NOTE
2 – GOING CONCERN AND MANAGEMENT’S PLANS
The
accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern,
which assumes the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company
experienced a net loss of $492,185 for the nine months ended September 30, 2022, had a working capital deficit of $868,332 and an
accumulated deficit of $14,625,357 as of September 30, 2022. These factors raise substantial doubt about the Company’s ability
to continue as a going concern and to operate in the normal course of business. These unaudited condensed consolidated financial statements
do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities
that might result from this uncertainty.
In
March 2020, the World Health Organization declared the novel COVID-19 virus as a global pandemic. The COVID-19 outbreak in the United
States negatively impacted to the Company’s ability to secure additional debt or equity funding to support operations in 2020 and
2021. In 2021, the Company raised an aggregate of $560,000 from the sale of 2,240,000 shares of common stock to support current operations
and extend research and development of its product line. No assurance can be given that the Company will be successful in this effort.
If the Company is unable to raise additional funds in 2022, it will be forced to severely curtail all operations and research and development
activities.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Basis
of Presentation and Principles of Consolidation
The
accompanying condensed consolidated financial statements in this report have been prepared by the Company without audit. In the opinion
of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods
have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and
note disclosures normally included in the Company’s consolidated annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted.
These
unaudited condensed consolidated financial statements should be read in conjunction with a reading of the Company’s consolidated
audited financial statements and notes thereto for the year ended December 31, 2021, filed with the Company’s annual report on
Form 10-K with the Securities and Exchange Commission (the “SEC”) on March 16, 2022. Interim results of operations for the
three and nine months ended September 30, 2022, and 2021, are not necessarily indicative of future results for the full year. The unaudited
condensed consolidated financial statements of the Company include the consolidated accounts of VLS and its wholly owned subsidiary VI.
All intercompany accounts and transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant
estimates included in the financial statements, include useful the life of intangible assets, valuation allowance for deferred tax assets
and non-cash equity transactions and stock-based compensation.
Cash
The
Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. The Company held
no cash equivalents as of September 30, 2022, and December 31, 2021. Cash balances may, at certain times, exceed federally insured limits.
If the amount of a deposit at any time exceeds the federally insured amount at a bank, the uninsured portion of the deposit could be
lost, in whole or in part, if the bank were to fail.
Intangible
Assets
Costs
of intangible assets are accounted for through the capitalization of those costs incurred in connection with developing or obtaining
such assets. Capitalized costs are included in intangible assets in the unaudited condensed consolidated balance sheets. The Company’s
intangible assets consist of costs incurred in connection with securing an Exclusive Patent License Agreement with The General Hospital
Corporation, d/b/a Massachusetts General Hospital (“MGH”), as amended (the “License Agreement”). These costs
are being amortized over the term of the License Agreement which is based on the remaining patent life of the related patents being licensed.
The
Company reviews these intangible assets for possible impairment when events or changes in circumstances indicate that the assets carrying
amount may not be recoverable. In evaluating the future benefit of its intangible assets, management performs an analysis of the anticipated
undiscounted future net cash flows of the intangible assets over the remaining estimated useful life. An impairment loss is recorded
if the carrying value of the asset exceeds the expected future cash flows.
Long-Lived
Assets
The
Company reviews long-lived assets at least annually or when events or changes in circumstances reflect the fact that the recorded value
may not be recoverable for impairment and recognizes impairment losses on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying values.
Equity
Method Investment
The
Company accounts for investments in which the Company owns more than 20% or has the ability to exercise significant influence of the
investee, using the equity method in accordance with the Financial Accounting Standard Board’s (the “FASB”) Accounting
Standards Codification (“ASC”) Topic 323, Investments—Equity Method and Joint Ventures. Under the equity method,
an investor initially records an investment in the stock of an investee at cost and adjusts the carrying amount of the investment to
recognize the investor’s share of the earnings or losses of the investee after the date of acquisition.
The
amount of the adjustment is included in the determination of net income by the investor, and such amount reflects adjustments similar
to those made in preparing consolidated statements including adjustments to eliminate intercompany gains and losses, and to amortize,
if appropriate, any difference between investor cost and underlying equity in net assets of the investee at the date of investment. The
investment of an investor is also adjusted to reflect the investor’s share of changes in the investee’s capital. Dividends
received from an investee reduce the carrying amount of the investment. A series of operating losses of an investee or other factors
may indicate that a decrease in value of the investment has occurred which is other than temporary, and which should be recognized even
though the decrease in value is in excess of what would otherwise be recognized by application of the equity method.
In
accordance with ASC 323-10-35-20 through 35-22, the investor ordinarily shall discontinue applying the equity method if the investment
(and net advances) is reduced to zero and shall not provide for additional losses unless the investor has guaranteed obligations of the
investee or is otherwise committed to provide further financial support for the investee. An investor shall, however, provide for additional
losses if the imminent return to profitable operations by an investee appears to be assured. For example, a material, nonrecurring loss
of an isolated nature may reduce an investment below zero even though the underlying profitable operating pattern of an investee is unimpaired.
If the investee subsequently reports net income, the investor shall resume applying the equity method only after its share of that net
income equals the share of net losses not recognized during the period the equity method was suspended.
Equity
and cost method investments are classified as investments. The Company periodically evaluates its equity and cost method investments
for impairment due to declines considered to be other than temporary. If the Company determines that a decline in fair value is other
than temporary, then a charge to earnings is recorded as an impairment loss in the accompanying consolidated statements of operations.
The
Company’s equity method investment consisted of equity owned in Athens Encapsulation Inc. (“AEI”), a Company controlled
by former directors of the Company which was given to the Company as part of an investment and restructuring agreement entered into in
May 2019. In January 2021, the Company sold its’ equity investment in AEI, back to AEI for $100,000, which is presented as other
income on the statement of operations for the nine months ended September 30, 2021. As of September 30, 2022, the Company did not have
any remaining equity investment in AEI. During the three and nine months ended September 30, 2021, the Company’s proportionate
share of net income was insignificant.
Fair
Value of Financial Instruments
ASC
825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial
instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to management as of September 30, 2022.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued
liabilities, payables with related parties, approximate their fair values because of the short maturity of these instruments.
Revenue
Recognition
Revenue
recognition is accounted for under ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) and all
the related amendments. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those
goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment
and estimates may be required within the revenue recognition process than required under U.S. GAAP including identifying performance
obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction
price to each separate performance obligation.
