refundable
payments received on the execution of licence agreements are recognized as revenue on execution of the licence agreements when the Company
has no significant future performance obligations and collectability of the fees is reasonably assured.
Leases
Under IFRS 16, the Company assesses
whether a contract is or contains a lease based on the definition of a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys
the right to control the use of an identified asset, the Company assesses whether:
| ● | the contract involves the use of an identified asset, specified either explicitly or implicitly, that
is physically distinct, and usage represents substantially all of the capacity of the asset; |
| ● | the Company has the right to obtain substantially all of the economic benefits from the use of the asset;
and |
| ● | the Company has the right to direct use of the asset, which is evidenced by decision-making rights to
direct how and for what purpose the asset is used. |
The Company recognizes an
asset and a lease liability at the lease commencement date.
The asset is initially measured at cost,
which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus
any initial direct costs incurred, less any incentives received. The asset is subsequently depreciated using the declining balance method
from the commencement date to the earlier of
the end of the useful life of the asset or the end of the lease term. The estimated useful lives of leased assets are determined on the
same basis as those of property and equipment.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
2 | Summary of material accounting policies and basis of preparation
(continued) |
Leases (continued)
The carrying amount of the leased asset
is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability, if any.
The lease liability is initially measured
at the present value of future lease payments, discounted using the interest rate implicit in the lease, or, if that rate cannot be readily
determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount
rate. The lease liability is subsequently measured at amortized cost using the effective interest method. The lease liability is remeasured
if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. If the lease liability
is remeasured in this way, a corresponding adjustment will be made to the carrying amount of the leased asset, or recorded in the consolidated
statements of loss and comprehensive loss if the carrying value of the leased asset is zero.
The Company has elected not to recognize
assets and lease liabilities for short-term leases with a term of 12 months or less and leases of low value assets. The lease payments
associated with these leases will be recognized as an expense in the consolidated statements of loss and comprehensive loss over the lease
term.
Adoption of New Accounting
Standards
Disclosure of Accounting
Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
The amendments require the disclosure
of ‘material’, rather than ‘significant’, accounting policies. The amendments also provide guidance on the application
of materiality to disclosure of accounting policies, assisting entities to provide useful, entity-specific accounting policy information
that users need to understand other information in the consolidated financial statements. The amendments are effective for annual reporting
periods beginning on or after January 1, 2023.
Although adoption of the amendments
did not result in any changes to accounting policies, they impacted the accounting policy information disclosed in the financial statements.
Management reviewed the accounting policies and made updates to the information disclosed in Note 2 Material Accounting Policies (2022
– Significant Accounting Policies) in certain instances in line with the amendments.
Amendments to IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors re: Definition of Accounting Estimates
The amendments introduce the definition
of accounting estimates and include other amendments to IAS 8 to help entities distinguish changes in accounting estimates from changes
in accounting policies. The amendments are effective for annual periods beginning on or after January 1, 2023 and changes in accounting
policies and changes in accounting estimates that occur on or after the start of that period. The adoption of these amendments did not
have a material impact on the consolidated financial statements.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
3 | Critical accounting estimates and judgments |
Adoption of New Accounting Standards
(continued)
The Company makes estimates and assumptions
concerning the future that will, by definition, seldom equal actual results.
The following estimates and judgments
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Ability to continue as a going
concern
In order to assess whether it is appropriate
for the Company to continue as a going concern, management is required to apply judgment and make estimates with respect to future cash
flow projections.
In arriving at this judgment, there
are a number of assumptions and estimates involved in calculating these future cash flow projections. This includes making estimates regarding
the timing and amounts of future expenditures and the ability and timing of raising additional financing.
Calculation of carrying amounts of
long-term debt
Atlantic Canada Opportunities Agency
(“ACOA”) Atlantic Innovation Fund (“AIF”) loan
The Company has an interest-free AIF
government loan from ACOA with a maximum contribution of $2,803,148. The annual repayments, commencing December 1, 2022, until the advances
are repaid, are calculated as 5% of gross revenue from a specific product for the preceding fiscal year. As at March 31, 2024, $33,700
(2023- $16,725) is included in current liabilities in the consolidated statement of financial position.
The initial fair value of the ACOA AIF
loan is determined by using a discounted cash flow analysis for the loan, which requires a number of assumptions. The difference between
the face value and the initial fair value of the ACOA AIF loan is recorded in the consolidated statements of loss and comprehensive loss
as government assistance. The carrying amount of the ACOA AIF loan requires management to adjust the long-term debt to reflect actual
and revised estimated cash flows whenever revised cash flow estimates are made or new information related to market conditions is made
available. Management recalculates the carrying amount by computing the present value of the estimated future cash flows at the original
effective interest rate. Any adjustments are recognized in the consolidated statements of loss and comprehensive loss as accreted interest
after initial recognition.
The significant assumptions used in
determining the discounted cash flows include estimating the amount and timing of future revenue for the Company and the discount rate.
The Company’s estimates of future revenues are derived from several significant assumptions including estimated time to market,
expected future selling price, potential target market, estimated market penetration, the product’s shelf-life, returns provision,
number of years of exclusivity and estimated royalty rate.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
3 | Critical accounting estimates and judgments (continued) |
Calculation of carrying amounts of
long-term debt (continued)
As the ACOA AIF loan is repayable based
on a percentage of gross revenue from the Company’s product, ATI-1501, if any, the determination of the amount and timing of future
revenue significantly impacts the initial fair value of the loan, as well as the carrying value of the ACOA AIF loan at each reporting
date. The Company is still in the development stage for this infectious disease product and accordingly, determination of the amount and
timing of revenue, if any, requires significant judgment by management.
The discount rate determined on initial
recognition of the ACOA AIF loan is used to determine the present value of estimated future cash flows expected to be required to settle
the debt. In determining the appropriate discount rates, the Company considered the weighted average cost of capital for the Company,
risk adjusted based on the development risks of the Company’s product. The ACOA AIF loan is repayable based on a percentage of gross
revenue from the Company’s product, ATI-1501, if any; accordingly, finding financing arrangements with similar terms is difficult.
Management used a discount rate of 26.7% to discount the ACOA AIF loan.
The Company signed a licence agreement
for the US development and commercialization rights for ATI-1501 with pharmaceutical company Saptalis Pharmaceuticals Inc. (“Saptalis”)
in December 2019, which included an upfront payment, future milestone payments and future royalty payments. The Company performed the
following sensitivity analysis on the basis that each change in the assumption being analyzed is made assuming the other assumptions remain
the same.
| ● | If the forecasted revenue was 10% higher or lower, the carrying
value of the long-term debt would be $33,900 higher or $34,100 lower, respectively. |
| ● | If the total forecasted revenue were reduced to $nil, no amounts
would be forecast to be repaid on the ACOA AIF loan and the ACOA AIF loan payable at March 31, 2024 would be recorded at $nil, which
would be a reduction in the ACOA AIF loan payable of $466,400. |
| ● | If the timing of the receipt of forecasted future revenue
was earlier or later by one year, the carrying value of the long-term debt at March 31, 2024 would have been an estimated $60,700 higher
or $84,600 lower, respectively. |
Any changes in the amounts recorded
on the consolidated statements of financial position for the ACOA AIF loan result in an offsetting charge to accreted interest after initial
recognition in the consolidated statements of loss and comprehensive loss.
Equity-settled share-based compensation
The Company estimates the cost of equity-settled
share-based compensation using the Black-Scholes valuation model. The model takes into account the estimate of the expected life of the
option, the current price of the underlying share, the expected volatility, an estimate of future dividends on the underlying common share,
the risk-free rate of return expected for an instrument with a term equal to the expected life of the option and the expected forfeiture
rate.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
| |
| | |
| |
Sales tax receivable | |
| 71,310 | | |
| 50,978 | |
Amounts due from USAFA | |
| 1,075,028 | | |
| - | |
Other receivable | |
| 11,697 | | |
| 69,006 | |
| |
| 1,158,035 | | |
| 119,984 | |
During the year, the Company entered
into a contract with USAFA to fund the early-stage development and regulatory activities for ATI-1701 amounting to US$13,966,218 (C$18,752,441).
Of this amount, US$10,940,578 (C$14,824,483) is allotted and currently available. If additional funds are not made available by USAFA,
then the agreement will be terminated, and the Company is not obligated to continue with the related research activities or incur costs
in excess of the amount allotted.
Under the terms of its contract with
USFA, the Company will be reimbursed for direct costs and labour costs associated with budgeted program activities, and a portion of its
overhead costs. The contract period of performance is May 5, 2023 to September 30, 2025. In the event of a termination, USAFA will retain
the USAFA purpose licence for the invention, copyright work, and data made or developed under the contract.
For the year ended March 31, 2024, the
Company recognized the reimbursement of costs of $5,710,558 (2023 - $nil) as government assistance.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
Property and equipment consist of the
following:
| |
Office
Furniture | | |
Laboratory
Furniture | | |
Laboratory
Equipment | | |
Computers | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
Opening net book value (“NBV”) - March 31, 2023 | |
| 2,978 | | |
| 570 | | |
| 28,800 | | |
| 9,899 | | |
| 42,247 | |
Additions | |
| - | | |
| - | | |
| - | | |
| 3,175 | | |
| 3,175 | |
Disposals | |
| | | |
| | | |
| | | |
| | | |
| | |
Cost | |
| (654 | ) | |
| (968 | ) | |
| (71,575 | ) | |
| - | | |
| (73,197 | ) |
Accumulated depreciation | |
| 486 | | |
| 730 | | |
| 47,435 | | |
| - | | |
| 48,651 | |
Depreciation | |
| (705 | ) | |
| (83 | ) | |
| (1,164 | ) | |
| (4,314 | ) | |
| (6,266 | ) |
| |
| 2,105 | | |
| 249 | | |
| 3,496 | | |
| 8,760 | | |
| 14,610 | |
At March 31, 2023 | |
| | | |
| | | |
| | | |
| | | |
| | |
Cost | |
| 7,009 | | |
| 1,208 | | |
| 15,022 | | |
| 32,308 | | |
| 55,547 | |
Accumulated depreciation | |
| (4,904 | ) | |
| (959 | ) | |
| (11,526 | ) | |
| (23,548 | ) | |
| (40,937 | ) |
| |
| 2,105 | | |
| 249 | | |
| 3,496 | | |
| 8,760 | | |
| 14,610 | |
Opening NBV - March 31, 2024 | |
| | | |
| | | |
| | | |
| | | |
| | |
Additions | |
| - | | |
| - | | |
| 22,846 | | |
| 6,871 | | |
| 29,717 | |
Disposals | |
| | | |
| | | |
| | | |
| | | |
| | |
Cost | |
| (1,219 | ) | |
| (1,208 | ) | |
| - | | |
| - | | |
| (2,427 | ) |
Accumulated depreciation | |
| 876 | | |
| 1,028 | | |
| - | | |
| - | | |
| 1,904 | |
Depreciation | |
| (675 | ) | |
| (69 | ) | |
| (5,735 | ) | |
| (7,183 | ) | |
| (13,662 | ) |
| |
| 1,087 | | |
| - | | |
| 20,607 | | |
| 8,448 | | |
| 30,142 | |
At March 31, 2024 | |
| | | |
| | | |
| | | |
| | | |
| | |
Cost | |
| 5,790 | | |
| - | | |
| 37,868 | | |
| 39,179 | | |
| 82,837 | |
Accumulated depreciation | |
| (4,703 | ) | |
| - | | |
| (17,260 | ) | |
| (30,731 | ) | |
| (52,695 | ) |
| |
| 1,087 | | |
| - | | |
| 20,607 | | |
| 8,448 | | |
| 30,142 | |
Depreciation expense of $5,804 (2023 - $1,248)
is included in research and development expenses and depreciation expense of $7,858 (2023 - $5,018) is included in general and administrative
expenses.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
6 | Amounts due to directors |
During the year ended March 31, 2024,
the Company incurred $303,611 (2023 - $302,855) of directors’ fees earned by the independent members of the Board of Directors who
are not employees, officers or are greater than 10% shareholders of the Company. As at March 31, 2024, $75,750 (2023 - $75,750) was due
to those individuals. These costs are included in accounts payable and accrued liabilities in the consolidated statements of financial
position.
7 | Due to related party and related transactions |
The Company’s Chair of the Board
of Directors (formerly Chief Executive Officer) is a partner of Bloom Burton & Co. (“Bloom Burton”), which is a principal shareholder
of the Company. For the year ended March 31, 2024, the Company was charged $nil (2023 - $269,975) for services performed by the former
Chief Executive Officer and no directors fees were paid in current or prior year. As at March 31, 2024, $nil (2023 - $342,346) is included
in accounts payable and accrued liabilities owing to the former Chief Executive Officer in accordance with his employment contract, which
was terminated on November 12, 2022 due to his change in role. The Company granted 975,000 (2023– nil) to the former Chief Executive
Officer during the year ended March 31, 2024.
For the year ended March 31, 2024, the
Company was charged $208,189 (2023 - $205,345) for consulting services in relation to business development activities by Bloom Burton
Securities Inc., an affiliate of Bloom Burton.
For the year ended March 31, 2024, no
compensation warrants were issued. For the year ended March 31, 2023, the Company issued 1,189,579 compensation warrants valued at $50,057
and paid $315,000 in cash commission to Bloom Burton Securities Inc, resulting from the May 2022 Public Offering (as detailed in note
10).
During the year ended March 31, 2024,
the Company earned $ 827,407 (2023 - $334,177). This includes $815,710 from milestone revenue for ATI-1501 program (2023 - $334,177) and
$11,697 from royalties earned on the sale of ATI-1501 drugs (2023 - $nil).
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
| |
| | |
| |
ACOA Business Development Program interest-free loan with a maximum contribution of $500,000 repayable in 120 equal monthly payments of $4,167 beginning April 1, 2018. As at March 31, 2024, the principal outstanding was $237,500 (2023- $287,500) and has been recorded at an effective interest rate of 12% | |
| 180,400 | | |
| 207,000 | |
| |
| | | |
| | |
ACOA Business Development Program interest-free loan with a maximum contribution of $500,000 repayable in 84 equal monthly payments of $5,952 beginning January 1, 2019. As at March 31, 2024, the principal outstanding was $178,592 (2023- $250,016) and has been recorded at an effective interest rate of 12% | |
| 153,600 | | |
| 203,300 | |
| |
| | | |
| | |
ACOA Business Development Program interest-free loan with a maximum contribution of $474,839 repayable in 120 equal monthly payments of $3,960 beginning March 1, 2020. As at March 31, 2024, the principal outstanding was $316,440 (2023- $363,960) and has been recorded at an effective interest rate of 12% | |
| 217,200 | | |
| 237,300 | |
| |
| | | |
| | |
ACOA Atlantic Innovation Fund (‘AIF’) interest-free loan with a maximum contribution of $2,803,148. Annual repayments, which commenced on December 1, 2021 are calculated as 5% of gross revenue from resulting products for the preceding fiscal year. As at March 31, 2024, the amount drawn down on the loan is $2,796,139 (2023- $2,662,990) and has been recorded at an effective interest rate of 26.8% | |
| 466,400 | | |
| 398,225 | |
| |
| | | |
| | |
Long Zone Holdings Inc. (LZH) secured loan bearing an interest rate of the higher of 11% or the US prime lending rate plus 3.25% per year plus 4% per year fixed maintenance fee (2023 - higher of 11% or the US prime lending rate plus 3.25% per year plus 4% per year fixed maintenance fee, compounded quarterly, with a maturity date of March 15, 2025. As at March 31, 2024, the principal outstanding was US$3,600,000 (2023- US$3,600,000) | |
| 4,751,898 | | |
| 4,659,128 | |
| |
| | | |
| | |
Long Zone Holdings Inc. (LZH) secured loan bearing an interest rate of the higher of 11% or the Canadian prime lending rate plus 4.3% per year, plus 4% per year fixed maintenance fee, compounded quarterly, with a maturity date of March 15, 2025. As at March 31, 2024, the principal outstanding was $2,500,000 (2023- $2,500,000) | |
| 2,133,672 | | |
| 1,960,392 | |
| |
| | | |
| | |
Bloom Burton unsecured bridge loan bearing an interest rate of 1% per annum for the first month increasing to 2% thereafter (average rate during the period was 2%) and matures the earlier of July 31, 2024 or certain corporate events. As at March 31, 2024, the principal outstanding was $300,000 (2023- $nil) | |
| 281,687 | | |
| - | |
| |
| 8,184,857 | | |
| 7,665,345 | |
Less: Current Portion | |
| (7,309,657 | ) | |
| (113,125 | ) |
| |
| 875,200 | | |
| 7,552,220 | |
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
9 | Long-term debt (continued) |
ACOA Loans
Total contributions received, less amounts
that have been repaid as at March 31, 2024 for ACOA loans, were $3,528,671 (2023 - $3,564,466). Certain ACOA loans require approval by
ACOA before the Company can pay dividends or other distributions, or before there is any change in ownership of the Company.
