QUANTRX BIOMEDICAL CORP - Quarter Report: 2020 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________
to __________
Commission File No. 000-17119
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QUANTRX BIOMEDICAL CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
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Nevada
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33-0202574
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(State or Other Jurisdiction of Incorporation or
Organization)
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(I.R.S. Employer Identification Number)
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10190
SW 90th Avenue, Tualatin, Oregon 97062
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(Address of Principal Executive Offices) (Zip Code)
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(212)
980-2235
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(Registrant's Telephone Number, Including Area Code)
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Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No
[ ]
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required
to submit such files). Yes [ ] No
[X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-Accelerated filer
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[X]
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Smaller reporting company
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[X]
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Emerging growth company
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[ ]
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
[ ] No [X]
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Exchange
Act: Common Stock, par value $0.01 per share
The number of shares outstanding of the issuer’s common stock
as of May 20, 2020 was 78,696,461.
TABLE OF
CONTENTS
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PAGE
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PART I - FINANCIAL INFORMATION
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PART I –
FINANCIAL
INFORMATION
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
THIS QUARTERLY REPORT ON FORM 10-Q, INCLUDING EXHIBITS HERETO,
CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE
FORWARD-LOOKING STATEMENTS ARE TYPICALLY IDENTIFIED BY THE WORDS
“ANTICIPATES,” “BELIEVES,”
“EXPECTS,” “INTENDS,”
“FORECASTS,” “PLANS,”
“ESTIMATES,” “MAY,” “FUTURE,”
“STRATEGY,” OR WORDS OF SIMILAR MEANING. VARIOUS
FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN THE FORWARD-LOOKING STATEMENTS, INCLUDING THOSE
DESCRIBED IN “RISK FACTORS” IN OUR ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2019. WE ASSUME NO
OBLIGATIONS TO UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT
NEW INFORMATION, ACTUAL RESULTS, CHANGES IN ASSUMPTIONS, OR CHANGES
IN OTHER FACTORS, EXCEPT AS REQUIRED BY LAW.
ITEM 1. Financial
Statements
QUANTRX BIOMEDICAL CORPORATION
BALANCE SHEETS
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March
31,
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December
31,
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2020
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2019
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ASSETS
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(Unaudited)
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(Audited)
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Current
Assets:
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Cash
and cash equivalents
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$111,976
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$130,351
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Prepaid
expenses
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-
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7,000
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Total
Current Assets
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111,976
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137,351
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Investments,
net of impairment of $500,000 and $278,000
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-
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-
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Total
Assets
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$111,976
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$137,351
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
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Current
Liabilities:
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Accounts
payable
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$27,637
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$48,137
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Accounts
payable, related party
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-
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14,085
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Notes
Payable
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1,387,694
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1,387,694
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Notes
Payable, accrued interest
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714,870
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664,788
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Notes
Payable, related party and accrued interest
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154,768
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150,968
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Total
Liabilities
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2,284,969
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2,265,672
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Commitments
and Contingencies
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-
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-
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Stockholders’
Equity (Deficit):
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Preferred stock; $0.01 par value, 25,000,000
authorized shares; 20,500,000 shares designated as Series B
Convertible Preferred
Stock; Series B Convertible Preferred
shares 6,196,893 issued
and outstanding
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61,969
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61,969
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Common stock; $0.01 par value; 150,000,000
authorized; 78,696,461 shares issued and outstanding
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786,964
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786,964
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Stock
to be issued
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8,600
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8,600
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Additional
paid-in capital
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48,876,398
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48,876,398
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Accumulated
deficit
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(51,906,924)
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(51,862,252)
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Total
Stockholders’ Equity (Deficit)
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(2,172,993)
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(2,128,321)
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Total
Liabilities and Stockholders’ Equity (Deficit)
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$111,976
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$137,351
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The accompanying condensed notes are an integral part of
these financial
statements.
QUANTRX BIOMEDICAL
CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
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For
the Three Months Ended March 31,
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2020
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2019
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Revenue
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$-
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$-
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Total
Revenue
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-
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-
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Costs and Operating
Expense:
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Sales, general and
administrative
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3,900
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22,579
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Professional
fees
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1,000
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15,425
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Professional fees,
related party
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10,500
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21,000
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Total Costs and
Operating Expenses
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15,400
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59,004
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LOSS FROM
OPERATIONS:
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(15,400)
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(59,004)
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Other Income
(Expense):
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Interest
Expense
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(53,882)
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(53,213)
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Gain (loss) on
forgiveness of accounts payable
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24,610
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-
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Total Other Income
(Expense), net
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(29,272)
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(53,213)
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Profit (Loss)
Before Taxes
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(44,672)
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(112,217)
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Provision for
Income Taxes
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-
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-
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Net Profit
(Loss)
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$(44,672)
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$(112,217)
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Basic and Diluted
Net Loss per Common Share
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$(0.00)
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$(0.00)
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Basic and Diluted
Weighted Average Shares Used in per Share Calculation
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78,696,461
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78,696,461
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The accompanying condensed notes are an integral part of these
interim financial statements.