The
Company’s contracts with customers are generally on a contract and work order basis and represent obligations that are satisfied
at a point in time, as defined in the new guidance, generally upon delivery or has services are provided. Accordingly, revenue for each
sale is recognized when the Company has completed its performance obligations. Any costs incurred before this point in time, are recorded
as assets to be expensed during the period the related revenue is recognized. The Company did not generate any revenue for the three
and nine months ended September 30, 2022, and 2021.
Stock-Based
Compensation
Stock-based
compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation,”
which requires recognition in the financial statements of the cost of employee, director and non-employee services received in exchange
for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange
for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee
services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures
as they occur as permitted under the FASB’s Accounting Standards Update ASU 2016-09 Improvements to Employee Share-Based Payment.
Research
and Development
Costs
and expenses that can be clearly identified as research and development are charged to expense as incurred. For the three and nine months
ended September 30, 2022, the Company incurred $3,097 and $13,097, respectively, in research and development expenses with a related
party. For the three and nine months ended September 30, 2021, the Company incurred $0 and $7,243, respectively, in research and development
expenses to a related party.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to
reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation
allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will
not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of
enactment.
ASC
740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements
and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure,
and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company has
not been assessed, nor paid, any interest or penalties.
Uncertain
tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at
the effective date may be recognized or continue to be recognized.
Earnings
(Loss) Per Share
The
Company reports earnings (loss) per share in accordance with ASC 260, “Earnings per Share.” Basic earnings (loss) per share
is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted
earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock, common stock equivalents
and other potentially dilutive securities outstanding during the period using the treasury stock method and as-if converted method. As
of September 30, 2022, and 2021, the Company’s dilutive securities are convertible into 3,396,281 and 23,467,283 shares of common
stock, respectively, which are not included in the computation of dilutive loss per share because their impact is antidilutive.
The
following table represents the classes of dilutive securities as of September 30, 2022, and 2021:
SCHEDULE
OF ANTIDILUTIVE SECURITIES OF EARNINGS PER SHARE
| |
September 30, 2022 | | |
September 30, 2021 | |
Common stock to be issued | |
| 726,281 | | |
| 17,507,283 | |
Stock options | |
| 2,670,000 | | |
| — | |
Warrants to purchase common stock | |
| — | | |
| 4,060,000 | |
Anti-dilutive securities | |
| 3,396,281 | | |
| 23,467,283 | |
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect
on the accompanying unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022, and
2021.
NOTE
4 – INTANGIBLE ASSETS
The
Company’s intangible assets consist of costs incurred in connection with the License Agreement with MGH (See Note 5). The
consideration paid for the rights included in the License Agreement was in the form of common stock shares which resulted in MGH
receiving approximately 20%
of the total outstanding shares of common stock of VI. The estimated fair value of the common stock as of the date of the agreement
is being amortized over the term of the License Agreement which is based on the remaining patent life of the related patents being
licensed which is approximately 16
years.
The
Company’s intangible assets consisted of the following at September 30, 2022, and December 31, 2021:
SCHEDULE OF INTANGIBLE ASSETS
| |
September 30, 2022 | | |
December 31, 2021 | |
Licensed patents | |
$ | 492,514 | | |
$ | 492,514 | |
Accumulated amortization | |
| (144,461 | ) | |
| (120,994 | ) |
Total | |
$ | 348,053 | | |
$ | 371,520 | |
The
Company recognized $7,822 and $23,467 of amortization expense related to the License Agreement with MGH for the three and nine months
ended September 30, 2022, and 2021, respectively, which is included in general and administrative expenses on the unaudited condensed
consolidated statements of operations.
Future
expected amortization of intangible assets is as follows:
SCHEDULE OF FUTURE AMORTIZATION OF
INTANGIBLE ASSETS
Fiscal year ending December 31, | |
| |
2022 (months remaining) | |
$ | 7,822 | |
2023 | |
| 31,299 | |
2024 | |
| 31,299 | |
2025 | |
| 31,299 | |
2026 | |
| 31,299 | |
Thereafter | |
| 215,035 | |
Total | |
$ | 348,053 | |
NOTE
5 – RELATED PARTY TRANSACTIONS
Consulting
Agreements
On
November 5, 2021, the Company entered into a Consulting Agreement (the “Poznansky Agreement”) with Mark Poznansky, MD, a
minority stockholder and former Director. The Company engaged Dr. Poznansky to render consulting services with respect to informing,
guiding, and supervising the development of antagonists to immune repellents or anti-fugetaxins for the treatment of cancer. The initial
term of the Poznansky Agreement was for six months (the “Initial Term”), which was extended indefinitely, and the Company agreed to pay the Consultant $2,000
per month commencing November 5, 2021, with consideration for an increase in the monthly fee following the completion for the Company’s
successful up listing to the NASDAQ Stock Market. The Company incurred a total of $6,000 and $18,000 in expenses for the three and nine
months ended September 30, 2022, respectively, related to the Poznansky Agreement, which is included in professional fees on the unaudited
condensed consolidated statements of operations. The Company did not incur any expenses related to the Poznansky Agreement for the three
and nine months ended September 30, 2021. As of September 30, 2022, and December 31, 2021, $21,000 and $13,000, respectively, is included
in accounts payable, related parties, on the unaudited condensed consolidated balance sheets, related to the Poznansky Agreement.
On
January 1, 2022, the Company entered into a consulting agreement (the “Toneguzzo Agreement”) with Frances Toneguzzo, Ph.D.,
the Company’s former CEO. Pursuant to the one-year term of the Toneguzzo Agreement in exchange for services in leading the research
and development teams and laboratory work, the consultant will receive $5,000 per month. The Company incurred a total of $15,000 and
$45,000 in expenses for the three and nine months ended September 30, 2022, respectively, related to the Toneguzzo Agreement, which is
included in professional fees on the unaudited condensed consolidated statements of operations. The Company did not incur any expenses
related to the Toneguzzo Agreement for the three and nine months ended September 30, 2021. As of September 30, 2022, and December 31,
2021, $25,000 and $-0-, respectively, is included in accounts payable, related parties, on the unaudited condensed consolidated balance
sheets, related to the Toneguzzo Agreement.