Bloom Burton unsecured bridge loan
On June 28, 2023, the Company obtained
an unsecured bridge loan (the “Bridge Loan”) from Bloom Burton, a related party (see note 7) amounting to $300,000. The Bridge
Loan bears interest at 1% per annum for the first month increasing to 2% thereafter and under the original terms matured on the earlier
of September 28, 2024, or the date on which the Company receives aggregate reimbursements from USAFA of not less than $2,500,000.
On December 1, 2023 and March 30, 2024,
the Company and Bloom Burton agreed to amend the terms of the Bridge Loan. Under the amended terms, the Bridge Loan will now mature on
July 31, 2024, subject to acceleration in connection with certain corporate events. The change in the fair value of the loan as a result
of the modifications was $22,655 and recognized as additional financing costs in the consolidated statement of loss and comprehensive
loss.
The Bridge Loan was recorded at fair
value at inception. The fair value was calculated using the discounted cashflow method using a discount rate of 24% based on the estimated
market interest rate of comparable debt. The fair value was determined to be $238,236 and the discount of $61,764 has been accounted for
as a transaction with a shareholder and credited to equity as contributed surplus.
Interest on the Bridge Loan is accrued
monthly on the last business day of each successive month, commencing July 31, 2023. Prior to the maturity date, interest accrued under
the Bridge Loan is added to the principal amount.
The costs associated directly with the
acquisition of the Bridge Loan for legal and other fees amounting to $18,011 were capitalized and deducted from the initial carrying value
of the loan and are amortized on a straight-line over the term of the Bridge Loan.
LZH Secured Loans
On March 28, 2022, the Company executed
a senior secured loan agreement (the “Agreement”) with LZH providing for a secured loan for gross proceeds of $4,500,000 (US$3,600,000)
(the “First Tranche Loan”).
Under the terms of the Agreement, LZH
obtained the First Tranche Loan bearing a minimum interest rate of 8.5% or the US Prime Lending rate plus 5.25% per year, compounded quarterly
and paid in arrears, maturing on March 28, 2025. The loan is secured by a general security over all the assets of the Company, including
intellectual property. The Agreement provides for early prepayment option and various default events which trigger a default penalty interest
of an additional 5% to be paid. These features represent embedded derivatives requiring bifurcation. The Company determined the fair value
of these embedded derivatives to be nominal at inception.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
9 | Long-term debt (continued) |
LZH Secured Loans (continued)
The Company received net proceeds of
$4,297,646 (US$3,438,117) after deducting fees paid to LZH for origination fee, work fee and other costs totaling $202,354 (US$161,883).
The Company also paid legal, professional and other costs amounting to $99,464. Total costs of $301,818, relating directly to the acquisition
of the loan were capitalized and deducted from the initial carrying value of the loan.
Concurrently with the loan, the Company
issued 1,500,000 common share purchase warrants, exercisable over seven years at an exercise price of $0.115. The fair value of the warrants
on the date of issuance was $117,627.
Concurrently with the loan, the Company
entered into an agreement which, subject to obtaining certain consents by the due date, entitled LZH an exclusive licence to commercialize
the Company’s future approved products in Latin America, Canada, and Israel. The fair value of the agreement at inception was estimated
at $117,627, with the respective portion of the loan proceeds allocated to the transaction and recorded as deferred credit in the consolidated
statement of financial position. As the Company was not able to secure the required consents, additional 1,500,000 warrants were issued
to LZH on December 28, 2022 (note 12), and the deferred credit was recognized as the fair value of the additional warrants in the consolidated
statement of changes in shareholders’ equity.
On March 17, 2023, the Company entered
into an amended and restated secured loan agreement (the “Amended Loan Agreement”) with LZH, amending and restating the Agreement.
Pursuant to the terms of the Amended Loan Agreement, LZH provided an additional loan (the “Second Tranche Loan”) of $2,500,000,
which supplements the First Tranche Loan (collectively with Second Tranche Loan, the “Loans”). The Loans mature on March 15,
2025, bearing the following terms:
| ● | The interest rate on the First Tranche Loan was amended, to
be the higher of 11% or the US prime lending rate plus 3.25%; |
| ● | Second Tranche Loan, higher of 11% or the Canadian prime lending
rate plus 4.3%; |
| ● | Loans include a prepayment feature at the option of the Company,
which requires interest to be paid to the maturity date from the payment date; |
| ● | Loans include a default interest feature whereby the Company
will owe 5% in additional interest if an event of default occurs. |
| ● | Loans require the Company to maintain a minimum cash balance
of US$360,000 at all times, unless a waiver is obtained from LZH. On September 27, 2023, the Company entered into an agreement with LZH
to temporarily waive the minimum cash balance requirement to April 1 ,2024. On April 1, 2024 (see note 18), LZH waived the minimum cash
balance requirement. |
| ● | Loans also require that the Company obtain certain additional
funding of not less than $10 million on or before March 31, 2024. On April 1, 2024 (see note 18), LZH waived this requirement. |
| ● | Interest is compounded quarterly and paid in arrears. In addition,
a 4% per year fixed maintenance fee is payable on the Loans to LZH. |
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
9 | Long-term debt (continued) |
LZH Secured Loans (continued)
Concurrently with the Second Tranche
Loan, the Company issued 6,930,000 common share purchase warrants, exercisable over seven years at an exercise price of $0.045. The fair
value of the warrants on the date of issuance was $279,378 (note 12).
The Company received net proceeds of
$2,199,348 after deducting fees paid to LZH for origination fee, legal and other fees amounting to $300,652 on the Second Tranche Loan.
The Company allocated the net proceeds of the Second Tranche Loan to the Second Tranche Loan and the common share purchase warrants on
a reasonable basis, proportionately based on their relative stand-alone fair values of the instruments. Based on the proportionate relative
fair value, $1,953,568 was allocated to the Second Tranche Loan and $245,780 was allocated to the common share purchase warrants.
Total costs associated with the Second
Tranche Loan of $300,652 was allocated to the Second Tranche Loan and the common share purchase warrants on a reasonable basis, proportionately
based on their relative stand-alone fair values of the instruments. Based on the proportionate relative fair value $267,054 was allocated
to the Second Tranche Loan and deducted from the initial loan, and $33,598 to the common share purchase warrants.
The fair value of the LZH secured loans
is as follows:
| |
$ | |
LZH secured loan - March 31, 2022 | |
| 3,962,928 | |
Proceeds from Second Tranche Loan | |
| 2,500,000 | |
Costs associated with acquisition of the loan | |
| (267,054 | ) |
Fair value of the warrants issued | |
| (279,378 | ) |
Loss due to modified terms of First Tranche Loan | |
| 144,241 | |
Accreted interest | |
| 186,417 | |
Unrealized foreign exchange loss | |
| 372,366 | |
LZH secured loans - March 31, 2023 | |
| 6,619,520 | |
Accreted interest | |
| 301,406 | |
Unrealized foreign exchange gain | |
| (35,356 | ) |
LZH secured loans - March 31, 2024 | |
| 6,885,570 | |
Minimum annual repayments of long-term
debt over the next five years (listed below), do not include potential ACOA Atlantic Innovation Fund repayments beyond 2024, since these
are not determinable at this time:
| |
$ | |
Year ending March 31, 2025 | |
| 7,309,657 | |
March 31, 2026 | |
| 118,381 | |
March 31, 2027 | |
| 101,342 | |
March 31, 2028 | |
| 75,325 | |
March 31, 2029 | |
| 72,250 | |
| |
| 7,676,955 | |
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
9 | Long-term debt (continued) |
Net debt reconciliation
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Balance - Beginning of period | |
| 7,665,345 | | |
| 4,978,683 | |
Accreted interest, cash | |
| (72,521 | ) | |
| (83,377 | ) |
Accreted interest | |
| 485,576 | | |
| 529,704 | |
Unrealized foreign exchange translation (LZH) | |
| (35,356 | ) | |
| 372,366 | |
Net proceeds from LZH secured loans | |
| - | | |
| 1,953,568 | |
Net proceeds from Bridge Loan | |
| 300,000 | | |
| - | |
Fair value adjustment recorded of Bridge Loan | |
| (61,764 | ) | |
| - | |
Repayment of debt | |
| (96,423 | ) | |
| (85,599 | ) |
Balance - End of period | |
| 8,184,857 | | |
| 7,665,345 | |
Less: Current Portion | |
| (7,309,657 | ) | |
| (113,125 | ) |
Non-current portion | |
| 875,200 | | |
| 7,552,220 | |
Financing costs consist of the following for the year ended
March 31:
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Accreted interest on government loans & LZH secured loans | |
| 485,576 | | |
| 529,704 | |
Interest on LZH secured loans | |
| 1,145,429 | | |
| 422,138 | |
Loss due to modified terms of First Tranche loan | |
| - | | |
| 144,241 | |
| |
| 1,631,005 | | |
| 1,096,083 | |
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
Authorized
Unlimited number
of Class A common shares
Unlimited number
of Class B non-voting common shares (nil outstanding)
Unlimited number
of preferred shares (nil outstanding)
Issued
Class A common
shares
| |
Number of | | |
| |
| |
Shares | | |
Amount | |
| |
# | | |
$ | |
Balance - March 31, 2022 | |
| 71,266,120 | | |
| 39,653,314 | |
Issued for cash | |
| 50,000,000 | | |
| 3,214,286 | |
Less: share issuance costs | |
| - | | |
| (544,241 | ) |
Balance - March 31, 2023 | |
| 121,266,120 | | |
| 42,323,359 | |
| |
| | | |
| | |
Balance
- March 31, 2024 | |
| 121,266,120 | | |
| 42,323,359 | |
On May 26, 2022, the Company completed
a prospectus offering (“May 2022 Public Offering”) of 50,000,000 units at a price of $0.09 per unit, for aggregate gross proceeds
of $4,500,000. Each unit consisted of one common share and one-half of one common share purchase warrant, with each whole warrant entitling
the holder to acquire one common share of the Company at an exercise price of $0.15 for a period of five years, expiring on May 26, 2027.
The Company allocated the gross proceeds of the May 2022 Public Offering to the common share and the common share purchase warrants on
a reasonable basis, proportionately based on their relative stand-alone fair values of the instruments. Based on the proportionate relative
fair values, $3,214,286 was allocated to the common shares and $1,285,714 to the common share purchase warrants.
Total costs associated with the May
2022 Public Offering are $761,955, including cash costs for commissions of $315,000, professional fees and regulatory costs of approximately
$306,955 and 3,500,000 compensation warrants issued as commissions to the agents valued at approximately $140,000. Each compensation warrant
entitles the holder to acquire one common share of the Company at an exercise price of $0.095 for a period of two years, expiring on May
26, 2024. The Company allocated the total costs of the May 2022 Public Offering to the common share and the common share purchase warrants
on a reasonable basis, proportionately based on their relative stand-alone fair values of the instruments. Based on the proportionate
relative fair values, $544,241 was allocated to the common shares and $217,714 to the common share purchase warrants.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
The change in contributed surplus as
presented in the consolidated statement of changes in shareholders’ equity is as follows:
| |
Amount | |
| |
$ | |
Balance- March 31, 2022 | |
| 5,013,399 | |
Vesting of stock options | |
| 875,124 | |
Warrants expired | |
| 524,440 | |
Balance- March 31, 2023 | |
| 6,412,963 | |
Vesting of stock options | |
| 191,346 | |
Fair value adjustment of Bridge Loan | |
| 61,764 | |
Warrants expired | |
| 6,203,902 | |
Balance- March 31, 2024 | |
| 12,869,975 | |
The Board of Directors of the Company
has established a stock option plan (the “Plan”) under which options to acquire common shares of the Company are granted to
directors, employees and other advisors of the Company. The maximum number of common shares issuable under the Plan shall not exceed 10%
of the issued and outstanding common shares at the date of such grant. If any option expires or otherwise terminates for any reason without
having been exercised in full, or if any option is exercised in whole or in part, the number of shares in respect of which option is expired,
terminated or was exercised shall again be available for the purposes of the Plan.
Stock options are granted with an exercise
price determined by the Board of Directors, which is the market price of the shares on the day preceding the award. The term of the option
is determined by the Board of Directors, not to exceed ten years from the date of the grant. The vesting of the options is determined
by the Board and is typically 33 1/3% every year after the date of grant.
In
the event that the option holder should die while he or she is still a director, employee or other advisor of the Company, the expiry
date shall be one (1) year from the date of death of the option holder, not to exceed the original expiry date of the option. In the event
that the option holder ceases to be a director, employee or other advisor of the Company other than by reason of death or termination,
the expiry date of the option shall be three (3) months following the date the option holder ceases to be a director, employee or other
advisor of the Company, not to exceed the original expiry date of the option.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
11 | Contributed surplus (continued) |
On November 13, 2022, the Company
granted 1,000,000 stock options, to the newly appointed President & Chief Executive Officer on appointment, under Appili’s Stock
Option Plan. The stock options will be exercisable at $0.04 per share and will have a term of ten years and will vest over a period of
three years.
On January 4, 2023 the Company terminated
and cancelled 4,305,990 stock options with a strike price in excess of $0.13 to purchase Class A common shares of the Company, resulting
in additional stock based compensation expense of $368,777 in the consolidated statement of loss and comprehensive loss.
On May 15, 2023, the Company granted
4,673,250 stock options under Appili’s Stock Option Plan. The stock options will be exercisable at $0.04 per share and will have
a term of ten years. 3,487,500 options vest immediately and 1,185,750 will vest over a period of three years.
On November 15, 2023, the Company
granted 140,000 stock options under Appili’s Stock Option Plan. The stock options will be exercisable at $0.04 per share and will
have a term of ten years and will vest immediately.
The fair value of stock options is estimated
using the Black-Scholes valuation model. Due to the absence of company specific volatility rates, the Company determined the expected
volatility of these stock options using the average volatility of biotechnology companies traded on the Toronto Stock Exchange and the
TSX Venture Exchange.
