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Vicapsys Life Sciences, Inc. - Quarter Report: 2021 September (Form 10-Q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2021

 

Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from __________ to __________

 

Commission file number: 000-56145

 

VICAPSYS LIFE SCIENCES, INC.

 

Florida   91-1930691
(State or Other Jurisdiction of   (IRS Employer
Incorporation or Organization)   Identification Number)

 

7778 Mcginnis Ferry Rd. #270    
Suwanee, GA   30024
(Address of Principal Executive Offices)   (Zip Code)

 

(972) 891-8033

(Registrant’s Telephone Number, Including Area Code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered under Section 12(b) of the Act: None

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or has 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 ☒ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth 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.

 

Large accelerated filer ☐ Accelerated filer ☐
   
Non-accelerated filer Smaller reporting company
   
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

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

 

The number of shares outstanding of the registrant’s $0.001 par value common stock as of November 11, 2021, was 30,114,564 shares (includes common stock to be issued of 12,607,281 shares).

  

 

 

 

 

 

Vicapsys Life Sciences, Inc.

 

TABLE OF CONTENTS

 

    Page
PART I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements  
  Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (unaudited) 4
  Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited) 5
  Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2021 and 2020 (unaudited) 6
  Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited) 7
  Notes to Unaudited Condensed Consolidated Financial Statements 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
Item 3. Quantitative and Qualitative Disclosures About Market Risks 22
Item 4. Controls and Procedures 22
     
PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 23
Item 1A. Risk Factors 23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Mine Safety Disclosures 23
Item 5. Other Information 23
Item 6. Exhibits 24
     
SIGNATURES 25

 

2

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains certain forward-looking statements that are subject to various risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “outlook,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth or anticipated in our forward-looking statements. Factors that could have a material adverse effect on our forward- looking statements and upon our business, results of operations, financial condition, funds derived from operations, cash available for dividends, cash flows, liquidity and prospects include, but are not limited to, the factors referenced in this document, including those set forth below:

 

  our lack of an operating history;
  the net losses that we expect to incur as we develop our business;
  Obtaining U.S. Food and Drug Administration (“FDA”) or other regulatory approvals or clearances for our technology;
  implementing and achieving successful outcomes for clinical trials of our products;
  convincing physicians, hospitals and patients of the benefits of our technology and to convert from current technology;
  the ability of users of our products (when and as developed) to obtain third-party reimbursement;
  any failure to comply with rigorous FDA and other government regulations; and
  securing, maintaining and defending patent or other intellectual property protections for our technology.
  decline in global financial markets and economic downturn resulting from the coronavirus COVID-19 global pandemic;
  business interruptions resulting from the coronavirus COVID-19 global pandemic.

 

Forward-looking statements include risks and uncertainties and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties can be found in Company’s Annual Report filed on Form 10-K filed with the SEC on September 16, 2021, (the “Form 10-K”) for the fiscal year ended December 31, 2020, as the same may be updated from time to time, including in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this document. The matters discussed herein and elsewhere in this document could cause our actual results and performance to differ materially from those set forth or anticipated in forward-looking statements. Accordingly, we cannot guarantee future results or performance. Furthermore, except as required by law, we are under no duty to, and we do not intend to, update any of our forward-looking statements after the date of this document, whether as a result of new information, future events or otherwise.

  

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VICAPSYS LIFE SCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   September 30, 2021   December 31, 2020 
Assets          
           
Current Assets:          
Cash  $165,549   $1,269 
Total Current Assets   165,549    1,269 
           
Prepaid expenses   7,240     
Intangible asset, net of accumulated amortization of $113,132 and $89,665, respectively   379,383    402,849 
Total Assets  $552,172   $404,118 
           
Liabilities and Stockholders’ Equity (Deficit)          
           
Current Liabilities:          
Accounts payable  $496,555   $501,732 
Accounts payable, related parties   134,180    236,180 
Accrued salaries, related parties   115,312    115,312 
Total Current Liabilities   746,047    853,224 
           