MGH
License Agreement
On
May 8, 2013, VI and MGH, a principal stockholder (see Note 6), entered into the License Agreement, pursuant to which MGH granted to the
Company, in the field of coating and transplanting cells, tissues and devices for therapeutic purposes, on a worldwide basis: (i) an
exclusive, royalty-bearing license under its rights in Patent Rights (as defined in the License Agreement) to make, use, sell, lease,
import and transfer Products and Processes (each as defined in the License Agreement); (ii) a non-exclusive, sub-licensable (solely in
the License Field and License Territory (each as defined in the License Agreement)) royalty-bearing license to Materials (as defined
in the License Agreement) and to make, have made, use, have used, Materials for only the purpose of creating Products, the transfer of
Products and to use, have used and transfer processes; (iii) the right to grant sublicenses subject to and in accordance with the terms
of the License Agreement, and (iv) the nonexclusive right to use technological information (as defined in the License Agreement) disclosed
by MGH to the Company under the License Agreement, all subject to and in accordance with the License Agreement (the “License”).
As
amended by the Eighth Amendment to the License Agreement on March 14, 2022 (“Effective Date”), which replaces the prior pre-sales
due diligence requirements in their entirety, the License Agreement requires that the Company satisfy the following requirements prior
to the first sale of Products (“MGH License Milestones”), by certain dates.
Pre-Sales
Diligence Requirement:
|
(x) |
The
Company shall provide a detailed business plan and development plan by June 1st, 2022. As of the date of this filing the
Company has yet to submit the business and development plan and is negotiating the extension of this requirement with
MGH. |
|
(xi) |
The
Company shall raise $2 million in financing by December 1st, 2022. |
|
(xii) |
The
Company shall raise an additional $8 million in financing by December 1st, 2023. |
|
(xiii) |
The
Company shall initiate research regarding the role of CXCL12 in beta cell function and differentiation by January 1st,
2023. |
|
(xiv) |
The
Company shall initiate diabetic non-human primate studies using cadaveric islets encapsulated in the CXCL12 technology by March 1st,
2023. |
|
(xv) |
The
Company shall initiate research regarding other applications of the CXCL12 platform by June 1st, 2023. |
|
(xvi) |
The
Company shall initiate a Phase I clinical trial of a Product or Process by March 1st, 2024. |
|
(xvii) |
The
Company shall initiate a Phase II clinical trial of a Product or Process within thirteen (13) years from Effective Date. |
|
(xviii) |
The
Company shall initiate Phase III clinical trial of a Product or Process within sixteen (16) years from Effective Date. |
Additionally,
as amended by the Eighth Amendment to the License Agreement on March 14, 2022, which replaces the prior post-sales due diligence requirements
in their entirety, the License Agreement requires that the Company satisfy the following requirements post-sales of Products (“MGH
License Milestones”), by certain dates.
Post-Sales
Diligence Requirements:
|
(i) |
The
Company shall itself or through an Affiliate or Sublicensee make a First Commercial Sale within the following countries and regions
in the License Territory within eighteen (18) years after the Effective Date of this Agreement: US and Europe and China or Japan.
|
|
|
|
|
(ii)
|
Following
the First Commercial Sale in any country in the License Territory, Company shall itself or through its Affiliates and/or Sublicensees
use commercially reasonable efforts to continue to make Sales in such country without any elapsed time period of one (1) year or
more in which such Sales do not occur due to lack such efforts by Company. |
In
consideration of the update to the diligence milestones, the Company shall pay the following Annual Minimum Royalty payments:
|
(i) |
Prior
to the First Commercial Sale, the Company shall pay to MGH a non-refundable annual license fee of ten thousand dollars ($10,000)
by June 30, 2022, and on each subsequent anniversary of the Eighth Amendment Effective Date thereafter. This agreed upon non-refundable
license fee has been included in accounts payable as of June 30, 2022 and expensed as research and development expense upon execution
of the Eight Amendment during the six months ended June 30, 2022. The non-refundable annual license fee was paid on July 1, 2022. |
|
|
|
|
(ii)
|
Following
the First Commercial Sale, Company shall pay MGH a non-refundable annual minimum royalty in the amount of one hundred thousand dollars
United States Dollars ($100,000) per year within sixty (60) days after each annual anniversary of the Effective Date. The annual
minimum royalty shall be credited against royalties subsequently due on Net Sales made during the same calendar year, if any, but
shall not be credited against royalties due on Net Sales made in any other year. |
The
License Agreement also requires VI to pay to MGH a 1% royalty rate on net sales related to the first license sub-field, which is the
treatment of Type 1 Diabetes (“T1D”). Future sub-fields shall carry a reasonable royalty rate, consistent with industry standards,
to be negotiated at the time the first such royalty payment shall become due with respect to the applicable Products and Processes (as
defined in the License Agreement).
The
License Agreement additionally requires VI to pay to MGH a $1.0 million “success payment” within 60 days after the first
achievement of total net sales of Product or Process equal to or to exceed $100,000,000 in any calendar year and $4,000,000 within 60
days after the first achievement of total net sales of Product or Process equal or exceed $250,000,000 in any calendar year. The Company
is also required to reimburse MGH’s expenses in connection with the preparation, filing, prosecution and maintenance of all Patent
Rights.
The
License Agreement expires on the later of (i) the date on which all issued patents and filed patent applications within the Patent Rights
have expired (November 2033) or have been abandoned, and (ii) one year after the last sale for which a royalty is due under the License
Agreement.
The
License Agreement also grants MGH the right to terminate the License Agreement if VI fails to make any payment due under the License
Agreement or defaults in the performance of any of its other obligations under the License Agreement, subject to certain notice and rights
to cure set forth therein. MGH may also terminate the License Agreement immediately upon written notice to VI if VI: (i) shall make an
assignment for the benefit of creditors; or (ii) or shall have a petition in bankruptcy filed for or against it that is not dismissed
within 60 days of filing. As of the date of this filing, this License Agreement remains active and the Company has not received any termination
notice from MGH.
VI
may terminate the License Agreement prior to its expiration by giving 90 days’ advance written notice to MGH, and upon such termination
shall, subject to the terms of the License Agreement, immediately cease all use and sales of Products and Processes.
The
Company incurred costs to MGH of $3,097 and $13,097, respectively, for the three and nine months ended September 30, 2022, respectively,
which is classified as research and development costs, related party, on the consolidated statements of operations. The Company incurred
costs to MGH of $0 and $7,243, respectively, for the three and nine months ended September 30, 2021, respectively. As of September 30,
2022, and December 31, 2021, $3,097 and $3,860, respectively, is included in accounts payable, related parties, on the consolidated balance
sheets, for services that remain unpaid.