During the year ended March 31, 2024,
4,813,250 stock options (2023– 1,000,000) with a weighted average exercise price of $0.04 (2023 - $0.04), a term of 10 years (2022
– 10 years). The value of these stock options was estimated at $191,830 (2023 - $40,000) which is a weighted average grant date
value per option of $0.04 (2023 - $0.04) using the Black -Scholes valuation model and the following weighted average assumptions:
| |
2024 | | |
2023 | |
Risk-free interest rate | |
| 3.80 | % | |
| 3.15 | % |
Expected volatility | |
| 120 | % | |
| 110 | % |
Expected life (years) | |
| 10 | | |
| 10 | |
Dividend yield | |
| - | | |
| - | |
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
11 | Contributed surplus (continued) |
Option activity for the years ended March 31, 2024, and 2023
was as follows:
| |
| | |
2024 | | |
| | |
2023 | |
| |
| | |
Weighted | | |
| | |
Weighted | |
| |
| | |
average | | |
| | |
average | |
| |
Number | | |
exercise price | | |
Number | | |
exercise price | |
| |
# | | |
$ | | |
# | | |
$ | |
| |
| | |
| | |
| | |
| |
Outstanding - Beginning of period | |
| 3,168,750 | | |
| 0.10 | | |
| 9,276,490 | | |
| 0.67 | |
Granted | |
| 4,813,250 | | |
| 0.04 | | |
| 1,000,000 | | |
| 0.04 | |
Forfeited | |
| (25,000 | ) | |
| 0.04 | | |
| (879,584 | ) | |
| 0.43 | |
Cancelled | |
| - | | |
| - | | |
| (4,305,990 | ) | |
| 0.84 | |
Expired | |
| - | | |
| - | | |
| (1,922,166 | ) | |
| 0.81 | |
Outstanding - End of period | |
| 7,957,000 | | |
| 0.06 | | |
| 3,168,750 | | |
| 0.10 | |
The weighted average exercise price of options exercisable
at March 31, 2024, is $0.07 (2023 - $0.10). As at March 31, 2024, the following options were outstanding:
Exercise price | |
Opening | | |
Issued | | |
Forfeited | | |
Closing | | |
Exercisable | | |
Expiry | |
Average
remaining | |
0.13 | |
| 2,168,750 | | |
| - | | |
| - | | |
| 2,168,750 | | |
| 1,889,167 | | |
December 8, 2031 | |
| 7.69 | |
0.04 | |
| 1,000,000 | | |
| - | | |
| - | | |
| 1,000,000 | | |
| 333,333 | | |
November 12, 2032 | |
| 8.62 | |
0.04 | |
| - | | |
| 4,673,250 | | |
| (25,000 | ) | |
| 4,648,250 | | |
| 3,347,500 | | |
May 15, 2033 | |
| 9.13 | |
0.04 | |
| - | | |
| 140,000 | | |
| - | | |
| 140,000 | | |
| 140,000 | | |
November 15, 2033 | |
| 9.63 | |
| |
| 3,168,750 | | |
| 4,813,250 | | |
| (25,000 | ) | |
| 7,957,000 | | |
| 5,710,000 | | |
| |
| | |
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
Warrant activity for the years ended March 31, 2024 and 2023
was as follows:
| |
| | |
Weighted | |
| |
| | |
average | |
| |
Number | | |
exercise price | |
| |
# | | |
$ | |
Outstanding - March 31, 2022 | |
| 22,203,037 | | |
| 1.14 | |
Granted | |
| 36,930,000 | | |
| 0.12 | |
Expired | |
| (885,158 | ) | |
| 1.20 | |
Outstanding - March 31, 2023 | |
| 58,247,879 | | |
| 0.49 | |
Expired | |
| (13,391,005 | ) | |
| 1.29 | |
Outstanding - March 31, 2024 | |
| 44,856,874 | | |
| 0.25 | |
The Company completed the May 2022 Public Offering (see note
10) and issued 25,000,000 common share purchase warrants exercisable for a period of 5 years at an exercise price of $0.15 per share,
valued at $1,285,714 on May 26, 2022. The Company also issued 3,500,000 compensation warrants as commissions to the agents exercisable
for a term of 2 years at an exercise price of $0.10 per share, valued at $140,000 on May 26, 2022.
On March 28, 2022, the Company issued
1,500,000 common share purchase warrants to LZH, for a term of seven years at an exercise price of $0.115 per share, valued at $117,627
on March 28, 2022. On December 28, 2022, an additional 1,500,000 warrants were issued to LZH as certain consents required by the licencing
agreement were not obtained and the deferred credit was recognized as the fair value of the additional warrants in the consolidated statements
of changes in shareholders’ equity (note 9).).
On March 17, 2023, the Company issued
6,930,000 common share purchase warrants to LZH for a term of seven years at an exercise price of $0.045 per share, valued at $279,378
on March 17, 2023 (note 9).
The weighted average value per warrant issued for the year
ended March 31, 2024, was $nil (2023 - $0.05) and was determined using the Black-Scholes valuation model and following weighted average
assumptions:
| |
2024 | | |
2023 | |
Risk-free interest rate | |
| - | | |
| 2.76 | % |
Expected volatility | |
| - | | |
| 112 | % |
Expected life (years) | |
| - | | |
| 4.51 | |
Dividend yield | |
| - | | |
| - | |
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
Income tax expense differs from the
tax recovery amount that would be obtained by applying the statutory income tax rate to the respective year’s net loss before income
taxes as follows:
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Net Loss before income taxes | |
| (3,711,327 | ) | |
| (9,206,622 | ) |
| |
| | | |
| | |
Recovery based on combined federal and provincial rate of 28% | |
| (1,062,509 | ) | |
| (2,630,948 | ) |
Change in deferred tax assets not recognized | |
| 103,004 | | |
| 2,375,921 | |
Tax rate change on opening unrecognized deferred tax asset | |
| 36,357 | | |
| 39,960 | |
Non-deductible share-based compensation | |
| 54,103 | | |
| 250,082 | |
Gain on expiration of warrants | |
| 877,080 | | |
| - | |
| |
| | | |
| | |
Other non-deductible items | |
| 61,548 | | |
| 1,377 | |
Net income tax expense | |
| 69,583 | | |
| 36,392 | |
Deferred tax assets are recognized for
tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profit is probable. The Company
did not recognize deferred tax assets that can be carried forward against future taxable income.
The following reflects the balance of
temporary differences of which no deferred income tax asset has been recognized:
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Property and equipment | |
| 9,678 | | |
| 14,903 | |
Non-capital losses | |
| 55,424,843 | | |
| 53,523,133 | |
Share Issuance Costs | |
| 2,125,883 | | |
| 3,510,847 | |
Scientific research and experimental development expenditures | |
| 11,658,187 | | |
| 11,569,851 | |
Long-term debt | |
| 700,715 | | |
| 932,700 | |
Net temporary differences | |
| 69,919,306 | | |
| 69,551,434 | |
The Company has non-capital loss carry-forwards
of $55,424,843 as at March 31, 2024 (2023 - $53,523,133) that expire in varying amounts from 2036 to 2044.
The Company has SR&ED expenditures
for both 2024 and 2023 and will also have federal and provincial tax credits that will be available to be applied against federal and
provincial taxes otherwise payable in future years. As at March 31, 2024, $1,318,650 (2023 -$1,341,322) of ITCs are receivable.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
Financial instruments are defined as
a contractual right or obligation to receive or deliver cash on another financial asset. The following table sets out the approximate
fair values of financial instruments as at the consolidated statements of financial position dates with relevant comparatives:
| March 31, 2024 | | |
March 31, 2023 | |
| |
Carrying Value | | |
Fair Value | | |
Carrying Value | | |
Fair Value | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Cash | |
| 94,493 | | |
| 94,493 | | |
| 2,465,882 | | |
| 2,465,882 | |
Amounts Receivable | |
| 1,086,725 | | |
| 1,086,725 | | |
| 69,006 | | |
| 69,006 | |
Accounts Payable and accrued liabilities | |
| 4,183,176 | | |
| 4,183,176 | | |
| 2,823,001 | | |
| 2,823,001 | |
Long-term debt | |
| 8,184,857 | | |
| 8,184,857 | | |
| 7,665,345 | | |
| 7,665,345 | |
Assets and liabilities, such as commodity
taxes, that are not contractual and arise as a result of statutory requirements imposed by governments, do not meet the definition of
financial assets or financial liabilities and are, therefore, excluded from amounts receivable and accounts payable and accrued liabilities
in this table.
Fair value of items, which are short-term
in nature, has been deemed to approximate their carrying value. The above-noted fair values, presented for information only, reflect conditions
that existed only at March 31, 2024, and do not necessarily reflect future value or amounts, which the Company might receive if it were
to sell some or all of its assets to a willing buyer in a free and open market.
The fair value of the long-term debt
is estimated based on the expected interest rates for similar borrowings by the Company at the consolidated statements of financial position
dates. At March 31, 2024, the fair value is estimated to be equal to the carrying amount. The inputs into the determination of the fair
value of the long-term debt, including the discount rate, are classified as Level 3 in the fair value hierarchy.
Risk management
The Company, through its financial
assets and liabilities, has exposure to the following risks from its use of financial instruments: credit risk; market risk; and liquidity
risk. Management is responsible for setting acceptable levels of risk and reviewing risk management activities as necessary.
Credit risk
Credit risk is the risk of a financial
loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligation. The Company is exposed to credit
risk on its cash, short-term investment and accounts receivable balances. The Company’s cash management policies include ensuring
that the cash is deposited in Canadian chartered banks.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
14 | Financial instruments (continued) |
Market risk
Market risk is the risk the fair value
or future cash flows of a financial instrument will fluctuate because of changes in market prices, including interest rate risk and foreign
currency risk.
Interest rate price risk
The Company has exposure to interest
rate risk on its lending and borrowing activities. The Company has interest-free debt that is either repayable over 84 months or 120 months
or becomes repayable when revenue is earned. The Company also has a secured loan of $4,500,000 (US $3,600,000) based on minimum interest
rate of 11% or the US prime lending rate plus 3.25% per year, repayable over 24 months and a secured loan of $2,500,000 based on a minimum
interest rate of 11% or the Canadian prime lending rate plus 4.3% per year, repayable over 24 months.
Foreign currency risk
Foreign currency risk occurs as a result
of foreign exchange rate fluctuations between the time a transaction is recorded and the time it is settled.
The Company purchases goods and services
denominated in foreign currencies and, accordingly, is subject to foreign currency risk. As at March 31, 2024, the Company’s cash included
$27,271 (2023 - $63,776) denominated in United States dollars. In addition, the Company’s accounts payable and accrued liabilities included
$1,013,262 (2023 - $480,939) denominated in United States dollars. The Company performed a sensitivity analysis on the foreign exchange
rate. If the year-end foreign exchange rate was 5% higher or lower, the Company’s cash and accounts payable and accrued liabilities
denominated in United States dollars would be $70,496 higher or $70,496 lower, respectively. The Company also has exposure to foreign
exchange on the LZH secured loan of $3,600,000 denominated in US dollars. The Company performed a sensitivity analysis on the foreign
exchange rate. If the foreign exchange rate as at March 31, 2024, was 5% higher or lower, LZH secured loan would be $237,595 higher or
$237,595 lower, respectively.
The Company does not enter into derivative
financial instruments to reduce exposure to foreign currency risk.
Liquidity risk
Liquidity risk is the risk the Company
will encounter difficulties in meeting its financial liability obligations as they come due. The Company has a planning and budgeting
process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis.
The Company controls liquidity risk
through management of working capital, cash flows and the availability and sourcing of financing. As described in note 1, the Company’s
ability to accomplish all of its future strategic plans is dependent on obtaining additional financing or executing other strategic options;
however, there is no assurance that the Company will achieve these objectives.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
14 | Financial instruments (continued) |
Liquidity risk (continued)
The following table outlines the contractual repayments for
long-term debt, which includes loans with a set repayment schedule, as well as loans that are repayable based on a percentage of revenues,
for the Company’s financial liabilities. The long-term debt is comprised of the contributions received described in note 9 as at March
31, 2024:
| |
Total | | |
Year 1 | | |
Years
2 to 3 | | |
Years
4 to 5 | | |
After
5 Years | |
| |
| $ | | |
| $ | | |
| $ | | |
| $ | | |
| $ | |
Accounts payable and accrued liabilities | |
| 4,183,176 | | |
| 4,183,176 | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Long-term debt | |
| 11,206,671 | | |
| 7,880,616 | | |
| 378,181 | | |
| 347,803 | | |
| 2,600,071 | |
| |
| 15,389,847 | | |
| 12,063,792 | | |
| 378,181 | | |
| 347,803 | | |
| 2,600,071 | |
The Company’s capital management objectives
are to safeguard its ability to continue as a going concern, and to provide returns for shareholders and benefits for other stakeholders
by ensuring it has sufficient cash resources to fund its research and development activities, to pursue its eventual commercialization
efforts and to maintain its ongoing operations. The Company includes its share capital, deficit and long-term debt in the definition of
capital.
A summary of the Company’s capital structure
is as follows:
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
| |
| | |
| |
Common Shares | |
| 42,323,359 | | |
| 42,323,359 | |
Contributed Surplus | |
| 12,869,975 | | |
| 6,412,963 | |
Warrants | |
| 2,975,003 | | |
| 9,178,905 | |
Deficit | |
| (69,093,116 | ) | |
| (65,312,206 | ) |
Long-term debt | |
| 8,184,857 | | |
| 7,665,345 | |
| |
| (2,739,922 | ) | |
| 268,366 | |
16 | Compensation of key management |
Key management includes the Company’s
directors and senior management team. The remuneration of directors and the senior management team was as follows during the years ended
March 31, 2024, and 2023:
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Salary and employee benefits | |
| 1,925,693 | | |
| 2,702,727 | |
Share-based compensation | |
| 177,115 | | |
| 871,145 | |
| |
| 2,102,808 | | |
| 3,573,872 | |
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
Research and development costs | |
| 2,886,002 | | |
| 1,518,903 | |
Salaries, wages and benefits | |
| 3,174,994 | | |
| 2,948,845 | |
Professional and consulting fees | |
| 2,051,051 | | |
| 1,947,119 | |
Stock-based compensation | |
| 191,345 | | |
| 875,124 | |
Marketing, communications and investor relations | |
| 47,784 | | |
| 237,351 | |
Insurance | |
| 226,975 | | |
| 357,293 | |
Office and telecommunications | |
| 184,097 | | |
| 123,297 | |
Lease expense | |
| 43,341 | | |
| 14,038 | |
Finance costs | |
| 1,631,005 | | |
| 1,096,083 | |
Depreciation and loss on disposal of property and equipment | |
| 13,495 | | |
| 30,812 | |
Travel | |
| 38,333 | | |
| 181,535 | |
Other | |
| 11,236 | | |
| - | |
Foreign exchange (gain)/loss | |
| (56,711 | ) | |
| 378,747 | |
Research and development tax credits | |
| (29,722 | ) | |
| (89,040 | ) |
Government assistance | |
| (5,857,679 | ) | |
| (49,426 | ) |
| |
| 4,555,546 | | |
| 9,570,681 | |
Aditxt Transaction
On April 2, 2024, the Company announced that it had entered
into a definitive arrangement agreement (the “Arrangement Agreement”) pursuant to which Aditxt, through its wholly-owned subsidiary,
Adivir, Inc. (“Adivir” or the “Buyer”), agreed to acquire all of the issued and outstanding Class A common shares
(the “Appili Shares”) of the Company by way of a court-approved plan of arrangement under the Canada Business Corporations
Act (the “Transaction”).
Under the terms of the Arrangement Agreement, shareholders
of the Company (the “Appili Shareholders”) will receive (i) 0.002745004 of a share of common stock (each whole share, an “Aditxt
Share”) of Aditxt (the “Share Consideration”) and (ii) US$0.0467 (or approximately CAD$0.0633 with reference to the
Bank of Canada closing exchange rate on March 29, 2024) for each Appili Share held (the “Cash Consideration” and together
with the Share Consideration collectively, the “Transaction Consideration”) representing implied total consideration per Appili
Share of approximately US$0.0561(or approximately CAD$0.07598 with reference to the Bank of Canada closing exchange rate on March 29,
2024) based on the closing price of the Aditxt shares on March 28, 2024.