QUANTRX BIOMEDICAL
CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
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For
the Three Months Ended
March
31,
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2020
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2019
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CASH FLOWS FROM
OPERATING ACTIVITIES
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Net
loss
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$(44,672)
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$(112,217)
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Adjustments to
reconcile net loss to net cash used by operating
activities:
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Loss
(gain) on forgiveness of accounts payable
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(24,610)
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-
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(Increase) Decrease
in:
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Prepaid
expense
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7,000
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10,254
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Increase (Decrease)
in:
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Accounts
Payable
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(9,975)
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20,031
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Accrued
interest
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53,882
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52,832
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Accrued
expenses
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-
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(11,004)
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Net Cash Used by
Operating Activities
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(18,375)
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(40,104)
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CASH FLOWS FROM
INVESTING ACTIVITIES
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Net Cash Provided
by Investing Activities
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-
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-
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CASH FLOWS FROM
FINANCING ACTIVITIES
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Net Cash Provided
(Used) by Financing Activities
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-
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-
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Net Increase
(Decrease) in Cash and Cash Equivalents
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(18,375)
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(40,104)
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Cash and Cash
Equivalents, Beginning of Period
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130,351
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322,024
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Cash and Cash
Equivalents, End of Period
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$111,976
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$281,920
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Supplemental Cash
Flow Disclosures:
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Interest expense
paid in cash
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$-
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$381
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Income tax
paid
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$-
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$-
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The accompanying condensed notes are an integral part of these
interim financial statements.
QUANTRX BIOMEDICAL
CORPORATION
STATEMENTS OF STOCKHOLDERS’
EQUITY
(unaudited)
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Preferred
Stock
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Common
Stock
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Additional
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Number
of Shares
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Amount
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Number
of Shares
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Amount
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Paid-in
Capital
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Stock
to be
Issued
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Accumulated
Deficit
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Total
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BALANCE,
January 1, 2019
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6,196,893
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$61,969
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78,696,461
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$786,964
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$48,876,398
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$8,600
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$(51,240,332)
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$(1,506,401)
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Net loss for the
three months ended March 31, 2019
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-
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-
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-
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-
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-
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-
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(112,217)
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(112,217)
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BALANCE,
MARCH 31, 2019
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6,196,893
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$61,969
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78,696,461
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$786,964
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$48,876,398
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$8,600
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$(51,352,549)
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$(1,618,618)
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BALANCE,
January 1, 2020
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6,196,893
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$61,969
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78,696,461
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$786,964
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$48,876,398
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$8,600
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$(51,862,252)
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$(2,128,321)
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|
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Net loss for the
three months ended March 31, 2020
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-
|
-
|
-
|
-
|
-
|
-
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(44,672)
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(44,672)
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BALANCE,
MARCH 31, 2020
|
6,196,893
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$61,969
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78,696,461
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$786,964
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$48,876,398
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$8,600
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$(51,906,924)
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$(2,172,993)
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The accompanying condensed notes are an integral part of these
interim financial statements
QUANTRX BIOMEDICAL
CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF
PRESENTATION
Overview
As used in this Quarterly Report on Form 10-Q, the terms
“Company”,
“we”,
“our”,
“us”,
“QuantRx”
or the “Company”
refers to QuantRx Biomedical Corporation, unless context otherwise
requires. QuantRx Biomedical
Corporation was incorporated on December 5, 1986, in the State of
Nevada. Our principal business office is located at 10190 SW 90th
Avenue, Tualatin, Oregon 97062.
We have developed and intend to commercialize our patented miniform
pads (“PADs”)
and PAD based over-the-counter products for the treatment of
hemorrhoids, minor vaginal infection, urinary incontinence, general
catamenial uses and other medical needs. We are also developing and
intend to commercialize genomic diagnostics for the laboratory
market, based on our lateral flow patents. Our platforms include:
inSync®, UniqueTM, and OEM branded
over-the-counter and laboratory testing products based on our core
intellectual property related to our PAD
technology.
The continuation of our operations remains contingent upon the
receipt of additional financing required to execute our business
and operating plan, which is currently focused on the
commercialization of our PAD technology either directly or through
a joint venture or other relationship intended to increase
shareholder value. In the interim, we have nominal operations,
focused principally on maintaining our intellectual property
portfolio and maintaining compliance with the public company
reporting requirements. In order to continue as a going concern, we
will need to raise capital, which may include through the issuance
of debt and/or equity securities. No assurances can be given that
we will be able to obtain additional financing under terms
favorable to us, if at all, or otherwise successfully develop a
business and operating plan or enter into an alternative
relationship to commercialize our PAD technology.
Our principal business line consists of over-the-counter
commercialization of our InSync feminine hygienic interlabial pad,
the Unique® Miniform for hemorrhoid application, and other
treated miniforms (the “OTC
Business”), as well as
maintaining established and continuing licensing relationships
related to these products. We also own certain diagnostic testing
technology (the “Diagnostic
Business”) that is based
on our lateral flow patents. Management believes this corporate
structure permits us to more efficiently explore options to
maximize the value of our products and intellectual property
portfolio, with the objective of maximizing the value of the
Businesses for the benefit of the Company and our
shareholders.