During
the three and nine months ended September 30, 2022, and 2021, there have not been any sales of Product or Process under this License
Agreement.
Accounts
Payable, related parties and Accrued Salaries, related party
The
Company incurred director fees of $30,000 and $90,000 for the three and nine months ended September 30, 2022, respectively, to Federico
Pier, the Company’s Chief Executive Officer and Chairman of the Board, which are included in personnel costs on the unaudited condensed
consolidated statements of operations. The Company incurred director fees of $22,500 and $67,500 for the three and nine months ended
September 30, 2021, respectively, to Mr. Pier. As of September 30, 2022, and December 31, 2021, $115,000 and $60,000, respectively, of
these director fees are included in accounts payable, related parties, on the unaudited condensed consolidated balance sheets.
The
Company incurred consulting fees of $22,500 and $67,500 for the three and nine months ended September 30, 2022, respectively, to Jeff
Wright, the Company’s Chief Financial Officer, which are included in professional fees on the unaudited condensed consolidated
statements of operations. The Company incurred consulting fees of $15,000 and $45,000 for the three and nine months ended September 30,
2021, respectively, to Mr. Wright. As of September 30, 2022, and December 31, 2021, $77,762 and $40,000, respectively, is included in
accounts payable, related parties, on the unaudited condensed consolidated balance sheets.
In
August 2020, Frances Tonneguzzo, the Company’s Chief Executive Officer (the “former CEO”) tendered her resignation
as CEO. For the three and nine months ended September 30, 2022, and 2021, the Company did not incur any expenses to the former CEO. As
of September 30, 2022, and December 31, 2021, $115,312, respectively, of unpaid salary to the former CEO is included in accrued salaries,
related party on the unaudited condensed consolidated balance sheets. See Note 5 for a consulting agreement executed with the former
CEO.
Sale
of Equity Method Investment
In
January 2021, the Company sold its’ equity investment in AEI back to AEI for $100,000, which is included in other income on the
unaudited condensed consolidated statements of operations for the nine months ended September 30, 2021 (see Note 3).
NOTE
6– COMMITMENTS AND CONTINGENCIES
Legal
Matters
The
Company is not aware of any material, existing or pending legal proceedings against the Company, nor is it involved as a plaintiff in
any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any
registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
MGH
License Agreement
As
discussed in Note 5, the Company executed a License Agreement with MGH. Prior to the first commercial sale, the License Agreement requires
the Company to pay MGH a non-refundable annual license fee of $10,000 by June 30, 2022, and on each subsequent anniversary of the Effective
Date thereafter. The first non-refundable annual license fee was paid on July 1, 2022. Additionally, following the first commercial sale,
the License agreement requires the Company to pay MGH a non-refundable annual minimum royalty in the amount of $100,000 per year within
sixty days after each annual anniversary of the Effective Date.
The
License Agreement also requires VI to pay to MGH a 1% royalty rate on net sales related to the first license sub-field, which is the
treatment of T1D. Future sub-fields shall carry a reasonable royalty rate, consistent with industry standards, to be negotiated at the
time the first such royalty payment shall become due with respect to the applicable Products and Processes (as defined in the License
Agreement).
The
License Agreement additionally requires VI to pay to MGH a $1.0 million “success payment” within 60 days after the first
achievement of total net sales of Product or Process equal or exceeding $100,000,000 in any calendar year and $4,000,000 within 60 days
after the first achievement of total net sales of Product or Process equal to or exceeding $250,000,000 in any calendar year. The Company
is also required to reimburse MGH’s expenses in connection with the preparation, filing, prosecution and maintenance of all Patent
Rights. $3,097 and $0, respectively, of expense reimbursements were incurred to MGH during the three and nine months ended September
30, 2022, and 2021. As of September 30, 2022, and December 31, 2021, $3,097 and $0, respectively, is included in accounts payable, related
parties, on the unaudited condensed consolidated balance sheets.
Consulting
Agreements
On
January 12, 2022, the Company entered into a Consulting Agreement (the “Consulting Agreement”) with Donohoe Advisory Associates,
LLC. (the “Consultant”). The Company engaged the Consultant to provide assistance and advice to the Company in support of
the Company’s efforts to obtain a listing on a national securities exchange. The Company agreed to pay the Consultant a retainer
fee of $17,500, which is to be applied to the Company’s monthly invoices until such time as the retainer fee is exhausted or the
engagement under the agreement ends. The Company incurred $0 and $10,680 in expenses for the three and nine months ended September 30,
2022, which are included in professional fees on the unaudited condensed consolidated statements of operations, and none of which is
included in accounts payable on the unaudited condensed consolidated balance sheet. As of September 30, 2022, the remaining balance of
the retainer paid to the Consultant was $6,820 and is included in prepaid expenses on the unaudited condensed consolidated balance sheet.
No expenses were paid to the Consultant during the three and nine months ended September 30, 2021. If the Company is successful in listing
on an exchange, the Company will be obligated to pay a “success fee” to the Consultant of either $10,000 or that number of
registered common shares equivalent to $10,000 divided by the closing price of the Company’s common stock on the last day of trading
on the OTC Market. The form of the success fee will be determined by the Company.
On
March 7, 2022, the Company entered into a Consulting Agreement (the “Consulting Agreement”) with Alpha IR Group, LLC. (the
“Consultant”). The Company engaged the Consultant to provide consulting, investor relations, and corporate and transaction
communication related services. The initial term of the Consulting Agreement is for three months (the “Initial Term”) beginning
March 1, 2022, and the Company agreed to pay compensation equal to the sum of $50,000 payable in cash or stock options for the three
months of service. The Company incurred $0 and $50,000 in expenses for the three and nine months ended September 30, 2022, respectively,
which are included in professional fees on the unaudited condensed consolidated statements of operations. As of September 30, 2022, the
balance owed to the Consultant was $50,000 which is included in accounts payable on the unaudited condensed consolidated balance sheet.
No expenses were incurred with the Consultant during the three and nine months ended September 30, 2021.
NOTE
7 – STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred
Stock
The
Company has 20,000,000 authorized shares of preferred stock, $0.001 par value per share.
