UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| Quarterly REPORT PURSUANT to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the quarterly period ended | |
| or | |
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the transaction period from _____________ to _____________ | |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered |
| N/A | N/A | N/a |
Securities registered pursuant to Section 12(g) of the Act: : Common Stock, par value $0.0001 per share
Indicate
by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during
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COEPTIS THERAPEUTICS, INC.
FORM 10-Q
For the Quarter Ended June 30, 2022
TABLE OF CONTENTS
| PART I -- FINANCIAL INFORMATION | 3 |
| Item 1. | Condensed Consolidated Unaudited Financial Statements | 3 |
| Balance Sheets | 3 | |
| Statements of Operations | 4 | |
| Statements of Stockholders' Equity (Deficit) | 5 | |
| Statements of Cash Flows | 6 | |
| Notes to Financial Statements | 7 |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 22 |
| Item 4. | Controls and Procedures | 22 |
| PART II -- OTHER INFORMATION | 23 |
| 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 | 23 |
| SIGNATURES | 24 |
| 2 |
PART I — FINANCIAL INFORMATION
| Item 1. | Unaudited Financial Statements |
COPETIS THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| TOTAL CURRENT ASSETS | ||||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Furniture and fixtures | ||||||||
| Less: accumulated depreciation | ||||||||
| Furniture and fixtures, net | ||||||||
| OTHER ASSETS | ||||||||
| Co-development options | ||||||||
| Right of use asset, net of accumulated amortization | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Notes payable, current portion | ||||||||
| Notes payable, related parties, current portion | ||||||||
| Right of use liability, current portion | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| LONG TERM LIABILITIES | ||||||||
| Note payable | ||||||||
| Right of use liability, non-current portion | ||||||||
| TOTAL LONG TERM LIABILITIES | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 7) | ||||||||
| STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Series B Preferred Stock, $ par value, shares authorized, and shares issued and outstanding, respectively | ||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding at June 30, 2022, and shares issued and shares outstanding at December 31, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Common stock subscribed | ||||||||
| Treasury stock, shares at cost | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 3 |
COEPTIS THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| 3 Months Ended | 6 Months Ended | |||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||
| SALES | ||||||||||||||||
| Consulting services | $ | $ | $ | $ | ||||||||||||
| Sales | ||||||||||||||||
| Total sales | ||||||||||||||||
| Cost of goods, including inventory obsolescence | ||||||||||||||||
| Gross profit | ||||||||||||||||
| COST OF OPERATIONS | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Selling and marketing | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Royalties and licensing fees | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain (Loss) on extinguishment of debt | ( | ) | ||||||||||||||
| TOTAL OTHER INCOME (EXPENSE) | ( | ) | ( | ) | ( | ) | ||||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| PROVISION FOR INCOME TAXES (BENEFIT) | ||||||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| LOSS PER SHARE | ||||||||||||||||
| Loss per share, basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share, fully diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding, basic | ||||||||||||||||
| Weighted average number of common shares outstanding, diluted | ||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 4 |
COEPTIS THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
| SERIES B | ADDITIONAL | COMMON | ||||||||||||||||||||||||||||||||||
| PREFERRED STOCK | COMMON STOCK | PAID-IN | STOCK | TREASURY | ACCUMULATED | |||||||||||||||||||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | CAPITAL | SUBSCRIBED | STOCK | DEFICIT | TOTAL | ||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Retroactive application of recapitalization | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Shares issued for cash | – | |||||||||||||||||||||||||||||||||||
| Shares issued for services | – | |||||||||||||||||||||||||||||||||||
| Net income (loss) | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Shares issued for cash | – | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued for services | – | |||||||||||||||||||||||||||||||||||
| Warrants issued for services | – | – | ||||||||||||||||||||||||||||||||||
| Shares issued through conversion of debt | – | |||||||||||||||||||||||||||||||||||
| Net income (loss) | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Shares issued for cash | – | |||||||||||||||||||||||||||||||||||
| Shares issued for services | – | |||||||||||||||||||||||||||||||||||
| Retirement of shares | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Warrants converted to shares | – | |||||||||||||||||||||||||||||||||||
| Warrants issued for services | – | – | ||||||||||||||||||||||||||||||||||
| Warrants issued for extinguishment of debt | – | – | ||||||||||||||||||||||||||||||||||
| Net income (loss) | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||
| Shares issued for cash | – | |||||||||||||||||||||||||||||||||||
| Shares issued for services | – | |||||||||||||||||||||||||||||||||||
| Warrants converted to shares | – | |||||||||||||||||||||||||||||||||||
| Warrants issued for services | – | – | ||||||||||||||||||||||||||||||||||
| Net income (loss) | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 5 |
COEPTIS THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 6 Months Ended | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Forgiveness of debt | ( | ) | ||||||
| Debt discount from modification of debt | ( | ) | ||||||
| Shares issued for non-employee services | ||||||||
| Shares issued for conversion of debt | ||||||||
| Warrants issued for extinguishment of debt | ||||||||
| Warrants issued for services | ||||||||
| (Increase) decrease in: | ||||||||
| Right of use asset/liability | ( | ) | ||||||
| Increase (decrease) in: | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of license right | ( | ) | ||||||
| Purchase of property and equipment | ||||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ||||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from notes payable | ||||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Repayment of notes payable, related parties | ( | ) | ||||||
| Cash paid for debt as part of merger/recapitalization | ( | ) | ||||||
| Shares issued for cash | ||||||||
| Shares issued for cash for the conversion warrants | ||||||||
| Cash received for stock subscription | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid (refunded) | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 6 |
COEPTIS THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Six months ended June 30, 2022 and 2021 (unaudited)
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Nature of Business – Coeptis Pharmaceuticals, LLC (LLC) was formed in July 12, 2017 as a Pennsylvania multi-member limited liability company. On December 1, 2018, the members of LLC contributed their interest to a newly formed corporation, Coeptis Pharmaceuticals, Inc (“Coeptis”). As of December 1, 2018, the LLC became a disregarded single-member limited liability company which is wholly owned by the newly formed corporation. On February 12, 2021, Vinings Holdings, Inc., a Delaware corporation (“Vinings”), merged (the “Merger”) with and into Coeptis Pharmaceuticals, Inc. On July 12, 2021, the company has legally changed its name from Vinings Holdings, Inc. to Coeptis Therapeutics, Inc. Coeptis was the surviving corporation of that Merger. As a result of the Merger, Vinings acquired the business of Coeptis and will continue the existing business operations of Coeptis as a wholly owned subsidiary. The Merger was treated as a recapitalization of the Company for financial accounting purposes. The historical financial statements of Vinings before the Merger were replaced with the historical financial statements of Coeptis before the Merger in all future filings with the Securities and Exchange Commission (the “SEC”).
