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. Although the
Company experienced net income of $50,230 for the three months ended March 31, 2021, due to the sale and proceeds received of $100,000
from the sale of an equity investment held by the Company, not operations (see Note 3), we had a working capital deficit of $792,821
and an accumulated deficit of $13,842,524 as of March 31, 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. Since April 1, 2021, the Company has raised $385,000 (see Note 8) through August 2021 and management intends to raise additional
funds in 2021 to support current operations and extend 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. 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 months ended March 31, 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 March 31, 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.
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 three months ended March 31, 2021. As of March 31, 2021, the Company did not
have any remaining equity investment in AEI. During the three months ended March 31, 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 March 31, 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.
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. For the three months ended March 31, 2021, and 2020, the
Company did not generate any revenue.
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 months ended
March 31, 2021, and 2020, the Company incurred $2,307 and $94,048, respectively, in research and development expenses to a related party.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to
reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation
allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will
not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of
enactment.
ASC
740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements
and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure
and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company has
not been assessed, nor paid, any interest or penalties.
Uncertain
tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at
the effective date may be recognized or continue to be recognized.
Earnings
(Loss) Per Share
The
Company reports earnings (loss) per share in accordance with ASC 260, “Earnings per Share.” Basic earnings (loss) per share
is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted
earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock, common stock equivalents
and other potentially dilutive securities outstanding during the period. As of March 31, 2021, and 2020, the Company’s dilutive
securities are convertible into 17,114,006 and 17,688,006 shares of common stock, respectively. For the three months ended March 31,
2021, the dilutive securities are included in diluted net income per share. The amount for the three months ended March 31, 2020 are
not included in the computation of dilutive loss per share because their impact is antidilutive.
The following table presents a reconciliation
of basic and diluted net income (loss) per share for the three months ended March 31, 2021 and 2020:
|
|
For the three months ended March
31, 2021
|
|
|
|
2021
|
|
|
2020
|
|
Net income (loss) per common share - basic:
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$
|
50,230
|
|
|
$
|
(364,459
|
)
|
Weight average common shares outstanding - basic
|
|
|
17,496,083
|
|
|
|
17,483,283
|
|
Net income (loss) per common share - basic
|
|
$
|
0.00
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share - diluted:
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$
|
50,230
|
|
|
$
|
(364,459
|
)
|
Add: stock- based compensation
|
|
|
2,163
|
|
|
|
-
|
|
Numerator for income (loss) per common share - diluted
|
|
$
|
52,393
|
|
|
$
|
(364,459
|
)
|
|
|
|
|
|
|
|
|
|
Weight average common shares outstanding - diluted
|
|
|
|
|
|
|
|
|
Basic
|
|
|
17,496,083
|
|
|
|
17,483,283
|
|
Stock Options
|
|
|
2,681,549
|
|
|
|
-
|
|
Warrants
|
|
|
1,064,000
|
|
|
|
-
|
|
Common stock to be issued
|
|
|
11,067,281
|
|
|
|
-
|
|
Denominator weighted average common shares outstanding - diluted
|
|
|
32,308,913
|
|
|
|
17,483,283
|
|
Net income (loss) per common share - diluted
|
|
$
|
0.00
|
|
|
$
|
(0.02
|
)
|
The following table represents the classes
of dilutive securities as of March 31, 2021, and 2020:
|
|
March
31,
2021
|
|
|
March
31,
2020
|
|
Common
stock to be issued
|
|
|
11,067,281
|
|
|
|
651,281
|
|
Convertible
preferred stock
|
|
|
-
|
|
|
|
10,440,000
|
|
Stock
options
|
|
|
1,900,000
|
|
|
|
2,450,000
|
|
Warrants
to purchase common stock
|
|
|
4,146,725
|
|
|
|
4,146,725
|
|
|
|
|
17,114,006
|
|
|
|
17,688,006
|
|
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 months ended March 31, 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, on a fully-diluted basis at that time. 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 March 31, 2021, and December 31, 2020:
|
|
March
31,
2021
|
|
|
December
31,
2020
|
|
Licensed
patents
|
|
$
|
492,514
|
|
|
$
|
492,514
|
|
Accumulated
Amortization
|
|
|
(97,487
|
)
|
|
|
(89,665
|
)
|
Balance
|
|
$
|
395,027
|
|
|
$
|
402,849
|
|
The
Company recognized $7,822 and $7,862 of amortization expense related to the License Agreement with MGH for the three months ended March
31, 2021, and 2020, respectively.
Future
expected amortization of intangible assets is as follows:
Fiscal
year ending December 31,
|
|
|
|
2021
(months remaining)
|
|
$
|
23,477
|
|
2022
|
|
|
31,299
|
|
2023
|
|
|
31,299
|
|
2024
|
|
|
31,299
|
|
2025
|
|
|
31,299
|
|
Thereafter
|
|
|
246,354
|
|
|
|
$
|
395,027
|
|
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 $9,000 for the three months ended
March 31, 2020, related to the Consulting Agreement which is included in professional fees on the unaudited condensed consolidated statements
of operations. As of March 31, 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 4) 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.
|
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 $2,307 and $94,048, respectively, during the three months ended March 31, 2021, and 2020, and is classified
as research and development costs, related party, on the unaudited condensed consolidated statements of operations. As of March 31, 2021,
and December 31, 2020, $79,487 and $102,180, respectively, is included in accounts payable, related parties, on the unaudited condensed
consolidated balance sheets, related to this license agreement.