The Transaction will be effected by way of a court-approved
plan of arrangement pursuant to the Canada Business Corporations Act. Under the terms of the Arrangement Agreement, Adivir
will acquire all of the issued and outstanding Appili Shares, with each Appili Shareholder receiving the Transaction Consideration. In
connection with the Transaction, each outstanding option and warrant of the Company will be cashed-out based on the implied in-the-money
value of the Transaction Consideration.
Appili Therapeutics Inc.
Notes to Consolidated Financial Statements
March 31,
2024 and 2023
18 | Subsequent event (continued) |
Aditxt Transaction (continued)
In connection with the Transaction Aditxt will: (i) agree
to repay no less than 50% in outstanding senior secured debt at the closing of the Transaction (the “Closing”) and to repay
the remaining outstanding senior secured debt by no later than December 31, 2024; (ii) assume all of the Company’s remaining outstanding
liabilities and indebtedness, and (iii) agree to satisfy certain payables of the Company at Closing as further detailed in the Arrangement
Agreement.
The Transaction is subject to the approval of at least two-thirds
of the votes cast by the Company shareholders.
The Transaction is conditional upon Aditxt raising at least
US$20 million in financing (the “Aditxt Financing”) prior to Closing. In addition, completion of the Transaction is subject
to other customary conditions, including the receipt of all necessary court, regulatory and stock exchange approvals. Subject to the receipt
of all required approvals, Closing is currently expected to occur calendar Q3 2024.
The Arrangement Agreement contains customary terms and conditions,
including non-solicitation provisions which are subject to Appili’s right to consider and accept a superior proposal subject to
a matching right in favour of Aditxt. The Arrangement Agreement also provides for the payment of a termination fee of $1.25 million in
certain circumstances.
Changes to debt obligations
On April 1, 2024, LZH, provided the requisite consent to
the Transaction and agreed to waive compliance to secure additional funding by March 15, 2024 (as extended to April 1, 2024) and maintain
a minimum cash balance of US$360,000. With respect to the interest payment due on March 31, 2024, LZH agreed to capitalize the interest
and add it to the principal of the Loans. In connection with such consent and waivers, the Company agreed to issue to LZH an aggregate
of $18,000 worth of the Company’s shares prior to the Closing.
On April 26, 2024, the Company obtained
an additional unsecured bridge loan (“the Loan”) from Bloom Burton, a related party (see note 6) amounting to $300,000. The
Loan bears interest at 10% per annum (to be accrued on a quarterly basis and capitalized against the principal loan amount). The Loan,
together with all accrued and capitalized interest, will be due on the earlier of April 26, 2025, or the occurrence of a change in control
of the Company, as detailed in the promissory agreement.
Option Grants
On April 29, 2024, the Company granted
3,563,281 stock options under Appili’s Stock Option Plan. The stock options will be exercisable at $0.04 per share and will have
a term of ten years. 1,779,000 options vest immediately and 1,784,281 will vest over a period of three years.
F-39
Exhibit
99.2
Aditxt
Inc.
Unaudited
Pro Forma Consolidated
Financial Statements
(In
U.S. dollars)
March
31, 2024
Aditxt Inc.
Pro
Forma Consolidated Statement of Financial Position
(Unaudited)
(In
thousands of U.S. dollars)
As
at March 31, 2024
| |
Aditxt | | |
Evofem | | |
Appili
(Note 3) | | |
Pro
Forma Adjustments | | |
Notes | |
Pro
Forma Consolidated | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
| |
$ | |
ASSETS | |
| | |
| | |
| | |
| | |
| |
| |
CURRENT
ASSETS: | |
| | |
| | |
| | |
| | |
| |
| |
Cash | |
| 89 | | |
| - | | |
| 69 | | |
| 12,104 | | |
5(a) | |
| 12,259 | |
Restricted
Cash | |
| - | | |
| 689 | | |
| - | | |
| - | | |
| |
| 689 | |
Accounts
receivable, net | |
| 427 | | |
| 4,306 | | |
| 855 | | |
| - | | |
| |
| 5,588 | |
Inventory | |
| 623 | | |
| 1,306 | | |
| - | | |
| - | | |
| |
| 1,929 | |
Prepaid
expenses | |
| 457 | | |
| 622 | | |
| 142 | | |
| - | | |
| |
| 1,221 | |
Subscription
receivable | |
| - | | |
| - | | |
| - | | |
| - | | |
| |
| - | |
Other
receivable | |
| - | | |
| - | | |
| 11 | | |
| - | | |
| |
| 11 | |
TOTAL
CURRENT ASSETS | |
| 1,596 | | |
| 6,923 | | |
| 1,077 | | |
| 12,104 | | |
| |
| 21,700 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Fixed
assets, net | |
| 2,022 | | |
| 1,200 | | |
| 22 | | |
| - | | |
| |
| 3,244 | |
Intangible
assets, net | |
| 9 | | |
| - | | |
| - | | |
| 6,451 | | |
5(b) | |
| 6,460 | |
Deposits | |
| 132 | | |
| - | | |
| - | | |
| - | | |
| |
| 132 | |
Right
of use asset - long term | |
| 1,940 | | |
| 59 | | |
| - | | |
| - | | |
| |
| 1,999 | |
Other
assets | |
| - | | |
| 35 | | |
| - | | |
| - | | |
| |
| 35 | |
Goodwill | |
| - | | |
| - | | |
| - | | |
| 132,972 | | |
5(c) | |
| 132,972 | |
Investment
in Evofem / Appili | |
| 22,277 | | |
| - | | |
| - | | |
| (22,277 | ) | |
5(d) | |
| - | |
TOTAL
ASSETS | |
| 27,976 | | |
| 8,217 | | |
| 1,099 | | |
| 129,250 | | |
| |
| 166,542 | |
The
accompanying notes are an integral part to these unaudited pro forma consolidated financial statements.
Aditxt Inc.
Pro
Forma Consolidated Statement of Financial Position
(Unaudited)
(In
thousands of U.S. dollars)
As
at March 31, 2024
| |
Aditxt | | |
Evofem | | |
Appili
(Note 3) | | |
Pro
Forma Adjustments | | |
Notes | |
Pro
Forma Consolidated | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
| |
$ | |
LIABILITIES
AND STOCKHOLDERS’ EQUITY | |
| | |
| | |
| | |
| | |
| |
| |
CURRENT
LIABILITIES: | |
| | |
| | |
| | |
| | |
| |
| |
Accounts
payable and accrued expenses | |
| 9,361 | | |
| 24,130 | | |
| 3,087 | | |
| 2,600 | | |
5(e) | |
| 39,178 | |
Notes
payable - related party | |
| 468 | | |
| - | | |
| - | | |
| - | | |
| |
| 468 | |
Notes
payable, net of discount | |
| 5,678 | | |
| - | | |
| - | | |
| - | | |
| |
| 5,678 | |
Financing
on fixed assets | |
| 148 | | |
| - | | |
| - | | |
| - | | |
| |
| 148 | |
Deferred
rent | |
| 147 | | |
| - | | |
| - | | |
| - | | |
| |
| 147 | |
Convertible
notes payable carried at fair value | |
| - | | |
| 13,252 | | |
| - | | |
| (13,252 | ) | |
5(e) | |
| - | |
Convertible
notes payable - Adjuvant | |
| - | | |
| 29,101 | | |
| - | | |
| (29,101 | ) | |
5(e) | |
| - | |
Derivative
liabilities | |
| - | | |
| 4,310 | | |
| - | | |
| (4,310 | ) | |
5(e) | |
| - | |
Other
current liabilities | |
| - | | |
| 3,391 | | |
| - | | |
| - | | |
| |
| 3,391 | |
Corporate
taxes payable | |
| - | | |
| - | | |
| 35 | | |
| - | | |
| |
| 35 | |
Long-term
debt - current | |
| - | | |
| - | | |
| 5,394 | | |
| - | | |
| |
| 5,394 | |
Lease
liability - current | |
| 901 | | |
| 55 | | |
| - | | |
| - | | |
| |
| 956 | |
–Advance
on private placement | |
| 600 | | |
| - | | |
| - | | |
| - | | |
| |
| 600 | |
TOTAL
CURRENT LIABILITIES | |
| 17,303 | | |
| 74,239 | | |
| 8,516 | | |
| (44,063 | ) | |
| |
| 55,995 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Long-term
debt – non-current | |
| - | | |
| - | | |
| 646 | | |
| - | | |
| |
| 646 | |
Lease
liability - long term | |
| 892 | | |
| 4 | | |
| - | | |
| - | | |
| |
| 896 | |
TOTAL
LIABILITIES | |
| 18,195 | | |
| 74,243 | | |
| 9,162 | | |
| (44,063 | ) | |
| |
| 57,537 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Convertible and redeemable preferred stock | |
| - | | |
| 4,640 | | |
| - | | |
| 77,284 | | |
5(f) | |
| 81,924 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
STOCKHOLDERS’
EQUITY (DEFICIT) | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Common
stock | |
| 2 | | |
| 5 | | |
| - | | |
| (5 | ) | |
5(g) | |
| 2 | |
Treasury
stock | |
| (202 | ) | |
| - | | |
| - | | |
| - | | |
| |
| (202 | ) |
Additional
paid-in capital | |
| 152,601 | | |
| 823,409 | | |
| 44,629 | | |
| (847,552 | ) | |
5(g) | |
| 173,087 | |
Accumulated other comprehensive income (loss) | |
| - | | |
| (525 | ) | |
| 178 | | |
| 347 | | |
5(g) | |
| - | |
Accumulated
equity (deficit) | |
| (142,471 | ) | |
| (893,555 | ) | |
| (52,870 | ) | |
| 943,239 | | |
5(g) | |
| (145,657 | ) |
| |
| 9,930 | | |
| (70,666 | ) | |
| (8,063 | ) | |
| 96,029 | | |
| |
| 27,230 | |
NON-CONTROLLING
INTEREST | |
| (149 | ) | |
| - | | |
| - | | |
| - | | |
| |
| (149 | ) |
TOTAL
STOCKHOLDERS’ EQUITY (DEFICIT) | |
| 9,781 | | |
| (70,666 | ) | |
| (8,063 | ) | |
| 96,029 | | |
| |
| 27,081 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
TOTAL
LIABILITIES, CONVERTIBLE AND REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) | |
| 27,976 | | |
| 8,217 | | |
| 1,099 | | |
| 129,250 | | |
| |
| 166,542 | |
The accompanying notes are an integral part to these unaudited
pro forma consolidated financial statements.
Aditxt Inc.
Consolidated
Pro Forma Statement of Earnings
(Unaudited)
(In
thousands of U.S. dollars, except earnings per share)
For
the three months ended March 31, 2024
| |
Aditxt | | |
Evofem | | |
Appili
(Note 3) | | |
Pro
Forma Adjustments | | |
Notes | |
Pro
Forma Consolidated | |
REVENUE | |
$ | | |
$ | | |
$ | | |
$ | | |
| |
$ | |
Sales | |
| 80 | | |
| 3,603 | | |
| 8 | | |
| - | | |
| |
| 3,691 | |
Cost
of goods sold | |
| 66 | | |
| 684 | | |
| - | | |
| - | | |
| |
| 750 | |
Gross profit (loss) | |
| 14 | | |
| 2,919 | | |
| 8 | | |
| - | | |
| |
| 2,941 | |
OPERATING
EXPENSES | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Research and development | |
| 8,145 | | |
| 594 | | |
| 1,183 | | |
| - | | |
| |
| 9,922 | |
Sales and marketing | |
| 41 | | |
| 2,345 | | |
| 15 | | |
| - | | |
| |
| 2,401 | |
General
and administrative expenses | |
| 3,364 | | |
| 2,824 | | |
| 606 | | |
| - | | |
| |
| 6,794 | |
Total
operating expenses | |
| 11,550 | | |
| 5,763 | | |
| 1,804 | | |
| - | | |
| |
| 19,117 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
NET LOSS
FROM OPERATIONS | |
| (11,536 | ) | |
| (2,844 | ) | |
| (1,796 | ) | |
| - | | |
| |
| (16,176 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
OTHER INCOME/(EXPENSE) | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Interest expense | |
| (2,489 | ) | |
| - | | |
| - | | |
| - | | |
| |
| (2,489 | ) |
Interest income | |
| - | | |
| 4 | | |
| 1 | | |
| - | | |
| |
| 5 | |
Other
expense | |
| - | | |
| (616 | ) | |
| (93 | ) | |
| - | | |
| |
| (709 | ) |
Amortization of debt discount | |
| (636 | ) | |
| - | | |
| - | | |
| - | | |
| |
| (636 | ) |
Amortization of intangible
assets | |
| - | | |
| - | | |
| - | | |
| (117 | ) | |
5(h) | |
| (117 | ) |
Loss on issuance of financial
instruments | |
| - | | |
| (3,275 | ) | |
| - | | |
| 3,275 | | |
5(h) | |
| - | |
Gain on debt extinguishment | |
| - | | |
| 1,120 | | |
| - | | |
| (1,120 | ) | |
5(h) | |
| - | |
Change in fair value of financial
instruments | |
| - | | |
| 802 | | |
| - | | |
| (802 | ) | |
5(h) | |
| - | |
Financing costs | |
| - | | |
| - | | |
| (286 | ) | |
| - | | |
| |
| (286 | ) |
Government assistance | |
| - | | |
| - | | |
| 1,361 | | |
| - | | |
| |
| 1,361 | |
Loss
on note exchange agreement | |
| (208 | ) | |
| - | | |
| - | | |
| - | | |
| |
| (208 | ) |
Total
other income/(expense) | |
| (3,333 | ) | |
| (1,965 | ) | |
| 983 | | |
| 1,236 | | |
| |
| (3,079 | ) |
Net loss
before income taxes | |
| (14,869 | ) | |
| (4,809 | ) | |
| (813 | ) | |
| 1,236 | | |
| |
| (19,255 | ) |
Income
tax expense | |
| - | | |
| - | | |
| (7 | ) | |
| - | | |
| |
| (7 | ) |
NET LOSS | |
| (14,869 | ) | |
| (4,809 | ) | |
| (820 | ) | |
| 1,236 | | |
| |
| (19,262 | ) |
NON-CONTROLLING
INTEREST LOSS | |
| 139 | | |
| - | | |
| - | | |
| - | | |
| |
| 139 | |
NET LOSS
ATTRIBUTABLE TO ADITXT, INC. & SUBSIDIARIES | |
| (14,730 | ) | |
| (4,809 | ) | |
| (820 | ) | |
| 1,236 | | |
| |
| (19,123 | ) |
Deemed
Dividend | |
| - | | |
| (47 | ) | |
| - | | |
| 47 | | |
| |
| - | |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | |
| (14,730 | ) | |
| (4,856 | ) | |
| (820 | ) | |
| 1,283 | | |
| |
| (19,123 | ) |
NET LOSS per share: | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Basic | |
| (9.1 | ) | |
| | | |
| | | |
| | | |
| |
| (9.84 | ) |
Diluted | |
| (9.1 | ) | |
| | | |
| | | |
| | | |
| |
| (9.84 | ) |
Weighted
average number of shares: | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Basic | |
| 1,610,872 | | |
| | | |
| | | |
| | | |
| |
| 1,943,748 | |
Diluted | |
| 1,610,872 | | |
| | | |
| | | |
| | | |
| |
| 1,943,748 | |
The
accompanying notes are an integral part to these unaudited pro forma consolidated financial statements.
Aditxt Inc.