Stockholders’ Equity (Deficit):          
Preferred Stock; par value $0.001; 20,000,000 shares authorized Series A Convertible Preferred Stock; par value $0.001; 3,000,000 shares authorized; -0- and 3,000,000 shares issued and outstanding, respectively;       3,000 
Series B Convertible Preferred Stock; par value $0.001; 4,440,000 shares authorized; -0- and 4,440,000 shares issued and outstanding, respectively;       4,440 
Common Stock, par value $0.001; 300,000,000 shares authorized; 17,507,283 and 17,483,283 shares issued and outstanding, respectively   17,507    17,483 
Common stock to be issued, par value $0.001; 12,607,281 and 651,281 shares outstanding, respectively   12,607    651 
Additional paid-in capital   13,801,778    13,418,074 
Accumulated deficit   (14,025,767)   (13,892,754)
Total Stockholders’ Deficit   (193,875)   (449,106)
           
Total Liabilities and Stockholders’ Deficit  $552,172   $404,118 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4

 

  

VICAPSYS LIFE SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

                     
   For the three months ended
September 30,
   For the nine months ended
September 30,
 
   2021   2020   2021   2020 
Revenues  $-   $-   $-   $- 
                     
Operating Expenses:                    
Personnel costs   23,072    59,756    68,532    252,487 
Research and development expenses, related party           7,243    94,048 
Professional fees   79,465    15,925    130,828    302,259 
General and administrative expenses   8,644    13,540    26,410    36,501 
Total operating expenses   111,181    89,221    233,013    685,295 
                     
Loss from operations   (111,181)   (89,221)   (233,013)   (685,295)
                     
Other income:                    
Other income           100,000     
Total other income   -    -    100,000    - 
                     
Loss before income taxes   (111,181)   (89,221)   (133,013)   (685,295)
Income taxes                
Net loss available to common shareholders  $(111,181)  $(89,221)  $(133,013)  $(685,295)
                     
Loss per share basic and fully diluted  $(0.01)  $(0.01)  $(0.01)  $(0.04)
                     
Basic and diluted weighted average common shares outstanding   17,507,283    17,483,283    17,503,591    17,483,283 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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VICAPSYS LIFE SCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the nine months ended September 30, 2021 and 2020

(Unaudited)

 

                                           Total 
   Series A Preferred Stock   Series B Preferred Stock   Common Stock   Common Stock to be Issued   Additional Paid-in   Accumulated   Stockholders’
Equity
 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   (Deficit) 
Balance December 31, 2019   3,000,000   $3,000    4,440,000   $4,440    17,483,283   $17,483    651,281   $651   $13,403,293   $(13,126,910)  $301,957 
Net loss                                       (364,459)   (364,459)
Balance March 31, 2020   3,000,000   3,000    4,440,000   4,440    17,483,283   17,483    651,281   651   13,403,293   (13,491,369)  (62,502)
Net loss                                       (231,614)   (231,614)
Balance June 30, 2020   3,000,000   3,000    4,440,000   8,880    17,483,283   17,483    651,281   651   13,403,293   (13,722,983)  (294,116)
Stock-based compensation expense                                   13,699       13,699 
Net loss                                       (89,222)  (89,222)
Balance September 30, 2020   3,000,000   $3,000    4,440,000   $8,880    17,483,283   $17,483    651,281   $651   $13,416,992   $(13,812,205)  $(369,639)

 

   Series A Preferred Stock   Series B Preferred Stock   Common Stock   Common Stock to
be Issued
   Additional Paid-in   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
Balance January 1, 2021   3,000,000   $3,000    4,440,000   $4,440    17,483,283   $17,483    651,281   $651   $13,418,074   $(13,892,754)  $(449,106)
 Conversion of Series A Preferred Stock to common stock to be issued   (3,000,000)   (3,000)                   6,000,000    6,000    (3,000)        
 Conversion of Series B Preferred Stock to common stock           (4,440,000)   (4,440)           4,440,000.00    4,440             
 Common stock issued for common stock to be issued                   24,000    24    (24,000)   (24)            
Stock-based compensation expense                                   1,082    -    1,082 
Net income                                       50,230    50,230 
Balance March 31, 2021                   17,507,283    17,507    11,067,281    11,067    13,416,156    (13,842,524)   (397,794)
Stock-based compensation expense                                   1,081        1,081 
Sale of common stock for cash                           840,000    840    209,160        210,000 
Net loss                                       (72,062)   (72,062)
Balance June 30, 2021                   17,507,283   17,507    11,907,281   11,907   13,626,397   (13,914,586)  (258,775)
Stock-based compensation expense                                   1,081        1,081 
Sale of common stock for cash                           700,000    700    174,300        175,000 
Net loss                                      (111,181)  (111,181)
Balance September 30, 2021                   17,507,283   $17,507    12,607,281   $12,607   $13,801,778   $(14,025,767)  $(193,875)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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VICAPSYS LIFE SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