During
the three months ended March 31, 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 for the three months ended March 31, 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
March 31, 2021, and December 31, 2020, $90,000 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 for the three months ended March 31, 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 March 31, 2021, and December 31, 2020, $60,000 and $45,000, respectively, is included in accounts payable, related parties, on the
unaudited condensed consolidated balance sheets, related to these consulting fees.
In
August 2020, Frances Tonneguzzo, the Company’s Chief Executive Officer (the “former CEO”) tendered her resignation
as CEO. For the three months ended March 31, 2021, and 2020, the Company incurred expenses of $-0- and $68,451, respectively, to the
former CEO, which are included in personnel costs on the unaudited condensed consolidated statements of operations. As of March 31, 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 for $100,000, which is included in on gain sale of equity method investment for the
three months ended March 31, 2021 on the unaudited condensed consolidated statements of operations (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 months ended March 31, 2021, and 2020.
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 $10,500 for the three months ended March 31, 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 March 31, 2021, and December 31, 2020, the balance owed the Consultant $14,000, respectively, and is included in accounts payable
on the unaudited condensed consolidated balance sheets.
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 March 31, 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.
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 March 31, 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 March 31, 2021, and December 31, 2020, there
were 27,923,283 and 17,483,283 shares, respectively, of common stock outstanding.
Common
Stock Issuances
On
February 11, 2021, the Company issued 24,000 shares to an investor. The shares were previously included in common stock to be issued.
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 March 31, 2021, and December 31, 2020, there were 11,067,281 and 654,281, respectively, shares of common stock to be issued. The March
31, 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, 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 December 31, 2020, amount is comprised of 621,281 shares related to the SRI Agreement and the 30,000 shares of common stock to
be issued to two initial shareholders of VI.
Stock
Options
The
following table summarizes activities related to stock options of the Company for the three months ended March 31, 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 March 31, 2021
|
|
|
1,900,000
|
|
|
$
|
0.66
|
|
|
|
6.59
|
|
Exercisable
at March 31, 2021
|
|
|
1,858,333
|
|
|
$
|
0.67
|
|
|
|
6.55
|
|
The
Company did not grant any options to purchase shares of common stock during the three months ended March 31, 2021.
The
Company recorded stock compensation expense of $1,082 and $5,408 during the three months ended March 31, 2021, and 2020, respectively.
As of March 31, 2021, 41,667 options to purchase shares of common stock remain unvested and $5,408 of stock compensation expense remains
unrecognized and will be expensed over a weighted average period of 1.25 years.
Warrants
The
following table summarizes activities related to warrants of the Company for the three months ended March 31, 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
|
|
Outstanding
and exercisable at March 31, 2021
|
|
|
4,146,725
|
|
|
$
|
0.53
|
|
|
|
1.25
|
|
The
Company did not issue any warrants during the three months ended March 31, 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. The Company has raised an aggregate amount of $385,000 as of the date of these unaudited condensed consolidated financial statements.
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 Months Ended March 31, 2021, and 2020
Revenues
The
Company did not have any revenues from continuing operations for the three months ended March 31, 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 months ended March 31, 2021, and 2020, were $49,770
and $364,459, respectively.
The
resignation of our former CEO in August 2020, resulted in a decrease in personnel costs to $22,208 from $99,078 for the three months
ended March 31, 2021, compared to March 31, 2020. The decrease in other operating 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 operations and continue research
and development activities. The impact of COVID-19, resulted in a decrease in professional fees to $16,082 from $157,247, for the three
months ended March 31, 2021, compared to the three months ended March 31, 2020, a decrease in general and administrative expenses to
$8,573 from $14,085 for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, and a decrease in research
and development expenses to $2,307 from $94,048 for the three months ended March 31, 2021, compared to the three months ended March 31,
2020.
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
March 31, 2021, we had $30,463 of cash on hand and an accumulated deficit of $13,842,524.
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 for $100,000, which is included in other income for the three months
ended March 31, 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. The Company has raised an aggregate amount of $385,000 from the sale of 1,540,000 shares of common stock,
as of the date these financial statements are available for issuance. We will still require additional capital to meet our liquidity
needs.
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
|
|
March
31, 2021
|
|
|
December
31, 2020
|
|
Current
Assets
|
|
$
|
33,378
|
|
|
$
|
1,269
|
|
Current
Liabilities
|
|
|
826,199
|
|
|
|
853,224
|
|
Working
Capital (Deficit)
|
|
$
|
(792,821
|
)
|
|
$
|
(851,955
|
)
|
Cash
Flows
Cash
activity for the three months ended March 31, 2021, and 2020 is summarized as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Net Cash used in operating activities
|
|
$
|
(70,806
|
)
|
|
$
|
(233,218
|
)
|
Net cash provided by investing activities
|
|
$
|
100,000
|
|
|
$
|
--
|
|
Net increase (decrease) in cash
|
|
$
|
29,194
|
|
|
$
|
(233,218
|
)
|
As
of March 31, 2021, the Company had $30,463 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.
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.