Notes
to Pro Forma Consolidated Financial Statements
(Unaudited)
(In
thousands of U.S. dollars)
For
the three months ended March 31, 2024
1 | Description
of Transactions |
Acquisition
of Appili Therapeutics Inc. by Aditxt Inc.:
On
December 12, 2023, Aditxt Inc. (“Aditxt”), through its wholly owned subsidiary, Adivir, Inc. (“Adivir”), acquired
all of the outstanding Class A common shares of Appili Therapeutics Inc. (“Appili”) by way of a court approved plan of arrangement
under the Canada Business Corporations Act and a definitive arrangement agreement entered between Appili and Adivir (the “Appili
Transaction”). Upon closing of the Appili Transaction, Appili will become an indirect, wholly owned subsidiary of Aditxt. As part
of the acquisition terms, Appili shareholders will receive 0.002745004 of a share of Aditxt common stock (the “Share Consideration”)
and US$0.0467 in cash for each Appili share held (the “Cash Consideration” and together with Share Consideration collectively,
the “Appili Transaction Consideration”), representing total consideration of approximately $6,582 based on closing price
of the Aditxt shares on July 5, 2024. The consideration for acquiring Appili also included the assumption of Appili’s existing
liabilities.
Acquisition
of Evofem Biosciences by Aditxt:
On
December 11, 2023, Aditxt, through a definitive agreement, entered into an Agreement and Plan of Merger, as amended and restated, with
Evofem Biosciences, Inc. (“Evofem”) whereby Evofem will merge with a merger sub with Evofem surviving as as a wholly owned
subsidiary of Aditxt (the “Evofem Transaction” and together with the Appili Transaction collectively, “the Transactions”)).
The consideration for acquiring Evofem includes the issuance or exchange of convertible preferred stock of $91,610, and cash consideration
of $1,800 to Evofem’s common stockholders, along with paying off Evofem’s senior secured notes amounting to $12,591, investment
of $4,000 to Evofem and the assumption of Evofem’s existing liabilities.
The
accompanying unaudited Pro Forma Consolidated Financial Statements of Aditxt, have been prepared to give effect to the acquisitions of
Evofem and Appili under the acquisition method of accounting in accordance with ASC Topic 805 – Business Combinations (“ASC
805”). The unaudited Pro Forma Consolidated Statement of Financial Position gives effect to the transactions as if they had occurred
on March 31, 2024. The unaudited Pro Forma Consolidated Statement of Earnings for the three months ended March 31, 2024, gives effect
to the transactions as if they had occurred on January 1, 2023. The unaudited Pro Forma Consolidated Statement of Financial Position
combines the unaudited interim Condensed Consolidated Statement of Financial Position of Aditxt as at March 31, 2024, with the unaudited
interim Condensed Consolidated Statement of Financial Position of Evofem as at March 31, 2024, and the adjusted audited consolidated financial
position of Appili as at March 31, 2024 (see Note 3).
Aditxt Inc.
Notes
to Pro Forma Consolidated Financial Statements
(Unaudited)
(In
thousands of U.S. dollars)
For
the three months ended March 31, 2024
2 | Basis
of preparation (continued) |
The
unaudited Pro Forma Consolidated Financial Statements are based on, and should be read in conjunction with:
| ● | the
audited consolidated financial statements of Aditxt as at and for the year ended December
31, 2023 (“Aditxt’s 2023 Annual Consolidated Financial Statements”) prepared in
U.S. dollars and in accordance with accounting principles generally accepted in the United
States (“US GAAP); |
| ● | the
audited consolidated financial statements of Evofem as at and for the year ended December
31, 2023 (“Evofem’s 2023 Annual Consolidated Financial Statements”) prepared
in U.S. dollars and in accordance with US GAAP; |
| ● | the
unaudited interim condensed consolidated financial statements of Aditxt as at and for the
three months ended March 31, 2024 (“Aditxt’s 2024 Interim Condensed Consolidated Financial
Statements”) prepared in U.S. dollars and in accordance with accounting principles generally
accepted in the United States (“US GAAP); |
| ● | the
unaudited interim condensed consolidated financial statements of Evofem as at and for the
three months ended March 31, 2024 (“Evofem’s 2024 Interim Condensed Consolidated
Financial Statements”) prepared in U.S. dollars and in accordance with accounting principles
generally accepted in the United States (“US GAAP); |
| ● | the
audited consolidated financial statements of Appili as at and for the year ended March 31,
2024 (Appili’s 2024 Annual Consolidated Financial Statements”) prepared in Canadian
Dollars (“CAD”) and in accordance with Internation Financial Reporting Standards
(“IFRS”); and |
| ● | the
unaudited interim condensed consolidated financial statements for the nine months ended December
31, 2023 (“Appili 2023 Interim Condensed Consolidated Financial Statements”)
prepared in CAD and in accordance with IFRS. |
For
the purposes of preparing the unaudited Pro Forma Consolidated Financial Statements, adjustments have been made to align the financial
information to US GAAP and convert to U.S. dollars (see Note 3).
The
unaudited Pro Forma Consolidated Financial Statements have been presented for illustrative purposes only. The pro forma information is
not necessarily indicative of what the combined company’s financial position or financial performance would have been had the transactions
been completed as at the dates indicated above, nor does it purport to project the future financial position or operating results of
the combined company. The unaudited Pro Forma Consolidated Financial Statements do not reflect potential cost savings, operating synergies,
and revenue enhancements that may be realized from the transactions. The actual financial position and results of operations of Aditxt
for any period following the closing of the transactions may vary from the amounts set forth in the unaudited Pro Forma Consolidated
Financial Statements, and such variations could be material.
Aditxt Inc.
Notes
to Pro Forma Consolidated Financial Statements
(Unaudited)
(In
thousands of U.S. dollars)
For
the three months ended March 31, 2024
2 | Basis
of preparation (continued) |
The
pro forma adjustments are based upon available information and certain assumptions believed to be reasonable under the circumstances.
The purchase price allocation and the corresponding fair value adjustments are provisional and subject to refinement as more detailed
analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.
Aditxt will finalize all amounts as it obtains the necessary information to complete the measurement process, which will be no later
than one year from the closing of the transactions. Accordingly, the pro forma adjustments are preliminary and have been made solely
for the purpose of providing the unaudited Pro Forma Consolidated Financial Statements. Differences between these preliminary estimates
and the final acquisition accounting may occur, and these differences could be material to the accompanying unaudited Pro Forma Consolidated
Financial Statements and Aditxt’s future financial performance and financial position.
3 | IFRS
to US GAAP Reconciliation |
For
the purposes of preparing the unaudited Pro Forma Interim Consolidated Financial Statements, adjustments have been made to align the
financial information of Appili to US GAAP and convert to U.S. dollars as detailed below.
As
the ending date of the fiscal period for Appili differs from that of Aditxt, the three months results were extracted from the
historical results of Appili for the year ended March 31, 2024, resulting in the statement of earnings for the three months ended
March 31, 2024, as summarized below.
Appili
Therapeutics Inc
Consolidated Balance Sheet | |
As
reported on March 31,
2024 | | |
US
GAAP Adjustments | | |
Notes | |
As
at
March 31,
2024 | | |
Currency
Translation Adjustments | | |
Notes | |
As
at
March 31,
2024 | |
| |
(IFRS) | | |
| | |
| |
(US GAAP) | | |
| | |
| |
(US GAAP) | |
| |
(CAD) | | |
| | |
| |
(CAD) | | |
| | |
| |
(U.S. Dollars) | |
| |
$ | | |
| | |
| |
$ | | |
| | |
| |
$ | |
Assets | |
| | |
| | |
| |
| | |
| | |
| |
| |
Current Assets | |
| | |
| | |
| |
| | |
| | |
| |
| |
Cash | |
| 94 | | |
| - | | |
| |
| 94 | | |
| (25 | ) | |
(c) | |
| 69 | |
Accounts receivable | |
| 1,159 | | |
| - | | |
| |
| 1,159 | | |
| (304 | ) | |
(c) | |
| 855 | |
Other receivable | |
| 15 | | |
| - | | |
| |
| 15 | | |
| (4 | ) | |
(c) | |
| 11 | |
Prepaid
expenses | |
| 192 | | |
| - | | |
| |
| 192 | | |
| (50 | ) | |
(c) | |
| 142 | |
| |
| 1,460 | | |
| - | | |
| |
| 1,460 | | |
| (383 | ) | |
| |
| 1,077 | |
Non-Current Assets | |
| | | |
| | | |
| |
| | | |
| | | |
| |
| | |
Fixed
assets, net | |
| 30 | | |
| - | | |
| |
| 30 | | |
| (8 | ) | |
(c) | |
| 22 | |
Total
Assets | |
| 1,490 | | |
| - | | |
| |
| 1,490 | | |
| (391 | ) | |
| |
| 1,099 | |
Aditxt Inc.
Notes
to Pro Forma Consolidated Financial Statements
(Unaudited)
(In
thousands of U.S. dollars)
For
the three months ended March 31, 2024
| 3 | IFRS
to US GAAP Reconciliation (continued) |
Appili
Therapeutics Inc
Consolidated Balance Sheet | |
As reported on
March 31,
2024 | | |
US GAAP Adjustments | | |
Notes | | |
As at March 31,
2024 | | |
Currency Translation Adjustments | | |
Notes | | |
As at March 31,
2024 | |
| |
(IFRS) | | |
| | |
| | |
(US GAAP) | | |
| | |
| | |
(US GAAP) | |
| |
(CAD) | | |
| | |
| | |
(CAD) | | |
| | |
| | |
(U.S. Dollars) | |
| |
$ | | |
| | |
| | |
$ | | |
| | |
| | |
$ | |
Liabilities | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Current Liabilities | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Accounts payable and accrued expenses | |
| 4,183 | | |
| - | | |
| | | |
| 4,183 | | |
| (1,096 | ) | |
| (c) | | |
| 3,087 | |
Long-term debt - current | |
| 7,310 | | |
| (1 | ) | |
| (a) | | |
| 7,309 | | |
| (1,915 | ) | |
| (c) | | |
| 5,394 | |
Corporate taxes payable | |
| 47 | | |
| - | | |
| | | |
| 47 | | |
| (12 | ) | |
| (c) | | |
| 35 | |
| |
| 11,540 | | |
| (1 | ) | |
| | | |
| 11,539 | | |
| (3,023 | ) | |
| | | |
| 8,516 | |
Non-Current liabilities | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Long-term debt - non-current | |
| 875 | | |
| - | | |
| | | |
| 875 | | |
| (229 | ) | |
| (c) | | |
| 646 | |
Total Liabilities | |
| 12,415 | | |
| (1 | ) | |
| | | |
| 12,414 | | |
| (3,252 | ) | |
| | | |
| 9,162 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shareholder’s Equity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Additional paid-in capital | |
| 58,168 | | |
| - | | |
| | | |
| 58,168 | | |
| (13,539 | ) | |
| (d) | | |
| 44,629 | |
Accumulated deficit | |
| (69,093 | ) | |
| 1 | | |
| (a) | | |
| (69,092 | ) | |
| 16,222 | | |
| (d) | | |
| (52,870 | ) |
Currency translation adjustments | |
| - | | |
| - | | |
| | | |
| - | | |
| 178 | | |
| (e) | | |
| 178 | |
Total Shareholder’s Equity | |
| (10,925 | ) | |
| 1 | | |
| | | |
| (10,924 | ) | |
| 2,861 | | |
| | | |
| (8,063 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total Liabilities and Shareholder’s Equity | |
| 1,490 | | |
| - | | |
| | | |
| 1,490 | | |
| (391 | ) | |
| | | |
| 1,099 | |
Aditxt Inc.
Notes
to Pro Forma Consolidated Financial Statements
(Unaudited)
(In
thousands of U.S. dollars)
For
the three months ended March 31, 2024
| 3 | IFRS
to US GAAP Reconciliation (continued) |
Appili
Therapeutics Inc | |
3 months ended
March 31,
2024 (Extracted) | | |
US GAAP Adjustments | | |
Notes | | |
3 months ended
March 31,
2024 | | |
Currency translation adjustments | | |
Notes | | |
3 months
ended March 31,
2024 | |
| |
(IFRS) | | |
| | |
| | |
(US GAAP) | | |
| | |
| | |
(US GAAP) | |
| |
(CAD) | | |
| | |
| | |
(CAD) | | |
| | |
| | |
(U.S. Dollars) | |
Income | |
$ | | |
| | |
| | |
$ | | |
| | |
| | |
$ | |
Sales | |
| 11 | | |
| - | | |
| | | |
| 11 | | |
| (3 | ) | |
| (f) | | |
| 8 | |
Interest income | |
| 1 | | |
| - | | |
| | | |
| 1 | | |
| - | | |
| (f) | | |
| 1 | |
| |
| 12 | | |
| - | | |
| | | |
| 12 | | |
| (3 | ) | |
| | | |
| 9 | |
Expenses | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Research and development | |
| 1,591 | | |
| 5 | | |
| (b) | | |
| 1,596 | | |
| (413 | ) | |
| (f) | | |
| 1,183 | |
Sales and marketing | |
| 20 | | |
| - | | |
| | | |
| 20 | | |
| (5 | ) | |
| (f) | | |
| 15 | |
General and administrative expenses | |
| 817 | | |
| - | | |
| | | |
| 817 | | |
| (211 | ) | |
| (f) | | |
| 606 | |
Financing costs | |
| 383 | | |
| 3 | | |
| (a) | | |
| 386 | | |
| (100 | ) | |
| (f) | | |
| 286 | |
Government assistance | |
| (1,831 | ) | |
| (5 | ) | |
| (b) | | |
| (1,836 | ) | |
| 475 | | |
| (f) | | |
| (1,361 | ) |
Other income | |
| 126 | | |
| - | | |
| | | |
| 126 | | |
| (33 | ) | |
| (f) | | |
| 93 | |
| |
| 1,106 | | |
| 3 | | |
| | | |
| 1,109 | | |
| (287 | ) | |
| | | |
| 822 | |
Loss before income taxes | |
| (1,094 | ) | |
| (3 | ) | |
| | | |
| (1,097 | ) | |
| 284 | | |
| | | |
| (813 | ) |
Income tax expense | |
| 9 | | |
| - | | |
| | | |
| 9 | | |
| (2 | ) | |
| (f) | | |
| 7 | |
Net loss | |
| (1,103 | ) | |
| (3 | ) | |
| | | |
| (1,106 | ) | |
| 286 | | |
| | | |
| (820 | ) |
(a)
Reflects an adjustment to the accretion of a loan payable on conversion from IFRS to US GAAP.
(b)
Reflects a presentation conforming adjustment to reclassify recognition of government grant funding relating to research and development
activities on conversion from IFRS to US GAAP.
(c)
Reflects a currency translation adjustment from CAD to US dollars using the closing exchange rate on March 31, 2024, of 0.7380.
(d)
Reflects a currency translation adjustment from CAD to US dollars using the closing historical exchange rate for equity transactions
and subsequently carried at historic values.
(e)
Reflects a presentation currency translation difference adjustment arising on translation of CAD to US dollars using historical rates.
(f)
Reflects a currency translation adjustment from CAD to US dollars using the average exchange rate for the three months ended March 31,
2024, of 0.7415.
Aditxt Inc.