  

           
   For the Nine months ended
September 30,
 
   2021   2020 
Cash Flows from Operating Activities:          
Net loss  $(133,013)  $(685,295)
Adjustments to reconcile net loss to net cash used in operating activities:          
Amortization   23,466    23,587 
Stock-based compensation   3,244    13,699 
Gain on sale of equity method investment   (100,000)    
Changes in operating assets and liabilities:          
Prepaid Expenses   (7,240)   (1,942)
Accounts payable   (5,177)   81,579 
Accounts payable, related parties   (102,000)   190,548 
Accrued salaries, related party       115,312 
Net Cash Used in Operating Activities   (320,720)   (262,512)
           
Cash Flows from Investing Activities:          
Proceeds from sale of equity method investment   100,000     
Net Cash Used in Investing Activities   100,000     
           
Cash Flows from Financing Activities:          
Proceeds from sale of common stock   385,000     
Net Cash Provided By Financing Activities   385,000     
           
Net Increase (decrease) in Cash   164,280    (262,512)
           
Cash, Beginning of period   1,269    264,166 
           
Cash, End of period  $165,549   $1,654 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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VICAPSYS LIFE SCIENCES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - ORGANIZATION

 

Business

 

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 September 13, 2017, the Company changed its name to Vicapsys Life Sciences, Inc., effected a 1-for-100 reverse stock split of its outstanding common stock, increased the Company’s authorized capital stock to 300,000,000 shares of common stock, par value $0.001 per share, and 20,000,000 shares of “blank check” preferred stock, par value $0.001 per share. 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”. VLS serves as the holding company for VI. Other than its interest in VI, VLS does not have any material assets or operations.

 

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 immunoprotection 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.

 

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 $133,013 for the nine months ended September 30, 2021, we had a working capital deficit of $580,498 and an accumulated deficit of $14,025,767 as of September 30, 2021. 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 has resulted in a significant impact to the Company’s ability to secure additional debt or equity funding to support operations in 2020. In 2021, the Company raised $385,000 through September 30, 2021 from the sale of 1,540,000 shares of common stock (see Note7). Since October 1, 2021, the Company has raised $125,000 (see Note 8) and management intends to raise additional funds in 2021 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 2021, 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 have been condensed or omitted.

 

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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, 2020, filed on Form 10-K with the Securities and Exchange Commission on September 17, 2021. Interim results of operations for the three and nine months ended September 30, 2021, and 2020, 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, 2021, and December 31, 2020. 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 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 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.

 

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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 included in gain on sale of equity method investment for the nine months ended September 30, 2021. As of September 30, 2021, the Company did not have any remaining equity investment in AEI. During the three and nine months ended September 30, 2021, and 2020, 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, 2021.

 

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.

 

10

 

 

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, 2021, and 2020.

 

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 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, 2021, the Company incurred $-0- and $7,243, respectively, in research and development expenses to a related party. For the three and nine months ended September 30, 2020, research and development costs, related party, were $-0- and $94,048, respectively.

 

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. As of September 30, 2021, and 2020, the Company’s dilutive securities are convertible into 23,467,283 and 17,431,756 shares of common stock, respectively. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive.

 

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The following table represents the classes of dilutive securities as of September 30, 2021, and 2020:

 

   September 30, 2021   September 30, 2020 
Common stock to be issued   17,507,283    651,281 
Convertible preferred stock   -    10,440,000 
Stock options   1,900,000    2,193,750 
Warrants to purchase common stock   4,060,000    4,146,725 
    23,467,283    17,431,756 

 

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, 2021, and 2020.