The Company is located in Wexford, PA, and engages primarily in the acquisition, development, and commercialization of pharmaceutical products.
Merger - On April 18, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BH Merger Sub, Inc., (“Merger Sub”) a Delaware corporation and wholly-owned subsidiary of Bull Horn Holdings Corp., a company incorporated in the British Virgin Islands (together with its successors, including after giving effect to the Domestication as described below, “Bull Horn” or the “Purchaser”).
Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) prior to the Closing (as defined below), Bull Horn will re-domicile from the British Virgin Islands to the State of Delaware through a statutory re-domestication (the “Domestication”), and (ii) upon the consummation of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with and into Coeptis (the “Merger” and, together with the Domestication and the other transactions contemplated by the Merger Agreement, the “Transactions”), with Coeptis continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of Bull Horn (after the Domestication).
Prior to the Merger, all outstanding shares of Coeptis preferred stock will convert or exchange their shares of preferred stock for shares of Coeptis common stock at the applicable ratio in Coeptis organizational documents (the “Preferred Stock Exchange”).
In the Merger, (i) all shares of Coeptis common stock issued and outstanding immediately prior to the effective time of the Merger (other than those properly exercising any applicable dissenters rights under Delaware law), but after giving effect to the Preferred Stock Exchange, will be converted into the right to receive a portion of the Merger Consideration (as defined below), (ii) certain issued and outstanding warrants to acquire shares of Coeptis stock (the “Specified Warrants”) will be assumed by Bull Horn and converted into a warrant for shares of Bull Horn common stock with its price and number of shares equitably adjusted based on the conversion of the shares of Coeptis common stock into the Merger Consideration (each, an “Assumed Warrant”), (iii) certain outstanding convertible debt of Coeptis (the “Coeptis Convertible Debt”) will be assumed by Bull Horn and be convertible into common stock of Bull Horn (the “Assumed Convertible Debt”) and (iv) any other outstanding securities with the right to convert into or acquire equity securities of Coeptis or its subsidiaries will be terminated. At the Closing, Bull Horn will change its name to “Coeptis Therapeutics Holdings, Inc.”.
The aggregate Merger consideration received by
Coeptis security holders from Bull Horn at the Closing will have an aggregate value equal to (the “Merger Consideration”)
(i) $
| 7 |
The Coeptis Convertible Debt, along with (i)
certain other outstanding indebtedness of Coeptis as of the date of the Merger Agreement (which together with the Coeptis Convertible
Debt, has aggregate outstanding obligations of approximately $
Basis of Presentation - The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles in the United States of America for complete financial statements. In the opinion of the Company’s management, any adjustments contained in the accompanying unaudited consolidated financial statements are of a normal recurring nature, and are necessary to fairly present the financial position of the Company as of June 30, 2022, along with its results of operations for the three and six-month periods ended June 30, 2022 and 2021 and cash flows for the six-month periods ended June 30, 2022 and 2021. Interim financial statements are prepared on a basis consistent with the Company’s annual financial statements and should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Results of operations for the six-month period ended June 30, 2022, are not necessarily indicative of the operating results that may be expected for the full year ending December 31, 2022.
Principles of Consolidation – The accompanying unaudited consolidated financial statements include the accounts of Coeptis Therapeutics Inc., Coeptis Pharmaceuticals, Inc. and its wholly-owned subsidiary, Coeptis Pharmaceuticals, LLC. All material intercompany accounts, balances and transactions have been eliminated.
Risks and Uncertainties - In late 2019, an outbreak of a novel strain of the Coronavirus 2019 Disease (COVID-19) was identified and infections have been found in a number of countries around the world, including the United States. COVID-19 and its impact on trade including customer demand, travel, employee productivity, supply chain, and other economic activities has had, and may continue to have, a potentially significant effect on financial markets and business activity. The extent of the impact of COVID-19 on the Company’s operational and financial performance is currently uncertain and cannot be predicted.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies are described in Note 2 “Summary of Significant Accounting Policies,” in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 11, 2022. There have been no material changes to the significant accounting policies during the six-month period ended June 30, 2022, except for items mentioned below.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company believes that the estimates, judgments and assumptions upon which it relies are reasonable based upon information available at the time that these estimates, judgments and assumptions are made. Actual results could differ from those estimates. The Company’s accounting estimates include the useful lives of long-lived assets and recoverability of those assets, and valuation allowance of deferred tax assets.