Notes
to Pro Forma Consolidated Financial Statements
(Unaudited)
(In
thousands of U.S. dollars)
For
the three months ended March 31, 2024
| 4 | Preliminary
Purchase Price Allocation |
The
following is a preliminary fair value estimate of the assets acquired and liabilities assumed by Aditxt in connection with Appili Transaction
and Evofem Transaction, reconciled to the purchase price. For any items without a corresponding reference below, book value is assumed
to reasonably approximate fair value based on currently available information.
| |
Notes | |
Evofem | | |
Appili | |
Assets acquired | |
| |
$ | | |
$ | |
Cash | |
| |
| - | | |
| 69 | |
Restricted cash | |
| |
| 689 | | |
| - | |
Accounts receivable | |
| |
| 4,306 | | |
| 855 | |
Inventory | |
| |
| 1,306 | | |
| - | |
Prepaid expenses | |
| |
| 622 | | |
| 142 | |
Other receivable | |
| |
| - | | |
| 11 | |
Intangible assets | |
(a) | |
| - | | |
| 7,037 | |
Fixed assets | |
| |
| 1,200 | | |
| 22 | |
Right-of-use assets | |
| |
| 59 | | |
| - | |
Other assets | |
| |
| 35 | | |
| - | |
Total Assets | |
| |
| 8,217 | | |
| 8,136 | |
Liabilities assumed | |
| |
| | | |
| | |
Accounts payable and accrued expenses | |
| |
| 24,130 | | |
| 3,087 | |
Other current liabilities | |
| |
| 3,391 | | |
| - | |
Corporate taxes payable | |
| |
| - | | |
| 35 | |
Long-term debt | |
| |
| - | | |
| 6,040 | |
Lease liabilities | |
| |
| 59 | | |
| - | |
| |
| |
| 27,580 | | |
| 9,162 | |
Fair value of identifiable net liabilities acquired | |
| |
| (19,363 | ) | |
| (1,026 | ) |
| |
| |
| | | |
| | |
Goodwill arising on acquisition: | |
| |
| | | |
| | |
Cash consideration | |
| |
| 1,800 | | |
| 6,096 | |
Shares issued | |
| |
| - | | |
| 486 | |
Convertible preferred shares issued | |
| |
| 91,610 | | |
| - | |
Notes assumed | |
| |
| 12,591 | | |
| - | |
Consideration paid | |
| |
| 106,001 | | |
| 6,582 | |
Add: fair value of identifiable net liabilities acquired | |
| |
| 19,363 | | |
| 1,026 | |
| |
| |
| | | |
| | |
Goodwill arising from transaction | |
(b) | |
| 125,364 | | |
| 7,608 | |
Aditxt Inc.
Notes
to Pro Forma Consolidated Financial Statements
(Unaudited)
(In
thousands of U.S. dollars)
For
the three months ended March 31, 2024
| 4 | Preliminary
Purchase Price Allocation (continued) |
(a)
A preliminary fair value estimate of $7,037 has been allocated to identifiable intangible assets acquired for the Appili Transaction.
Intangibles assets acquired include licences and intellectual property rights to the research and development activities of Appili, with
a useful life of 15 years.
(b)
A preliminary estimate of $125,364 and $7,608 has been allocated to the goodwill for the Evofem Transaction and the Appili Transaction,
respectively. Goodwill is calculated as the excess of the preliminary estimate of the acquisition date fair value of the consideration
transferred, over the preliminary estimate of the fair values assigned to the identifiable assets acquired and liabilities assumed.
| 5 | Pro
Forma Adjustments in Connection with the Transactions |
The
following summarizes the pro forma adjustments in connection with the Appili Transaction and the Evofem Transaction to give effect to
the transactions as if they had occurred on January 1, 2023, for the purposes of the unaudited Pro Forma Interim Consolidated Statement
of Earnings and on March 31, 2024, for the purposes of the unaudited Pro Forma Interim Consolidated Statement of Financial Position.
The pro forma adjustments were based on preliminary estimates and assumptions that are subject to change.
(a)
Cash
Reflects
the pro forma adjustment to cash representing the sources and uses of cash to close the Transactions as if the Transactions had occurred
on March 31, 2024. Sources and uses of cash include the $6,096 decrease for the preliminary purchase price paid for the Appili Transaction,
$1,800 decrease for the preliminary purchase price paid for the Evofem Transaction, and an increase of $20,000 in proceeds from the issuance of common stock of Aditxt, net
of issuance costs.
(b)
Intangible Assets
An
increase of $7,037 to the carrying value of Appili intangible assets to adjust it to its preliminary estimated fair value and an increase
of $586 to the accumulated amortization. Intangibles assets acquired include licenses and intellectual property rights to research and
development activities of Appili.
(c)
Goodwill
Reflects
an increase of $125,364 and $7,608 of goodwill as a result of the preliminary purchase price allocation of Evofem Transaction and Appili
Transaction, respectively. Goodwill is not amortized and is not currently assumed to be deductible for tax purposes. Goodwill could materially
change based on changes in estimates in the fair value of the assets acquired, and liabilities assumed.
Aditxt Inc.
Notes
to Pro Forma Consolidated Financial Statements
(Unaudited)
(In
thousands of U.S. dollars)
For
the three months ended March 31, 2024
| 5 | Pro
Forma Adjustments in Connection with the Transactions (continued) |
(d)
Investment in Evofem
Reflects
a decrease of $22,277 in Investment in Evofem for the elimination of cost of investment in Evofem on consolidation.
(e)
Current Liabilities
Accounts
payable and accrued expenses: Reflects an increase of $2,600 for transaction costs associated with Evofem Transaction and Appili Transaction.
Convertible
notes payable carried at fair value: Reflects a decrease of $13,252 to reflect the settlement of the notes in conjunction with the close
of the transaction.
Convertible
notes payable – Adjuvant: Reflects a decrease of $29,101 to reflect the settlement of the notes in conjunction with the close
of the transaction.
Derivative
liabilities: Reflects a decrease of $4,310 to reflect the settlement of the liabilities in conjunction with the
close of the transaction.
(f)
Mezzanine Equity
Convertible
preferred stock: Reflects an increase of $81,925 for the issuance of convertible preferred stock for the Evofem Transaction and $4,640
decrease on elimination of convertible preferred stock of Evofem on consolidation.
(g)
Total Equity
Common
stock: Reflects the elimination of $5 for the common stock of Evofem.
Additional
paid-in capital: Reflects an increase of $20,486 for the issuance of common stock in connection with the Appili Transaction, a $44,629
decrease on elimination of Appili paid-in-capital and a $823,409 decrease on elimination of Evofem paid-in-capital on consolidation.
Accumulated other comprehensive
income (loss): Reflects a decrease of $178 on elimination of currency translation adjustment on consolidation of Appili and an increase of
$525 upon elimination of comprehensive loss of Evofem.
Accumulated
deficit: Reflects a $893,555 and $52,870 decrease in accumulated deficit to eliminate historical retained loss of Evofem and Appili,
respectively, $586 increase in amortization expense for intangible assets relating to Appili,
and $2,600 increase for transaction costs associated with the Appili Transaction and Evofem Transaction.
(h)
The unaudited Pro Forma Consolidated Statement of Earnings is also adjusted as follows:
|
● |
Increase amortization expense by $117 for amortization of the intangible assets recorded at fair value for the three months ended March 31, 2024. |
|
● |
Decrease to loss on issuance of financial instruments of $3,275 for the three months ended March 31, 2024 to remove the impact of issuances of purchase rights due to a down-round related to instruments that would have been extinguished as a requirement of the Evofem closing. |
|
● |
Decrease to gain on debt extinguishment of $1,120 for the three months ended March 31, 2024 to remove the impact of the debt extinguishment related to an instrument that would have been extinguished as a requirement of the Evofem closing. |
|
● |
Decrease to change in fair value of financial instruments of $802 for the three months ended March 31, 2024 to remove the impact of fair value adjustments related to instruments that would have been extinguished as a requirement of the Evofem closing. |
Exhibit
99.3
Aditxt
Inc.
Unaudited
Pro Forma Consolidated
Financial Statements
(In
U.S. dollars)
December
31, 2023
Aditxt
Inc.
Pro
Forma Consolidated Statement of Financial Position
(Unaudited)
(In
thousands of U.S. dollars)
As
at December 31, 2023
| |
Aditxt | | |
Evofem | | |
Appili (Note 3) | | |
Pro Forma adjustments | | |
Notes | |
Pro Forma consolidated | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
| |
$ | |
ASSETS | |
| | |
| | |
| | |
| | |
| |
| |
CURRENT ASSETS: | |
| | |
| | |
| | |
| | |
| |
| |
Cash | |
| 97 | | |
| - | | |
| 456 | | |
| 12,104 | | |
5(a) | |
| 12,657 | |
Restricted Cash | |
| - | | |
| 580 | | |
| - | | |
| - | | |
| |
| 580 | |
Accounts receivable, net | |
| 408 | | |
| 5,738 | | |
| 800 | | |
| - | | |
| |
| 6,946 | |
Inventory | |
| 746 | | |
| 1,697 | | |
| - | | |
| - | | |
| |
| 2,443 | |
Prepaid expenses | |
| 217 | | |
| 1,195 | | |
| 173 | | |
| - | | |
| |
| 1,585 | |
Subscription receivable | |
| 5,445 | | |
| - | | |
| - | | |
| - | | |
| |
| 5,445 | |
Other receivable | |
| - | | |
| - | | |
| 33 | | |
| - | | |
| |
| 33 | |
TOTAL CURRENT ASSETS | |
| 6,913 | | |
| 9,210 | | |
| 1,462 | | |
| 12,104 | | |
| |
| 29,689 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Fixed assets, net | |
| 1,898 | | |
| 1,203 | | |
| 26 | | |
| - | | |
| |
| 3,127 | |
Intangible assets, net | |
| 9 | | |
| - | | |
| - | | |
| 6,568 | | |
5(b) | |
| 6,577 | |
Deposits | |
| 106 | | |
| - | | |
| - | | |
| - | | |
| |
| 106 | |
Right of use asset - long term | |
| 2,200 | | |
| 106 | | |
| - | | |
| - | | |
| |
| 2,306 | |
Other assets | |
| - | | |
| 35 | | |
| - | | |
| - | | |
| |
| 35 | |
Goodwill | |
| - | | |
| - | | |
| - | | |
| 130,152 | | |
5(c) | |
| 130,152 | |
Investment in Evofem | |
| 22,277 | | |
| - | | |
| - | | |
| (22,277 | ) | |
5(d) | |
| - | |
Deposit on acquisition | |
| 11,174 | | |
| - | | |
| - | | |
| (11,174 | ) | |
5(d) | |
| - | |
TOTAL ASSETS | |
| 44,577 | | |
| 10,554 | | |
| 1,488 | | |
| 115,373 | | |
| |
| 171,992 | |
The accompanying notes are an integral part to these unaudited
pro forma consolidated financial statements.
Aditxt Inc.
Pro Forma Consolidated Statement of Financial Position
(Unaudited)
(In thousands of U.S. dollars)
As at December 31, 2023
| |
Aditxt | | |
Evofem | | |
Appili (Note 3) | | |
Pro Forma Adjustments | | |
Notes | |
Pro Forma Consolidated | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
| |
$ | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | |
| | |
| | |
| | |
| |
| |
CURRENT LIABILITIES: | |
| | |
| | |
| | |
| | |
| |
| |
Accounts payable and accrued expenses | |
| 8,555 | | |
| 23,856 | | |
| 2,835 | | |
| 3,052 | | |
5(e) | |
| 38,298 | |
Notes payable - related party | |
| 375 | | |
| - | | |
| - | | |
| - | | |
| |
| 375 | |
Notes payable, net of discount | |
| 15,653 | | |
| - | | |
| - | | |
| - | | |
| |
| 15,653 | |
Financing on fixed assets | |
| 148 | | |
| - | | |
| - | | |
| - | | |
| |
| 148 | |
Deferred rent | |
| 159 | | |
| - | | |
| - | | |
| - | | |
| |
| 159 | |
Convertible notes payable carried at fair value | |
| - | | |
| 14,731 | | |
| - | | |
| (14,731 | ) | |
5(e) | |
| - | |
Convertible notes payable - Adjuvant | |
| - | | |
| 28,537 | | |
| - | | |
| (28,537 | ) | |
5(e) | |
| - | |
Derivative liabilities | |
| - | | |
| 1,926 | | |
| - | | |
| (1,926 | ) | |
5(e) | |
| - | |
Other current liabilities | |
| - | | |
| 3,316 | | |
| - | | |
| - | | |
| |
| 3,316 | |
Corporate taxes payable | |
| - | | |
| - | | |
| 29 | | |
| - | | |
| |
| 29 | |
Long-term debt - current | |
| - | | |
| - | | |
| 314 | | |
| - | | |
| |
| 314 | |
Lease liability - current | |
| 1,000 | | |
| 97 | | |
| - | | |
| - | | |
| |
| 1,097 | |
TOTAL CURRENT LIABILITIES | |
| 25,890 | | |
| 72,463 | | |
| 3,178 | | |
| (42,142 | ) | |
| |
| 59,389 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Settlement liability | |
| 1,600 | | |
| - | | |
| - | | |
| - | | |
| |
| 1,600 | |
Long-term debt – non-current | |
| - | | |
| - | | |
| 5,740 | | |
| - | | |
| |
| 5,740 | |
Lease liability - long term | |
| 1,042 | | |
| 8 | | |
| - | | |
| - | | |
| |
| 1,050 | |
TOTAL LIABILITIES | |
| 28,532 | | |
| 72,471 | | |
| 8,918 | | |
| (42,142 | ) | |
| |
| 67,779 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Convertible and redeemable preferred stock | |
| - | | |
| 4,593 | | |
| - | | |
| 66,158 | | |
5(f) | |
| 70,751 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
STOCKHOLDERS’ EQUITY (DEFICIT) | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Common stock | |
| 1 | | |
| 2 | | |
| - | | |
| (2 | ) | |
5(g) | |
| 1 | |
Treasury stock | |
| (202 | ) | |
| - | | |
| - | | |
| - | | |
| |
| (202 | ) |
Additional paid-in capital | |
| 143,998 | | |
| 823,036 | | |
| 44,621 | | |
| (847,171 | ) | |
5(g) | |
| 164,484 | |
Accumulated other comprehensive loss | |
| - | | |
| (849 | ) | |
| (5 | ) | |
| 854 | | |
5(g) | |
| - | |
Accumulated deficit | |
| (127,742 | ) | |
| (888,699 | ) | |
| (52,046 | ) | |
| 937,525 | | |
5(g) | |
| (130,811 | ) |
| |
| 16,055 | | |
| (66,510 | ) | |
| (7,430 | ) | |
| 91,357 | | |
| |
| 33,472 | |
NON-CONTROLLING INTEREST | |
| (10 | ) | |
| - | | |
| - | | |
| - | | |
| |
| (10 | ) |
TOTAL
STOCKHOLDERS’ EQUITY (DEFICIT) | |
| 16,045 | | |
| (66,510 | ) | |
| (7,430 | ) | |
| 91,357 | | |
| |
| 33,462 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
TOTAL LIABILITIES,
CONVERTIBLE AND REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) | |
| 44,577 | | |
| 10,554 | | |
| 1,488 | | |
| 115,373 | | |
| |
| 171,992 | |
The
accompanying notes are an integral part to these unaudited pro forma consolidated financial statements.
Aditxt
Inc.