 

NOTE 4 – INTANGIBLE ASSETS

 

The Company’s intangible assets consist of costs incurred in connection with the License Agreement with MGH, as amended (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 value of the common stock is being amortized over the term of the License Agreement which is based on the remaining life of the related patents being licensed which is approximately 16 years.

 

The Company’s intangible assets consisted of the following at September 30, 2021, and December 31, 2020:

 

   September 30, 2021   December 31, 2020 
Licensed patents  $492,514   $492,514 
Accumulated amortization   (113,132)   (89,665)
Balance  $379,382   $402,849 

 

The Company recognized $7,823 and $23,467 of amortization expense related to the License Agreement with MGH for the three and nine months ended September 30, 2021, and $7,862 and $23,587 for the three and nine months ended September 30, 2020, respectively.

 

Future expected amortization of intangible assets is as follows:

 

Fiscal year ending December 31,    
2021 (months remaining)  $7,823 
2022   31,299 
2023   31,299 
2024   31,299 
2025   31,299 
Thereafter   246,363 
Balance  $379,382 

 

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NOTE 5 – RELATED PARTY TRANSACTIONS

 

Consulting Agreement

 

On June 21, 2019, the Company entered into a Consulting Agreement (the “Consulting Agreement”) with Mark Poznansky, MD, (the “Consultant”) a minority stockholder and former Director. The Company engaged the Consultant 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 Consulting Agreement is for one year (the “Initial Term”) and the Company agreed to pay the Consultant $3,000 per month commencing June 1, 2019, with the fee increasing to $6,000 per month commencing on the 1st day of the month following the completion of a $5 million in fundraising by the Company. The Consulting Agreement was not renewed after the Initial Term due the Company’s working capital deficiencies. The Company incurred expenses of $-0- and $18,000 for the three and nine months ended September 30, 2020, respectively, related to the Consulting Agreement which is included in professional fees on the unaudited condensed consolidated statements of operations. As of September 30, 2021, and December 31, 2020, $9,000, respectively is included in accounts payable, related parties, on the unaudited condensed consolidated balance sheets, related to the Consulting 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 Seventh Amendment to the License Agreement on December 22, 2017, the License Agreement requires that VI satisfy the following requirements prior to the first sale of Products (“MGH License Milestones”), by certain dates which have passed. The table below lists the MGH Milestones and the Company’s progress in satisfying or negotiating the extension of each milestone:

 

MILESTONE:   STATUS:
(i) Provide a detailed business and development plan.   The Company has provided MGH with a completed Corporate pitch deck which outlines the Company’s business and development plans has been provided to MGH.
           
(ii) Raise $2 million in a financing round.   The Company has raised $1 million and is currently in the process of raising the second $1 million. The Company and MGH are currently negotiating extending this milestone.
           
(iii) Initiate and finance research regarding the role of CXCL12 in minimizing fibrosis formation.   Milestone completed.
           
(iv) Initiate and finance research regarding the role of CXCL12 in beta cell function and differentiation.   Dr. Poznansky’s lab was focusing on this as part of the academic project. The Company therefore made the strategic decision to fund another aspect of CXCL12 biology which focuses on the role of CXCL12 in wound healing. For the time being, the Company is excused from meeting this milestone as it has provided an alternative milestone as well as a justification for not pursuing this particular milestone.

 

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The Company and MGH have agreed to work together to restate the License Agreement, incorporating all the relevant provisions from the seven amendments and agreeing on a new set of milestones for future development.

 

The License Agreement also requires VI to pay to MGH a one percent (1%) royalty rate on net sales related to the first license sub-field, which is the treatment of Type 1 Diabetes. 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 sixty (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 or been abandoned, and (ii) one (1) 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 sixty (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 ninety (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 $-0- and $7,243, respectively, for the three and nine months ended September 30, 2021, and is classified as research and development costs, related party, on the unaudited condensed consolidated statements of operations. For the three and nine months ended September 30, 2020, the Company incurred costs to MGH of $-0- and $94,048, respectively. As of September 30, 2021, and December 31, 2020, $-0- and $101,180, respectively, is included in accounts payable, related parties, on the unaudited condensed consolidated balance sheets.