Series
A Preferred Stock
On
December 19, 2017, the Company amended its articles of incorporation by filing a certificate of designation with the Secretary of State
of Florida therein designating a class of preferred stock as Series A Preferred Stock, $0.001 par value per share, consisting of 3 million
(3,000,000) shares. Each holder of shares of Series A Preferred Stock shall be entitled to the number of votes equal to the number of
votes held by the number of shares of common stock into which such share of Series A Preferred Stock could be converted, and except as
otherwise required by applicable law, shall have the voting rights and power equal to the voting rights and powers of the common stock.
The holders of the Series A Preferred Stock shall vote together with the holders of the common stock of the Company as a single class
and as single voting group upon all matters required to be submitted to a class or series vote pursuant to the protective provisions
of the Certificate of Designation or under applicable law.
In
the event of liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, the holders of Series A Preferred
Stock shall be entitled to receive, prior and in preference to any common stock holders, distribution of any surplus funds equal to the
greater of (i) the sum of $1.67 per share or (ii) such amount per share as would have been payable had all shares been converted to common
stock.
Each
share of Series A Preferred Stock is convertible into shares of common stock at a conversion Rate of 2:1 (the “Series A Conversion
Rate”). The Series A Conversion Rate shall be adjusted for stock splits, stock combinations, stock dividends or similar recapitalizations.
Pursuant
to the Articles of Incorporation, the shares of Series A Preferred Stock automatically converted into 6,000,000 shares of common stock
to be issued on February 12, 2021, (the one-year anniversary of the initial filing by the Company of the Form 10 filed with the SEC).
The common stock shares for the conversion of the Series A Preferred Stock were issued on January 13, 2022.
As
of September 30, 2022, and December 31, 2021, there were -0- shares of Series A Preferred Stock issued and outstanding.
Series
B Preferred Stock
On
December 19, 2017, the Company amended the articles of incorporation by filing a certificate of designation with the Secretary of State
of Florida therein designating a class of preferred stock as Series B Preferred Stock, $0.001 par value per share, consisting of 4.44
million (4,440,000) shares (the “Series B Preferred Stock Certificate of Designation”).
Each
holder of shares of Series B Preferred Stock shall be entitled to the number of votes equal to the number of votes held by the number
of shares of common stock into which such share of Series B Preferred Stock could be converted, and except as otherwise required by applicable
law, shall have the voting rights and power equal to the voting rights and powers of the common stock. The holders of the Series B Preferred
Stock shall vote together with the holders of the common stock of the Company as a single class and as single voting group upon all matters
required to be submitted to a class or series vote pursuant to the protective provisions of the Series B Preferred Stock Certificate
of Designation or under applicable law. In the event of liquidation, dissolution or winding up of the Corporation, either voluntarily
or involuntarily, the holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any common stock holders,
distribution of any surplus funds equal to the greater of : the sum of $0.83 per share or such amount per share as would have been payable
had all shares been converted to common stock.
The
holder of Series B Preferred Stock may elect at any time to convert such sharers into common stock of the Company. Each share of Series
B Preferred Stock is convertible into shares of common stock at a conversion rate of 1:1 (the “Series B Conversion Rate”).
The Series B Conversion Rate shall be adjusted for stock splits, stock combinations, stock dividends or similar recapitalizations.
Pursuant
to the Articles of Incorporation, the shares of Series B Preferred Stock automatically converted into 4,440,000 shares of common stock
to be issued on February 12, 2021, the one-year anniversary of the initial filing by the Company of the Form 10 filed by the Company
with the SEC. The common stock shares for the conversion of the Series B Preferred Stock were issued on January 13, 2022.
As
of September 30, 2022, and December 31, 2021, there were -0- shares of Series B Preferred Stock issued and outstanding.
Common
Stock
The
Company has 300,000,000 authorized shares of common stock, $0.001 par value per share. As of September 30, 2022, and December 31, 2021,
there were 31,188,460 and 19,747,283 shares, respectively, of common stock issued and outstanding.
Common
Stock Issuances
On
February 11, 2021, the Company issued 24,000 shares to an investor. The shares were previously included in common stock to be issued.
On
February 12, 2021, the Company issued 6,000,000 shares of common stock to the holders of Series A Preferred Stock, pursuant to the automatic
conversion feature of the Series A Certificate of Designation, whereby, the Series A shares are to automatically convert on the one-year
anniversary of the Company filing its Registration Statement on Form 10. The Form 10 Registration Statement was filed with the SEC on
February 12, 2020. The common stock shares for the conversion of the Series A Preferred Stock were issued on January 13, 2022.
On
February 12, 2021, the Company issued 4,440,000 shares of common stock to the holders of Series B Preferred Stock, pursuant to the automatic
conversion feature of the Series B Certificate of Designation, whereby, the Series B shares are to automatically convert on the one-year
anniversary of the Company filing its Registration Statement on Form 10. The Form 10 Registration Statement was filed with the SEC on
February 12, 2020. The common stock shares for the conversion of the Series B Preferred Stock were issued on January 13, 2022.
During
the three and nine months ended September 30, 2022, the Company determined that the former Series B Preferred Stockholders, subsequent
to all Series B Preferred Stock having previously been converted to shares of common stock in 2021, were owed additional shares of common
stock due to an adjustment to the conversion price that occurred as a result of a down round trigger event that occurred in 2019 when
the Company sold shares of common stock and a warrant in a private placement at a price of $0.25, which was below the original conversion
ratio of the Series B Preferred Stock. Management determined the total additional shares owed to the Preferred B Stockholders to be 1,001,177
as a result of the down round trigger. The financial statement impact of this down round trigger was not significant. The shares owed
to the Series B Preferred Stockholders due to the 2019 trigger event have been presented on the statement of stockholders’ equity
retrospectively as common stock to be issued with no impact on total stockholders’ deficit. The Company issued the additional shares
to the Series B Preferred Stockholders on March 24, 2022.
In
July 2022, the Company received proceeds totaling $50,000 and issued 100,000 shares of common stock pursuant to the exercise of warrants
at $0.50 per share.
Common
Stock to be issued
As
of September 30, 2022 and 2021, there were 726,281 and 12,607,281, respectively, shares of common stock to be issued. The September 30,
2022, amount relates to 597,281 shares to be issued pursuant to a Stock Issuance and Release Agreement (“SRI Agreement”)
executed by the Company in February 2019 to stockholders for no consideration who purchased shares in 2018 at $1.85, 30,000 shares of
common stock to be issued to two initial shareholders of VI, and 100,000 shares to be issued pursuant to the exercise of warrants in
July 2022.