Consolidated
Pro Forma Statement of Earnings
(Unaudited)
(In
thousands of U.S. dollars, except earnings per share)
For
the year ended December 31, 2023
| |
Aditxt | | |
Evofem | | |
Appili (Note 3) | | |
Pro Forma Adjustments | | |
Notes | |
Pro Forma Consolidated | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
| |
$ | |
REVENUE | |
| | |
| | |
| | |
| | |
| |
| |
Sales | |
| 645 | | |
| 18,218 | | |
| 852 | | |
| - | | |
| |
| 19,715 | |
Cost of goods sold | |
| 757 | | |
| 6,512 | | |
| - | | |
| - | | |
| |
| 7,269 | |
Gross profit (loss) | |
| (112 | ) | |
| 11,706 | | |
| 852 | | |
| - | | |
| |
| 12,446 | |
OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Research and development | |
| 7,074 | | |
| 2,939 | | |
| 4,101 | | |
| - | | |
| |
| 14,114 | |
Sales and marketing | |
| 269 | | |
| 11,664 | | |
| 184 | | |
| - | | |
| |
| 12,117 | |
General and administrative expenses | |
| 18,607 | | |
| 14,950 | | |
| 2,424 | | |
| 2,600 | | |
| |
| 38,581 | |
Total operating expenses | |
| 25,950 | | |
| 29,553 | | |
| 6,709 | | |
| 2,600 | | |
| |
| 64,812 | |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
NET LOSS FROM OPERATIONS | |
| (26,062 | ) | |
| (17,847 | ) | |
| (5,857 | ) | |
| (2,600 | ) | |
| |
| (52,366 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| |
| | |
OTHER INCOME/(EXPENSE) | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Interest expense | |
| (4,195 | ) | |
| - | | |
| - | | |
| - | | |
| |
| (4,195 | ) |
Interest income | |
| 10 | | |
| 31 | | |
| 17 | | |
| - | | |
| |
| 58 | |
Other expense/(income) | |
| - | | |
| (2,628 | ) | |
| 147 | | |
| - | | |
| |
| (2,481 | ) |
Amortization of debt discount | |
| (2,195 | ) | |
| - | | |
| - | | |
| - | | |
| |
| (2,195 | ) |
Amortization of intangible assets | |
| - | | |
| - | | |
| - | | |
| (469 | ) | |
5(h) | |
| (469 | ) |
Loss on issuance of financial instruments | |
| - | | |
| (6,776 | ) | |
| - | | |
| 6,776 | | |
5(h) | |
| - | |
Gain on debt extinguishment | |
| - | | |
| 75,337 | | |
| - | | |
| (75,337 | ) | |
5(h) | |
| - | |
Change in fair value of financial instruments | |
| - | | |
| 4,879 | | |
| - | | |
| (4,879 | ) | |
5(h) | |
| - | |
Financing costs | |
| - | | |
| - | | |
| (1,254 | ) | |
| - | | |
| |
| (1,254 | ) |
Government assistance | |
| - | | |
| - | | |
| 3,047 | | |
| - | | |
| |
| 3,047 | |
Gain on note exchange agreement | |
| 52 | | |
| - | | |
| - | | |
| - | | |
| |
| 52 | |
Total other income/(expense) | |
| (6,328 | ) | |
| 70,843 | | |
| 1,957 | | |
| (73,909 | ) | |
| |
| (7,437 | ) |
Net income/(loss) before income taxes | |
| (32,390 | ) | |
| 52,996 | | |
| (3,900 | ) | |
| (76,509 | ) | |
| |
| (59,803 | ) |
Income tax expense | |
| - | | |
| (17 | ) | |
| (50 | ) | |
| - | | |
| |
| (67 | ) |
NET INCOME/(LOSS) | |
| (32,390 | ) | |
| 52,979 | | |
| (3,950 | ) | |
| (76,509 | ) | |
| |
| (59,870 | ) |
NON-CONTROLLING INTEREST LOSS | |
| (10 | ) | |
| - | | |
| - | | |
| - | | |
| |
| (10 | ) |
NET INCOME/(LOSS) ATTRIBUTABLE TO ADITXT, INC. & SUBSIDIARIES | |
| (32,380 | ) | |
| 52,979 | | |
| (3,950 | ) | |
| (76,509 | ) | |
| |
| (59,860 | ) |
Deemed Dividend | |
| (320 | ) | |
| (2,984 | ) | |
| - | | |
| 2,984 | | |
| |
| (320 | ) |
NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | |
| (32,700 | ) | |
| 49,995 | | |
| (3,950 | ) | |
| (73,525 | ) | |
| |
| (60,180 | ) |
NET INCOME/(LOSS) per share: | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Basic | |
| (108 | ) | |
| | | |
| | | |
| | | |
| |
| (95 | ) |
Diluted | |
| (108 | ) | |
| | | |
| | | |
| | | |
| |
| (95 | ) |
Weighted average number of shares: | |
| | | |
| | | |
| | | |
| | | |
| |
| | |
Basic | |
| 302,356 | | |
| | | |
| | | |
| | | |
| |
| 635,232 | |
Diluted | |
| 302,356 | | |
| | | |
| | | |
| | | |
| |
| 635,232 | |
The
accompanying notes are an integral part to these unaudited pro forma consolidated financial statements.
Aditxt
Inc.
Notes
to Pro Forma Consolidated Financial Statements
(Unaudited)
(In
thousands of U.S. dollars)
For
the year ended December 31, 2023
1 | Description
of Transactions |
Acquisition
of Appili Therapeutics Inc. by Aditxt Inc.:
On
December 12, 2023, Aditxt Inc. (“Aditxt”), through its wholly owned subsidiary, Adivir, Inc. (“Adivir”), acquired
all of the outstanding Class A common shares of Appili Therapeutics Inc. (“Appili”) by way of a court approved plan of arrangement
under the Canada Business Corporations Act and a definitive arrangement agreement entered between Appili and Adivir (the “Appili
Transaction”). Upon closing of the Appili Transaction, Appili will become an indirect, wholly owned subsidiary of Aditxt. As part
of the acquisition terms, Appili shareholders will receive 0.002745004 of a share of Aditxt common stock (the “Share Consideration”)
and US$0.0467 in cash for each Appili share held (the “Cash Consideration” and together with Share Consideration collectively,
the “Appili Transaction Consideration”), representing total consideration of approximately $6,582 based on closing price
of the Aditxt shares on July 5, 2024. The consideration for acquiring Appili also included the assumption of Appili’s existing
liabilities.
Acquisition
of Evofem Biosciences by Aditxt:
On
December 11, 2023, Aditxt, through a definitive agreement, entered into an Agreement and Plan of Merger, as amended and restated, with
Evofem Biosciences, Inc. (“Evofem”) whereby Evofem will merge with a merger sub with Evofem surviving as as a wholly owned
subsidiary of Aditxt (the “Evofem Transaction” and together with the Appili Transaction collectively, “the Transactions”)).
The consideration for acquiring Evofem includes the issuance or exchange of convertible preferred stock of $91,610, and cash consideration
of $1,800 to Evofem’s common stockholders, along with paying off Evofem’s senior secured notes amounting to $12,592, investment
of $4,000 to Evofem and the assumption of Evofem’s existing liabilities.
The
accompanying unaudited Pro Forma Consolidated Financial Statements of Aditxt, have been prepared to give effect to the acquisitions of
Evofem and Appili under the acquisition method of accounting in accordance with ASC Topic 805 – Business Combinations (“ASC
805”). The unaudited Pro Forma Consolidated Statement of Financial Position gives effect to the transactions as if they had occurred
on December 31, 2023. The unaudited Pro Forma Consolidated Statement of Earnings for the year ended December 31, 2023, gives effect to
the transactions as if they had occurred on January 1, 2023. The unaudited Pro Forma Consolidated Statement of Financial Position combines
the audited Consolidated Statement of Financial Position of Aditxt as at December 31, 2023, with the audited Consolidated Statement of
Financial Position of Evofem as at December 31, 2023 and the adjusted unaudited interim condensed consolidated financial statements of
Appili as at December 31, 2023 (see note 3).
Aditxt Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
(In thousands of U.S. dollars)
For the year ended December
31, 2023
2 | Basis
of preparation (continued) |
The
unaudited Pro Forma Consolidated Financial Statements are based on, and should be read in conjunction with:
| ● | the
audited consolidated financial statements of Aditxt as at and for the year ended December
31, 2023 (“Aditxt’s 2023 Annual Consolidated Financial Statements”) prepared in
U.S. dollars and in accordance with accounting principles generally accepted in the United
States (“US GAAP); |
| ● | the
audited consolidated financial statements of Evofem as at and for the year ended December
31, 2023 (“Evofem’s 2023 Annual Consolidated Financial Statements”) prepared
in U.S. dollars and in accordance with US GAAP; |
| ● | the
audited consolidated financial statements of Appili as at and for the year ended March 31,
2023 (Appili’s 2023 Annual Consolidated Financial Statements”) prepared in Canadian
Dollars (“CAD”) and in accordance with Internation Financial Reporting Standards
(“IFRS”); and |
| ● | the
unaudited interim condensed consolidated financial statements for the nine months ended December
31, 2023 (“Appili 2023 Interim Condensed Consolidated Financial Statements”)
prepared in CAD and in accordance with IFRS. |
For
the purposes of preparing the unaudited Pro Forma Consolidated Financial Statements, adjustments have been made to align the financial
information to US GAAP and convert to U.S. dollars (see note 3).
The
unaudited Pro Forma Consolidated Financial Statements have been presented for illustrative purposes only. The pro forma information is
not necessarily indicative of what the combined company’s financial position or financial performance would have been had the transactions
been completed as at the dates indicated above, nor does it purport to project the future financial position or operating results of
the combined company. The unaudited Pro Forma Consolidated Financial Statements do not reflect potential cost savings, operating synergies,
and revenue enhancements that may be realized from the transactions. The actual financial position and results of operations of Aditxt
for any period following the closing of the transactions may vary from the amounts set forth in the unaudited Pro Forma Consolidated
Financial Statements, and such variations could be material.
The
pro forma adjustments are based upon available information and certain assumptions believed to be reasonable under the
circumstances. The purchase price allocation and the corresponding fair value adjustments are provisional and subject to refinement
as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed
becomes available. Aditxt will finalize all amounts as it obtains the necessary information to complete the measurement process,
which will be no later than one year from the closing of the transactions. Accordingly, the pro forma adjustments are preliminary
and have been made solely for the purpose of providing the unaudited Pro Forma Consolidated Financial Statements. Differences
between these preliminary estimates and the final acquisition accounting may occur, and these differences could be material to the
accompanying unaudited Pro Forma Consolidated Financial
Statements and Aditxt’s future financial performance and financial position. 3 IFRS to US GAAP
Reconciliation
Aditxt Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
(In thousands of U.S. dollars)
For the year ended December
31, 2023
3 | IFRS
to US GAAP Reconciliation |
For
the purposes of preparing the unaudited Pro Forma Consolidated Financial Statements, adjustments have been made to align the financial
information of Appili to US GAAP and convert to U.S. dollars as detailed below.
As
the ending date of the fiscal period for Appili differs from that of Aditxt, adjustments were made to combine the historical results
of Appili for the nine months period ended December 31, 2023, with the three months period ended March 31, 2023, resulting in a recreated
statement of earnings for the twelve months ended December 31, 2023, as summarized below.
Appili Therapeutics Inc | |
As reported on December 31, 2023 | | |
US GAAP Adjustments | | |
Notes | |
As at December 31, 2023 | | |
Currency Translation Adjustments | | |
Notes | |
As at December 31,
2023 | |
Consolidated Balance Sheet | |
(IFRS) | | |
| | |
| |
(US GAAP) | | |
| | |
| |
(US GAAP) | |
| |
(CAD) | | |
| | |
| |
(CAD) | | |
| | |
| |
(U.S. Dollars) | |
| |
$ | | |
| | |
| |
$ | | |
| | |
| |
$ | |
Assets | |
| | |
| | |
| |
| | |
| | |
| |
| |
Current Assets | |
| | | |
| | | |
| |
| | | |
| | | |
| |
| | |
Cash | |
| 603 | | |
| | | |
| |
| 603 | | |
| (147 | ) | |
(c) | |
| 456 | |
Accounts receivable | |
| 1,058 | | |
| | | |
| |
| 1,058 | | |
| (258 | ) | |
(c) | |
| 800 | |
Other receivable | |
| 44 | | |
| | | |
| |
| 44 | | |
| (11 | ) | |
(c) | |
| 33 | |
Prepaid expenses | |
| 229 | | |
| | | |
| |
| 229 | | |
| (56 | ) | |
(c) | |
| 173 | |
| |
| 1,934 | | |
| - | | |
| |
| 1,934 | | |
| (472 | ) | |
| |
| 1,462 | |
Non-Current Assets | |
| | | |
| | | |
| |
| | | |
| | | |
| |
| | |
Fixed assets, net | |
| 34 | | |
| | | |
| |
| 34 | | |
| (8 | ) | |
(c) | |
| 26 | |
Total Assets | |
| 1,968 | | |
| - | | |
| |
| 1,968 | | |
| (480 | ) | |
| |
| 1,488 | |
Aditxt Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
(In thousands of U.S. dollars)
For the year ended December
31, 2023
3. | IFRS
to US GAAP Reconciliation (continued) |
Appili Therapeutics Inc | |
As reported on December 31, 2023 | | |
US GAAP Adjustments | | |
Notes | |
As at December 31, 2023 | | |
Currency Translation Adjustments | | |
Notes | |
As at December 31, 2023 | |
Consolidated Balance Sheet | |
(IFRS) | | |
| | |
| |
(US GAAP) | | |
| | |
| |
(US GAAP) | |
| |
(CAD) | | |
| | |
| |
(CAD) | | |
| | |
| |
(U.S. Dollars) | |
| |
$ | | |
| | |
| |
$ | | |
| | |
| |
$ | |
Liabilities | |
| | |
| | |
| |
| | |
| | |
| |
| |
Current Liabilities | |
| | |
| | |
| |
| | |
| | |
| |
| |
Accounts payable and accrued expenses | |
| 3,749 | | |
| | | |
| |
| 3,749 | | |
| (914 | ) | |
(c) | |
| 2,835 | |
Long-term debt - current | |
| 420 | | |
| (5 | ) | |
(a) | |
| 415 | | |
| (101 | ) | |
(c) | |
| 314 | |
Corporate taxes payable | |
| 39 | | |
| | | |
| |
| 39 | | |
| (10 | ) | |
(c) | |
| 29 | |
| |
| 4,208 | | |
| (5 | ) | |
| |
| 4,203 | | |
| (1,025 | ) | |
| |
| 3,178 | |
Non-Current liabilities | |
| | | |
| | | |
| |
| | | |
| | | |
| |
| | |
Long-term debt - non-current | |
| 7,592 | | |
| | | |
| |
| 7,592 | | |
| (1,852 | ) | |
(c) | |
| 5,740 | |
Total Liabilities | |
| 11,800 | | |
| (5 | ) | |
| |
| 11,795 | | |
| (2,877 | ) | |
| |
| 8,918 | |
| |
| | | |
| | | |
| |
| | | |
| | | |
| |
| | |
Shareholder’s Equity | |
| | | |
| | | |
| |
| | | |
| | | |
| |
| | |
Additional paid-in capital | |
| 58,158 | | |
| | | |
| |
| 58,158 | | |
| (13,537 | ) | |
(d) | |
| 44,621 | |
Accumulated deficit | |
| (67,990 | ) | |
| 5 | | |
(a) | |
| (67,985 | ) | |
| 15,939 | | |
(d) | |
| (52,046 | ) |
Currency translation adjustments | |
| | | |
| | | |
| |
| | | |
| (5 | ) | |
(e) | |
| (5 | ) |
Total Shareholder’s Equity | |
| (9,832 | ) | |
| 5 | | |
| |
| (9,827 | ) | |
| 2,397 | | |
| |
| (7,430 | ) |
| |
| | | |
| | | |
| |
| | | |
| | | |
| |
| | |
Total Liabilities and Shareholder’s Equity | |
| 1,968 | | |
| - | | |
| |
| 1,968 | | |
| (480 | ) | |
| |
| 1,488 | |
Aditxt Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
(In thousands of U.S. dollars)
For the year ended December
31, 2023
3. | IFRS
to US GAAP Reconciliation (continued) |
Appili Therapeutics Inc | |
12 months ended December 31, 2023 (Recreated) | | |
US GAAP Adjustments | | |
Notes | |
12 months ended December 31, 2023 | | |
Currency translation adjustments | | |
Notes | |
12 months ended December 31, 2023 | |
| |
(IFRS) | | |
| | |
| |
(US GAAP) | | |
| | |
| |
(US GAAP) | |
| |
(CAD) | | |
| | |
| |
(CAD) | | |
| | |
| |
(U.S. Dollars) | |
| |
$ | | |
| | |
| |
$ | | |
| | |
| |
$ | |
Income | |
| | |
| | |
| |
| | |
| | |
| |
| |
Sales | |
| 1,150 | | |
| - | | |
| |
| 1,150 | | |
| (298 | ) | |
(f) | |
| 852 | |
Interest income | |
| 23 | | |
| - | | |
| |
| 23 | | |
| (6 | ) | |
(f) | |
| 17 | |
| |
| 1,173 | | |
| - | | |
| |
| 1,173 | | |
| (304 | ) | |
| |
| 869 | |
Expenses | |
| | | |
| | | |
| |
| | | |
| | | |
| |
| | |
Research and development | |
| 5,495 | | |
| 40 | | |
(b) | |
| 5,535 | | |
| (1,434 | ) | |
(f) | |
| 4,101 | |
Sales and marketing | |
| 249 | | |
| - | | |
| |
| 249 | | |
| (65 | ) | |
(f) | |
| 184 | |
General and administrative expenses | |
| 3,272 | | |
| - | | |
| |
| 3,272 | | |
| (848 | ) | |
(f) | |
| 2,424 | |
Financing costs | |
| 1,698 | | |
| (5 | ) | |
(a) | |
| 1,693 | | |
| (439 | ) | |
(f) | |
| 1,254 | |
Government assistance | |
| (4,072 | ) | |
| (40 | ) | |
(b) | |
| (4,112 | ) | |
| 1,065 | | |
(f) | |
| (3,047 | ) |
Other income | |
| (198 | ) | |
| - | | |
| |
| (198 | ) | |
| 51 | | |
(f) | |
| (147 | ) |
| |
| 6,444 | | |
| (5 | ) | |
| |
| 6,439 | | |
| (1,670 | ) | |
| |
| 4,769 | |
Loss before income taxes | |
| (5,271 | ) | |
| 5 | | |
| |
| (5,266 | ) | |
| 1,366 | | |
| |
| (3,900 | ) |
Income tax expense | |
| 68 | | |
| - | | |
| |
| 68 | | |
| (18 | ) | |
(f) | |
| 50 | |
Net loss | |
| (5,339 | ) | |
| 5 | | |
| |
| (5,334 | ) | |
| 1,384 | | |
| |
| (3,950 | ) |
(a)
Reflects an adjustment to the accretion of a loan payable on conversion from IFRS to US GAAP.