Our current focus is to obtain additional working capital necessary
to continue as a going concern, and to develop a longer term
financing and operating plan to: (i) commercialize our
over-the-counter products either directly or through joint
ventures, mergers or similar transactions intended to capitalize on
potential commercial opportunities; (ii) contract manufacturing of
our over-the-counter products to third parties while maintaining
control over the manufacturing process; (iii) maintain our
intellectual property portfolio with respect to patents and
licenses pertaining to both the OTC Business and the Diagnostics
Business; and (iv) maximize the value of our investments in
non-core assets. As a result of our current financial
condition, however, our efforts in the short-term will be focused
on obtaining financing necessary to maintain the Company as a going
concern.
We follow the accounting guidance outlined in the Financial
Accounting Standards Board Codification guidelines. The
accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted principles for
interim financial information and with the items under Regulation
S-X required by the instructions to Form 10-Q. They may not include
all information and footnotes required by United States Generally
Accepted Accounting Principles (“GAAP”) for complete financial statements.
However, except as disclosed herein, there have been no material
changes in the information disclosed in the notes to the financial
statements for the year ended December 31, 2019 included in the
Company’s Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on April 14, 2020. The interim
unaudited financial statements presented herein should be read in
conjunction with those financial statements included in the Form
10-K. In the opinion of Management, all adjustments considered
necessary for a fair presentation, which unless otherwise disclosed
herein, consisting primarily of normal recurring adjustments, have
been made. Operating results for the three months ended March 31,
2020 are not necessarily indicative of the results that may be
expected for the year ending December 31,
2020.
Certain amounts in the prior period financial statements have been
reclassified to conform to the current period presentation. These
reclassifications had no effect on previously reported losses,
total assets or stockholders’ equity.
2. MANAGEMENT STATEMENT REGARDING GOING CONCERN
We currently are not generating revenue from operations, and do not
anticipate generating meaningful revenue from operations or
otherwise in the short-term. We have historically financed our
operations primarily through issuances of equity and the proceeds
from the issuance of promissory notes. In the past, we also
provided for our cash needs by issuing Common Stock, options and
warrants for certain operating costs, including consulting and
professional fees, as well as divesting its minority equity
interests and equity-linked investments. In addition, in the fiscal
year ended 2018, we received cash payments as consideration for the
sale and transfer of the Purchased Assets to
Preprogen.
Our history of operating losses, limited cash resources and
the absence of an operating plan necessary to capitalize on our
assets raise substantial doubt about our ability to continue
as a going concern absent a strengthening of our cash
position. Management is currently pursuing various funding
options, including seeking debt or equity financing, licensing
opportunities and the sale of certain investment holdings, as well
as a strategic, merger or other transaction to obtain additional
funding to continue the development of, and to successfully
commercialize, our products. There can be no assurance that
the Company will be successful in its efforts. Should we be
unable to obtain adequate financing or generate sufficient revenue
in the future, the Company’s business, result of operations,
liquidity and financial condition would be materially and adversely
harmed, and we will be unable to continue as a going
concern.
There can be no assurance that, assuming we are able to
strengthen its cash position, we will achieve sufficient revenue or
profitable operations to continue as a going concern.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is
presented to assist in understanding the Company’s financial
statements. The financial statements and notes are representations
of the Company’s management, which is responsible for their
integrity and objectivity. These accounting policies conform to
GAAP and have been consistently applied in the preparation of the
financial statements.
Accounting for Share-Based Payments. The Company follows the provisions of ASC Topic
718, which establishes the accounting for transactions in which an
entity exchanges equity securities for services and requires
companies to expense the estimated fair value of these awards over
the requisite service period. The Company uses the Black-Scholes
option pricing model in determining fair value. Accordingly,
compensation cost has been recognized using the fair value method
and expected term accrual requirements as prescribed. During
the three months ended March 31, 2020 and 2019, the Company had no
stock compensation expense.
The Company accounts for share-based payments granted to
non-employees in accordance with ASC Topic 505,
“Equity Based Payments to
Non-Employees”. The
Company determines the fair value of the stock-based payment as
either the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably
measurable. If the fair value of the equity instruments issued
is used, it is measured using the stock price and other measurement
assumptions as of the earlier of either (i) the date at which a
commitment for performance by the counterparty to earn the equity
instruments is reached, or (ii) the date at which the
counterparty’s performance is
complete.
In the case of modifications, the Black-Scholes model is used to
value modified warrants on the modification date by applying the
revised assumptions. The difference between the fair value of the
warrants prior to the modification and after the modification
determines the incremental value. In the past, the Company has
modified warrants in connection with the issuance of certain notes
and note extensions. These modified warrants were originally issued
in connection with previous private placement investments. In the
case of debt issuances, the warrants were accounted for as original
issuance discount based on their relative fair values. When
modified in connection with a note issuance, the Company recognizes
the incremental value as a part of the debt discount calculation,
using its relative fair value in accordance with ASC Topic 470-20,
“Debt
with Conversion and Other Options”. When modified in connection with note
extensions, the Company recognized the incremental value as prepaid
interest, which is expensed over the term of the
extension.
The fair value of each share-based payment is estimated on the
measurement date using the Black-Scholes model with the following
assumptions, which are determined at the beginning of each year and
utilized in all calculations for that year. During the three months
ended March 31, 2020 and 2019, the Company did not make any
Black-Scholes model assumptions, as no share-based payments were
made during those periods.
Risk-Free Interest Rate. The interest rate used is based on the yield
of a U.S. Treasury security as of the beginning of the
year.