The
September 30, 2021 amount relates to 6,000,000 shares of common stock be issued for the automatic conversion of the Series A Preferred
Stock, 4,440,000 shares of common stock to be issued for the automatic conversion of the Series B Preferred Stock, 1,540,000 shares of
common stock to be issued pursuant to stock subscription agreements, 597,281 shares to be issued pursuant to a Stock Issuance and Release
Agreement (“SRI Agreement”) executed by the Company in February 2019 to stockholders for no consideration who purchased shares
in 2018 at $1.85, and 30,000 shares of common stock to be issued to two initial shareholders of VI.
Stock
Option-Based Compensation Plan
On
August 10, 2022, the Board of Directors of the Company approved and adopted the Vicapsys Life Sciences, Inc., 2022 Omnibus Equity Incentive
Plan (the “Plan”). The material terms of the 2022 Plan are set forth below:
● |
The
Board or a committee established by the Board will administer the 2022 Plan. |
● |
The
total number of shares of common stock authorized for issuance under the 2022 Plan is 3,200,000 shares of Common Stock plus, to the
extent the Company issues new shares of Common Stock other than under the terms of the 2022 Plan or other than certain Inducement
Awards, 3.1% of the shares of Common Stock issued by the Company in such issuance (or such lower amount as determined by the Board).
As of August 16, 2022, 3,200,000 shares of Common Stock represents approximately 10.1% of our common stock outstanding. |
● |
Eligible
recipients of awards include an employee, director or independent contractor of the Company who has been selected as an eligible
participant by the Administrator, subject to certain limitations relating to Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”). |
● |
No
non-employee director may be granted awards under the 2022 plan during any calendar year if such awards and cash fees paid for serving
as a non-employee director would exceed $150,000 in the non-employee director’s initial year of service, or $195,000 in any
year thereafter. |
● |
In
no event shall the exercise price of an option issued pursuant to the 2022 Plan be less than one hundred percent (100%) of the Fair
Market Value of a share of Common Stock on the date of grant. |
The
purposes of the Plan are to (i) provide an additional incentive to selected employees, directors, and independent contractors of the
Company or its Affiliates whose contributions are essential to the growth and success of the Company, (ii) strengthen the commitment
of such individuals to the Company and its Affiliates, (iii) motivate those individuals to faithfully and diligently perform their responsibilities
and (iv) attract and retain competent and dedicated individuals whose efforts will result in the long-term growth and profitability of
the Company. To accomplish these purposes, the Plan provides that the Company may grant Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Other Stock-Based Awards or any combination of the foregoing.
Stock
Option Activity
On
August 10, 2022, the Board of Directors authorized the Company to issue options to purchase an aggregate of 770,000 shares of common
stock to certain consultants, and former directors. The stock options are exercisable at a price of $0.50. The options granted are estimated
to have fair market value per share of $0.16. The stock options fully vest after six months from the grant date.
We
utilized the Black-Scholes valuation method to recognize compensation expense over the vesting period. The expected life was determined
using the simplified method.
The
simplified method provided in Securities and Exchange Commission release, Staff Accounting Bulletin No. 110, averages an award’s
weighted average vesting period and contractual term for “plain vanilla” share options. The expected volatility was estimated
by analyzing the historic volatility of similar public biotech companies in an early stage of development. No dividend payouts were assumed
as we have not historically paid, and do not anticipate paying, dividends in the foreseeable future. The risk-free rate of return reflects
the average interest rate offered for US treasury rates over the expected term of the options.
The
option price was set at the estimated fair value of the common stock on the date of grant using an actual transactions approach. The
actual transactions method considers actual sales of the Company’s equity prior to the valuation date. The Company determined the
price per share of the most recent private sale of equity to be a more reliable indicator of the Company’s fair value rather than
the quoted OTC prices, which reflected very low trading volume that subjected the quote price to unusual fluctuations in the stock prices.
The
significant assumptions used to estimate the fair value of the equity awards granted were;
SCHEDULE
OF STOCK OPTIONS VALUATION ASSUMPTIONS
Grant date | |
August 10, 2022 | |
Price of common stock of the Company’s last capital raise | |
$ | 0.25 | |
Expected term (years) | |
| 5.25 | |
Risk-free interest rate | |
| 2.93 | % |
Volatility | |
| 95 | % |
Dividend yield | |
| None | |
The
following table summarizes activities related to stock options of the Company for the nine months ended September 30, 2022:
SCHEDULE OF STOCK OPTIONS ACTIVITY
| |
Number of
Options | | |
Weighted-
Average
Exercise
Price per
Share | | |
Weighted-
Average
Remaining
Life
(Years) | | |
Aggregate
Intrinsic
Value
(Per
Option) | |
Outstanding at December 31, 2021 | |
| 1,900,000 | | |
$ | 0.66 | | |
| 5.83 | | |
$ | — | |
Granted | |
| 770,000 | | |
$ | 0.50 | | |
| 9.86 | | |
$ | — | |
Outstanding at September 30, 2022 | |
| 2,670,000 | | |
$ | 0.62 | | |
| 6.46 | | |
$ | — | |
Exercisable at September 30, 2022 | |
| 1,900,000 | | |
$ | 0.66 | | |
| 5.08 | | |
$ | — | |
As
of September 30, 2022, there were 770,000
shares of time-based, non-vested stock options that fully vest in February 2023. As of September 30, 2022, there was $82,789
of total unrecognized stock-based compensation related to these non-vested stock options. That expense is expected to be recognized
on a straight-line basis over a weighted average period of 0.33
years.
The
Company recorded stock compensation expense of $41,395 and $43,557 for the three and nine months ended September 30, 2022, respectively.
The Company recorded stock compensation expense of $1,081 and $3,244 for the three and nine months ended September 30, 2021, respectively.
Warrants
On
July 14, 2022, the Board authorized and approved to extend the end date of certain warrants issued with common stock purchases at various
dates in 2019, by and among the Company and certain investors, pursuant to which the investors had the right to exercise the warrants
until July 31, 2022.
Accounting
Standards Codification (“ASC”) ASC 718-20 Compensation-Stock compensation, which provides for the guidance on the
accounting for a modification of the terms or conditions of an equity award, and requires a modification to be treated as an
exchange of the original issuance for a new issuance, and any incremental value between the original award and the modified award be
recorded.