Adoption of New Accounting Pronouncements - The Company has implemented all new applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and management does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Going Concern - The accompanying financial
statements have been prepared in conformity with generally accepted accounting principles in the United States of American (GAAP), which
contemplate continuation of the Company as a going concern, which is dependent upon the Company’s ability to obtain sufficient financials
or establish itself as a profitable business. As of the quarter ended June 30, 2022, the Company had accumulated deficit of $
| 8 |
NOTE 3 – LICENSE RIGHT
In 2019, the Company entered into an agreement with a foreign entity to market, distribute, and sell the Consensi product (Product) on an exclusive basis within the United States and Puerto Rico. Upon execution of the Agreement the Company paid $1,000,000 to the foreign entity. Milestone payments were due as follows; (1) $1,500,000 upon completion of the CMC Plan as reimbursements of costs incurred by the foreign entity, (2) $1,000,000 was due upon first commercial sale of the Product which occurred in June 2020. Milestones were not met as of June 30, 2022.
In September of 2021, the Company executed a license
termination agreement with the foreign entity to cease all efforts for sales and promotion of the product in the United States and Puerto
Rico. The termination included (i) issuance of $
During
the year ended December 31, 2021, the Company and VyGen-Bio, Inc. (“Vy-Gen”) entered into agreements to jointly develop and
commercialize two Vy-Gen product candidates, CD38-GEAR-NK and CD38-Diagnostic (the “CD38 Assets”). The Company paid $
Related to the joint development, Coeptis, under the direction of the joint steering committee, is assessing market opportunities, intellectual property protection, and potential regulatory strategies for the CD38 Assets. VyGen Bio is responsible for development activities conducted and overseen by the scientists at Karolinska Institute. The agreement does not currently require additional payments for RD costs by Coeptis and no additional payments are required upon development or regulatory milestones.
NOTE 4 – DEBT
The Company entered into a note payable agreement
with an unrelated company with a conversion option. The principal amount of $
In January 2020, the Company entered into a
Senior Secured Note agreement with an unrelated party. The principal amount of $
In January 2020, the Company entered into a Senior
Secured Note agreement with a related party stockholder. The principal amount of $
In January 2020, the Company entered into another
Senior Secured Note agreement with a stockholder. The principal amount of $
| 9 |
In January 2020, the Company entered into a Senior
Secured Note agreement with an unrelated party. The principal amount of $
In January 2020, the Company entered into a Senior
Secured Note agreement with an unrelated party. The principal amount of $
In September 2020, the Company entered a non-interest
bearing, unsecured note agreement with two shareholders for $
In September 2021, as part of a termination of
license agreement with Purple BioTech, the Company issued a convertible note in the principal amount of $
Loans under the CARES Act -- On May 6,
2020, the Company received loan proceeds in the amount of approximately $
On July 8, 2020, the Company received a loan
of $
Maturities of long-term debt are as follows for the quarter ended June 30,
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total long-term debt | $ | |||
| 10 |
NOTE 5 – CAPITAL STRUCTURE
The total number of shares of stock which the corporation shall have authority to issue is shares, of which shares of $ par value shall be designated as Common Stock and shares of $ shall be designated as Preferred Stock. The Preferred Stock authorized by these Articles of Incorporation may be issued in one or more series. The Board of Directors of the Corporation is authorized to determine or alter the rights, preferences, privileges, and restrictions granted or imposed upon any wholly unissued series of Preferred Stock, and within the limitations or restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series, to determine the designation and par value of any series and to fix the numbers of shares of any series.
Common Stock - As of June 30, 2022 the Company had shares of its common stock issued and outstanding, and on June 30, 2021 the Company had shares of its common stock issued and outstanding. All references to the common shares outstanding have been retroactively adjusted to reflect the stock splits unless stated otherwise.
In 2022 and 2021, the Company raised capital by
issuance of common stock above the stated par value. The contributed capital recognized as additional paid in capital during the quarter
ended June 30, 2022 and 2021 was $
Treasury Stock – As part of the Merger
in February of 2021, the Company repurchased shares of its common stock previously held by Vinings’ shareholders. The stock
was recorded at the cost paid for it, of $
Series A Preferred Stock - As of April 30, 2019, the Series A Preferred Stock had been canceled, and no shares remain outstanding. The rights and privileges of future issuances of the Series A Preferred stock will be determined at such time if and when they are issued. As of the balance sheet dates presented, there were shares of Series A Preferred outstanding.
Series B Convertible Preferred Stock - The Company designated shares of Series B Convertible Preferred Stock with a par value of $ per share. Initially, there will be no dividends due or payable on the Series B Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.
All shares of the Series B Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series B Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series B Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.
The Series B Preferred shall have no liquidation preference over any other class of stock.
Each holder of outstanding shares of Series B Preferred Stock shall be entitled to the number of votes equal to equal to one thousand (1,000) Common Shares. Except as provided by law, or by the provisions establishing any other series of Preferred Stock, holders of Series B Preferred Stock and of any other outstanding series of Preferred Stock shall vote together with the holders of Common Stock as a single class.
Each holder of shares of Series B Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series B Preferred Stock into a 1,000 of fully paid and nonassessable shares of Common Stock; provided, however, that any Optional Conversion must involve the issuance of at least 100 shares of Common Stock.
In the event of a reverse split, the conversion ratio shall not be changed. However, in the event a forward split shall occur then the conversion ratio shall be modified to be increased by the same ratio as the forward split.
| 11 |
The Company has evaluated the Series B Preferred Stock in accordance with ASC 815 and has determined their conversion options were for equity and ASC 815 did not apply as of December 31, 2021. The Company has evaluated the Series B Preferred Stock in accordance with FASB ASC Subtopic 470-20-40 and has determined that there is no beneficial conversion feature that must be accounted for as of December 31, 2021.