Expected Volatility. The
Company calculates the expected volatility based on historical
volatility of monthly stock prices over a three-year
period.
Dividend Yield. The
Company has never paid cash dividends, and does not currently
intend to pay cash dividends, and thus has assumed a 0% dividend
yield.
Expected Term. For
options, the Company has no history of employee exercise patterns.
Therefore, the Company uses the option term as the expected term.
For warrants, the Company uses the actual term of the
warrant.
Pre-Vesting Forfeitures. Estimates of pre-vesting option forfeitures
are based on Company experience. The Company will adjust its
estimate of forfeitures over the requisite service period based on
the extent to which actual forfeitures differ, or are expected to
differ, from such estimates. Changes in estimated forfeitures will
be recognized through a cumulative catch-up adjustment in the
period of change and will also impact the amount of compensation
expense to be recognized in future periods.
Earnings per Share. The
Company computes net income (loss) per common share in accordance
with ASC Topic 260. Net income (loss) per share is based upon the
weighted average number of outstanding common shares and the
dilutive effect of common share equivalents, such as options and
warrants to purchase common stock, convertible preferred stock and
convertible notes, if applicable, that are outstanding each
year. Diluted earnings per
share, if presented, would include the dilution that would occur
upon the exercise or conversion of all potentially dilutive
securities into common stock using the “treasury stock”
and/or “if converted” methods as applicable. For the
quarter ended March 31, 2020, including potentially dilutive
securities in diluted shares outstanding would be
“anti-dilutive’.
For the three months ended March 31, 2019 and the three months
ended March 31, 2020, basic and
diluted earnings per share were the same at the reporting dates of
the accompanying financial statements, as including common stock
equivalents in the calculation of diluted earnings per share would
have been antidilutive.
As of March 31, 2020, the Company had outstanding warrants
exercisable for 15,000,000 shares of its common stock $0.01 par
value (“Common
Stock”), and outstanding
preferred stock, $0.01 par value (“Preferred
Stock”) convertible into
6,196,893 shares of its Common Stock, which options, warrants and
Preferred Stock were deemed to be antidilutive for the three months
ended March 31, 2020. At March 31, 2020, the Company had reserved
for issuance to certain investors 860,000 shares of its Series B
Convertible Preferred Stock, convertible into 860,000 shares of its
Common Stock. As of March 31, 2020, the Company has estimated and
reserved for issuance approximately 20.0 million shares of Common
Stock for a future conversion of its issued and outstanding
Convertible Notes Payable.
As of March 31, 2019, the Company had outstanding options
exercisable for 2,300,000 shares of its Common Stock, outstanding
warrants exercisable for 15,000,000 shares of its Common Stock, and
outstanding Preferred Stock convertible into 6,196,893 shares of
its Common Stock, which options, warrants and Preferred Stock were
deemed to be antidilutive for the three months ended March 31,
2019. At March 31, 2019, the Company had reserved for issuance to
certain investors 860,000 shares of its Series B Convertible
Preferred Stock, convertible into 860,000 shares of its Common
Stock. As of March 31, 2019, the Company has estimated and reserved
for issuance approximately 20.0 million shares of Common Stock for
a future conversion of its issued and outstanding Convertible Notes
Payable.
Fair Value. The
Company has adopted ASC Topic 820, “Fair Value Measurements
and Disclosures” for
both financial and nonfinancial assets and liabilities. The
Company has not elected the fair value option for any of its assets
or liabilities.
Use of Estimates. The
accompanying financial statements are prepared in conformity with
accounting principles generally accepted in the United States of
America, and include certain estimates and assumptions, which
affect the reported amounts of assets and liabilities at the date
of the financial statements, and the reported amounts of revenue
and expense during the reporting period. Accordingly, actual
results may differ from those estimates.
Reclassifications. Prior period
financial statement amounts have been reclassified to conform to
current period presentation. The reclassifications have no effect
on net loss or earnings per share.
Recent Accounting Pronouncements.
Management has considered all recent accounting pronouncements in
the current period and identified no pronouncements that would have
an impact on our financial statements.
4. INVESTMENTS
In December 2018, the Company acquired a 15% interest in Preprogen
LLC pursuant to the Preprogen Transaction. On October 8, 2018, the Preprogen Agreement
was amended to provide for, among other things, the release of
funds held in escrow related to the manufacture of the miniform
pads (the “Preprogen
Amendment”), which
resulted in both parties receiving $200,583 in cash. As
consideration for the Preprogen Amendment, the Company agreed to
pay Preprogen a royalty of 5% from the sale of all over-the-counter
miniform products; provided, however,
that such royalty payments shall
terminate when Preprogen has received $200,000 in aggregate
consideration from the royalties paid by us, and that we shall be
entitled to offset such royalty payments due and payable to
Preprogen by amounts equal to certain other payments otherwise due
and payable to us by Preprogen pursuant to the terms of the
Preprogen Agreement. At December 31, 2019, we have fully impaired
our investment in Preprogen.
5. INTANGIBLE
ASSETS
On December 15, 2017, the Company entered into an agreement with
Preprogen, pursuant to which the parties agreed to the sale,
assignment, and license-back of certain assets, including
intellectual property transferred to Preprogen necessary to the
development, manufacture, marketing and sale of the Company’s
OTC miniform products for the feminine hygiene and hemorrhoid
treatment markets. At December 31, 2019, the Company had reduced
its capitalized intangible assets to zero.