 

During the three and nine months ended September 30, 2021, and 2020, 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 $22,500 and $67,500 for the three and nine months ended September 30, 2021, and 2020, respectively, to Federico Pier, the Company’s Chairman of the Board, which are included in personnel costs on the unaudited condensed consolidated statements of operations. As of September 30, 2021, and December 31, 2020, $75,000 and $67,500, 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 $15,000 and $45,000 for the three and nine months ended September 30, 2021, and 2020, respectively, to Jeff Wright, the Company’s Chief Financial Officer, which are included in professional fees on the unaudited condensed consolidated statements of operations. As of September 30, 2021, and December 31, 2020, $50,180 and $45,000, respectively, is included in accounts payable, related parties, on the unaudited condensed consolidated balance sheets.

 

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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, 2021, the Company did not incur any expenses and for the three and nine months ended September 30, 2020, the Company incurred expenses of $35,554 and $172,354 to the former CEO, which are included in personnel costs on the unaudited condensed consolidated statements of operations. As of September 30, 2021, and December 31, 2020, $115,312, respectively, of unpaid salary to the former CEO is included in accrued salaries, related party on the unaudited condensed consolidated balance sheets.

 

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 gain on sale of equity method investment 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 our Company, nor are we 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. The License Agreement also requires VI to pay to MGH a one percent (1%) royalty rate on net sales related to the first license sub-field, which is the treatment of Type 1 Diabetes. 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 sixty (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. No expense reimbursements were paid to MGH during the three and nine months ended September 30, 2021.

 

Consulting Agreement

 

On June 21, 2019, the Company entered into a Consulting Agreement (the “Consulting Agreement”) with C&H Capital, Inc. (the “Consultant”). The Company engaged the Consultant to render consulting services to facilitate long range strategic investor relations planning and other related services. The initial term of the Consulting Agreement is for one year (the “Initial Term”) and the Company agreed to pay the Consultant $3,500 on the last business day for each month of service. The Consulting Agreement was not renewed after the Initial Term due the Company’s working capital deficiencies. The Consulting Agreement expired June 30, 2020, and was not renewed. The Company incurred expenses of $-0- and $21,000 for the three and nine months ended September 30, 2020, related to the Consulting Agreement and is included in professional fees on the unaudited condensed consolidated statements of operations. On June 21, 2019, the Consultant also received a stock option grant of 50,000 shares of common stock that vested upon the grant, with an exercise price of $0.25 per share. As of September 30, 2021, and December 31, 2020, the balance owed to the Consultant was $14,000, respectively, and is included in accounts payable on the unaudited condensed consolidated balance sheet.

 

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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 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 (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 Securities and Exchange Commission).

 

As of September 30, 2021, and December 31, 2020, there were -0- and 3,000,000 shares, respectively, 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.

 

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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 Securities and Exchange Commission.

 

As of September 30, 2021, and December 31, 2020, there were -0- and 4,440,000 shares, respectively, 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, 2021, and December 31, 2020, there were 17,561,550 and 17,483,283 shares, respectively, of common stock outstanding.

 

Common Stock Issuances

 

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.

 

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.

 

During the nine months ended September 30, 2021, the Company sold 1,540,000 shares of common stock pursuant to a Private Placement Memorandum (the “PPM”) for $0.25 per share and received $385,000.

 

Common Stock to be issued

 

On February 12, 2021, the Company recorded 6,000,000 shares of common stock to be issued 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.

 

On February 12, 2021, the Company recorded 4,440,000 shares of common stock to be issued 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.

 

As of September 30, 2021, and December 31, 2020, there were 17,507,283 and 651,281, respectively, shares of common stock to be issued. 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. The September 30, 2020, amount relates to 621,281 shares to be issued pursuant to the SRI Agreement and 30,000 shares of common stock to be issued to two initial shareholders of VI.

 

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Stock Options

 

The following table summarizes activities related to stock options of the Company for the nine months ended September 30, 2021:

 

   Number of
Options
   Weighted-
Average
Exercise
Price per
Share
  

Weighted-
Average
Remaining
Life

(Years)

 
Outstanding at December 31, 2020   1,900,000   $0.66    6.83 
Outstanding at September 30, 2021   1,900,000   $0.66    6.08 
Exercisable at September 30, 2021   1,875,000   $0.67    6.06 

 

The Company did not grant any options to purchase shares of common stock during the nine months ended September 30, 2021.