We
utilized a Black-Scholes valuation method to determine any incremental value due to the modification. The inputs used to value the warrant
as of the modification date are as follows:
SCHEDULE
OF STOCK WARRANT VALUATION ASSUMPTIONS
|
● |
The
price of the common stock the Company last raised capital: $0.25 |
|
● |
Exercise
price of the warrant: $0.50 |
|
● |
Life
of the warrant: 0.15 years |
|
● |
Risk
free return rate: 1.99% |
|
● |
Annualized
volatility rate of four comparative companies: 94% |
The
Company recognized $3,548 in incremental value for the fair market value of the modified warrants over the fair market value of the original
warrants. The Company recognized the effect of the excess fair market value as a deemed dividend which reduced the income available to
common stockholders for the three and nine months ended September 30, 2022.
The
following table summarizes activities related to warrants of the Company for the nine months ended September 30, 2022:
SCHEDULE OF WARRANTS ACTIVITY
| |
Number of
Warrants | | |
Weighted- Average Exercise
Price
per Share | | |
Weighted-
Average
Remaining
Life
(Years) | | |
Aggregate
Intrinsic
Value (Per
Warrant) | |
Outstanding and exercisable at December 31, 2021 | |
| 4,060,000 | | |
$ | 0.50 | | |
| 0.53 | | |
$ | 1.50 | |
Exercised | |
| 100,000 | | |
$ | 0.50 | | |
| — | | |
| — | |
Expired | |
| 3,960,000 | | |
$ | 0.51 | | |
| — | | |
| — | |
Outstanding and exercisable at September 30, 2022 | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
The
Company did not issue any warrants during the nine months ended September 30, 2022.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited
condensed consolidated financial statements and the notes thereto appearing in Part I, Item 1 of this Quarterly Report. Historical results
and trends that might appear in this Quarterly Report should not be interpreted as being indicative of future operations.
Overview
Vicapsys
Life Sciences, Inc. (“VLS”) was incorporated in the State of Florida on July 8, 1997 under the name All Product Distribution
Corp. On August 19, 1998, the Company changed its name to Phage Therapeutics International, Inc. On November 13, 2007, the Company changed
its name to SSGI, Inc. On December 22, 2017, pursuant to a Share Exchange Agreement (the “Exchange Agreement”) by and among
VLS, Michael W. Yurkowsky, ViCapsys, Inc. (“VI”) and the shareholders of VI, a private company, VI became a wholly owned
subsidiary of VLS. We refer to VLS and VI together as the “Company”.
The
Company’s strategy is to develop and commercialize, on a worldwide basis, various intellectual property rights (patents, patent
applications, know how, etc.) relating to a series of encapsulated products that incorporate proprietary derivatives of the chemokine
CXCL12 for creating a zone of immuno protection around cells, tissues, organs and devices for therapeutic purposes. The product name
VICAPSYN™ is the Company’s proprietary product line that is applied to transplantation therapies and related stem-cell applications
in the transplantation field.
COVID-19
The
coronavirus outbreak (“COVID-19”) adversely affected the Company’s financial condition and results of operations. The
impact of the COVID-19 outbreak on businesses and the economy in the United States is expected to continue to be significant. The extent
to which the COVID-19 outbreak will continue to impact businesses and the economy is highly uncertain. Accordingly, the Company cannot
predict the extent to which its financial condition and results of operation will be affected.
On
January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency caused by a new strain of the
coronavirus and advised of the risks to the international community as the virus spread globally. In March 2020, the WHO classified the
COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The spread of COVID-19 coronavirus has caused public
health officials to recommend precautions to mitigate the spread of the virus, especially as to travel and congregating in large numbers.
In addition, certain states and municipalities have enacted quarantining regulations which severely limit the ability of people to move
and travel.
In
addition, the Company is uncertain of the full effect the pandemic will have on it for the longer term since the scope and duration of
the pandemic is unknown, and evolving factors such as the level and timing of the distribution of efficacious vaccines across the world
and the extent of any resurgences of the virus or emergence of new variants of the virus, such as the Delta variant and the Omicron variant,
will impact the stability of economic recovery and growth. The Company may experience long-term disruptions to its operations resulting
from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by the pandemic; and
closures of businesses or manufacturing facilities critical to its business.
Results
of Operations – Three and Nine Months Ended September 30, 2022, and 2021
Revenues
The
Company did not have any revenues for the three and nine months ended September 30, 2022, and 2021.
Operating
Expenses
We
classify our operating expenses into four categories: personnel costs, research and development expenses, professional fees, and general
and administrative expenses. The Company’s total operating expenses for the three and nine months ended September 30, 2022, were
$145,081 and $492,185 respectively, compared to $111,181 and $233,013, for the three and nine months ended September 30, 2021, respectively.
The
$2,500 monthly increase in Director fees for our CEO commencing in January 2022, resulted in an increase in personnel costs to $30,470
and $91,754 for the three and nine months ended September 30, 2022, respectively, from $23,072 and $68,532 for the three and nine months
ended September 30, 2021, respectively. We incurred $3,097 and $13,097 in research and development expenses during the three and nine
months ended September 30, 2022, respectively, related to expenses and a non-refundable royalty fee we agreed to pay upon execution of
the Eighth Amendment to the License Agreement with MGH which occurred in March 2022, which is a slight increase from $-0- and $7,243
in research in development expenses incurred during the three and nine months ended September 30, 2021, respectively. Research and development
expenses remained consistently low as the Company continued ongoing financing efforts in the wake of the negative impact of COVID-19,
which continued to hinder the Company’s ability to raise the additional capital necessary to maintain regular operating activities.
The increase in general and administrative costs to $12,257 and $41,210 for the three and nine months ended September 30, 2022, respectively,
from $8,644 and $26,410 for the three and nine months ended September 30, 2021, respectively, was due to expenses incurred operating
as a publicly traded entity. The increase in professional fees to $99,257 and $346,124 for the three and nine months ended September
30, 2022, respectively, from $79,465 and $130,828 for the three and nine months ended September 30, 2021, respectively, was primarily
attributable to the legal, accounting, and consulting and investor relations costs incurred in support of the Company’s efforts
to obtain a listing on a national securities exchange.
Funding
Requirements
We
anticipate that substantial additional equity or debt financings or funding from collaborative agreements or from foundations, government
grants or other sources, will be needed to complete preclinical and animal testing necessary to file an Investigational New Drug Application
with the U.S. Food and Drug Administration, and that further funding beyond such amounts will be required to commence trials and other
activities necessary to begin the process of development and regulatory approval of a product for the continued growth of the Company.