As of June 30, 2022 and December 31, 2021, there were shares of Series B Preferred outstanding.
Common Stock Warrants - On November 23,
2020, the Company issued a class A and a class B warrant to Coral Investment Partners, LP (“CIP”), with each warrant granting
CIP the right to purchase
On May 28, 2021, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On
July 30th, 2021, the Company issued a warrant to a third party in exchange for professional services, granting the warrant holder
the right to purchase
On September 22, 2021, the Company issued a warrant
in conjunction with the termination of the license right (see Note 3) with Purple Biotech, granting Purple Biotech the right to purchase
On December 20, 2021, the Company issued a warrant
to a third party in exchange for services to be provided, granting the warrant holder the right to purchase
On January 28, 2022, the Company issued a warrant
to a third party in exchange for contemplation of a debt extension, granting the warrant holder the right to purchase
On January 28, 2022, the Company issued a warrant
to a third party in exchange for contemplation of a debt extension, granting the warrant holder the right to purchase
On January 28, 2022, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On January 28, 2022, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
| 12 |
On January 28, 2022, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On January 28, 2022, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On January 28, 2022, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On January 28, 2022, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On January 28, 2022, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On
January 28, 2022, the Company issued a warrant to a third party in exchange for professional services, granting the warrant holder the
right to purchase
On January 28, 2022, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On January 28, 2022, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
On March 30, 2022, the Company issued a warrant
to a third party in conjunction with an investment, granting the warrant holder the right to purchase
On March 30, 2022, the Company issued a warrant
to a third party in exchange for professional services, granting the warrant holder the right to purchase
The warrants issued as of June 30, 2022 were valued using the Black-Scholes option pricing model using the following assumptions: 1) exercise price ranging from $1.00 to $5.00 per share, 2) fair value ranging from $4.80 to $6.00 per share, 3) discount rate ranging from 1.15% to 2.31%, 3) dividend rate of 0%, and 4) a term ranging from 2 to 5 years.
On April 19, 2022, Coeptis initiated a forced warrant conversation for certain warrants and on April 20, 2022, for additional warrants. The original expiration for the warrant conversions was set as May 19, 2022, and May 20, 2022. The expiration date was extended and moved to June 30, 2022. A second extension moved the expiration to July 15, 2022, and the third and most recent extension moved the expiration date for the warrant conversions to August 1, 2022.
| 13 |
Schedule of warrants outstanding
| Warrant contract | # Shares | $1.00 | $1.50 | $2.00 | $3.00 | $5.00 | ||||||||||||||||||
| Coral Investment Partners Warrants | – | – | – | |||||||||||||||||||||
| Warrant Holder | – | – | ||||||||||||||||||||||
| Warrant Holder | – | – | ||||||||||||||||||||||
| March 1, 2022 | ( | ) | ( | ) | – | – | – | – | ||||||||||||||||
| June 27, 2022 | ( | ) | ( | ) | – | ( | ) | – | – | |||||||||||||||
| – | – | – | ||||||||||||||||||||||
| Purple BioTech | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | 350,000 | – | 350,000 | – | – | – | ||||||||||||||||||
| March 1, 2022 | (53,334 | ) | – | (53,334 | ) | – | – | |||||||||||||||||
| – | – | – | – | |||||||||||||||||||||
| Warrant Holder | – | – | ||||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | 225,000 | – | 225,000 | – | – | – | ||||||||||||||||||
| March 1, 2022 | (15,000 | ) | – | (15,000 | ) | – | – | – | ||||||||||||||||
| – | – | – | – | |||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | 100,000 | – | 100,000 | – | – | – | ||||||||||||||||||
| June 27, 2022 | (25,000 | ) | – | (25,000 | ) | – | – | – | ||||||||||||||||
| – | – | – | – | |||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Warrant Holder | – | – | – | – | ||||||||||||||||||||
| Total warrants outstanding for purchase of shares: |
| 14 |
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Leases - The Company leases office space
under an operating lease commencing December 1, 2017 through November 30, 2019 and a first lease extensions commending December 1, 2019
through May 31, 2020. The second lease extension extends the lease for twenty-four months, beginning on June 1, 2020 and ending on May
31, 2022. The third lease extension extends the lease for twenty-four months, beginning on June 1, 2022 and ending on May 31, 2024. The
monthly rent is $3,750. On January 1, 2019, the Company adopted ASC Topic 842, Leases, requiring this lease to be recorded as an asset
and corresponding liability on its consolidated balance sheet. The Company records rent expense associated with this lease on the straight-line
basis in conjunction with the terms of the underlying lease. During the quarter ended June 30, 2022 and 2021, rents paid totaled $
Future minimum rental payments required under the lease are as follows:
| 2022 (remaining) | $ | |||
| 2023 | ||||
| 2024 | ||||
| Total minimum lease payments: | ||||
| Less amount representing interest | ( | ) | ||
| Present value of minimum lease payments: | ||||
As of June 30, 2022, the company had recorded
a right of use asset of $
Legal Matters – The company is currently not a defendant in any litigation or threatened litigation that could have a material effect on the company’s financial statements.
Royalty Obligations - In connection with
the product licensing agreement discussed in Note 3, the Company owed a minimum royalty payment of $1,000,000 following the first year
of product sales. A minimum royalty amount was also due in subsequent years. This agreement was terminated and settled in September 2021.