 

The Company recorded stock compensation expense of $1,081 and $3,244 for the three and nine months ended September 30, 2021, respectively, and $2,883 and $13,699 for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021, 25,000 options to purchase shares of common stock remain unvested and $3,245 of stock compensation expense remains unrecognized and will be expensed over a weighted average period of 0.50 years.

 

Warrants

 

The following table summarizes activities related to warrants of the Company for the nine months ended September 30, 2021:

 

   Number of
Warrants
   Weighted-
Average
Exercise
Price per
Share
  

Weighted-
Average
Remaining Life

(Years)

 
Outstanding and exercisable at December 31, 2020   4,146,725   $0.53    1.50 
Expired   86,725    1.85      
Outstanding and exercisable at September 30, 2021   4,060,000   $0.50    0.76 

 

The Company did not issue any warrants during the nine months ended September 30, 2021.

 

NOTE 8 – SUBSEQUENT EVENTS

 

In June 2021, the Company entered into Security Purchase Agreements (“SPA’s) 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. Since October 1, 2021, the Company has raised an aggregate amount of $125,000 as of the date of these unaudited condensed consolidated financial statements.

 

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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 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 September 13, 2017, the Company changed its name to Vicapsys Life Sciences, Inc., effected a 1-for-100 reverse stock split of its outstanding common stock, increased the Company’s authorized capital stock to 300,000,000 shares of common stock, par value $0.001 per share, and 20,000,000 shares of “blank check” preferred stock, par value $0.001 per share. 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 immunoprotection 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

 

In March 2020, the World Health Organization declared the spread of a novel strain of coronavirus (“COVID-19”) a global pandemic. Actions have been taken by federal, state and local governmental authorities to combat the spread of COVID-19, including through issuances of “stay-at-home” directives and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. These measures, while intended to protect human life, have led to significantly reduced economic activity. At the end of 2020, two vaccines became available. While many state and local authorities have started to reopen businesses, others have adopted additional measures to mitigate COVID-19 and the rapid development and uncertainty of the situation continues to preclude any prediction as to the ultimate impact COVID-19 will have on the Company’s business, financial condition, results of operation and cash flows, which will depend largely on future developments directly or indirectly relating to the duration and scope of the COVID-19 outbreak in the United States.

 

Results of Operations – Three and Nine Months Ended September 30, 2021, and 2020

 

Revenues

 

The Company did not have any revenues from continuing operations for the three and nine months ended September 30, 2021 and 2020.

 

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, 2021, were $111,181 and $233,013 respectively, compared to $89,221 and $685,295, respectively, for the three and nine months ended September 30, 2020.

 

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The resignation of our former CEO in August 2020, resulted in a decrease in personnel costs to $23,073 from $59,756 for the three months ended September 30, 2021, and to $68,532 from $252,487 for the nine months ended September 30, 2020. The decreases in research and development and general and administrative expenses was primarily due to the negative impact of COVID-19, which hindered the Company’s ability to raise the additional capital necessary to maintain regular operating activities. The increase in professional fees to $79,204 from $15,925 for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, respectively, was primarily due to accounting and legal fees incurred to bring the Company current with all public filing requirements pursuant to The Securities and Exchange Commission (the “SEC”) adopting amendments to Rule 15c2-11 which, in part, required issuers to be current and publicly available for broker-dealers to quote their securities in the OTC market by September 28, 2021. However, the overall impact of COVID-19 resulted in a decrease in professional fees to $130,526 from $302,259, for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, respectively.

 

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, 2021, we had $165,549 of cash on hand and an accumulated deficit of $14,025,767.

 

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.

 

We have no revenues as of the date of this quarterly report, 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 secure a loan. If we are unsuccessful in raising capital, 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 nine months ended September 30, 2021. In June 2021, the Company entered into Security Purchase Agreements (“SPA’s) 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. During the nine months ended September 30, 2021, the Company has raised an aggregate amount of $385,000 from the sale of 1,540,000 shares of common stock, and since October 31, 2021, the Company has raised an additional $125,000 from the sale of 500,000 shares of common stock as of the date these unaudited condensed consolidated financial statements. We will still require additional capital to meet our liquidity needs.