(b)
Reflects a presentation conforming adjustment to reclassify recognition of government grant funding relating to research and development
activities on conversion from IFRS to US GAAP.
(c)
Reflects a currency translation adjustment from CAD to US dollars using the closing exchange rate on December 31, 2023, of 0.7561.
(d)
Reflects a currency translation adjustment from CAD to US dollars using the closing historical exchange rate for equity transactions
and subsequently carried at historic values.
(e)
Reflects a presentation currency translation difference adjustment arising on translation of CAD to US dollars using historical rates.
(f)
Reflects a currency translation adjustment from CAD to US dollars using the average exchange rate for the year ended December 31, 2023,
of 0.7409.
Aditxt Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
(In thousands of U.S. dollars)
For the year ended December
31, 2023
4 | Preliminary
Purchase Price Allocation |
The
following is a preliminary fair value estimate of the assets acquired and liabilities assumed by Aditxt in connection with Appili Transaction
and Evofem Transaction, reconciled to the purchase price. For any items without a corresponding reference below, book value is assumed
to reasonably approximate fair value based on currently available information.
| |
Notes | |
Evofem | | |
Appili | |
| |
| |
$ | | |
$ | |
Assets acquired | |
| |
| | |
| |
Cash | |
| |
| - | | |
| 456 | |
Restricted cash | |
| |
| 580 | | |
| - | |
Accounts receivable | |
| |
| 5,738 | | |
| 800 | |
Inventory | |
| |
| 1,697 | | |
| - | |
Prepaid expenses | |
| |
| 1,195 | | |
| 173 | |
Other receivable | |
| |
| - | | |
| 33 | |
Intangible assets | |
(a) | |
| - | | |
| 7,037 | |
Fixed assets | |
| |
| 1,203 | | |
| 26 | |
Right-of-use assets | |
| |
| 106 | | |
| - | |
Other assets | |
| |
| 35 | | |
| - | |
Total Assets | |
| |
| 10,554 | | |
| 8,525 | |
Liabilities assumed | |
| |
| | | |
| | |
Accounts payable and accrued expenses | |
| |
| 23,856 | | |
| 2,835 | |
Other current liabilities | |
| |
| 3,316 | | |
| - | |
Corporate taxes payable | |
| |
| - | | |
| 29 | |
Long-term debt | |
| |
| - | | |
| 6,054 | |
Lease liabilities | |
| |
| 105 | | |
| - | |
| |
| |
| 27,277 | | |
| 8,918 | |
Fair value of identifiable net liabilities acquired | |
| |
| (16,723 | ) | |
| (393 | ) |
| |
| |
| | | |
| | |
Goodwill arising on acquisition: | |
| |
| | | |
| | |
Cash consideration | |
| |
| 1,800 | | |
| 6,096 | |
Shares issued | |
| |
| - | | |
| 486 | |
Convertible preferred shares issued | |
| |
| 91,610 | | |
| - | |
Notes assumed | |
| |
| 13,044 | | |
| - | |
Consideration paid | |
| |
| 106,454 | | |
| 6,582 | |
Add: fair value of identifiable net liabilities acquired | |
| |
| 16,723 | | |
| 393 | |
| |
| |
| | | |
| | |
Goodwill arising from transaction | |
(b) | |
| 123,177 | | |
| 6,975 | |
Aditxt Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
(In thousands of U.S. dollars)
For the year ended December
31, 2023
4 | Preliminary
Purchase Price Allocation (continued) |
(a)
A preliminary fair value estimate of $7,037 has been allocated to identifiable intangible assets acquired for the Appili Transaction.
Intangibles assets acquired include licences and intellectual property rights to the research and development activities of Appili, with
a useful life of 15 years.
(b)
A preliminary estimate of $123,177 and $6,975 has been allocated to the goodwill for the Evofem Transaction and the Appili Transaction,
respectively. Goodwill is calculated as the excess of the preliminary estimate of the acquisition date fair value of the consideration
transferred, over the preliminary estimate of the fair values assigned to the identifiable assets acquired and liabilities assumed.
5 | Pro
Forma Adjustments in Connection with the Transactions |
The
following summarizes the pro forma adjustments in connection with the Appili Transaction and the Evofem Transaction to give effect to
the transactions as if they had occurred on January 1, 2023, for the purposes of the unaudited Pro Forma Consolidated Statement of Earnings
and on December 31, 2023, for the purposes of the unaudited Pro Forma Consolidated Statement of Financial Position. The pro forma adjustments
were based on preliminary estimates and assumptions that are subject to change.
(a)
Cash
Reflects
the pro forma adjustment to cash representing the sources and uses of cash to close the Transactions as if the Transactions had occurred
on December 31, 2023. Sources and uses of cash include the $6,096 decrease for the preliminary purchase price paid for the Appili Transaction,
$1,800 decrease for the preliminary purchase price paid for the Evofem Transaction and an increase of $20,000 in proceeds from the issuance
of common stock of Aditxt, net of issuance costs.
(b)
Intangible Assets
An
increase of $7,037 to the carrying value of Appili intangible assets to adjust it to its preliminary estimated fair value. Intangibles
assets acquired include licences and intellectual property rights to research and development activities of Appili.
The
unaudited Pro Forma Consolidated Statement of Earnings is also adjusted to increase amortization expense by $469 for amortization of
the intangible assets recorded at fair value.
(c)
Goodwill
Reflects
an increase of $123,177 and $6,975 of goodwill as a result of the preliminary purchase price allocation of Evofem Transaction and Appili
Transaction, respectively. Goodwill is not amortized and is not currently assumed to be deductible for tax purposes. Goodwill could materially
change based on changes in estimates in the fair value of the assets acquired, and liabilities assumed.
Aditxt Inc.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
(In thousands of U.S. dollars)
For the year ended December
31, 2023
5 | Pro
Forma Adjustments in Connection with the Transactions (continued) |
(d)
Investment in Evofem and Deposit on acquisition
Reflects
a decrease of $22,277 in Investment in Evofem and $11,367 decrease in Deposit on acquisition for the elimination of cost of investment
in Evofem on consolidation.
The
unaudited Pro Forma Consolidated Statement of Earnings is also adjusted to eliminate the amortization of $193 relating to the discount
recognized on the notes assumed on acquisition of Evofem.
(e)
Current Liabilities
Accounts
payable and accrued expenses: Reflects an increase of $2,600 for transaction costs associated with Evofem Transaction and Appili Transaction
and $452 related to interest payable on notes.
Convertible
notes payable carried at fair value: Reflects a decrease of $14,731 to reflect the settlement of the notes in conjunction with the close
of the transaction.
Convertible
notes payable – Adjuvant: Reflects a decrease of $28,537 to reflect the settlement of the notes in conjunction with the close
of the transaction.
Derivative
liabilities: Reflects a decrease of $1,926 to reflect the settlement of the liabilities in conjunction with the
close of the transaction.
(f)
Mezzanine Equity
Convertible
preferred stock: Reflects an increase of $66,158 for the issuance of convertible preferred stock for the Evofem Transaction and $4,593
decrease on elimination of convertible preferred stock of Evofem on consolidation.
(g)
Total Equity
Common
stock: Reflects the elimination of $2 for the common stock of Evofem.
Additional
paid-in capital: Reflects an increase of $20,719 for the issuance of common stock in connection with the Appili Transaction, a $44,621
decrease on elimination of Appili paid-in-capital and a $823,036 decrease on elimination of Evofem paid-in-capital on consolidation.
Accumulated other comprehensive loss: Reflects an increase of $5 on
elimination of currency translation adjustment on consolidation of Appili and an increase of $849 upon elimination of comprehensive loss
of Evofem.
Accumulated
deficit: Reflects a $888,699 and $52,046 decrease in accumulated deficit to eliminate historical retained loss of Evofem and
Appili, respectively, and a $469 increase in amortization expense for intangible assets relating to Appili and $2,600 increase for
transaction costs associated with the Appili Transaction and Evofem Transaction.
(h) The unaudited Pro Forma Consolidated Statement of Earnings
is also adjusted as follows:
| ● | Increase
amortization expense by $469 for amortization of the intangible assets recorded at fair value for the twelve months ended December 31,
2023. |
| ● | Decrease
to loss on issuance of financial instruments of $6,776 for the twelve months ended December 31, 2023 to remove the impact of issuances
of purchase rights due to a down-round related to instruments that would have been extinguished as a requirement of the Evofem closing. |
| ● | Decrease
to gain on debt extinguishment of $75,337 for the twelve months ended December 31, 2023 to remove the impact of the debt extinguishment
related to an instrument that would have been extinguished as a requirement of the Evofem closing. |
|
● |
Decrease to change in fair value of financial instruments of $4,879 for the twelve months ended December 31, 2023 to remove the impact of fair value adjustments related to instruments that would have been extinguished as a requirement of the Evofem closing. |
F-11
v3.24.2.u1
Cover
|
Apr. 01, 2024 |
Cover [Abstract] |
|
Document Type |
8-K/A
|
Amendment Flag |
true
|
Amendment Description |
On
April 4, 2024, Aditxt, Inc. (the “Company” or “Aditxt”) filed a Current Report on Form 8-K (the “Original
Current Report”) disclosing that on April 1, 2024, the Company entered into an Arrangement Agreement (the “Arrangement
Agreement”) with Adivir, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Adivir”) and
Appili Therapeutics, Inc., a Canadian corporation (“Appili”), pursuant to which, Adivir will acquire all of the issued
and outstanding Class A common Shares of Appili (the “Appili Shares”) on the terms and subject to the conditions set
forth in the Arrangement Agreement. The acquisition of the Appili Shares (the “Arrangement”) will be completed by
way of a statutory plan of arrangement under the Canada Business Corporation Act (the “CBCA”). On
July 8, 2024, the Company filed a Current Report on Form 8-K (the “First Amendment Current Report”) disclosing that
on July 1, 2024, the Company, Adivir and Appili entered in entered into an Amending Agreement (the “Amending Agreement”),
pursuant to which the Parties (as defined in the Arrangement Agreement) agreed that: (i) the Outside Date (as defined in the Arrangement
Agreement) would be changed to August 30, 2024; (ii) Adivir agreed that it would convene the Company Meeting (as defined in the Arrangement
Agreement) no later than August 30, 2024, provided that Appili shall be under no obligation to convene the Company Meeting prior to the
date that is 50 days following the date that Aditxt delivers to Appili all complete Additional Financial Disclosure (as defined in the
Arrangement Agreement) required for inclusion in the Company Circular (as defined in the Arrangement Agreement); (iii) Aditxt shall use
commercially reasonable efforts to complete the Financing (as defined in the Arrangement Agreement) no later than August 30, 2024; and
(iv) Aditxt or Appili may terminate the Arrangement Agreement if the Financing is not completed by 5:00 p.m. (ET) on August 30, 2024
or such later date as the Parties may agree in writing. On July 22, 2024, the Company filed a Current Report on Form 8-K (the “Second
Amendment Current Report” and together with the Original current Report and the First Amendment Current Report, the “Current
Reports”) disclosing that on July 18, 2024, the Company, Adivir and Appili entered in entered into a Second Amending Agreement
(the “Second Amending Agreement”), pursuant to which the Arrangement Agreement was further amended to provide that
(i) the Outside Date will be extended to September 30, 2024, (ii) the Appili Meeting will be conducted no later than September 30, 2024,
provided that Appili shall be under no obligation to hold the Appili Meting prior to the date that is 50 days following the date that
the Company delivers all complete Additional Financial Disclosure required for inclusion in the circular; (iii) the Company shall use
commercially reasonable efforts to complete the Financing on or prior to September 15, 2024; and (iv) the Company and Appili may terminate
the Arrangement Agreement if the Financing is not completed on or before 5:00 p.m. (ET) on September 15, 2024 or such later date as the
Parties may in writing agree.
|
Document Period End Date |
Apr. 01, 2024
|
Entity File Number |
001-39336
|
Entity Registrant Name |
Aditxt, Inc.
|
Entity Central Index Key |
0001726711
|
Entity Tax Identification Number |
82-3204328
|
Entity Incorporation, State or Country Code |
DE
|
Entity Address, Address Line One |
2569 Wyandotte St.
|
Entity Address, Address Line Two |
Suite 101
|
Entity Address, City or Town |
Mountain View
|
Entity Address, State or Province |
CA
|
Entity Address, Postal Zip Code |
94043
|
City Area Code |
650
|
Local Phone Number |
870-1200
|
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|
Soliciting Material |
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|
Pre-commencement Tender Offer |
false
|
Pre-commencement Issuer Tender Offer |
false
|
Title of 12(b) Security |
Common Stock, par value $0.001
|
Trading Symbol |
ADTX
|
Security Exchange Name |
NASDAQ
|
Entity Emerging Growth Company |
true
|
Elected Not To Use the Extended Transition Period |
false
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