Additional capital will also be required for the clinical development of the recently discovered anti-fibrotic applications and corporate
partnerships will be necessary to move Company products into advanced clinical development and commercialization. We also anticipate
our cash expenditures will increase as we continue to operate as a publicly traded entity.
Liquidity
and Capital Resources
At
September 30, 2022, we had $26,210 of cash on hand and an accumulated deficit of $14,625,358.
We
do not believe that we have enough cash on hand to operate our business during the next 12 months. We anticipate we will need to raise
an additional $1 million through the issuance of debt or equity securities to sustain base operations during the next 12 months, excluding
development work. There can be no assurance that we will be able to obtain additional funding on commercially reasonable terms, or at
all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests
of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely
affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include conversion discounts
or covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring
dividends.
If
we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations,
or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our future revenue
streams, products or therapeutic candidates or to grant licenses on terms that may not be favorable to us.
To
date, we have financed our operations through our sale of equity and debt securities. Failure to generate revenue or to raise funds could
cause us to go out of business, which would result in the complete loss for investors in our Company.
To
date, we have generated no revenues, and no substantial revenues are anticipated until we have implemented our full plan of operations.
To implement our strategy to grow and expand per our business plan, we intend to generate working capital via a private placement of
equity or debt securities, or to secure a loan. If we are unsuccessful in raising capital or securing a loan, we could be required to
cease business operations and investors would lose all of their investment.
In
January 2021, the Company sold its equity investment in AEI, back to AEI for $100,000, which
is included in other income for the three and six months ended March 31, 2021. During the year
ended December 31, 2021, the Company entered into Securities Purchase Agreements with select accredited investors in connection with
a private offering by the Company to raise a maximum of $1,000,000 through the sale of common stock of the Company at $0.25 per share.
As of December 31, 2021, the Company had raised an aggregate amount of $560,000 from the sale of 2,240,000 shares of common stock. The
Company did not raise any additional capital during the three and nine month period ended September 30, 2022.
In
July 2022, the Company received aggregate proceeds totaling of $50,000 and issued 100,000 shares of common stock pursuant to the exercise
of warrants at $0.50 per share.
Additionally,
we will have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. Our
management will have to spend additional time on policies and procedures to make sure our Company is compliant with various regulatory
requirements.
This
additional corporate governance time required of management could limit the amount of time management has to implement our business plan
and may impede the speed of our operations.
Working
Capital Deficit
| |
September 30, 2022 | | |
December 31, 2021 | |
Current Assets | |
$ | 35,747 | | |
$ | 222,793 | |
Current Liabilities | |
| 904,079 | | |
| 715,964 | |
Working Capital Deficit | |
$ | (868,332 | ) | |
$ | (493,171 | ) |
Cash
Flows
Cash
activity for the nine months ended September 30, 2022, and 2021 is summarized as follows:
| |
Nine Months Ended September 30, | |
| |
2022 | | |
2021 | |
Net cash used in operating activities | |
$ | (241,085 | ) | |
$ | (320,720 | ) |
Net cash provided by investing activities | |
| — | | |
| 100,000 | |
Net cash provided by financing activities | |
| 50,000 | | |
| 385,000 | |
Net increase (decrease) in cash | |
$ | (191,085 | ) | |
$ | 164,280 | |
As
of September 30, 2022, the Company had $26,210 of cash on hand.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4) during the periods presented, investments
in special-purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic
leases.
Board
of Directors
On
September 22, 2022, the Board of Directors (the “Board”) accepted the resignations of John Potts and Michael Yurkowsky as
members of the Board, effective immediately. The resignations were not because of a disagreement with the Company on any matter relating
to the Company’s operations, policies or practices.
Also
on September 22, 2022, the Board appointed each of Charles “Charlie” Farrahar, Dr. Colleen Delaney and Richard Rosenblum
as members of the Board.
Contractual
Obligations
MGH
License Agreement
The
Company has executed a License Agreement with MGH. Prior to the first commercial sale, the License Agreement requires the Company to
pay MGH a non-refundable annual license fee of $10,000 by June 30, 2022, and on each subsequent anniversary of the Effective Date thereafter.
The first non-refundable annual license fee was paid on July 1, 2022. Additionally, following the first commercial sale, the License
agreement requires the Company to pay MGH a non-refundable annual minimum royalty in the amount of $100,000 per year within sixty days
after each annual anniversary of the Effective Date.
The
License Agreement also requires VI to pay to MGH a 1% royalty rate on net sales related to the first license sub-field, which is the
treatment of T1D. Future sub-fields shall carry a reasonable royalty rate, consistent with industry standards, to be negotiated at the
time the first such royalty payment shall become due with respect to the applicable Products and Processes (as defined in the License
Agreement).
The
License Agreement additionally requires VI to pay to MGH a $1.0 million “success payment” within 60 days after the first
achievement of total net sales of Product or Process equal or exceeding $100,000,000 in any calendar year and $4,000,000 within 60 days
after the first achievement of total net sales of Product or Process equal to or exceeding $250,000,000 in any calendar year. The Company
is also required to reimburse MGH’s expenses in connection with the preparation, filing, prosecution and maintenance of all Patent
Rights.
Critical
Accounting Policies and Estimates
Our
discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated
financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, expenses, and related disclosure of contingent assets and liabilities. We evaluate, on an ongoing basis, our estimates and
judgments, including those related to the useful life of the assets. We base our estimates on historical experience and assumptions that
we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The
methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results that
we report in our consolidated financial statements. The Securities and Exchange Commission (the “SEC”), considers an entity’s
most critical accounting policies to be those policies that are both most important to the portrayal of a company’s financial condition
and results of operations and those that require management’s most difficult, subjective or complex judgments, often as a result
of the need to make estimates about matters that are inherently uncertain at the time of estimation.
We
believe the following critical accounting policies, among others, require significant judgments and estimates used in the preparation
of our interim condensed consolidated financial statements.
Our
significant accounting policies are described in more detail in the notes to our consolidated financial statements for the fiscal year
ended December 31, 2021, included in the Company’s Annual Report filed on Form 10-K with the SEC on March 16, 2022.
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect
on the accompanying unaudited condensed consolidated financial statements.