 

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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, 2021   December 31, 2020 
Current Assets  $165,549   $1,269 
Current Liabilities   746,047    853,224 
Working Capital Deficit  $(580,498)  $(851,955)

 

Cash Flows

 

Cash activity for the nine months ended September 30, 2021, and 2020 is summarized as follows:

 

   Nine Months Ended September 30, 
   2021   2020 
Net cash used in operating activities  $(320,720)  $(262,512)
Net cash provided by investing activities   100,000    - 
Net cash provided by financing activities   385,000    - 
Net increase (decrease) in cash  $164,280   $(262,512)

 

As of September 30, 2021, the Company had $165,549 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.

 

Contractual Obligations

 

MGH License Agreement

 

The Company executed a License Agreement with MGH, a principal stockholder. The License Agreement also requires VI to pay to MGH a one (1%) royalty rate on net sales related to the first license sub-field, which is the treatment of Type 1 Diabetes. 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 exceed $100,000,000 in any calendar year and $4,000,000 within sixty (60) days after the first achievement of total net sales of Products 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 tights.

 

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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, 2020, included in the Company’s Annual Report filed on Form 10-K with the SEC on September 17, 2021.

 

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.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains “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”), that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

In designing and evaluating the Company’s disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and the Company necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

 

The Company’s management, including its Chairman of the Board and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2021, and concluded that the Company has a material weakness in disclosure controls and procedures as of September 30, 2021.

 

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The Company has an ineffective control environment due to a lack of internal resources with expertise to determine entries and disclosures related to some of the Company’s more complex equity transactions. Management believes this lack of internal expertise has been historically mitigated by continuing to retain consultants with this expertise when needed. This material weakness in the Company’s disclosure controls and procedures will be further remediated with future capital raises.

 

Changes in Internal Control Over Financial Reporting

 

During the three months ended September 30, 2021, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

The Company is not a party to any pending legal proceeding, nor is the Company’s property the subject of a pending legal proceeding. None of the Company’s directors, officers or affiliates are involved in a proceeding adverse to our business or has a material interest adverse to the Company’s business.

 

ITEM 1A. RISK FACTORS.

 

As a smaller reporting company, the Company is not required to disclose material changes to the risk factors that were contained in the Company’s Form 10 registration statement originally filed with the SEC on February 12, 2020, as amended (the “Form 10”). However, in light of the recent coronavirus (COVID-19) pandemic, set forth below is a risk factor relating to COVID-19. Other than as set forth below, as of the filing date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors faced by the Company from those previously disclosed in the Form 10.

 

COVID-19

 

In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. We are monitoring this closely, and although operations have not been materially affected by the COVID-19 outbreak to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and our business is uncertain. Accordingly, while we do not anticipate an impact on our operations, we cannot estimate the duration of the pandemic and potential impact on our business. In addition, a severe or prolonged economic downturn could result in a variety of risks to our business, including a possible delay in our ability to raise money. At this time, the Company is unable to estimate the impact of this event on its operations.

 

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.

 

Not applicable.

 

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ITEM 6. EXHIBITS.

 

Exhibit No.   Description
31.1   Section 302 Certification of Principal Executive Officer*
31.2   Section 302 Certification of Principal Financial Officer*
32.1   Section 906 Certification of Principal Executive Officer and Principal Financial Officer***
101.INS   Inline XBRL Instance Document **
101.SCH   Inline XBRL Taxonomy Extension Schema Document **
101.CAL   Inline XBRL Taxonomy Calculation Linkbase Document **
101.LAB   Inline XBRL Taxonomy Labels Linkbase Document **
101.PRE   Inline XBRL Taxonomy Presentation Linkbase Document **
101.DEF   Inline XBRL Definition Linkbase Document **
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith.
   
** Pursuant to Rule 406T of Regulation S-T adopted by the SEC, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise are not subject to liability under these sections.
   
*** This certification is being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, and it is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

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SIGNATURES

 

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

 

Date: November 12, 2021

 

  Vicapsys Life Science, Inc.
     
  By: /s/ Federico Pier
    Federico Pier
   

Executive Chairman of the Board

(Principal Executive Officer)

     
  By: /s/ Jeffery Wright
    Jeffery Wright
   

Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)

 

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