As of June 30, 2022 and 2021, liabilities of $
Royalty Advances - In the year ended December
31, 2020, the Company received royalty advances on future product sales from its pharmaceutical marketing partner. These cumulative advances
were recorded as deferred revenue of $
Potential Asset acquisition - On April 6, 2022, the Company entered into a strategic agreement with Statera Biopharma, Inc.(‘Statera’) (Nasdaq: STAB) giving Coeptis the exclusive right to negotiate a definitive agreement related to the acquisition by Coeptis of Statera’s toll-like receptor 5 (TLR5) agonist platform, including entolimod, a clinical-stage product currently being developed as a treatment for acute radiation syndrome. The consummation of the transaction is contingent upon a successful negotiation of a definitive agreement and satisfaction of a number of closing conditions, including a financing contingency. Coeptis and Statera have agreed to an exclusivity period through the date that is 30 days following the date on which the first draft of the definitive agreement is available to review by both parties.
Coeptis and Statera have agreed that the definitive agreement will provide for the payment by Coeptis to Statera of six million USD ($6,000,000) plus revenue-based milestone payments (to be defined in the definitive agreement) in exchange for a defined set of purchased assets that include Statera’s rights to any product containing Entolimod as an active ingredient and all other related TLR5 agonists, related intellectual property, contract rights, inventory and data related to such products.
Coeptis is currently continuing its due diligence
review of the Entolimod opportunity, and in connection therewith is in the process of reviewing proposed loan documentation the proceeds
of which would be used to finance the acquisition. Coeptis paid $
| 15 |
Option Agreement - On April 29, 2022, Coeptis entered into an exclusive option agreement with University of Pittsburgh for rights to three chimeric antigen receptor T cell (CAR-T) technologies that offer the potential to address a range of hematologic and solid tumors. Among the initial cancer indications under development are pre-clinical programs targeting breast cancer and ovarian cancer. The exclusive option agreement involves the intellectual property rights to three technologies jointly developed in the laboratories of Jason Lohmueller, Ph.D., Assistant Professor of Immunology; Alexander Deiters, Ph.D., Professor of Chemistry; and Olivera Finn, Ph.D., Professor of Immunology: 1) mSA2 affinity-enhanced biotin-binding CAR, 2) universal self-labeling SynNotch and CARs for programable antigen-targeting, and 3) conditional control of universal CAR-T cells through stimulus-reactive adaptors. Per the option agreement, Coeptis paid the University of Pittsburgh a non-refundable fee of $5,000 for the exclusive option to license the patent rights to each of the three technologies. Coeptis has until October 29, 2022, to exercise the options and pay the specified exercise considerations. The option agreement may be extended an additional six months, subject to the agreement of both parties.
The Company sponsors a qualified profit-sharing
plan with a 401(k) feature that covers all eligible employees. Participation in the 401(k) feature of the plan is voluntary. Participating
employees may defer up to 100% of their compensation up to the maximum prescribed by the Internal Revenue Code. The plan permits for employee
elective deferrals but has no contribution requirements for the Company. During the six months ended June 30, 2022 and 2021,
NOTE 8 – INCOME TAXES
For the six months ended June 30, 2022 and 2021,
respectively,
| 16 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Forward-Looking Statements
This Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 12E of the Securities Exchange Act of 1934, including or related to our future results, certain projections and business trends. Assumptions relating to forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. When used in this Report, the words “estimate,” “project,” “intend,” “believe,” “expect” and similar expressions are intended to identify forward-looking statements. Although we believe that assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate, and we may not realize the results contemplated by the forward-looking statement. Management decisions are subjective in many respects and susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause us to alter our business strategy or capital expenditure plans that may, in turn, affect our results of operations. In light of the significant uncertainties inherent in the forward-looking information included in this Report, you should not regard the inclusion of such information as our representation that we will achieve any strategy, objective or other plans. The forward-looking statements contained in this Report speak only as of the date of this Report as stated on the front cover, and we have no obligation to update publicly or revise any of these forward-looking statements. These and other statements which are not historical facts are based largely on management’s current expectations and assumptions and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by such forward-looking statements. These risks and uncertainties include, among others, the failure to successfully develop a profitable business, delays in identifying customers, and the inability to retain a significant number of customers, as well as the risks and uncertainties described in “Risk Factors” section to our Annual Report for the fiscal year ended December 31, 2021.
When we use works like “we,” “us”, “our,” the “company” and words of the like, unless otherwise indicated, we are referring to the operations of us and our wholly-owned subsidiary Coeptis Pharmaceuticals, Inc. (“Coeptis”).
Objective
The objective of our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MDA”) is to provide users of our financial statements with the following:
| · | A narrative explanation from the perspective of management of our financial condition, results of operations, cash flows, liquidity and certain other factors that may affect future results; |
| · | Useful context to the financial statements; and |
| · | Information that allows assessment of the likelihood that past performance is indicative of future performance. |
Our MDA is provided as a supplement to, and should be read together with, our unaudited financial statements for the three months ended June 30, 2022 and 2021, and the six months ended June 30, 2022 and 2021, included in Part I, Item 1 of this Form 10-Q.