6. CONVERTIBLE NOTES PAYABLE
During
the years 2014 to 2017, the Company issued a series of Bridge Notes
(the “Bridge
Notes”) in aggregate principal amount of $1,489,694.
The Bridge Notes matured on various dates through 2018. The Bridge
Notes are in default and bear interest rates ranging from 12% to
18%. As of March 31, 2020, the Bridge Notes are due and
payable.
At March 31, 2020 and December 31, 2019, the Company’s
Convertible Notes Payable are as follows:
|
|
March 31,
2020
|
December 31,
2019
|
|
Notes
Payable
|
$1,387,694
|
$1,387,694
|
|
Accrued
Interest
|
714,870
|
664,788
|
|
Notes
Payable, related party
|
102,000
|
102,000
|
|
Accrued
Interest, related party
|
52,768
|
48,968
|
|
Total
notes payable
|
$2,257,332
|
$2,203,450
|
Notes Payable, Related Party.
As of March 31, 2020 and December 31, 2019, the Company owed Mr.
Abrams, a director of the Company, an aggregate total of $154,768
and $150,968, respectively, for outstanding principal and accrued
and unpaid interest on certain Bridge Notes.
7.
RELATED PARTY TRANSACTIONS
In November 2018, the Company authorized payment of $3,500 per
month to Dr. Hirschman for his services as Chief Executive Officer
and $3,500 to Mr. Abrams for his services as a Director. Effective
April 1, 2020, Dr. Hirschman has waived the payments of fees for
his services as Chief Executive Officer. Effective January 1, 2020,
Mr. Abrams has waived the fees for his services as a
Director.
During the three months ended March 31, 2020, Dr. Hirschman
received aggregate compensation of $3,500 of consulting fees for
services as Chief Executive Officer. The Company applied $7,000 of
prepaid consulting fees to services for February and March 2020.
During the year ended December 31, 2019, Dr. Hirschman received
aggregate compensation of $42,000 of consulting fees for services
as Chief Executive Officer.
During the three months ended March 31, 2020, Mr. Abrams received payment of
accrued consulting fees for services during 2019 in the amount of
$14,085. During the three months ended March 31, 2020, Mr. Abrams
did not receive or accrue new compensation as he has waived his
compensation for services as a Director. During the year ended
December 31, 2019, Mr. Abrams received aggregate cash payments of
$35,000 for services as a director of the
Company.
As of March 31, 2020
and December 31, 2019, we owed
Mr. Abrams, a director of the Company, an aggregate of $154,768 and
$150,968, respectively, for outstanding principal and accrued and
unpaid interest due pursuant to certain Bridge
Notes.
8. PREFERRED STOCK
The Company has authorized 25,000,000 shares of Preferred Stock, of
which 20,500,000 are designated as Series B Convertible Preferred
Stock, $0.01 par value, with a stated value of approximately
$204,000 (“Series B
Preferred”). The
remaining authorized preferred shares had not been designated by
the Company as of March 31, 2020.
Series B Convertible Preferred Stock
The Series B Preferred ranks senior to the Company’s Common
Stock for purposes of liquidation preference, and to all other
classes and series of equity securities of the Company that by
their terms did not rank senior to the Series B Preferred
(“Junior
Stock”). Holders of
the Series B Preferred are entitled to receive cash dividends,
when, as and if declared by the Board of Directors, and they shall
be entitled to receive an amount equal to the cash dividend
declared on one share of Common Stock multiplied by the number of
shares of Common Stock equal to the outstanding shares of Series B
Preferred, on an as converted basis. The holders of Series B
Preferred have voting rights to vote as a class on matters (a)
amending, altering or repealing the provisions of the Series B
Preferred so as to adversely affect any right, preference,
privilege or voting power of the Series B Preferred; or (b) to
affect any distribution with respect to Junior Stock. At any
time, the holders of Series B Preferred may, subject to
limitations, elect to convert all or any portion of their Series B
Preferred into fully paid non-assessable shares of the
Company’s Common Stock at a 1:1 conversion
rate.
In July and August, 2017, the Company entered into Note Purchase
Agreements with two existing stockholders, pursuant to which the
Company issued the 2017 Bridge Notes in the aggregate principal
amount of $86,000. As additional consideration for the purchase of
the 2017 Bridge Notes, the Company has reserved for issuance an
aggregate of 860,000 shares of Series B Preferred to be issued to
the purchasers of the 2017 Bridge Notes. The Company has valued the
Series B Preferred and has recorded a discount on the 2017 Bridge
Notes of $7,818, which was amortized in full during the year ended
December 31, 2017.
In April 2018, the Company completed the purchase of 10,480,049
shares of Series B Preferred (the “Purchased
Shares”) from an
institutional shareholder for an aggregate purchase price of
$20,000. Following this transaction, the shareholder no longer
holds shares in the Company.
As of March 31, 2020 and December 31, 2019, the Company had
6,196,893 shares of Series B Preferred issued and outstanding, with
a liquidation preference of $61,969 and convertible into 6,196,893
shares of the Company’s Common Stock.
9. COMMON STOCK, OPTIONS AND WARRANTS
The Company has authorized 150,000,000 shares of its Common Stock
for issuance, of which 78,696,461 were issued and outstanding at
each of March 31, 2020 and December 31, 2019.
During the three months ended March 31, 2020 and 2019, there were
no warrants issued by the Company. As of March 31, 2020, the
Company has one warrant issued and outstanding, this warrant was
issued in December 2018 to Preprogen’s designee to purchase
up to 15.0 million shares of the Company’s Common Stock, at
an exercise price of $0.05 per share. The warrant was exercisable
immediately upon issuance, and expires on December 14,
2022.
2007 Incentive and Non-Qualified Stock Option Plan.
The fair value of options
granted under the Company’s 2007 Incentive and Non-Qualified
Stock Option Plan is recorded as compensation expense over the
vesting period, or, for performance based awards, the expected
service term. The Company did not
issue any options during the three months ended March 31, 2020 or
2019.
10. SUBSEQUENT EVENTS
We have evaluated subsequent events through the date of this filing
in accordance with the Subsequent Events Topic of the FASB ASC 855,
and have determined that no subsequent events occurred that are
reasonably likely to impact these financial
statements.
ITEM 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion of our financial condition should be read
in conjunction with the financial statements and notes to financial
statements included elsewhere in this filing. The following
discussion (as well as statements in Item 1 above and elsewhere)
contains forward-looking statements within the meaning of the
Private Securities Litigation Act of 1995 that involve risks and
uncertainties. Some or all of the results anticipated by these
forward-looking statements may not occur. Forward-looking
statements involve known and unknown risks and uncertainties
including, but not limited to, trends in the biotechnology,
healthcare, and pharmaceutical sectors of the economy; competitive
pressures and technological developments from domestic and foreign
genetic research and development organizations which may affect the
nature and potential viability of our business strategy; and
private or public sector demand for products and services similar
to what we plan to commercialize. We disclaim any intention or
obligation to publicly announce the results of any revisions to any
of the forward-looking statements contained herein to reflect
future events or developments.
Unless otherwise indicated or the context otherwise requires, all
references in this report to “we”, “our”,
“us”, the “Company” or similar terms refer
to QuantRx Biomedical Corporation, a Nevada
corporation.
Overview
We have developed and intend to commercialize our patented miniform
PADs and PAD based over-the-counter products for the treatment of
hemorrhoids, minor vaginal infection, urinary incontinence, general
catamenial uses and other medical needs. We are also developing and
intend to commercialize genomic diagnostics for the laboratory
market, based on our lateral flow patents. Our platforms include:
inSync®, UniqueTM, and OEM branded
over-the-counter and laboratory testing products based on our core
intellectual property related to our PAD
technology.
The continuation of our operations remains contingent upon the
receipt of additional financing required to execute our business
and operating plan, which is currently focused on the
commercialization of our PAD technology, either directly or through
a joint venture or other relationship intended to increase
shareholder value. In the interim, we have nominal operations,
focused principally on maintaining our intellectual property
portfolio and maintaining compliance with the public company
reporting requirements. In order to continue as a going concern, we
will need to raise capital, which may include through the issuance
of debt and/or equity securities. No assurances can be given that
we will be able to obtain additional financing under terms
favorable to us, if at all, or otherwise successfully develop a
business and operating plan or enter into an alternative
relationship to commercialize our PAD
technology.
Our principal business line consists of our OTC Business, which
includes commercialization of our InSync feminine hygienic
interlabial pad, the Unique® Miniform for hemorrhoid
application, and other treated miniforms, as well as maintaining
established and continuing licensing relationships related to the
OTC Business. We also own certain diagnostic testing
technology that is based on our lateral flow patents.
Management believes this corporate structure permits us to more
efficiently explore options to maximize the value of the
Businesses, with the objective of maximizing the value of the
Businesses for the benefit of the Company and our
shareholders.
Our current focus is to obtain additional working capital necessary
to continue as a going concern, and to develop a longer term
financing and operating plan to: (i) commercialize our
over-the-counter products either directly or through joint
ventures, mergers or similar transactions intended to capitalize on
potential commercial opportunities; (ii) contract manufacturing of
our over-the-counter products to third parties while maintaining
control over the manufacturing process; (iii) maintain our
intellectual property portfolio with respect to patents and
licenses pertaining to both the OTC Business and the Diagnostics
Business; and (iv) maximize the value of our investments in
non-core assets. As a result of our current financial
condition, however, our efforts in the short-term will be focused
on obtaining financing necessary to maintain the Company as a going
concern.
The following discussion of our financial condition should be read
together with our financial statements and related notes included
in the Annual Report on Form 10-K, filed on April 14,
2020.
Results of Operations
Comparison of the Three Months Ended March 31, 2020 to the Three
Months Ended March 31, 2019.
The Company did not generate any revenue during the three
months ended March 31, 2020 or the three months ended March 31,
2019. The absence of revenue
is due to no royalty revenue attributable to the Company’s
PAD technology received during the periods. Management does not
anticipate that the Company will generate any
revenue until such time as the Company develops a plan to
commercialize its over-the-counter products, which is contingent on
the receipt of financing.
Sales, general and administrative expense for the three months
ended March 31, 2020 and 2019 was $3,900 and $22,579, respectively.