Overview and Outlook
Our company, Coeptis Therapeutics, Inc. (“Coeptis Therapeutics”), is a holding company that conducts its current operations through its wholly-owned subsidiary Coeptis Pharmaceuticals, Inc. (“Coeptis”). We are a pharmaceutical company which owns, acquires, and develops drug products and pharmaceutical technologies which offer improvements to current therapies. Our products and technologies are intended to be commercialized in the US and worldwide markets. Since Coeptis’ inception in 2017, it has acquired and commercialized two drug products for the U S market, which were approved as 505b2 applications. These anti-hypertension products were launched into the US market during 2020 through a marketing partner. At launch, the sales and promotional efforts were significantly impeded by the limitation of the global pandemic and as such, we have since abandoned all activities and ownership pertaining to both products. We also began the development of several ANDA products which we divested in 2019 to a larger generic pharmaceutical drug manufacturer, and have moved away from focusing on the commercialization of generic products. In early 2021, we entered into strategic partnerships to co-develop improved therapies for the auto-immune and oncology markets. Following the reverse merger transaction involving us and Coeptis, we continue to focus on identifying and investing resources into innovative products and technologies which we believe will significantly transform Coeptis’ current products and therapies.
| 17 |
During 2020 and continuing through 2021, Coeptis faced several operational challenges related to the COVID-19 global pandemic, which we continue to work to overcome. The launch of both 5050b2 products was impacted because of various COVID-19 limitations, most notably field sales personnel were not able to make healthcare provider visits in person; thereby limiting the awareness of the availability of these products. We explored and implemented several non-personal promotion efforts, but given the global limitations and dynamics, it was challenging to achieve expected sales. We have since abandoned all activities and ownership pertaining to both products.
In May 2021, we entered into two exclusive option agreements (the “CD38 Agreements”) relating to separate technologies designed to improve the treatment of CD38-related cancers (e.g., multiple myeloma, chronic lymphocytic leukemia, and acute myeloid leukemia) with VyGen-Bio, Inc. (“Vy-Gen”), a majority-owned subsidiary of Vycellix, Inc., a Tampa, Florida-based private, immuno-centric discovery life science company focused on the development of transformational platform technologies to enhance and optimize next-generation cell and gene-based therapies, including T cell and Natural Killer (NK) cell-based cancer therapies.
The CD38 Agreements relate to two separate Vy-Gen drug product candidates, as follows:
CD38-GEAR-NK. This Vy-Gen drug product candidate is designed to protect CD38+ NK cells from destruction by anti-CD38 monoclonal antibodies, or mAbs. CD38-GEAR-NK is an autologous, NK cell-based therapeutic that is derived from a patient’s own cells and gene-edited to enable combination therapy with anti-CD38 mAbs. We believe CD38-GEAR-NK possesses the potential to minimize the risks and side effects from CD38-positive NK cell fratricide.
Market Opportunity. We believe CD38-GEAR-NK could potentially revolutionize how CD38-related cancers are treated, by protecting CD38+ NK cells from destruction by anti-CD38 mAbs, thereby promoting the opportunity to improve the treatment of CD38-related cancers, including multiple myeloma, chronic lymphocytic leukemia, and acute myeloid leukemia.
Multiple myeloma is expected to be the first cancer indication targeted with CD38-GEAR-NK. The global multiple myeloma market was $19.48B in 2018 and is expected to reach $31B by 2026 [Source: Fortune Business Reports].
CD38-Diagnostic. This Vy-Gen product candidate is an in vitro diagnostic tool to analyze if cancer patients might be appropriate candidates for anti-CD38 mAb therapy. CD38-Diagnostic is an in vitro screening tool that provides the ability to pre-determine which cancer patients are most likely to benefit from targeted anti-CD38 mAb therapies, either as monotherapy or in combination with CD38-GEAR-NK. CD38-Diagnostic also has the potential to develop as a platform technology beyond CD38, to identify patients likely to benefit for broad range of mAb therapies across myriad indications.
Market Opportunity. We believe CD38-Diagnostic provides opportunity to make more cost-effective medical decisions for the treatment of B cell malignancies with high CD38 expression, including multiple myeloma, which may help to avoid unnecessary administration of anti-CD38 therapies. CD38-Diagnostic could prevent patients from being subjected to ineffective therapy and enable significant savings to healthcare systems.
CD38-Diagnostic could be offered as a companion diagnostic for determining patient suitability and likelihood of positive treatment outcomes for CD38-GEAR-NK and/or CD38 monoclonal antibody therapies.
GEAR-NK Product Overview. GEAR-NK is an autologous, gene-edited, natural killer cell-based therapeutic development platform that allows for modified NK cells to be co-administered with targeted mAbs, which, in the absence of the GEAR-NK, would otherwise be neutralized by mAb therapy.
| 18 |
In May 2021, we made initial payments totaling $750,000 under the CD38 Agreements, to acquire the exclusive options to acquire co-development rights with respect to CD38-GEAR-NK and CD38-Diagnostic. On August 15, 2021, we entered into amendments to each of the CD038 Agreements. In connection with the two amendments, we delivered to VyGen promissory notes aggregating $3,250,000 with maturity dates of December 31, 2021, and made a cash payment of $1,000,000, upon which cash payment we exercised the two definitive option purchase agreements. In December 2021, we completed our payment obligations to secure the 50% ownership interest in the CD38-Diagnostic, and also entered into an amendment of the CD038-GEAR-NK promissory note to extend the maturity date to June 30, 2022 and to increase the scalable downward adjustment percentage for the CD38-GEAR-NK product candidate to 25%. Pursuant to the CD038-GEAR-NK amendment, if the promissory note is timely paid by June 30, 2022, Coeptis will maintain its 50% ownership interest in the CD38-GEAR-NK product candidate, and if the CD38-GEAR-NK promissory note is not timely paid by June 30, 2022, Coeptis’ ownership interest in such assets will automatically be reduced to 25% and the promissory note will be automatically cancelled and will no longer be due or payable. Details of the two August amendments and the December amendment are summarized in the amendments attached at Exhibits 4.1 and 4.2 to our Current Report on Form 8-K dated August 19, 2021 and Exhibits 4.2 to the our Current Report on Form 8-K dated December 27, 2021.