Sales, general and administrative expense includes, but is not
limited to, consulting expense, office and insurance expense,
accounting and other costs to maintain compliance with the
Company’s reporting requirements to the Securities and
Exchange Commission (the “SEC”). The decrease in sales,
general and administrative expense for the three months ended March
31, 2020 is principally due to decreases in the 2020 period
compared to the 2019 period related to Directors and Officers
Liability Insurance and costs for maintenance of intellectual
property.
Professional fees for the three months ended March 31, 2020 and
2019 were $1,000 and $15,425, respectively. Professional fees
include the costs of legal, consulting and auditing services
provided to us. The decrease in
professional fees for the three months ended March 31, 2020
relates to lower legal and audit expenses in the 2020 period
compared to the 2019 period.
Professional fees, related party for the three months ended March
31, 2020 and 2019 were $10,500 and $21,000, respectively. The
decrease in these professional fees are due to lower fees paid Mr.
Abrams related to his services to the Company as Mr. Abrams has
waived consulting fees effective January 1, 2020.
The Company did not incur any research and development costs
during the three months ended
March 31, 2020 or
2019. The Company did not
engage in any research and development efforts in the 2020 period,
nor does the Company expect to engage in any research and
development activity until funding is secured and it develops a
plan to commercialize its products.
Interest expense for the three months ended March 31, 2020 and 2019
was $53,882 and $53,213, respectively. The increase in
interest expense in the 2020 periods compared to the 2019 periods
is related to the number of calendar days for the interest
computation in the 2020 period compared to the 2019
period.
During the three months ended March 31, 2020, the Company recorded
a gain on forgiveness of accounts payable in aggregate amount of
$24,610 resulting from one of the Company’s vendors forgiving
its fees due for professional services incurred through December
31, 2019.
During the three months ended March 31, 2020, the Company recorded
net loss of $44,672 compared to net loss for the three months ended
March 31, 2019 of $112,217. Net loss for the three months
ended March 31, 2020 decreased from the 2019 period due to lower
expenses and gains discussed above.
The Company expects net loss to decrease in future periods due to
the current suspension of its active operations and its lack of
revenue. The Company does not expect to re-commence active
operations until it is able to secure financing necessary
to execute its business and operating plan, including the
development and launch of its over-the-counter products, or to
otherwise capitalize on our PAD technology.
Liquidity and Capital Resources
At March 31, 2020, the Company had cash and cash equivalents of
$111,976 as compared to $130,351 at December 31, 2019.
The Company had cash and cash equivalents of $281,920 at March 31,
2019. The decrease in cash and cash equivalents between the 2020
and 2019 periods of approximately $169,944 is primarily
attributable to cash used for operations in the 2019 and 2020
periods partially offset by the inclusion of the receipt of escrow
funds in the 2019 period from the December 2018 sale of certain
assets pertaining to its Diagnostic Business to Preprogen LLC
(“Preprogen”)
in 2017.
During the three months ended March 31, 2020, the Company used
$18,375 for operating activities, compared to $40,104 used during
the three months ended March 31, 2019. The net overall decrease in
cash used for operating activities during the three months ended
March 31, 2020 is attributable primarily to decreased operating
expenses in the in the 2020 period.
The Company has not generated sufficient revenue from operations to
meet its operating expense. The Company requires additional funding
to complete the development and launch of its over-the-counter
products, or to otherwise capitalize on its PAD technology. The
Company has historically financed its operations primarily through
issuances of equity and the proceeds of debt instruments. In the
past, the Company has also provided for its cash needs by issuing
shares of its Common Stock, options and warrants for certain
operating costs, including consulting and professional
fees. In addition, in the fiscal year ended December 31, 2018,
the Company received a large cash payment from Preprogen as
consideration for the sale and transfer of the certain
assets.
Management believes that given the current economic environment and
the continuing need to strengthen our cash position, there is
substantial doubt about our ability to continue as a going concern.
We are pursuing various funding options, including licensing
opportunities and the sale of investment holdings, as well other
financing transactions, to obtain additional funding to continue
the development of our products and bring them to commercial
markets. There can be no assurance that we will be successful in
our efforts. Should we be unable to raise adequate financing or
generate sufficient revenue in the future, the Company’s
business, results of operations, liquidity and financial condition
would be materially and adversely harmed.
The Company believes that the ability of the Company to re-commence
operations, and therefore continue as a going concern is dependent
upon its ability to do any or all of the
following:
●
obtain
adequate sources of funding to pay operating expense and fund
long-term business operations;
●
enter
into a licensing or other relationship that allows the Company to
commercialize its products;
●
manage
or control working capital requirements by reducing operating
expense; and
●
develop
new, and enhance existing, relationships with product distributors
and other points of distribution for the Company’s
products.
There can be no assurance that the Company will be successful in
achieving its short- or long-term plans as set forth above, or that
such plans, if consummated, will enable the Company to obtain
profitable operations or continue in the long-term as a going
concern.
Off-Balance Sheet Arrangements
We have not entered into any transactions with unconsolidated
entities in which we have financial guarantees, subordinated
retained interests, derivative instruments or other contingent
arrangements that expose us to material continuing risks,
contingent liabilities or any other obligations under a variable
interest in an unconsolidated entity that provides us with
financing, liquidity, market risk or credit risk
support.
Critical Accounting Policies
The listing below is not intended to be a comprehensive list of all
of our accounting policies. In most cases, the accounting treatment
of a particular transaction is specifically dictated by accounting
principles generally accepted in the United States. In
addition to the listing below accounting policies listed below,
please See to Note 3 to the Financial Statements.
Impairment of Assets
We assess the impairment of long-lived assets, including our other
intangible assets, at least annually or whenever events or changes
in circumstances indicate that their carrying value may not be
recoverable. The determination of related estimated useful lives
and whether or not these assets are impaired involves significant
judgments, related primarily to the future profitability and/or
future value of the assets. Changes in our strategic plan and/or
market conditions could significantly impact these judgments and
could require adjustments to recorded asset balances. We hold
investments in companies having operations or technologies in areas
which are within or adjacent to our strategic focus when acquired,
all of which are privately held and whose values are difficult to
determine. We record an investment impairment charge if we believe
an investment has experienced a decline in value that is other than
temporary. Future changes in our strategic direction, adverse
changes in market conditions or poor operating results of
underlying investments could result in losses or an inability to
recover the carrying value of the investments that may not be
reflected in an investment’s current carrying value, thereby
possibly requiring an impairment charge in the future.
In determining fair value of assets, the Company bases estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about carrying values of
assets that are not readily apparent from other sources. Actual
fair value may differ from management estimates resulting in
potential impairments causing material changes to certain assets
and results of operations.
Genomics USA, Inc. (“GUSA”):
During the years ended December 31,
2018 and 2017, the Company had recorded losses of $0 and $169,948,
respectively, on an impairment on the value of its Common Stock
investment in GUSA. The Company has valued the impairment based on
the dilution of the Company’s investment and certain other
factors. As of December 31, 2018, the Company has fully impaired
its investment in GUSA.
Global Cancer Diagnostics, Inc. (“GCD”):
During 2015, the Company entered into a letter of intent with GCD,
which provided for, among other things, the advance payment of
$50,000 towards a potential business combination. During 2017, the
Company determined the full amount of the advanced payment to be
impaired.
Preprogen: During the years ended December 31, 2019 and
December 31, 2018, the Company recorded a loss of $222,000 and
$278,000, respectively, on an impairment on the value of its
investment in Preprogen. The Company has valued the impairment
based on an evaluation by a third-party using the value of similar
investments in comparable companies. The Company has fully impaired
its investment in Preprogen.
Deferred Taxes
We recognize deferred tax assets and liabilities based on
differences between the financial statement carrying amounts and
tax bases of assets and liabilities, which requires management to
perform estimates of future transactions and their respective
valuations. We review our deferred tax assets for recoverability
and establish a valuation allowance if it is more likely than not
that the Company will not realize the benefit of the net deferred
tax asset. At March 31, 2020 and December 31, 2019, a valuation
allowance has been established. The likelihood of a material change
in the valuation allowance depends on our ability to generate
sufficient future taxable income. In the future, if management
determines that the likelihood exists to utilize the
Company’s deferred tax assets, a reduction of the valuation
allowance could materially increase the Company’s net
deferred tax asset.
ITEM 4. Controls and
Procedures
(a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial
officer, we conducted an evaluation of the effectiveness of the
design and operations of our disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”), as of March 31,
2020. Based on this evaluation, and in light of the previously
disclosed material weaknesses in internal controls over financial
reporting, the Company’s Chief Executive Officer, who also
serves as its Principal Financial Officer, concluded that our
disclosure controls and procedures were not
effective.
(b) Changes in internal controls over financial reporting.
There has been no change in our internal control over financial
reporting that occurred during our most recent fiscal year that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting. There has been no
progress towards remediating our previously disclosed material
weakness due to the lack of funding.
PART II - OTHER
INFORMATION
ITEM 1. Legal
Proceedings
As of the date hereof, there are no material pending legal
proceedings to which we are a party to or of which any of our
property is the subject.
ITEM 1A. Risk Factors
Our results of operations and financial condition are subject to
numerous risks and uncertainties described in our Annual Report on
Form 10-K for our fiscal year ended December 31, 2019, filed on
April 14, 2020. You should carefully consider these risk factors in
conjunction with the other information contained in this Quarterly
Report. Should any of these risks materialize, our business,
financial condition and future prospects could be negatively
impacted. As of March 31, 2020, there have been no material changes
to the disclosures made in the above-referenced Form
10-K.
ITEM 2. Unregistered
Sales of Equity Securities, and Use of Proceeds
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
Not Applicable.
ITEM 5. Other Information
None.
ITEM 6. Exhibits
|
Exhibit
|
|
Description
|
|
|
Certification of Chief Executive Officer and Principal Financial
and Accounting Officer required under Rule 13a-14(a) or Rule
15d-14(a) of the Securities and Exchange Act of 1934, as
amended.
|
|
|
|
Certification of Chief Executive Officer and Principal Financial
and Accounting Officer required under Rule 13a-14(a) or Rule
15d-14(a) of the Securities and Exchange Act of 1934, as amended,
and 18 U.S.C. Section 1350.
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
|
Date: May 20, 2020
|
/s/ Shalom Hirschman
|
|
|
Shalom Hirschman
Principal Executive, Financial and Accounting Officer
|
-15-