In connection with the Vy-Gen relationship and the Company’s ownership in the two product candidates described above, in December 2021 the Company and Vy-Gen entered into a co-development and steering committee agreement. The co-development and steering committee agreement provides for the governance and economic agreements between the Company and Vy-Gen related of the development of the two Vy-Gen drug product candidates and the revenue sharing related thereto, including each company having a 50% representation on the steering committee and each company receiving 50% of the net revenues related to the Vy-Gen product candidates (scalable downward to 25% for the CD38-GEAR-NK as described above). Details of the co-development and steering committee agreement are summarized in our Current Report on Form 8-K dated December 27, 2021, including Exhibits 4.1 and 4.2 thereto.
Vici Health Sciences, LLC. In partnership with Vici Health Sciences, LLC (“Vici”), we are co-developing a drug product, CPT60621 – a focus on Parkinson’s Disease. Through this partnership, Vici and Coeptis would co-develop, seek FDA approval and share ownership rights to CPT60621.
CPT60621 – a focus on Parkinson’s Disease. CPT60621 is a novel, ready to use, easy to swallow, oral liquid version of an already approved drug used for the treatment of Parkinson’s Disease (PD). The currently approved dosage form is only available as an oral solid tablet which can be difficult to swallow for some PD patients. Per Symphony Health data, an estimated 555,000 prescriptions are dispensed per year for the oral solid tablet version alone.
PD affected nearly 1,000,000 people in the U.S. in 2020, and nearly 10,000,000 people worldwide. Experts also predict that the PD affected rate is expected to increase at a rate of 2.2% per year for the next 10 years. The direct medical cost to treat PD is estimated to be over $25 billion per year, in which $4.1 billion of that is in medication cost alone.
Typical PD symptoms include thinking difficulties, uncontrolled shaking and tremors, loss of automatic movements, rigidity, and eating, speaking, and swallowing difficulties. During the course of their disease, nearly 80% of PD patients will develop a condition known as dysphagia which is defined as difficulty or discomfort in swallowing. Oral liquid dosage forms are easier to swallow than oral solid dosage forms. PD patients who suffer from dysphagia often must crush and dissolve tablets in juice in order to consume their medication. In more extreme cases, feeding tubes are utilized. This is costly to the healthcare system and is simply impractical.
CPT60621 can be administered to the patient using an easy-to-use oral syringe, eliminating time consuming, costly, and uncontrolled tablet crushing. This novel dosage form, if approved, we believe will fulfill a market need and provide a beneficial treatment option for many PD patients.
As we continue to direct our operational focus towards the Vy-Gen opportunities described elsewhere herein, we have recently shifted away from allocating priority resources to CPT60621.
| 19 |
We expect to generate revenue from product sales and technology licensing. We cannot be certain of the timing of this revenue and will likely need funding to support continuing operations and support our growth strategy. We may have to finance operations by offering any combination of equity offerings, debt financing, collaborations, strategic alliances, or other licensing arrangements.
Our Results of Operations
Revenue. To date, we have generated minimal revenue mostly from consulting arrangements and product sales. Due to the COVID-19 global pandemic and the resulting market dynamics, it is uncertain if the current marketed products can generate sufficient sales to cover expenses. If our strategic business discussions progress to agreements, we expect to generate additional revenue from collaboration partners.
Operating Expenses. General and administrative expenses consist primarily of salaries and related costs for personnel and professional fees for consulting services related to regulatory, pharmacovigilance, quality, legal, and business development. We expect that our general and administrative expenses will increase in the future as we increase our headcount to support the business growth. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, insurance, and investor relation expenses associated with operating as a public company.
Research and developments costs will continue to be dependent on the strategic business collaborations and agreements will are anticipating in the future.
We expect development costs to increase to support our new strategic initiatives.
Comparison of the three months ended June 30, 2022 and June 30, 2021
Revenues. Revenues, which were generated from consulting agreements of $0 and $0 recorded in the three months ended June 30, 2022 and 2021 respectively, continue to be minimal. The Company’s activities primarily include product development, raising capital, and building infrastructure. Management does not expect the Company to generate any significant revenue for at least the next two years, during which time drug development will continue toward the goal of commercializing, through a partnership or otherwise, one or more of the Company’s target products or technologies.
Operating Expenses
Overview. Operating expenses increased from $2,624,069 in the three months ended June 30, 2021 to $9,812,854 in the three months ended June 30, 2022. The increase is mainly due to higher professional services fees, as well as warrant expense.
General and Administrative Expenses. For the three months ended June 30, 2022 and 2021, general and administrative expenses are included in operating expenses. All costs incurred can be attributed to the planned principal operations of product development, raising capital, and building infrastructure. In addition, a substantial amount of General and Administrative Expenses resulted from warrant expense. The warrants issued as of June 30, 2022 were valued using the Black-Scholes option pricing model using the following assumptions: 1) exercise price ranging from $1.00 to $5.00 per share, 2) fair value ranging from $4.80 to $6.00 per share, 3) discount rate ranging from 1.15% to 2.31%, 3) dividend rate of 0%, and 4) a term ranging from 2 to 5 years. General and Administrative Expenses for the three months ended June 30, 2022 was $9,744,977 and was $2,580,971 for the three months ended June 30, 2021. Management may separate out GA expenses in 2022 and 2021, especially if new personnel are hired consistent with the Company’s financial regulatory and filings obligations as a publicly traded entity.
Interest Expense. Interest expense was $63,826 for the three months ended June 30, 2022 and was $43,098 for the three months ended June 30, 2021. Interest was related to notes payable, which are discussed in detail in the Footnotes to the financial statements, incorporated by reference herein. Management expects that in 2021 and thereafter, interest expense will increase, as it may take on debt from insiders or independent third parties to fund operations either while awaiting receipt of the proceeds of equity capital financings or as a stand-alone strategy in addition to raising capital through equity capital financings.
| 20 |
Comparison of the six months ended June 30, 2022 and June 30, 2021
Revenues. Revenues, which were generated from consulting agreements of $0 for the six months ended June 30, 2022 and $75,000 for the six months ended June 30, 2021. The Company’s activities primarily include product development, raising capital, and building infrastructure. Management does not expect the Company to generate any significant revenue for at least the next two years, during which time drug development will continue toward the goal of commercializing, through a partnership or otherwise, one or more of the Company’s target products or technologies.
Operating Expenses
Overview. Operating expenses increased from $4,399,149 in the six months ended June 30, 2021 to $25,583,988 in the six months ended June 30, 2022. The increase is mainly due to higher professional services related to the merger transaction, as well as warrant expense.
General and Administrative Expenses. For the six months ended June 30, 2022 and 2021, general and administrative expenses are included in operating expenses. All costs incurred can be attributed to the planned principal operations of product development, raising capital, and building infrastructure. In addition, a substantial amount of General and Administrative Expenses result from warrant expense. The warrants issued as of June 30, 2022 were valued using the Black-Scholes option pricing model using the following assumptions: 1) exercise price ranging from $1.00 to $5.00 per share, 2) fair value ranging from $4.80 to $6.00 per share, 3) discount rate ranging from 1.15% to 2.31%, 3) dividend rate of 0%, and 4) a term ranging from 2 to 5 years. General and Administrative Expenses for the six months ended June 30, 2022 was $25,460,292 and was $4,318,408 for the six months ended June 30, 2021. Management may separate out GA expenses in 2022 and 2021, especially if new personnel are hired consistent with the Company’s financial regulatory and filings obligations as a publicly traded entity.
Interest Expense. Interest expense was $119,644 and $77,823 for the six months ended June 30, 2022 and 2021, respectively. Interest was related to notes payable, which are discussed in detail in the Footnotes to the financial statements, incorporated by reference herein. Management expects that in 2022 and thereafter, interest expense will increase, as it may take on debt from insiders or independent third parties to fund operations either while awaiting receipt of the proceeds of equity capital financings or as a stand-alone strategy in addition to raising capital through equity capital financings.
Financial Resources and Liquidity. The Company had limited financial resources during the twelve months ended December 31, 2021 with cash and cash equivalents of $2,179,558. For the period ending June 30, 2022, cash and cash equivalents increased to $2,378,295. During both these time periods, the Company continues to operate a minimal infrastructure in order to maintain its ability to fund operations, keep full focus on all product development targets and to stay current with all of the Company’s scientist consultants, legal counsel, and accountants. During 2022, the Company believes that the ability to raise capital through equity transactions will increase liquidity and enable the execution of management’s operating strategy.
| 21 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this Item.
| Item 4. | Controls and Procedures |
Disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report on Form 10-Q. Based upon that evaluation, and as a result of the material weaknesses described below, our principal executive officer and principal financial officer concluded that, as of June 30, 2022, our disclosure controls and procedures were not effective. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
Our Annual Report on Form 10-K contains information regarding a material weakness in our internal control over financial reporting as of December 31, 2021. For example, the Company lacked adequate segregation of duties which led to situations where individuals had access to both initiate and approve transactions with no additional formal review process.
In an effort to address the Company’s internal accounting personnel deficiencies, in February 2021 we hired a consulting group to assist our Chief Financial Officer. Accordingly, the Company believes, based on its knowledge, that: (i) this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report; and (ii) the financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations and cash flows as of and for the periods presented in this quarterly report.
| 22 |
PART II — OTHER INFORMATION
| Item 1. | Legal Proceedings |
None.
| Item 1A. | Risk Factors |
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
During the six months ended June 30, 2022, we issued (i) 650,499 shares of our common stock in connection with an offering of our common stock that was made in reliance upon an exemption from registration provided by Regulation A Section 506(b) of Regulation D and (ii) _368,334 shares of our common stock upon the exercise of outstanding warrants.
We have previously disclosed all other sales of securities without registration under the Securities Act of 1933, as amended.
| Item 3. | Defaults Upon Senior Securities |
Not applicable.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information |
None.
| Item 6. | Exhibits |
The following exhibits are attached hereto or incorporated by reference herein (numbered to correspond to Item 601(a) of Regulation S-K, as promulgated by the Securities and Exchange Commission) and are filed as part of this Form 10-Q:
| 31.1 | Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer, Principal Executive Officer. Filed herewith. |
| 31.2 | Rule 13a-14(a)/15(d)-14(a) Certification of President, Principal Financial Officer. Filed herewith. |
| 32.1 | Section 1350 Certification of Principal Executive Officer. Filed herewith. |
| 32.2 | Section 1350 Certification of Principal Financial Officer. Filed herewith. |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). |
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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.
| COEPTIS THERAPEUTICS, INC. | ||
| Registrant | ||
| Date: August 2, 2022 | By: | /s/ David Mehalick |
| David Mehalick | ||
| Chief Executive Officer, Principal Executive Officer | ||
| Date: August 2, 2022 | By: | /s/ Christine Sheehy |
| Christine Sheehy | ||
| Chief Financial Officer, Principal Financial an Accounting Officer | ||
.
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